Road maintenance optimisation modelling is usually undertaken to assist road agencies plan and budget for their maintenance activities. It can promote best use of available funds by helping determine the types and timings of treatments to be carried out. At a higher level, it can help determine appropriate levels of maintenance funding.
This paper has identified two distinct types of underfunding compared with the unconstrained optimum. The first concerns the present value of funds made available for maintenance, which can be measured by the ‘maintenance deficit’. There is a variety of ways to define and measure the maintenance deficit, and different standards against which to compare actual funding levels — the unconstrained optimum, the level of spending required to achieve the same MBCR as for investment spending, and the level of spending required to attain predetermined minimum acceptable standards.
Economically efficient allocation of funds between maintenance and investment spending requires the Marginal Benefit-Cost Ratio (MBCR) for maintenance and the MBCR or cut-off Benefit-Cost Ration (BCR) for investment spending to be the same. If they are not, the return to society from road expenditure can be improved by shifting funds from the budget with the lower MBCR to the budget with the higher MBCR.
The second type of underfunding identified in the paper occurs when maintenance deferral increases the present value of maintenance costs without any improvement in the user cost outcome. It occurs when tight short-term annual budget constraints force a departure from the most efficient funding profile over time. This profile can be estimated by an optimisation model set up to minimise total transport costs subject to a budget constraint expressed as a present value. If preventative maintenance that protects and preserves road pavements is deferred, components of the assets can be damaged, and the future cost of restoration can exceed the short-term saving, even after adjusting for the time value of money. Departing from the cost-minimising time path to achieve the lowest acceptable standards by deferring maintenance is equivalent to going into debt.
This paper has proposed a way to use maintenance optimisation models to estimate an ‘equivalent interest rate for maintenance deferral’, which enables comparisons to be made between the cost of borrowing through maintenance deferral and conventional borrowing.