Condition can look steady while value drains away
A condition chart tells you where the network is. It does not tell you whether this year's budget is keeping up with this year's wear. Three simple ratios do, and one of them was written in Australia.
The problem with condition alone
Condition measures, such as percentage in good, fair and poor condition or an average index, are lagging indicators: they show the result of spending decisions made years ago. A network can hold a steady condition score for some time while the work needed to keep it there quietly grows.
The US Federal Highway Administration tested this between 2017 and 2024 with three state transport agencies. In Idaho, the agency's own condition projections showed the network staying in fair or better condition over a 40-year analysis. Financial measures calculated from the same data told a different story: after about 15 years, the modelled budget was no longer enough to offset the loss of asset value, and the backlog trend suggested a change of treatment strategy would be needed within those 15 years.
Same data, same budget, two very different messages. The second is the one a finance committee needs.
Three ratios worth knowing
| Ratio | How it is calculated | What it answers |
|---|---|---|
| Asset sustainability ratio | Spending on maintenance, renewal and replacement ÷ depreciation, for the same period | Are we renewing the network as fast as it is wearing out? |
| Sustainability index | Budget allocated ÷ the funding needed to address all the treatments the analysis identifies | How much of the identified need is funded? |
| Stewardship liability ratio | Unfunded needs (backlog) ÷ the network's replacement value | Is the backlog growing faster than the network? |
The asset sustainability ratio will be familiar to many Australian finance officers. The FHWA summary credits it to the Australian Infrastructure Financial Management Guidelines published by IPWEA in 2011.
In the US pilots, the asset sustainability ratio and the stewardship liability ratio proved the most useful. A fourth measure tested, the asset consumption ratio (depreciated value ÷ replacement value), added little that condition figures did not already show.
The researchers also found the hard part was not the arithmetic but its inputs: an agreed definition of “need”, a consistent way to estimate depreciation, and reliable records of what work was actually done. Most pavement software they reviewed did not report need, depreciation or true lifecycle cost directly.
Using the ratios well
- Look at the trend, not one year. A single year's ratio swings with project timing; a five- or ten-year projection shows direction.
- Read them beside condition, not instead of it. Together they say where the network is and where the money is taking it.
- Explain them in plain words. “At this budget, the network loses value faster than we renew it” is a sentence a council can debate. A table of indices is not.
- Show the inputs. Every ratio should come with the depreciation method, the definition of need and the budget it assumes, so it can be checked.
How PaveKeep handles this
PaveKeep's statutory and funding packs show what the network is worth, and its works programme shows how much it would take to reach a condition target. Its budget planning shows what condition a given budget leads to over five or ten years.
PaveKeep does not report the three ratios above as named measures today. The inputs they need, value and the cost to reach a target, are in its outputs and can be traced to their sources, so a council can calculate them.
PaveKeep is built for small and regional councils and is not yet in use at any council.
Sources
- Federal Highway Administration (2024), Development of Next-Generation Pavement Performance Measures and Asset Management Methodologies to Support MAP-21 Performance Management Objectives, FHWA-HRT-23-102, executive summary and chapters 5–7, 9.
- Federal Highway Administration (2023), *Next-Generation Pavement Performance Measures* (TechBrief), FHWA-HRT-23-076.
- Howard, J., Dixon, J. and Comrie, J. (2011), Australian Infrastructure Financial Management Guidelines, Institute of Public Works Engineering Australia (as cited in FHWA-HRT-23-076).