AbstractThis paper examines the problem of capital budgeting in the area of highway maintenance. Emphasis is placed on specific, real-world user concerns relating to standard capital budgeting models, and suggestions are made for improving planning in this area. A two-phase approach to capital budgeting is suggested as a mechanism for resolving some of these concerns. In phase 1 a financial planning model is used as a means of determining appropriate budget levels. In phase 2 a goal programming model for achieving desired levels of service is given. A brief description is given of such a two-phase system currently being implemented in a Canadian transport ministry.