Office of Operations
21st Century Operations Using 21st Century Technologies
Table of Contents

Operations Benefit/Cost Analysis Desk Reference

Chapter 1. Introduction

Project Background and Purpose

Due to an increasingly competitive fiscal environment, state, regional, and local transportation planning organizations around the country are being asked more than ever to justify their programs and expenditures. Transportation System Management and Operations (TSM&O) programs have not escaped this scrutiny and are routinely asked to rank their projects against traditional expansion projects, as well as conduct other “value”-related exercises.

This requirement can put TSM&O projects at a disadvantage since many specialists in this arena have limited experience in performing benefit/cost analysis; and often, many of the established tools and data available for conducting benefit/cost analysis for traditional infrastructure projects are poorly suited to analyzing the specific performance measures, project timelines, benefits, and life-cycle costs associated with operational improvements.

In response to the needs of system operators to conduct these analyses, a number of initiatives have been undertaken in recent years at the national, state, and regional levels to develop enhanced analysis tools, methodologies and information sources to support the conduct of benefit/cost analysis for many specific TSM&O strategies. It often remains difficult, however, for practitioners to weed through the multiple information and guidance sources in order to understand and apply an appropriate methodology for meeting their own specific analysis needs.

The FHWA Operations Benefit/Cost Analysis Desk Reference Project

The Federal Highway Administration (FHWA) Office of Operations initiated this project in recognition of practitioners’ need for relevant and practical guidance on how to effectively conduct benefit/cost analysis for a wide spectrum of transportation system management and operations strategies. The Operations Benefit/Cost Analysis Desk Reference project is intended to provide practitioners with relevant guidance on how to effectively and reliably estimate the benefits and costs of operations strategies.

This Desk Reference is intended to meet the needs of a wide range of practitioners looking to conduct benefit/cost analysis of operations strategies. The guidance provided in the Desk Reference includes basic background information on benefit/cost analysis, including basic terminology and concepts, intended to support the needs of practitioners just getting started with B/C analysis, who may be unfamiliar with the general process. Building off this primer base, the Desk Reference also describes some of the more complex analytical concepts and latest research in order to support more advanced analysts in conducting their analysis. Some of the more advanced topics include capturing the impacts of travel time reliability; assessing the synergistic effects of combining different strategies; and capturing the benefits and costs of supporting infrastructure, such as traffic surveillance and communications.

This Desk Reference is supported by an Operations B/C decision support tool, called the Tool for Operations Benefit/Cost (TOPS-BC). This spreadsheet-based tool is designed to assist practitioners in conducting benefit/cost analysis by providing four key capabilities, including the following:

  • The ability for users to investigate the expected range of impacts associated with previous deployments and analyses of many TSM&O strategies;
  • A screening mechanism to help users identify appropriate tools and methodologies for conducting a B/C analysis based on their analysis needs;
  • A framework and default cost data to estimate the life-cycle costs of various TSM&O strategies, including capital, replacement, and continuing operations and maintenance (O&M) costs; and
  • A framework and suggested impact values for conducting simple B/C analysis for selected TSM&O strategies.

Figure 1-1 shows the opening screen of TOPS-BC, which provides navigation to these capabilities within the support tool. The TOPS-BC application is supported by a separate, stand-alone User’s Manual providing instruction on its proper set up and use.

Figure 1-1. Capabilities Provided by TOPS-BC

Figure 1-1 shows a computer screen capture of the opening worksheet for the Tool for Operations Benefit/Cost spreadsheet tool.

Operations Strategies Covered

Together the Desk Reference and the TOPS-BC tool are intended to support the analysis of a wide range of the available TSM&O strategies. These “strategies” include the direct application of technologies and infrastructure to roadside application (e.g., deployment of freeway service patrol vehicles), as well as many harder-to-define, nonphysical strategies (e.g., interagency coordination). While it is not possible to comprehensively provide guidance on every type and variation in application of all the many diverse TSM&O strategies (especially in light of the fact that new strategies and technologies are constantly emerging), TSM&O strategies covered in the TOPS-BC tool and/or the Desk Reference document include strategies from the following categories (see Chapter 3 for a more complete description of the TSM&O strategies and substrategies that comprise each category):

Physical Strategies, such as:

  1. Arterial Signal Coordination – Improves the coordination of traffic signal timing to improve flow and reduce delay.
  2. Arterial Transit Signal Priority – Provides the capability to expand or accelerate the green time allotted to traffic signals when the transit vehicle is detected approaching the intersection.
  3. Transit Automatic Vehicle Location – Uses transponder and Global Positioning System (GPS) technologies to track the real-time location of transit vehicles. Compiled information is typically used to better manage the transit assets or provide traveler information to passengers.
  4. Ramp Metering – Applies signals to on-ramp or freeway-to-freeway ramp locations to control and manage the flow of vehicles into the merge area.
  5. Incident Management – Various combinations of incident detection, location verification, communication/coordination, and response strategies designed to lessen the time required to respond and clear traffic incidents.
  6. Pretrip Traveler Information – Traveler information provided through several different available channels (e.g., telephone, web-based, broadcast-media, social-media) intended to reach individuals prior to the initiation of their trip so that they may make informed decisions on destination, mode, route, time of travel, and even whether to forego the trip.
  7. En-route Traveler Information – Traveler information intended to reach the recipients while they are traveling. The information may be provided through several different channels, including telephone, in-vehicle system, roadside Dynamic Message Signs (DMS) or Highway Advisory Radio (HAR), or broadcast-media.
  8. Work Zone Management – Lessens the congestion, delay, and safety issues associated with construction or maintenance work zones.
  9. High-Occupancy Toll (HOT) Lanes – Allows single-occupancy vehicles (SOV) to pay a toll to use underutilized high-occupancy vehicle (HOV) lane capacity. The tolls charged may vary according to time-of-day schedules, or may be dynamically assessed in response to traffic conditions and available HOV lane capacity.
  10. Speed Harmonization – Involves the implementation of variable speed limits and the communication of those limits through roadside signs. The speed limits are modified according to congestion levels to lessen stop-and-go conditions and lower the speed of vehicles as they approach downstream bottlenecks.
  11. Hard Shoulder Running – Involves allowing vehicles to travel on the shoulder facilities of roadways, often for isolated sections of roadway or limited times of operation. The availability of the shoulder for use is often communicated through the use of overhead gantries or roadside DMS.
  12. Travel Demand Management – Includes a number of strategies that may be employed to lessen travel demand (number of trips). These may include physical strategies (e.g., employer-based vanpools), as well as nonphysical, policy-based strategies (e.g., alternative work hours).

Supporting Strategies, such as:

  1. Traffic Surveillance – Seeks to collect, compile, and analyze traffic data.
  2. Traffic Management Centers – Physical- or virtually-based centers designed to provide the backbone management and operations capability to monitor and operate the deployed systems and technologies.
  3. Communications – Landline- and mobile-based systems designed to provide communication between different roadside components, and provide communication between the components and any centralized management structure.

Nonphysical Strategies, such as:

  1. Active Transportation and Demand Management (ATDM) – The dynamic management, control, and influence of travel demand, traffic demand, and traffic flow of transportation facilities. Through the use of available tools and assets, traffic flow is managed and traveler behavior is influenced in real time to achieve operational objectives, such as preventing or delaying breakdown conditions, improving safety, reducing emissions, or maximizing system efficiency. Under an ATDM approach, the transportation system is continuously monitored. Using archived data and or/predictive methods, actions are performed in real time to achieve or maintain system performance.
  2. System Integration – Involves the coordination and integration of two or more strategies to allow for the sharing of data or capabilities to provide for the betterment of the combined system.
  3. Interagency Coordination – The integration of efforts, resources, knowledge, or technologies across various agencies, departments, or entities to improve the coordinated management and operation of the transportation system.
  4. Regional Concepts for Transportation Operations – Involves the coordination of various stakeholders responsible for operating one or more components or jurisdictions in order to develop sets of policies, procedures, and operating parameters that may be implemented according to specific identified conditions to improve the efficiency and effectiveness of operational strategies during those conditions.

Chapter 3 of this document provides expanded discussion of these various strategies, as well as substrategies and variations in application within the general categories. Chapter 3 also identifies the typical benefits and impact measures associated with the deployment of the strategies.

Table 1-1 below summarizes the TSM&O strategies above and identifies if specific guidance in their analysis is provided in this Desk Reference, the TOPS-BC tool, or both.

Table 1-1 Summary of Guidance on Various TSM&O Strategies
TSM&O Strategy Discussed in Desk Reference TOPS-BC Analysis Capability
Physical Strategies
Arterial Signal Coordination Guidance or analysis capability provided Guidance or analysis capability provided
Arterial Transit Signal Priority Guidance or analysis capability provided Guidance or analysis capability provided
Transit Automatic Vehicle Location Guidance or analysis capability provided Guidance or analysis capability provided
Ramp Metering Guidance or analysis capability provided Guidance or analysis capability provided
Incident Management Guidance or analysis capability provided Guidance or analysis capability provided
Pretrip Traveler Information Guidance or analysis capability provided Guidance or analysis capability provided
En-route Traveler Information Guidance or analysis capability provided Guidance or analysis capability provided
Work Zone Management Guidance or analysis capability provided Guidance or analysis capability provided
HOT Lanes Guidance or analysis capability provided Guidance or analysis capability provided
Speed Harmonization Guidance or analysis capability provided Guidance or analysis capability provided
Hard Shoulder Running Guidance or analysis capability provided Empty Cell.
Travel Demand Management Guidance or analysis capability provided Guidance or analysis capability provided
Supporting Strategies
Traffic Surveillance Guidance or analysis capability provided Life-cycle cost estimation capability only
Traffic Management Centers Guidance or analysis capability provided Life-cycle cost estimation capability only
Communications Guidance or analysis capability provided Life-cycle cost estimation capability only
Nonphysical Strategies
ATDM Guidance or analysis capability provided Empty Cell.
System Integration Guidance or analysis capability provided Empty Cell.
Interagency Coordination Guidance or analysis capability provided Empty Cell.
Regional Concepts for Transportation Operations Guidance or analysis capability provided Empty Cell.

Expert Review Panel

The development of the Desk Reference and TOPS-BC was greatly aided by an Expert Review Panel that was formed to provide input and guidance to the project. This Expert Review Panel was comprised of individuals representing Federal, state, regional, and local transportation agencies, as well as research organizations. The Expert Panel has been invaluable in identifying areas of the greatest need for guidance on particular strategies, performance measures and other issues, and in reviewing the guidance materials and the TOPS-BC application.

Project Workshops

In order to inform practitioners on the availability of the guidance materials, as well as provide an opportunity for additional testing and vetting of the material in a real-world analysis situations, the FHWA, as part of the Planning for Operations initiative, has technical workshop opportunities available. These workshops cover both the guidance available in this Desk Reference, as well as an overview of the proper set up and application of the TOPS-BC decision-support capabilities.

How to Use the Desk Reference and TOPS-BC Decision Support Tool

As discussed previously, the guidance in this Desk Reference is intended to be appropriate to a broad audience – from the novice to the more seasoned benefit/cost analyst. The first several sections of the Desk Reference are intended to serve as an overview primer for practitioners that may be unfamiliar with either benefit/cost analysis or the often unique characteristics and benefits of operations strategies. Subsequent sections build on this basic information to provide more detailed, often step-by-step guidance on particular aspects of conducting B/C analysis for operations planning. In overview, the remainder of the Desk Reference is organized into the following chapters:

  • Chapter 2, Overview of B/C Analysis for Operations provides an overview of B/C analysis, its role in the planning process, basic terminology and concepts, and identification of general challenges and limitations.
  • Chapter 3, Operations Strategies and Their Impacts summarizes the basic definitions of the types of TSM&O strategies covered in this project and maps these strategies to their likely impacts/benefits.
  • Chapter 4, Existing B/C Tools and Methods summarizes the capabilities along with the strengths and limitations of many existing B/C tools and methods to aid practitioners in identifying appropriate situations in which to apply these tools. This discussion also includes information that details how to obtain more information on the tools, and provides a comparison discussion of the level of effort needed to set up and apply the tools.
  • Chapter 5, Conduct B/C Analysis for Operations provides more detailed, step-by-step guidance on how to successfully conduct B/C analysis for operations strategies, identify considerations that need to be made, and highlight challenges that may be encountered, as well as propose methods to mitigate those challenges.

In parallel with the development of this Desk Reference, the TOPS-BC spreadsheet application was developed to provide additional decision-support and analysis structure. A separate, stand-alone User’s Manual was specifically developed to guide interested practitioners in the proper set up and application of the TOPS-BC spreadsheet tool. It should be noted that capabilities within TOPS-BC are often referenced within this Desk Reference document, along with discussions of many other applicable analysis tools, when appropriate, but the TOPS-BC User’s Manual focuses exclusively on TOPS-BC operation and is the devoted source of information for that resource.

Common Questions and Where to Locate More Information

As summarized above, the Desk Reference is structured to provide basic introductory information on the general principles and concepts of B/C analysis in the opening sections, appropriate as a reference resource for beginning and intermediate B/C analysts. The following represents some common overview questions along with a guide on where more information may be found on the particular topic:

  • What is B/C analysis? (See Chapter 2)
  • What is the role of B/C analysis in the planning process? (See Chapter 2)
  • How does B/C analysis differ from economic impact analysis? (See page 15 and Table 2-3 for a comparative discussion.)

Other users more seasoned with the basic concepts of B/C analysis may have more focused questions on the uniqueness of B/C analysis as it is applied to specific TSM&O strategies; for example:

  • What are the appropriate measures to consider for particular strategies (See Chapter 3 for a description of the TSM&O strategies and for a discussion of common measures of effectiveness (MOE), and Figure 5-5 for a mapping of strategies to likely impacts); and how can these outputs be quantified and monetized? (See Chapter 5)
  • What is the appropriate time horizon that should be used? (See Chapter 5 for a discussion of time horizons and the impact of the time value of money.)
  • How can life-cycle costs be estimated? (See Chapter 5 for a discussion of life-cycle costs and methodologies for estimating these costs.)

Other more complex questions related to emerging performance measures or the analysis of other nonphysical strategies with less apparent benefits are provided in the later sections of the Desk Reference. The following are some of the questions related to more difficult to quantify benefits related to TSM&O covered in this guidance:

  • What are appropriate ways to estimate travel time reliability impacts? (See Chapter 3 for a discussion of the importance of this measure in operations analysis and an overview of available methods for quantifying reliability; and Chapter 5 for a more detailed discussion of reliability (nonrecurring congestion) analysis methodologies).
  • How can the benefits of nonphysical strategies such as improved interagency coordination be assessed? (See nonphysical strategy discussion in Chapter 5)

The TOPS-BC spreadsheet tool is intended to support this Desk Reference by serving as a decision-support tool to the document. The TOPS-BC tool is referenced throughout this Desk Reference where appropriate; and often, the reader may be directed to specific information or a specific capability within the tool. A more detailed discussion of the proper set up and application of the TOPS-BC tool is provided in the separate, stand-alone User’s Manual that is distributed with the tool.