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TECHNICAL BRIEF #3 Benefit Cost Analysis – Transportation Systems Management and OperationsUse of Archived Operations Data in Planning and Benefit Cost AnalysisView the PDF Version [22 KB] This information brief is a continuation of the FHWA Office of Operations Transportation Systems Management and Operations Benefit-Cost Analysis technical briefing series. Earlier briefs were published in 2012 and are available online at: https://ops.fhwa.dot.gov/plan4ops/resources/brochures.htm. ARCHIVED OPERATIONS DATA SUPPORT PLANNING NEEDS Examples include:
FHWA, Desk Reference: "Use of Archived Operations Data in Planning – A Desk Reference" (FHWA-HOP-16-017, estimated April 2016). Effective transportation planning and investment decision making depends on timely, comprehensive, and accurate data. Traditionally data for planning has come from manual collection techniques and approximations from model output. While these sources are still used, transportation planners at the State, metropolitan, and local level are beginning to leverage an increasingly prevalent kind of transportation data—archived operations data. This data is collected and stored to support efforts to monitor and manage the transportation system. The purpose of this brief is to inform practitioners of the availability and potential uses of this data, highlighting the utility of the information in executing benefitcost analyses (BCA) for transportation systems management and operations (TSM&O) projects and strategies. One tool provided by the Federal Highway Administration (FHWA) to execute BCA is the Tool for Operations Benefit Cost Analysis (TOPS-BC), available from the FHWA website. Enormous amounts of data on the performance of the transportation system are generated daily from various technologies. For example, there are over 4 billion probe-based road segment speeds generated in the United States each day. Archived operations data can include traffic, transit, freight, bike, pedestrian, construction, and weather information that is usually collected in real time by intelligent transportation system (ITS) infrastructure, such as inductive in-pavement loop detectors, radar detectors, remote traffic microwave sensors (RTMS), Bluetooth, and E-ZPass or other unique ID tag readers. It also includes incident or event information entered into electronic logs by transportation or public safety personnel. Of the many types of data available, a few are highlighted here:
As stated, this is only a portion of the universe of archived operations data potentially available to the transportation planning community. Other data could include:
Process and Requirements for BCAA BCA uses monetized values to compare total benefits with total incremental costs. The results can be presented as a benefit-cost ratio (B/C ratio), with benefits divided by costs. The net benefit is defined as the sum of all benefits minus the sum of all costs and provides an absolute measure of benefits (total dollars) rather than the relative measures provided by the B/C ratio. To perform a BCA, it is necessary to monetize all relevant impacts. In recent years, economists have developed techniques for monetizing non-market impacts, and transportation analysts have been using standardized values for travel time, crash damages, and environmental impacts in evaluating and selecting projects. As previously mentioned, with TOPS-BC, the FHWA has developed a BCA tool to assist planners in conducting initial BCA of TSM&O projects and strategies. The achievable benefits and the corresponding methodology to monetize these benefits include:
The costs are project- or program-specific and can include various cost categories used by transportation departments to implement a project:
For each year of the life of the project, the benefits and costs will be assigned to the appropriate year in the life of the project. For example, in year 0 (the beginning of a project), no benefits would be realized, but the costs of construction, installation, training and other "up front" costs would be incurred. In subsequent years, benefits would accrue as the improvements in the facilities are realized. Ongoing costs over time would include the service, maintenance, and daily operational costs associated with the improvements. To account for future inflation and the time value of money, future cost and benefit streams are discounted (divided by a factor to account for inflation and the time value of money) to derive a net present value (NPV) of the streams to calculate the benefit-cost ratio (BCR). Per guidelines provided by the U.S. Office of Management and Budget, a 7 percent discount rate is used in the development of BCRs. TIGER grant applications suggest the analysis be presented at both at both 7 and 3 percent discount rates. HOW ARCHIVED OPERATIONS DATA CAN SUPPORT A BENEFIT-COST ANALYSIS
The BCR for a project is the sum of the NPV of benefits for the project divided by the NPV of the project costs. The net benefits for a project as a whole are the difference between the NPV of benefits and the NPV of costs over a specified time period. When a BCR is greater than 1:1 or the net benefits are greater than 0, the benefits outweigh the costs for a project over time. The higher the BCR or net benefits, the more economically attractive a project is. Therefore, BCRs or net benefits can be useful in prioritizing projects. Benefits of Archived Operations Data to PlannersArchived operations data provides numerous benefits to planners. Archived operations data is more accurate than modeled data, serves multiple purposes within a transportation agency, and enables new types of analyses to support better planning and investment decisions. Key benefits of using archived operations data in planning include:
The Use of Archived Data Results in New Transportation Planning ApplicationsAs described in the previous section, a BCA can inform many different phases of the transportation decision-making process. For example, it can assist engineers in developing more cost-effective designs for TSM&O projects that have already been scheduled. In this context, the use of archived data can improve the planning process and enable transportation planning officers to seize the opportunity to apply new methods and applications. Archived operations data can also be used to identify transportation needs and issues that should be addressed. These generally include safety and air quality improvements and congestion relief strategies. Archived data can be used to map traffic characteristics, resulting in the identification of priority areas for projects or other investments. Moreover, such data can also be used to prioritize and select future project options. Today, substantial opportunities exist for improving transportation management based on archived operations data. Such opportunities were not available before these data were collected. For more information, FHWA has published several reports providing further insight into executing BCAs for TSM&O projects and strategies, such as the FHWA Operations Benefit/Cost Analysis Desk Reference, the Transportation Systems Management and Operations Benefit-Cost Analysis Compendium, and the Road Weather Management Benefit Cost Analysis Compendium. Such resources assist transportation agencies in correctly applying BCAs to TSM&O projects and strategies. Additionally, transportation management can use procedures described above as guidelines for the use of archived operations data. Other TSM&O technical briefs take a closer look at the current application of BCA in transportation planning and serve as additional sources of information. Project ContactsIf you have any questions regarding the Use of Archived Operations Data in Planning and BCA please contact one of the individuals below: Jim Hunt Ralph Volpe
1 The U.S. Department of Transportation recommends valuing travel time savings
at 50 percent of the average wage rate for local personal travel. https://www.transportation.gov/sites/dot.gov/files/docs/USDOT%20VOT%20Guidance%202014.pdf
February 2016 FHWA-HOP-16-008 |
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United States Department of Transportation - Federal Highway Administration |