Use of Freeway Shoulders for Travel — Guide for Planning, Evaluating, and Designing Part-Time Shoulder Use as a Traffic Management Strategy

Chapter 6. Costs and Benefits Analysis

The previous chapters (3-5) address possible methods for estimating measures of part-time shoulder use performance in terms of mobility, safety, and environment, respectively. This chapter discusses how to compute the costs of part-time shoulder use over a project’s life cycle, how to monetize the potential benefits (or dis-benefits) discussed in previous chapters, and how to combine costs and benefits into a benefit-cost (B-C) ratio to simultaneously compare these performance measures. The B-C ratio is a useful tool in comparing alternative approaches for implementing and operating part-time shoulder use.

A benefit-cost analysis is also an important consideration within the broader regional transportation planning process. Transportation planners and operations personnel will likely need to compare more traditional infrastructure projects (e.g., permanent widening, bottleneck removal) and Transportation System Management and Operations (TSM&O)-oriented strategies, including part-time shoulder use. Because both of these different types of projects are often competing for the same funds, a benefit-cost analysis provides a framework for prioritizing and ranking widely varying improvement types.

This chapter provides information for computing life-cycle costs and developing a Benefit-Cost Analysis (BCA). Additional details on some of the BCA activities and processes can be found in the Federal Highway Administration (FHWA) Life-Cycle Cost Analysis Primer and the FHWA Operations Benefit/Cost Analysis Desk Reference.^{(34, 35)}

Life-Cycle Costs

Estimating the life-cycle costs of part-time shoulder use is often complex. This is particularly true of more-advanced part-time shoulder use, such as dynamic part-time shoulder use or static part-time shoulder use with dynamic signs. Compared with more traditional infrastructure improvements, TSM&O improvements such as part-time shoulder use typically incur a greater proportion of their costs as continuing operations and maintenance costs, as opposed to upfront capital costs.

Much of the intelligent transportation systems (ITS) equipment associated with part-time shoulder use also typically has a much shorter anticipated useful life than many traditional improvements and must be replaced as it reaches obsolescence. Costs include deployment, implementation, and operations and maintenance plans. Failure to recognize and accurately forecast these costs may result in future funding or resource shortfalls, or the inability to properly operate and maintain deployed part-time shoulder use.

The FHWA Operations Benefit/Cost Analysis Desk Reference recommends the following structure for organizing cost data:

Capital costs The upfront costs necessary to prepare the shoulder pavement for traffic flow, provide refuge areas, modify signing and pavement marking, and procure and install ITS equipment. These costs will be shown as a total (one-time) expenditure and will include the capital equipment costs, as well as the soft costs required for design, installation, and other systems engineering activities. Potential capital cost elements for part-time shoulder use are identified in Table 8.
Operations and maintenance costs Those continuing costs necessary to operate and maintain the deployed part-time shoulder use, including ongoing labor costs for activities such as emergency patrols, additional law enforcement, and TMC staffing. These costs do not include wholesale equipment replacement when the equipment reaches the end of its useful life. These operations and maintenance costs will be presented as annual estimates. Likely operations and maintenance costs are listed in Table 9.
Replacement costs The periodic cost of replacing and/or redeploying equipment as it becomes obsolete and reaches the end of its expected useful life.

Table 8. Potential capital cost components.
Component	Description
Activities associated with the systems engineering process	Concept of Operations and requirements documents, design and contract documents, testing and acceptance activities, construction engineering, and environmental assessments or environmental impact statements.
Shoulder reconstruction and widening	Repaving the shoulder, modifying drainage structures, adding/relocating guardrails, constructing turnouts, and complete reconstruction or minor widening of the shoulder.
Ramp treatments	Ramp widening and/or shoulder pavement improvement along ramps and in gore areas as may be required to provide continuity of the part- time shoulder use through interchanges.
Training	For existing / new operations staff, maintenance and law enforcement staff, and bus operators on Bus on Shoulder (BOS) facilities.
Emergency patrols	Typically increased to compensate for the loss of a breakdown area.
Public outreach and communications campaigns	Part-time shoulder use will likely be new to the motoring public and an extensive public outreach program may be required
ITS	Most part-time shoulder use, except for BOS, has some degree of ITS. Major ITS cost components may include: CMS and supporting sign supports and gantries — Static part- time shoulder uses facilities are increasingly being equipped with CMS, and dynamic facilities by definition must have CMS. Costs for CMS can vary greatly depending on spacing, mounting (overhead or ground-mounted), design (gantry or mast arm if overhead). Part-time shoulder uses with other Active Traffic Management (ATM) elements such as dynamic speed limits, dynamic lane assignment, and / or queue warning will require larger and more frequent CMS, increasing cost. Overhead lane-use control signals — These are less expensive than CMS, but can only indicate whether a lane is open, closed, or (in some cases) about to close Controllers — for operating CMS and for processing detector data. Detection and CCTV — Dynamic part-time shoulder use or static part-time shoulder use that can be closed due to incidents will require some sort of detection and surveillance, up to full CCTV coverage of the shoulder and emergency refuge areas. If additional ATM elements such as dynamic speed limits, dynamic lane assignment, and queue warning are included, the system will likely require extensive detector subsystems. Communications and power software — Dynamic part-time shoulder use with automated decision-making on the opening and closing of the shoulder will likely require additional software algorithms, including decision support systems that can assist operators with quickly inputting necessary information (e.g., confirm that a lane is closed, confirm that the shoulder is clear of any vehicles) and approving opening/closing. Central Hardware / TMC Enhancements — Additional central hardware such as servers, communications modems, workstations, and video displays may be required at the TMC. This in turn may require alterations or enhancements to the TMC.

Mobilization and contingency costs.

Table 9. Potential operations and maintenance cost components.
Component	Description
Compliance	It may be necessary to include the cost of additional police presence to help enforce the part-time shoulder use (e.g., not using the shoulder when closed) and related strategies such as variable speed limits.
Driver Training	Transit agencies using BOS facilities will need to conduct training for new bus drivers as they are hired or assigned to routes with BOS.
“Sweeps”	Many agencies with static or dynamic part-time shoulder use have a police or maintenance vehicle drive the length of the facility prior to each opening of the shoulder.
ITS	On-going TMC Operation — Depending on the size and complexity of the part-time shoulder uses system, and the degree of automation and accompanying ATM, existing TMC operators’ workload might increase, and additional staff might be required. Training of new staff must also be included in the costing. Updating and Maintaining Operating Procedures — Besides the additional labor costs associated with operations, there are other costs tied to operation of ATM strategies. These include updating standard operating procedures and the system rules based on operating experience. Maintenance — This includes a consistent and continuing program of preventive and reactive maintenance of supporting ITS hardware in the field and at the TMC. This may require additional maintenance staff, spare parts, and on-going training.
Roadway Maintenance	Maintenance of lanes designated for part-time shoulder use is typically the same as maintenance of adjacent general purpose lanes and the incremental cost of maintenance (patching potholes, maintaining pavement markings, etc.) is minimal. Debris removal needs are more similar to regular travel lanes than regular shoulders. Snow removal is sometimes challenging in constrained areas such as under or on bridges after a major snowfall, and there may be costs related to this.

Within each of the capital costs (Table 8) and operations and maintenance costs (Table 9), there are items that increase proportionally to the length of the facility and items that are only minimally affected by facility length. Costs such as driver training, public education, and “backbone” ITS infrastructure in a TMC are generally incurred regardless of facility length. Costs such as pavement preparation, CMS, and emergency turnouts are incremental, and largely a function of facility length.

Structuring the cost data in this framework provides the ability to readily scale the cost estimates to the size of potential deployments. Presenting the costs in this scalable format provides the opportunity to easily estimate the costs of expanding or contracting the size of the deployment and allows the cost data to be reutilized for evaluating other corridors.

Monetizing Benefits

The computation of potential operational, safety, and environmental benefits of part-time shoulder use was discussed in previous chapters. This section describes how to monetize those benefits. The estimated benefits will likely be expressed in terms of reduced travel times, reduced delays, reduced number of crashes, and so forth, relative to existing conditions or a future no-build scenario. It will, therefore, be necessary to convert these various measures into a dollar value. State DOTs typically have such conversion values, or national averages may be used. Table 10 shows the values used by the FHWA TOPS-BC tool for various benefit parameters.

TOPS-BC is a benefit-cost tool developed by FHWA for TSM&O projects. In addition to monetizing benefits, it can develop estimates of benefits—if they were not previously computed—using link volume (per analysis period) as a primary input, along with link length, number of lanes, link capacity, and free-flow speed.

Many advanced TSM&O strategies—including part-time shoulder use and particularly part-time dynamic shoulder lanes—have only been recently deployed in the U.S. Accordingly, estimates of the likely impacts and benefits resulting from these strategies may need to be based on limited empirical data of the actual benefits of the strategy within the analysis. Being conservative regarding the estimated benefits, and conducting a sensitivity analysis, should be considered. For part-time shoulder use, benefits are likely to be focused on improved operational performance. As discussed in previous chapters, there are no methods for reliably predicting crashes with part- time shoulder use, and environmental benefits may be positive or negative.

Table 10 shows some of the performance measures that would be used in a benefit-cost estimate, and the societal cost of each per TOPS-BC. Many agencies have their own valuations for these parameters as well.

Table 10. Benefit estimation parameters.
Benefit	Specific Condition	Valuation
Delay (per hour)	“On the clock” travel	$ 30.91
	Other auto travel	$ 15.46
	Truck travel	$ 30.91
Crashes (per occurrence)	Fatality	$ 9,936,727
	Injury	$ 73,973
	Property Damage (PDO)	$ 2,539
Fuel Use	Per gallon (excluding taxes)	$ 4.05
Non-fuel Operating Costs (per VMT)	Auto	$ 0.25
Non-fuel Operating Costs (per VMT)	Truck	$ 0.37
Emissions (per ton)	CO	$ 77
	CO2	$ 41
	Nox	$ 17,997
	PM10	$ 145,518
	VOC	$ 1,259
Noise (per VMT)	Auto	$ 0.0012
Noise (per VMT)	Truck	$ 0.0364

Note: From TOPS-BC Tool, assuming 2015 dollars and a 2% inflation rate

The combination (e.g., mobility, safety, reliability, environmental) and subsequent monetization of benefits needs to be carefully planned and structured to avoid the double-counting of benefits. Double-counting can occur in situations in which there are overlaps in different benefits, or when a change to one benefit results in a direct change to another benefit.
Another critical aspect of monetizing benefits is to annualize them, and then estimate the total dollar value of the benefits over the life cycle of the system. This life-cycle period must be the same as the analysis period used for the estimating costs, as discussed below.

Conducting a Benefit/Cost Analysis

Once the life-cycle cost of a project has been determined and the project’s benefits have been monetized, a benefit-cost analysis can be conducted.

Analysis Period

It is essential that the analyses use the same period of time—the “analysis period”—to assess life-cycle costs and benefits, and to compare the resulting benefit-cost ratios for different alternatives and scenarios. The analysis period should be long enough to include the initial construction up to (and possibly beyond) the point where it becomes necessary to replace many of the ITS components, as these have a shorter lifespan than traditional infrastructure. The purpose of this approach is to spread out both the benefits and costs over an appropriate timeframe to allow for a meaningful analysis. For part-time shoulder use, a 10-, 15-, or 20-year time horizon should be considered. Shorter horizons may be appropriate if part-time shoulder use is being implemented as a temporary measure until a traditional widening project is completed.

Inflation and Discounting

An inherent issue in life-cycle benefit-cost analysis is the difficulty of making value comparisons among projects that are not measured in equal units. Even when values are stated in monetary units such as dollars, the values still may not be comparable, for at least two reasons:

Inflation Expenditures typically occur at various points in the past or future and are, therefore, measured in different value units because of changes in price (e.g., a 1990 dollar would, in general, have purchased more real goods and services in 1990 than would a 2010 dollar in 2010). A general trend toward higher prices over time, as measured in dollars, is called inflation. A general trend toward lower prices is called deflation. Dollars that include the effects of inflation or deflation over time are known as nominal, current, or data-year dollars. Dollars that do not include an inflation or deflation component (i.e., their purchasing power remains unchanged) are called constant or base- year dollars.
Discounting Costs or benefits (in constant dollars) occurring at different points in time—past, present, and future—cannot be compared without allowing for the opportunity value of time. The opportunity value of time as it applies to current versus future funds can be understood in terms of the economic return that could be earned on funds in their next best alternative use (e.g., the funds could be earning interest) or the compensation that must be paid to induce people to defer an additional amount of current year consumption until a later year. Adjusting for the opportunity value of time is known as discounting.

Analytically, adjusting for inflation and discounting are separate calculations. Future costs and benefits of a project should be expressed in constant dollars and then discounted to the present at a discount rate that reflects only the opportunity value of time (known as a real discount rate).

Through the use of a real discount rate, the following transformations can be performed to facilitate comparison of the constant dollar costs of alternative transportation projects:

Relocation in Time A single figure can be “moved” (transformed into an equivalent value) backward or forward in time, without altering its real value, known as its “present worth”.
Annualized Cost. This is the average annual expenditure that would be expected to deploy, operate, and maintain the operations strategy and replace (or redeploy) any equipment as it reaches the end of its useful life. Within this cost figure, the capital costs will be amortized over the anticipated life of each individual piece of equipment. This annualized figure is added with the reoccurring annual operations and maintenance cost to produce the annualized cost figure. This figure is particularly useful in estimating the long-term budgetary impacts of TSM&O deployments.
Present Value Any combination of flows (finite or infinite) and lump sums can be summed into a single value at a single point in time.

TOPS-BC

A number of tools, many of them specific to certain agencies, exist for B/C analysis. The TOPS- BC tool, developed by FHWA for TSM&O projects including part-time shoulder uses, is described in this section.

TOPS-BC tool is a spreadsheet-based tool providing the following four key capabilities:

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 benefit/cost analysis based on their analysis needs.
A framework and default cost data to estimate the lifecycle costs of various TSM&O strategies, including capital, replacement, and continuing operations and maintenance costs.
A framework and suggested impact values for conducting simple benefit/cost analysis for selected TSM&O strategies.

A desk reference was developed in parallel with the tool.

Part-time shoulder use is one of the strategies addressed by TOPS-BC—identified therein as “ATDM Hard Shoulder Running.” The user will likely need to modify default values and add inputs to meet the specifics of any particular location and application, for example:

The useful life, capital costs and annual costs for the “infrastructure-related components”.
The useful life, capital costs and annual costs for the “incremental deployment equipment”.
Additional cost items for the two categories. Examples were listed earlier in this chapter in Table 8.
TOPS-BC calculates costs based on the user inputs of the “number of infrastructure deployments” and the “number of incremental deployments.” The infrastructure deployments (i.e., hardware, software, staff at the TMC, public outreach) can likely be set up as a single deployment. Incremental deployments may be set up as a single ITS location (e.g., lane control sign, support structure, controller, detector, and communications), although a “per mile” approach may work better if new communications infrastructure and/or some sort of shoulder work is required. With the per-mile approach, the cost per mile for new communications and shoulder work would be included, along with the number of signs, support structures, controllers, detectors, cameras, etc., per typical mile.

As was the case with estimating benefits, care should be taken to not double-count costs. For example, if part-time shoulder use is to be implemented with other ATM strategies (such as dynamic speed limits and dynamic lane assignment—what is shown in TOPS-BC as “speed harmonization”), then the supports, controllers, and communications for new signs may already be included in the other ATM costs, and should not be included for part-time shoulder use.

Selecting the Optimum Project(s)

Although a B-C analysis provides a robust and comprehensive framework for comparing the relative efficiency of different projects, strategies, and combinations of strategies, the resulting B-C ratios should not be the only piece of information that may be used in analyzing and prioritizing projects and strategies. Other considerations that should be addressed may include the following:

Regional goals and their relative priorities If improved transit is of great importance, a BOS approach may be given greater consideration even if it has a low B-C ratio. If congestion frequently occurs outside of traditional peak periods, widening—although costly—may be more appropriate than part-time shoulder uses.
Roadway Use Facilities that carry significant freight traffic, serve a large number of bus routes, provide access to and from special event venues, may be used for evacuations, and/or already have other types of ATM may have a higher priority for part-time shoulder uses.
Funding and time constraints There may be budget constraints that preclude some projects, regardless of the B-C ratio. Similarly, it may be easier and faster to construct and implement strategies along one roadway relative to others and allow benefits to start accruing as soon as possible.
Political will and public acceptability

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