MODULE 11. ECONOMIC ANALYSIS

1 Manual TABLE OF CONTENTSM odule 11. TABLE OF CONTENTS11-1 MODULE 11. ECONOMIC ANALYSISTABLE OF AND GOALS AND OF SYSTEM OF ESTIMATING COSTS AND of of Cost of of Benefit OF LIFE CYCLE COST SYSTEM OF SYSTEM BENEFITS TO LIFE-CYCLE Present and Incremental Benefit-Cost TABLE OF CONTENTSM odule 11. TABLE OF CONTENTS11-2 Sensitivity 4 TABLE OF CONTENTSM odule 11. TABLE OF CONTENTS11-3 Figure 11-1. An ECONOMIC ANALYSIS Has Many 11. ECONOMIC INTRODUCTIONS ince freeway management systems aredesigned, constructed, and operated andmaintained with public funding, it is criticalthat ECONOMIC analyses are conducted toensure that public funds are spent addition to being used to determine whichalternative system offers the most potential, ECONOMIC analyses serve to justify the cost-effectiveness of system installations toelected officials who oversee public funding,as well as to the public whom these electedofficials serve.

2 If funding for new freewaymanagement systems, or funding foroperating and maintaining existing systems isto continue, it is critical that elected officialsand the public be made aware of the benefitsof the freeway management AND SCOPEThis MODULE serves to give guidance toplanners and designers responsible for theeconomic justification of freewaymanagement systems. Planners anddesigners must be familiar with the costs andbenefits expected from freeway managementsystems in order to justify the installationand continued operation of these MODULE provides typical capital costsassociated with the design and constructionof freeway management systems, as well astypical continuing costs associated with theiroperation and maintenance.

3 Also providedin this MODULE are typical quantifiable andnonquantifiable benefits that can be expectedfrom the implementation of freewaymanagement TABLE OF CONTENTSM odule 11. TABLE OF CONTENTS11-4 SYSTEM GOALS AND OBJECTIVESThe primary function of freewayfreeway corridor. management systems is the real-timemanagement of recurrent and nonrecurrentcongestion. It is the goal of planners anddesigners to provide efficient, cost-effectiveThe next section of this MODULE , Estimatingfreeway management systems that meetCosts and Benefits, describes the types ofdefined system goals.

4 A successful freewaycosts and benefits normally associated withmanagement system meets or exceedsfreeway management systems. The sectiondefined system goals, thus producingthat follows, System Evaluation, describesbenefits such as delay reductions andthe different ECONOMIC ANALYSIS techniquesincreased safety to freeway users thatthat are available to evaluate and justifyoutweigh the system s initial capital costsfreeway management system expenditures,and its associated lifetime operating andand to compare various system costs.

5 Using the cost and benefit estimatingINTERRELATIONSHIP OF SYSTEM ELEMENTSC osts associated with freeway managementsystems, whether capital costs or operationand maintenance costs, are readily availableand easily measured in monetary , benefits accrued from variousfreeway management system elements aresometimes more difficult to quantify, due tothe interrelationships that exist among thevarious system elements. For example,dynamic message signs ( MODULE 7) andramp meters ( MODULE 5) both contribute toreducing freeway congestion.

6 The benefitsof each of these elements could be measured(via travel time studies, vehicle counts, etc.)if they were implemented alone within thefreeway section. However, the benefits ofstand alone systems are not necessarilyadditive. Rather, the effects of thesecomponents interact with each other. In theabove example, the provision of real-timeinformation via dynamic message signs mightcause some drivers normally intending toenter the freeway to utilize another route totheir destination. This would reduce thetraffic demands at the entrance ramps, andinfluence the magnitude of benefits thatwould be achieved with a ramp meteringsystem that was also implemented in theSTRUCTURE OF MODULE procedures described subsequently,designers and planners can utilize their costand benefit data to conduct economicanalyses.

7 ESTIMATING COSTSAND BENEFITSSYSTEM COSTST ypes of CostsCosts associated with freeway managementsystems can be classified as follows:CCapital costs. Capital costs include all costs associatedwith the design and construction of freewaymanagement systems (or componentthereof). Items classified as capital costsinclude:CDesign TABLE OF CONTENTSM odule 11. TABLE OF CONTENTS11-5 CConstruction systems with components ofCSoftware development costs (includinginformation. However, the reader must besystem integration).

8 Cautioned that these cost experiences can beContinuing costs are those associated withand so may have little (if any) relevance toongoing operations of the freewaythe freeway management system project ofmanagement system. These costs following:CEquipment and infrastructuremaintenance replacement ECONOMIC ANALYSIS requires theCStaffing costs to operate the systemimproved system relative to the existing(operations personnel, clerical personnel,system. To do this, the ANALYSIS comparespublic information personnel, etc.)

9 Existing conditions with those anticipatedCUtilities that a freeway managementCLeasing costs (communications, controlsome of which can be quantified ( , thecenter space, etc.).reduction in total system delay) and some ofSources of Cost InformationEach freeway management system isquantifiable benefits can be converted to(presumably) a compilation of componentsmonetary value ( , a reduction in fueland techniques designed to meet specificconsumption and motorist delay), othergoals and objectives of the do not easily lend themselves toTechnology used for freeway management ismonetary conversion ( , the reduction inconstantly being improved.)

10 In addition, thevehicle emissions).unique characteristics of each system (thecomponents employed, the method of theirTraditionally, benefits analyses for trafficintegration, etc.) heavily influence the costsoperations projects such as freewayof previous systems. Consequently,management systems have typically focused typical costs associated with freewayon the reduction in road user costs, whichmanagement systems are generally notcan be categorized as follows:available. Those involved in the planning, design, andevaluation of such systems are well-advisedCReductions in vehicle operating communicate directly with vendors of thevarious system components to obtain theCReductions in accident recent cost estimates.