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How to set up, run, interpret and maintain a life-cycle benefit-cost analysis that compares highway and bridge improvement alternatives against a do-minimum option in Alberta.
Benefit-cost analysis gives engineers and decision makers a consistent way to judge whether a road or bridge investment is economically justified and which of several alternatives offers the best return. This course explains the spreadsheet-based benefit-cost model used to evaluate provincial highway improvement projects in Alberta. Learners examine how up to three alternatives are compared with a do-minimum option over an analysis period of up to 80 years, and how the analysis accounts for construction, rehabilitation, operating and maintenance costs, vehicle operating costs, travel time, collisions and vehicle emissions. Key economic principles are covered, including real base-year dollars, the real discount rate, the provincial social perspective, shadow prices, direct costs and the exclusion of transfers such as taxes.
The course then walks through completing an analysis: defining the project and alternatives, entering construction periods and costs, selecting a vehicle operating cost approach based on average fuel and non-fuel costs or on curvature and gradient, adjusting collision rates with collision modification factors (CMFs), and describing traffic mix, intersections and trip purpose. Learners see how to interpret net present value (NPV), benefit/cost ratio (BCR), internal rate of return (IRR), break-even point and discounted cumulative costs, and why some indicators may not calculate. The course closes with model limitations, sensitivity analysis and the periodic updating of default values such as occupancy, value of time, collision costs and emission costs.
What Will Be Covered:
Purpose and components of a highway benefit-cost analysis
Real dollars, the real discount rate, social perspective, shadow prices and transfers
Defining a do-minimum option and up to two improvement alternatives
Construction, rehabilitation, operating and maintenance cost inputs
Road user costs: vehicle operating, travel time and collision costs
Collision rates, collision costs and collision modification factors
Vehicle emission costs
NPV, BCR, IRR, break-even point and discounted cumulative cost indicators
Sensitivity analysis and known limitations of the model
Updating default values for vehicles, occupancy, value of time and unit costs
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