The Dubious Status of Formal Project Evaluation Procedures

Abstract

For the last several decades developed countries have adopted and utilized formal transportation project evaluation schemes whose objective is to “provide an assessment of whether a proposal is worthwhile, and clearly communicate conclusions and recommendations” (UK, Green Book 2011). Such project evaluation procedures set the rationale for government intervention, define a project’s objectives and alternatives, and examine the direct transportation-economic costs and benefits for each option. Within this framework, Cost-Benefit Analysis (CBA) is the key analytical component because it is meant to appraise the net economic value of each alternative’s direct transportation benefits, given the required resources, in a way that treats all projects equally and unambiguously (Vickerman 2000). The end result of this process should be prioritization of the suggested options, based on welfare-economic foundations. Other evaluation approaches, such as the UK’s New Approach To Appraisal (NATA), require application of supplementary techniques, in addition to CBA, for the purpose of examining and weighing indirect costs and benefits—economic development, community cohesion and equity, to name just a few.

Appendix: Appraisal Schemes Commonly Used in the USA

3.1.1 STEAM

The Surface Transportation Efficiency Analysis Model (STEAM) is a CBA decision-making tool developed by the Federal Highway Administration (FHWA) in the 1990s. STEAM is used to compare the benefits and costs of alternative multi-modal transportation projects. It uses information produced from a travel demand model to compute the net value of mobility and safety benefits attributable to the respective projects. STEAM is composed of four modules: (1) the user interface module specifies inputs and reads the outputs produced at the end of the analysis; (2) the network analysis module reads highway traffic volumes, segment lengths, capacities and other link data to produce travel times and travel distances based on minimum time assignments; (3) the trip table analysis module estimates user benefits based on a comparison of the base scenario (no changes) against the improvement scenario, with multi-modal investment based on comparison of trip travel times and out-of-pocket costs; (4) the evaluation summary module calculates net present worth and a B/C ratio for the multi-modal investment under consideration.

Website: http://www.fhwa.dot.gov/steam/

3.1.2 AASHTO Red Book

The American Association of State Highway and Transportation Officials (AASHTO) Red Book is a manual that provides guidelines for performing user benefit analyses of highway improvements. The manual includes instructions for performing a CBA and provides information and explanations of the scheme’s various aspects. In enumerating benefits and costs, several factors are considered, including vehicle operation factors, road variables, vehicle operating costs, travel time saved, VOT and accident costs. The original manual was published in 1977, followed by a major update in 2003 with respect to the theory, methodologies, procedures and practices for assessing user benefits. The 2010 update includes software for conducting the analyses in accordance with the manual’s guidelines. A supplement dedicated to providing guidance on estimating non-user benefits, entitled Non-User Benefit Analysis for Highways: A Supplement to AASHTO’s User Benefit Analysis for Highways, has been published (2007). This update responded to calls for extending the comprehensiveness of highway improvement impact assessment by considering non-user benefits (AASHTO 2010).

User and Non-User Benefit Analysis for Highways: https://bookstore.transportation.org/imageview.aspx?id=884&DB=3

Congressional Budget Office (CBO), 2012, Infrastructure Banks and Surface Transportation, Congressional: Non-Partisan Analysis for the US Congress. http://www.cbo.gov/sites/default/files/cbofiles/attachments/07-12-12-InfrastructureBanks.pdf