Daniel Brand

Application of Benefit-Cost Analysis to the Proposed California High-Speed Rail System

A high-speed rail system operating on a dedicated right-of-way that results in a significant volume of trips being diverted from the air and highway modes can be expected to generate significant benefits. The major benefits that will accrue to both users and nonusers from the construction and operation of such a system are described. Both intercity and urban travel benefits are included in the analysis. A methodology for how these diverse benefits can be quantified is presented, and, importantly, it is shown how these benefits can be monetized for input into a comprehensive benefit-cost analysis. Of the 11 types of benefits examined, 4 were found to produce the bulk of the benefits of the high-speed rail system. For the present purposes, benefit-cost analysis is a public-sector evaluation tool that compares all the benefits of a project to society with all the costs of a project. The objective is to ascertain whether all the benefits do in fact exceed all the costs. The major benefits include the revenues derived from high-speed rail users, the high-speed rail user benefits (consumer surplus) net of fares paid, the travel time savings to urban commuters, and the value of time savings to intercity air travelers. Actual data have been taken from the proposed California highspeed rail system to illustrate the benefits that can be expected from such a system and the discrete steps that have been undertaken in the benefit-cost analysis.

HOW TRANSPORTATION PLANNERS AND DECISION MAKERS ADDRESS RISK AND UNCERTAINTY

A wide cross section of transportation planners was interviewed to understand how issues related to risk and uncertainty are presently addressed in the metropolitan transportation planning process. The results and insights from these interviews are reported. It was found that many of the current responses to risks in making decisions on transportation investments could usefully be explained and improved upon by the new options approach. The examples and the analyses of the interviews show that metropolitan planning organization planners and more senior transportation executives and decision makers are certainly aware of the risks they face in investing in major transportation projects. Furthermore, they already are capable of responding to those risks in ways that can be better appreciated and explained by the options approach. What is missing in metropolitan transportation planning, and in the public-sector investment community at large, is an appreciation that there are advantages to identifying and analyzing risks early in the planning process, and that investments involving risk can be systematically analyzed in a risk management plan that uses the real-options approach. This may result in (much) higher value investments to accomplish the stated investment goals, while avoiding serious mistakes in investing in projects that may fall far short of the investment goals.

Options Approach to Risk Analysis in Transportation Planning

The applicability of the real-options approach to risk management to the metropolitan transportation planning process is described. The options approach to risk analysis brings to investment decisions the insight that there is an inherent value in option-creating actions (by resolving uncertainty, enabling flexibility, or uncovering new and relevant information) and a cost associated with exercising options (irreversible commitments of resources and time). The options approach moves investment decision making from simply choosing whether to build a project to a regime that considers a range of possible decisions, with the potential value of each decision measured in terms of its option-creation value and irreversible commitment cost. This approach is specifically designed to maximize the value of investments having the characteristics of transportation projects that are subject to uncertainty and risk in their outcomes. Also described is the new options approach; examples that illustrate the value of different kinds of options are given. By recognizing the value of improved information—and actions to obtain it—the options approach can give real impetus to improved planning methods. Because the analysis tools provided by the options approach make it possible to value the additional information that improved planning can provide, recommendations are provided on how—and in what parts of the metropolitan transportation planning process—the new tools of risk analysis can most appropriately be applied.

APPLYING BENEFIT/COST ANALYSIS TO IDENTIFY AND MEASURE THE BENEFITS OF INTELLIGENT TRANSPORTATION SYSTEMS

The guidance provided by benefit/cost analysis (BCA) is used to identify the measures appropriate for assessing the benefits of intelligent transportation systems (ITS) investments using BCA. Proper recognition of how ITS differs from conventional transportation improvements can avoid expensive data collection, serious underestimates of the benefits of ITS, and mistakes in our planning and investment policies. The steps in BCA are described, including its strict rules governing the inclusion of benefit measures. An ITS causal model chain is presented that links the five traditional ITS goals (efficiency, mobility, safety, productivity, and energy/environment). The model chain varies from the conventional planning model because the ITS mobility and productivity benefit measures do not vary directly with its safety, energy, and environmental impacts. Recommendations are given for avoiding double counting ITS mobility and productivity benefits, and for identifying them correctly. Errors in valuing the mobility benefit using observed data on travel and ITS product and service buying behavior are described, as is the potential for serious underestimates of ITS mobility benefits from using observed or predicted travel time savings as the primary mobility benefit measure. Instead, direct measurement and valuation of the ITS mobility benefit using customer satisfaction (stated preference) survey methods avoid the problems of (a) how exactly to measure the utility-generating features of ITS user benefits, and (b) observing the behavioral responses to ITS information, which involve expensive data collection. Measuring customer satisfaction directly can also simplify other areas of ITS evaluation, including avoiding traditional transportation modeling in some instances.

WHAT ADVANCED TRAVELER INFORMATION SYSTEM INFORMATION DO USERS WANT? EVIDENCE FROM IN-VEHICLE NAVIGATION DEVICE USERS

Findings from research into user preferences for enhanced travel information disseminated to the drivers of private vehicles are reported. The research is based on trade-off surveys of three small populations in the Seattle, Chicago, and Boston metropolitan regions who had had significant hands-on experience with vehicles equipped with dynamic invehicle navigation (IVN) units in prior field operational tests. It was found that the structure of consumers’ preferences was similar across the three surveys. The analysis indicates that, at least in a familiar commuting context, users are split in their opinions whether they prefer to receive routing advice or simply advice about traffic delays to inform their own routing decisions. More people prefer the latter, although this is less pronounced for women than for men. Geographical coverage of routes and the frequency of information updates were found to be significantly important attributes of IVN information. The results also indicate diminishing returns in user values for information improvement. At least at this stage of market development, respondents valued the basic enhancements in coverage and update frequency more than they valued further refinements.

A Benefit/Cost Analysis Of The Commercial Vehicle Information Systems And Networks (Cvisn) Program

This paper describes a comprehensive benefit/cost analysis that was performed based on the results of model deployments of CVISN (Commercial Vehicle Information Systems and Networks) systems that provide electronic credentialing and electronic screening of heavy trucks to improve their safe and efficient operation. CVISN is intended to make a regulatory system operate at lower cost and increased effectiveness to both its users and to society. Benefit/cost analysis is a public sector evaluation tool that compares all of a projects benefits to society to all of the projects costs to society. The question to be answered in undertaking such an analysis is: Do these benefits exceed the costs In the case of the CVISN programs evaluated in this paper, it is clear that considerable public benefits can be expected, and that the benefits greatly exceed the costs. Based on the results of several representative CVISN deployment scenarios examined, it is prudent to proceed with full deployment of such systems.

BENEFIT-COST ANALYSIS OF THE COMMERCIAL VEHICLE INFORMATION SYSTEMS AND NETWORKS PROGRAM

A comprehensive benefit–cost analysis was performed using the results of model deployments of the Commercial Vehicle Information Systems and Networks (CVISN) program, which provides electronic credentialing and electronic screening of heavy trucks to improve their safe and efficient to operation. CVISN is intended to enable a regulatory system to operate at reduced cost and increased effectiveness for both its users and society. Benefit–cost analysis is a public-sector evaluation tool that compares all of a project’s benefits to society with all of the project’s costs to society. The question to be answered in undertaking such an analysis is: do these benefits exceed the costs? In the case of the CVISN programs evaluated, considerable public benefits can be expected, and the benefits greatly exceed the costs. From the results of several representative CVISN deployment scenarios examined, it appears prudent to proceed with full deployment of such systems.