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Benefit-Cost Analysis Benefits >

When to Use Benefit-
Cost Analysis
Economic Effects
BCA vs. Economic
Impact Analysis
Analysis Framework Transportation projects can have various impacts on a a communitys
Perspective and Scope economic development objectives, such as productivity, employment,
Defining Alternatives business activity, property values, investment andtax revenues (in
Geographic Scope this case "community" can range in scale from individual households
Level of Effort to cities, regions, nations or even the entire world).
Project Description
Project Schedule In general, transport projects that improve overall accessibility (i.e.,
Analysis Purpose
they improve businesses ability to provide goods and services, and
Project Objectives and
people's ability to access education, employment and services) and
Impacts reduce transportation costs (including travel time, vehicle operating
Time Period of Analysis costs, road and parking facility costs, accident and pollution
Benefits damages) tend to increase economic productivity and
Travel Time development.Care is needed to avoid double countingimpacts that
Vehicle Costs are already counted in travel time and vehicle cost savings, emission
Safety or safety benefits. Many economic impacts are economic transfers
Emissions (one person, group or area benefits at another's expense) while
Greenhouse Gases others are true resource changes (overall economic productivity
Induced Travel increases or declines). In many situations, the distribution of impacts
Travel Time Reliability is important; for example, from the perspective of the people who
Noise gain from an economic transfer, it is a true benefit, but not from
Construction society's overall perspective.
Disbenefits
Habitat and Water It is important to consider the full range of economic impacts, both
Quality positive and negative, that a transport project may cause. For
Economic Effects example, an urban highway expansion may improve motorists' access
Community Impacts and reduce their costs per vehicle-mile, but by creating a barrier to
Parking Costs pedestrian travel and stimulating more dispersed land use
Equity and Option development patterns, reduces access by other modes, and increases
Value Benefits the total amount of travel required to reach destinations.
Costs Similarly,improving access to a particular area can expose
Initial Costs businesses to more competition (for example, if previously captive
Continuing Costs local customers can more easily access regional shopping centers),
Rehabilitation Costs reducing business activity there.
End of Project Costs
Types of Measures Examples
Benefit-Cost Ratio
Net Present Value

A new highway or public transport service increases a

 Cost Effectiveness A new highway or public transport service increases a
Internal Rate of Return community's access to other areas. This increases businesses'
Payback Period labor pool, reduces their costs to obtain input materials and
Graphical services, and expands their potential market. This may increase
Representation "economies of scale" in production processes, which means
Calculation Issues higher productivity through lower costs per unit of output.
Valuing Benefits Improved accessibility may increase workers' ability to access
Inflation education and employment opportunities (increasing their
Discounting productivity and incomes), and increase residents' access to
Transfers and Double more shopping opportunities (providing financial savings), and
Counting
increase access torecreation and culturalopportunities
Joint and Sunk Costs
(increasingtheir welfare).
Uncertainty
Mobility management strategies, such as more efficient road
Sensitivity Analysis
pricing, can improve travel time reliability, which reduces
Presentation logistics and scheduling costs beyond just the travel time
Models savings.
BCA.Net
New transportation links between cities and ports, and new
Cal-B/C
types of inter-modal facilities and services at those locations,
HERS-ST
make it possible for new patterns of international trade to
Israeli Nohal Prat
develop. In some cases, the new links may improve the
MicroBENCOST
efficiency of business customer/client visits as well as product
STEAM
deliveries.
StratBENCOST
Case Studies
CVISN
Relationship to Other Benefits and Costs
Truck Bypass
Electronic Toll In all of the above examples, the benefits flow to parties that depend
Collection on transportation facilities and services for their activities. In some
Monorail cases, the ultimate beneficiary is the business operation that can
Public Transport achieve operating cost savings or greater productivity (output per
Studded Tires unit of cost). In the case of cargo deliveries, the beneficiaries may be
Airport Runway senders and receivers rather than the transportation company that
Published Guidance and actually does the traveling.
References
Other Websites It is also possible to account for many business operations and
Acknowledgements scheduling benefits, as well as logistics benefits and production
TRB Transportation economies of scale, as additions to the valuation of travel time
Economics Committee benefits for truck trips. Alternatively, they can be addressed
Sitemap separately as additional economic benefits.

Finally, it is important to note that there are many broader forms of

economic impacts on communities, regions and states in which
transportation facilities lead to business expansion, additional job
creation and additional tax revenues. Those economic impacts reflect
a combination of the productivity benefits discussed here and
broader business attraction impacts that also affect local economies.
This is discussed further in the separate section on economic impact
analysis.

Resources
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landusemodelsthatpredictthelongtermeconomicandenvironmental
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Report,isavailableatwww.iww.uni
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CambridgeSystematics(1998),EconomicImpactAnalysisofTransit
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ResearchBoard(www.trb.org).

EDRG (2001),GuideforUsingEmpiricalInformationtoMeasureEconomic
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EIOLCAModel(www.eiolca.net)isacomputermodelthatquantifiesthe
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David Forkenbrock, SondipK.MathurandLisaA.Schweitzer(2001),

TransportationInvestmentPolicyandUrbanLandUsePatternsUniversityof
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David J. Forkenbrock andGlenE.Weisbrod(2001),Guidebookfor

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AReassessmentForWesternEurope,inTransportInfrastructureInvestment
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(www.vtpi.org)atwww.vtpi.org/tranben.pdf.

Todd Litman (2010),

 Todd Litman (2010),EvaluatingTransportationEconomicDevelopment
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David Luskin (1999), Facts and Furphies in Benefit-Cost Analysis:

Transport, Bureau of Transport Economics (www.bitre.gov.au); at
www.bitre.gov.au/publications/24/Files/r100.pdf.

M.I. Nadri andT.P.Mamuneas(1996),ContributionofHighwayCapitalto

IndustryandNationalProductivityGrowth,FederalHighwayAdministration
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REMI (2005),TranSight,RegionalEconomicModels(www.remi.com).This
input/outputmodelevaluatestheeffectsoftransportationimprovementsand
activitiesonemployment,industrialoutput,wagesandincome,populationand
grossregionalproduct.

SACTRA (1999),AFrameworkforAssessingStudiesoftheImpactof
TransportInfrastructureProjectsonEconomicActivity,StandingAdvisory
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Regions(www.roads.detr.gov.uk)availableat
www.dft.gov.uk/stellent/groups/dft_transstrat/documents/page/dft_transstrat_504940.pdf

HowardJ.Shatz,KarinE.Kitchens,SandraRosenbloomandMartinWachs
(2011),HighwayInfrastructureandtheEconomy:ImplicationsforFederal
Policy,RANDCorporation(www.rand.org)at
www.rand.org/pubs/monographs/MG1049.html.

Glen Weisbrod (2007),ModelstoPredicttheEconomicDevelopment

ImpactofTransportationProjects:HistoricalExperienceandNew
Applications,AnnalsofRegionalScience,December2007at
www.edrgroup.com/edr1/bm%7Edoc/modelstopredicttheeco.pdf.

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