A model for life-cycle benefit and cost analysis of highway project

Abstract

Economic analysis is a critical component of a comprehensive project or program evaluation methodology that considers all key quantitative and qualitative impacts of highway investments. It allows highway agencies to identify, quantify, and value the economic benefits and costs of highway projects and programs over a multiyear timeframe. This research was conducted to provide the Indiana Department of Transportation (INDOT) with a uniform economic analysis methodology. The developed economic evaluation model applies the methodology of life-cycle benefit cost analysis to perform economic analysis for proposed highway projects. As a result of this research, an Excel based computer program, the Indiana Highway Economic Evaluation Model (IHEEM), was developed to provide a convenient tool for INDOT personnel to implement the method. A probabilistic model was developed in IHEEM to provide an alternative option for economic analysis in addition to the deterministic model described in the previous chapters. Users of IHEEM can choose either one or both of deterministic and probabilistic methods in economic analysis of highway and bridge improvement projects. In the model, traffic volume and construction cost are treated as random variables with certain statistic characteristics. In the probabilistic process, the random variable is assigned to an appropriate distribution with an estimated coefficient of variance (CV). A simulation process is repeated for a user defined number of times by random numbers to generate an output with statistic ranges and confidence levels.