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Benefit Cost Analysis

What is it? What is new? What does this mean for existing users?

 

cost benefitWhat is it? Benefit-Cost Analysis compares total project costs and benefits – portrayed on a consistent (money denominated) basis that adjusts for differences between the up-front timing of costs and the later timing of accrued benefits to society. This tool calculates the overall efficiency of investment – rolling up various elements of costs and benefits across times, areas, and elements of society. Efficiency is a major consideration in establishing the “business case” for a project (along with consideration of distributional impacts related to strategic development goals, and financial feasibility).

The Benefit Cost Analysis module of TREDIS is unique in covering all modes of transportation (air, marine, road, rail, pedestrian and bicycle) and connectivity between modes. The tool employs a “sketch planning” perspective that does not require highly detailed engineering measures, making it ideal for preliminary evaluation of long-range plans and corridor alternatives, and for grant applications. It is widely used for US “TIGER” grant applications, and as a teaching tool in many universities.

TREDIS offers two types of BCA. There is a basic (free) version that covers “traditional” or “user” benefit-cost analysis, including travel time, travel expense, safety and air emissions benefits. There is also an expanded version that adds “wider economic benefits” -- effects that require further data about the economic geography of a region – including the productivity benefits of enhanced labor and delivery market access, logistics and supply chain reliability and intermodal connectivity.

What is new? TREDIS 5 introduces a major enhancement of our core benefit-cost accounting structure. It now allows for more choices of perspective for measuring public and private sector costs and benefits, and a choice of compliance with either North American or European BCA accounting systems (reflecting differences in treatment of public vs. private sector tolling and fees.)

It also features an updated and more sophisticated calculation of energy use, other operating costs and emissions characteristics of transportation vehicle (car, bus, truck, aircraft and boat) fleets. This makes it possible to evaluate shifts in the characteristics and mix of vehicle sizes, types, and engine technologies – including electric, hydrogen, diesel, gas and hybrid engines. It also enables greater flexibility for public transportation analysis, extended ability to distinguish sub-mode alternatives (such as bus, BRT, light rail and heavy rail transit) and enhanced sensitivity to changes in congestion and associated start/stop patterns.

The updated system can now handle significantly more complex patterns of change over time – allowing for evaluation of longer time periods and a choice of year-by-year data entry or trend interpolation. This allows for diverging rates of vehicle and passenger growth, as well as non-linear and discrete changes in future travel times. It also enables application of the system for ex-post analysis (evaluation of built projects), as well as for ex-ante analysis (assessment of proposed new projects).

Finally, the system incorporates more sophisticated analysis of labor, delivery and intermodal access and connectivity effects on productivity, incorporating new methods developed by the SHRP2 and NCHRP research programs. The reporting interface is now graphical, and shows the key factors driving results.

What does this mean for existing TREDIS users? Users will see dramatically improved graphical and tabular reporting with enhanced ability to “drill down” and see details behind BCA results. The updated benefit calculations may increase or decrease the calculation of total benefits compared to earlier versions of the system. Specifically, the valuation of safety and emissions benefits are now higher, but the valuation of vehicle operating cost savings is often lower because of the model’s greater sensitivity to changes in energy prices, vehicle energy efficiency and incremental insurance factors.

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