How does benefit-cost analysis fit into the project development process?Ī benefit-cost analysis is a tool for assisting project managers when they are evaluating and comparing different alternatives. A benefit-cost analysis provides monetary measure of the relative economic desirability of project alternatives, but decision-makers often weigh the results against other non-monetized effects and impacts of the project. A properly conducted benefit-cost analysis would indicate whether travel time and safety savings exceed the costs of design, construction, and the long-term increased operating costs.īenefit-cost analyses have been used as a tool by project managers to help evaluate preliminary concepts during early planning studies, to evaluate alternatives and select a Preferred Alternative as part of project environmental documentation, and to evaluate potential design and construction staging options as part of detailed design and/or construction. For some kinds of projects, such as bypasses, travel times and safety may improve, but operating costs may increase due to longer travel distances. The primary transportation-related elements that can be monetized are travel time costs, vehicle operating costs, safety costs, ongoing maintenance costs, and remaining capital value (a combination of capital expenditure and salvage value). The objective of a benefit-cost analysis is to translate the effects of an investment into monetary terms and to account for the fact that benefits generally accrue over a long period of time while capital costs are incurred primarily in the initial years. In other words, a benefit-cost analysis tries to answer the question: What additional benefits will result if this Alternative is undertaken, and what additional costs are needed to bring it about? The analysis evaluates incremental differences between the Base Case and the Alternative(s). ![]() Typically, a “Base Case” is compared to one or more Alternatives (which have some significant improvement compared to the Base Case). Section 5 Conducting a Benefit-Cost AnalysisĪ benefit-cost analysis is a systematic evaluation of the economic advantages (benefits) and disadvantages (costs) of a set of investment alternatives.Section 4 Economic Terms and Principles.Section 3 How Does Benefit-Cost Analysis fit into the Project Development Process?.Section 2 What is Benefit-Cost Analysis?.This document presents benefit-cost analysis guidance for highway improvement projects in the following sequence: This Guidance is based on “User Benefit Analysis for Highways”, AASHTO, August 2003. Review of relevant stages in conducting a benefit-cost analysis for highway projects.Discussion of economic terms and principles.Background information on benefit-cost analysis and how it may fit into the project development process. ![]() This document is intended to provide guidance to perform benefit-cost analysis for highway projects. Benefit-Cost Analysis for Transportation Projects 1.
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