Economic evaluation model of highway improvement projects

Abstract

The increased emphasis on the existing public highway system has highlighted the usefulness of economic analysis in the highway project selection process, but it has also highlighted the deficiencies of existing methods and models to perform that analysis. This study presents a computer program to perform a benefit-cost analysis for a wide variety of highway improvement projects. The relationship between the flow of benefits and the construction cost and maintenance costs is a very important consideration in determining the desirability of a proposed project. Three methods to measure project desirability are examined--the benefit-cost ratio, the net present value, and the internal rate of return. The strengths and weaknesses of each technique are examined, along with the appropriate rate to discount the flow of future benefits and costs. The equations and formulas to calculate motorist benefits from a highway improvement are presented in detail. The major variable in most calculations average speed, and the major categories of user costs include time costs, vehicle operating costs, and accident costs. Calculations are based upon highway type and vehicle volume, with adjustments for such things as percent trucks, lane width, vertical alignment, and horizontal alignment. A method to calculate delay costs and signalized intersections is also presented. Benefits are calculated using a consumer surplus approach, with the approach corrected and refined to correctly distinguish between induced and diverted traffic. The computer program incorporates the equations and formulas to calculate user benefits. It also has a complicated technique to allocate corridor traffic to routes within a corridor, based upon the user costs for each route. Some sample problems are also presented, which were used to test the program.