1. AT Benefit Cost Analysis Model Highway Design, Project Management and Training Section Technical Standards Branch Presented by Bill Kenny, Director: Design, Project Management and Training, Technical Standards Branch.

2. Background BCA is an analytical tool to provide information to decision makers on the economic merits of a proposed investment or alternate investment options. BCA Model is intended to assist in the economic evaluation of various projects to determine: - Which project options are economically viable. - Which projection option is preferable from an economic point of view.

3. Process for updating Review existing models currently available and in use to evaluate road and bridge infrastructure projects. Evaluate these models against a set of criteria to determine a preferred approach to either use or modify one of these models, or modify the Ministry’s current model. Findings: it is optimal to update and modify the Ministry’s current benefit cost model on a regular basis.

4. Model Development Reviewed the types of projects that economic analysis would be applied to. Identified the major components of analysis that should be included in the updated model. Add model analytical functionality. Develop an approach for how the user will interact with the model. Prepare documentation on how the model can be used and how to interpret analysis results.

5. Model Development (Con’t) Excel (Microsoft) based Evaluate up to 3 alternatives Long term (80 years) Flexibility to define project and scenarios User interface Various result outputs (e.g. NPV, benefit/cost ratio, internal rate of return, payback period)

6. Model Development (Con’t) – Analysis Components Capital Investment Rehabilitation Costs Operating & Maintenance Costs (2 options) Road User Costs Vehicle Operating Costs (2 options) Travel Time Costs Collision Costs Environmental Costs

7. Project and alternative investment costs can be entered for user defined categories over the expected period of construction for the project.

8. Rehabilitation costs can be assigned to each project by type of project. These costs are specified by the user and will be added to project costs based on their expected timing.

9. Maintenance Costs used in the Ministry’s RODA program can be selected for each project or alternative – Case 1

10. Maintenance Costs can alternatively be defined for each project or alternative using customized categories – Case 2

11. Vehicle Operating Costs based on the Ministry’s original benefit/cost model taking into account road features such as surface type, gradient and curvature. – Case 1

12. Alternatively, vehicle operating costs can be defined as fuel and non-fuel vehicle operating costs. – Case 2 based on CalTrans

13. Travel Time Costs include consideration of the vehicle mix, vehicle occupancy and work/business and other (non work) trips.

14. Collision costs are based on Road Type and whether the road is in either an Urban or Rural area – 2010 Severities are for illustration only (not real)

15. The vehicle emission costs are user defined

16. Emission costs per liter of gasoline Sources: 1. CalTrans, 2. Environment Canada, 3. Environment Australia.

17. Emission costs per liter of diesel

18. BCA Results Results for each Alternative (up to 3) Three Scenarios for each Alternative Vary major analysis components (e.g. investment costs, discount rate, traffic growth, etc.) Benefit Cost Analysis Results Net Present Value Benefit Cost Ratio Internal Rate of Return Payback Period Net Present Value / Capital Cost (Primary Indicator)

19. Model Parameter and Value Updates All model parameters and values are being updated. Decisions about how model parameters are specified Identifying reliable sources of data Converting all values to current year $ On-going: these parameters will need to be revisited and values updated – ideally on an annual basis.

20. Model and Analysis Documentation The value and reliability of any analysis depends on transparency of analysis inputs and calculations. All model calculations are traceable in the model. Standardized input and output results will allow for a review of any analysis completed. The model will be accompanied by: User Guide Technical Report

21. Implementation The Model provides an analytical framework to consistently evaluate road and bridge projects. Model does not run automatically. Quality of the analysis depends on quality of the definition of the project alternatives and the model inputs. Veracity of the analysis results will be the responsibility of analyst. Interpretation of results will be the responsibility of the analyst.

22. QUESTIONS?