1 / 30

Bridge Investment Analysis Strategies Nathaniel D. Coley Jr. Economic Analysis Program Federal Highway Administration

Bridge Investment Analysis Strategies Nathaniel D. Coley Jr. Economic Analysis Program Federal Highway Administration . Topics. Economic Concepts/Examples Strategies for Applying Economic Analysis to assets with Limited Funding Life-Cycle Evaluation Framework Benefit-Cost Analysis

amos
Download Presentation

Bridge Investment Analysis Strategies Nathaniel D. Coley Jr. Economic Analysis Program Federal Highway Administration

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Bridge Investment Analysis StrategiesNathaniel D. Coley Jr. Economic Analysis Program Federal Highway Administration

  2. Topics • Economic Concepts/Examples • Strategies for Applying Economic Analysis to assets with Limited Funding • Life-Cycle Evaluation Framework • Benefit-Cost Analysis • Life-Cycle Cost Analysis • Items to Consider

  3. Goals • By the end of this Discussion you should: • Recognize how the economic analysis of bridge life-cycles supports the development of bridge maintenance strategies • Understand Economic Analysis Methods and available resources

  4. A Question After 60 Years

  5. Benefits Initial Capital Costs Cost Dollars 6 1 2 3 4 5 7 8 9 10 11 12 16 18 19 20 15 13 14 17 0 Year Life-Cycle of Highway Projects Typical Life-Cycle Profile • Example Direct Benefits • Life-Cycle Cost Savings • Reduced Accident Costs • Reductions in Delay Costs • Reduced noise or emissions • Example Indirect Benefits • Land use impacts • Employment • Non-user benefits

  6. Application of Economic Analysis: Network View What are our Bridge Replacement needs over the next 20years given our budget expectations? And when? Interstate Bridges All Other Except Locals

  7. Application of Economic Analysis: Network View How much will we need for our Bridge Replacement needs over the next 20years given our budget? And when? How can maintenance/preservation change the numbers? Interstate Bridges All Other Except Locals

  8. Application of Economic Analysis: Network View The result of more aggressive preservation activities on specific elements of interstate bridges? Interstate Bridges All Other Except Locals

  9. Timing is Everything • Should we act now or wait? • Acting now has a benefit cost ratio of 2.2 • Waiting 7 years has a benefit cost ratio of 3.7 • Waiting 12 years has a benefit cost ratio of 1.6

  10. Application of Economic Analysis: Project View What is the best alternative for this project from a life-cycle cost perspective?

  11. Leveraging BCA to Support Policies Transportation Asset Management Guide:Vol.2 A Focus on Implementation (Chapter 5)

  12. Performance Goals in FHWA 2012 Budget Proposal • Safety:Reduction in transportation-related fatalities and injuries. (Fatalities and Fatality Rate) • Environmental Sustainability:Increased use of environmentally sustainable practices in the transportation sector. (No. of Projects with sustainable design and/or tools). • State of Good Repair:Increased proportion of highways and bridges in good condition. (Pavement and Bridge Condition) • Livable Communities: Improved networks that accommodate pedestrians and bicycles. (No. of State & MPO Plans that address) • Economic Competitiveness: Maximum economic returns on transportation policies and investments. (Travel Time Reliability)

  13. Benefits Initial Capital Costs Cost Dollars 6 1 2 3 4 5 7 8 9 10 11 12 16 18 19 20 15 13 14 17 0 Year Life-Cycle of Highway Projects Typical Life-Cycle Profile • Example Direct Benefits • Life-Cycle Cost Savings • Reduced Accident Costs • Reductions in Delay Costs • Reduced noise or emissions • Example Indirect Benefits • Land use impacts • Employment • Non-user benefits

  14. The Role of Economic Analysis • Mechanism for monetizing, evaluating and comparing long-term costs and benefits of alternatives • Economic analysis results • Help structure project and program level tradeoffs • Quantify & Qualify costs and benefits to the agency and to roadway users • Support repeatable and transparent project justification and prioritization • Does not provide THE decision. It provides a logical framework to support decisions Adam Smith

  15. Time Initial Activity Activity One Activity Two Asset Performance PerformanceMeasure Terminal Serviceability or Health Index Service Life Analysis Period How do we expect Maintenance/Preservation to impact performance?

  16. Definition of Benefit Cost Analysis • For public agencies benefit-cost analysis is essentially ROI. Traditional benefit cost analysis and ROI analysis for transportation includes user benefits (time, cost, safety) for travelers and select environmental effects (air, quality, noise) along with capital, operations, and maintenance(O&M) costs.

  17. Benefit Cost Analysis • Benefit Cost Analysis - the comparison of benefits over time and of costs over time for proposed projects. BCA is a tool used to aid in public investment decision making by measuring the return on investment(ROI) of spending from the viewpoint of net benefit to society. • BCA is different from financial analysis, which focuses on how to fund a project

  18. Benefit Cost Analysis Establish Objectives Specify Assumptions Define Alternatives The Process Analyze Traffic Impacts Estimate Benefits and Costs Analyze Risks Compare Net Benefits and Rank Alternatives Make Recommendations

  19. Comparing Benefits and CostsDifferent BCA Measures • Net Present Value (NPV) • Benefit-Cost Ratio (BCR) • Other measures include: • Equivalent Uniform Annual Value (EUAV) • Internal Rate of Return (IRR)

  20. Life-Cycle Analysis Tools • Software Tools to assist in identifying “good” bridge preservation strategies: • BCA.NET: web-based project-level benefit-cost analysis tool • NBIAs: network level bridge needs assessment tool • NCHRP BLCCA: Project Level Life-Cycle Cost Analysis Tool • NIST BLCC: Project Level Life-Cycle Cost Analysis Tool • RealCost LCCA Tool: Project Level Life-Cycle Cost Analysis Tool

  21. Life-Cycle Analysis Tools – NIST BLCC

  22. Life-Cycle Analysis Tools – BCA.net

  23. Uncertainty and Risk • Measured uncertainty is known as risk • Basic risk analysis questions are: • What can happen? • How likely is it to happen? • What are the consequences? • Once understood, risk can be capitalized on or mitigated

  24. Boston Central Artery 1985-2007 $2.5 to $14+ Billion The Poster Child Example

  25. Probabilistic Analysis • Inputs are defined by their range of values and probability of occurrence (probability distribution) • Through simulation, outputs are expressed as ranges of values with probabilities of occurrence Output Inputs

  26. Most Likely Best Case Worst Case Simulation Results: Histogram Frequency 2.8 2.9 3.0 3.1 3.2 3.3 3.4 Range = 0.4 Net Present Value (NPV), $Millions

  27. Economic Analysis Tools - Risk

  28. Economic Analysis Tools - Risk

  29. More Information

  30. Thank You • Nathaniel D. Coley Jr. • Evaluation and Economic Investment Team • FHWA Office of Asset Management • Washington, DCNColey@dot.gov202-366-2171 • http://www.fhwa.dot.gov/infrastructure/asstmgmt/economic.cfm

More Related