An economic analysis methodology for evaluating highway improvement projects

Guangyuan Zhao, Purdue University

Abstract

Economic analysis is an important component for the decision-making involved in highway projects. However, the Indiana Department of Transportation (INDOT) lacks a uniform and comprehensive methodology or model to evaluate highway improvement projects. This research project seeks to fill that gap. The preferred methodology is called life-cycle benefit cost analysis. The two key parts in the proposed model, Indiana Life-Cycle Benefit Cost Model (ILCBCM), are agency costs and user benefits. Agency costs include initial costs, routine maintenance costs, rehabilitation costs, and salvage value of the facility. User benefits contain travel time savings, vehicle operating cost savings, and accident reduction savings. By analyzing Indiana's traffic data and referring to the existing methods used in other highway agencies, the framework and calculation procedures for each module are developed. The probabilistic analysis model is then incorporated into ILCBCM so that the outputs can be expressed as ranges of values with likelihoods of occurrence, which is more realistic when evaluating projects with high risks. In order to illustrate the overall economic analysis process, a software application, called Indiana Economic Analysis Tool (IEAT), is developed. A case study was performed to reflect the convenience and flexibility of the software.

Degree

M.S.

Advisors

Jiang, Purdue University.

Subject Area

Economics|Civil engineering

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