Links

• Agency Perspective
• Basis for Analysis
• Geographic Scope of the Analysis
• Level of Effort
• Project Description
• Project Schedule
• Purpose of the Analysis
• Purpose of the Project
• Time Period of Analysis

Setting Up the Analysis

Many decisions and assumptions must be made before an analysis can be completed. It is easiest to do this first, even if some assumptions are later modified.

Questions arise as soon as one attempts to measure the benefits of a transportation improvement project. For example:

What is the baseline from which benefits are measured? What area is affected? Which aspects are most important? Different benefits and costs engender different questions,which can lead to benefit and cost estimates that are not consistent with one another and that must later be revised. This problem can be eliminated if the assumptions behind the analysis are laid out from the beginning.

The first step is to consider questions in the following areas:

• Purpose of the project: What is the problem or goal that the project is intended to address? What are its intended benefits?
• Project description: What will be done? Where? When? How? By whom?
• Purpose of the analysis: Will the analysis be used to determine if the project should be undertaken? Will it be used to determine which of a group of projects should be selected or which should have highest priority?
• Appropriate level of effort for the analysis: Given the cost of the project, how much effort should be devoted to benefit-cost analysis and which aspects should receive the most attention?
• Agency perspective: What is the agency's constituency? For whom are benefits being sought? Who will incur the direct and indirect costs?
• Basis for the analysis:

  • Base case: What will happen if there is no project?
  • Alternatives to be considered: Through what other means could the desired benefit be achieved?
• Project schedule: When will costs be incurred? When will benefits be realized?
• Type of benefit-cost analysis to be used: Should the project be evaluated on the basis of its benefit-cost ratio, net present value, internal rate of return or some combination of these?
• Geographic scope of the analysis: What area will be affected by the project? By its alternatives?
• Time period of analysis: Over what period of time should projects be evaluated

Acknowledgements

Hosted by the Caltrans Office of Transportation Economics

Created by the California Center for Innovative Transportation at the Institute of Transportation Studies at the University of California at Berkeley and the Committee on Planning and Economics of the American Society of Civil Engineers

Acknowledgements | Comments and Suggestions