1. Economic Evaluation

Economic Evaluation (also called Appraisal or Analysis) refers to various methods for determining the value of a policy, project or program to help individuals, businesses and communities make decisions that involve tradeoffs. Economic evaluation is an important part of transportation decision-making.

Specific evaluation methods are described below:

• Cost-Effectiveness compares the costs of different options for achieving a specific objective, such as building a particular road or delivering a particular amount of freight. The quantity of outputs (benefits) are held constant, so there is only one variable, the cost of inputs.
• Benefit-Cost Analysis compares total incremental benefits with total incremental costs of each option. It is not limited to a single objective or benefit. For example, potential highway routes may differ in construction costs and the quality of service (speed and safety) they provide.
• Lifecycle Cost Analysis is Benefit-Cost Analysis that incorporates the time value of money. Lifecycle Cost Analysis allows programs or projects to be compared that have benefits and costs occurring at different times. For example, one option may be quicker to implement but has greater costs or lesser benefits than an alternative. Lifecycle cost analysis is important for determining the best long-term infrastructure maintenance program (FCM, 2002).
• Least Cost Planning is a type of Benefit-Cost Analysis that considers demand management on equal terms with capacity expansion. Least Cost Planning allows TDM to be implemented when it is cost effective.
• Multiple Accounts Evaluation is an analysis method that incorporates both quantitative and qualitative criteria, and can be used when some impacts cannot be monetized. Each option is rated for each criterion.

These methods evaluate the economic impacts (costs and benefits) of a policy or project to determine net benefits or net value (incremental benefits minus incremental costs). Economic analysis is not limited to market (monetary) impacts; it can also incorporate non-market impacts such as travel time, crash risk, environmental impacts and equity objectives. Various techniques are used to determine the monetized value (i.e., how much people would be willing to pay) for these non-market goods.

Transportation decisions often have various levels of impacts. For example, increasing roadway capacity has direct impacts of reducing traffic congestion and increasing vehicle traffic speeds. A second-level impact is that this increased speed and convenience may attract additional travel from other routes and times, in induce additional vehicle travel, and it may create barriers to walking and cycling. A third level impact may be that over the long run, land use patterns change as people and businesses respond to more convenient driving and less convenient nonmotorized travel.

In most planning situations, evaluation concerns incremental impacts, such as an improvement or reduction in transportation facilities or services. For example, planners may want to compare the incremental benefits and costs of a new pedestrian bridge, roadway capacity expansion or improved transit services. This is called a marginal analysis. It is seldom necessary to calculate the total value of transportation facilities or services, such as the total benefits from all pedestrian, roadway or transit travel.

An evaluation framework specifies the basic structure of the analysis for clear and consistent evaluation and comparison. A framework usually identifies:

• Evaluation method, such as cost-effectiveness, benefit-cost, lifecycle cost analysis, etc.
• Evaluation criteria, which are the various factors and impacts that are to be considered in the analysis, including indirect and long-term impacts. Impacts can be defined in terms of objectives or their opposite, problems (for example, congestion reduction is an objective because congestion is considered a problem), or they can be defined in terms of costs and benefits (for example, congestion reduction benefits can be measured based on reductions in congestion costs). Planners tend to use the terms objectives and problems (which are more qualitative), while economists tend to use the terms benefits and costs (which are more quantitative), all of which can be considered different approaches for evaluating the same impacts, as illustrated in the table below.
• Modeling techniques, which predict how a policy change or program will affect travel behavior and land use patterns, and measure the incremental benefits and costs that result.
• The Base Case, meaning what would happen without the policy or program.
• Comparison units, such as costs per lane-mile, vehicle-mile, passenger-mile, incremental peak-period trip, etc.
• Base year and discount rate, which indicates how costs are adjusted to reflect the time value of money.
• Perspective and scope, such as the geographic range of impacts to consider.
• Dealing with uncertainty, such as whether sensitivity analysis or other statistical tests will be used.
• How results are presented, so that the results of different evaluations are easy to compare.

2. General Steps in Economic Evaluation

A typical economic evaluation involves the following general steps.

1. Describe each option, including a base-case and one or more alternatives.
2. Define the analysis framework (described above), which identifies all impacts (costs and benefits) and objectives to be considered in the analysis. Classify impacts to avoid double-counting.
3. Quantify and monetize (measure in monetary value) impacts that are suitable for each option.
4. Calculate the total monetized benefits and costs for each year that is being considered (typically 10-20 years for a major investment project), and apply a discount value to future impacts. Sum the present value of benefits and costs to determine the Net Present Value.
5. Describe, and measure as much as possible, impacts that are unsuited for monetization (such as equity and effects on strategic community development objectives). Rates each alternative according to how much it supports or contradicts the objectives.
6. Conduct sensitivity analysis to determine how changes in key assumptions affect outcomes.
7. Report result. Develop various ways to illustrate important differences between the options and describe their implications. For example:
• Produce graphs that illustrate differences in key impacts.
• Produce a table or matrix that compares each alternative in terms of its costs, benefits and rating in terms of objectives (such as whether it supports or contradicts equity and strategic community development objectives).
• Identify the distribution of impacts (which individual or group bears costs or gains benefits).
• Produce short summaries that describe key differences, and factors that may affect these differences.

Of course, these steps can be adjusted and repeated as needed. For example, stakeholders may sometimes request that additional options, impacts or objectives be considered, or that additional analysis be performed to determine the distribution of impacts.

3. Performance Evaluation

Performance Evaluation refers to monitoring and analysis of policies, programs and projects as they are implemented in order to determine how well they are performing with regard to their intended objectives. This can help determine whether a planning decision was appropriate, identify potential problems, and to provide guidance for optimization. This tends to be particularly important for innovative solutions, such as TDM.

Performance indicators (also called measures of effectiveness) are practical ways to measure progress toward established objectives. Various performance indicators can be used to evaluate transportation system quality and the effectiveness of a TDM program. These usually include both quantitative measures of mobility and access, and qualitative measures of user acceptance and satisfaction. In most cases, no single indicator is adequate, so a set of indicators that reflect various objectives and perspectives are used. Which indicators are selected and how they are weighted and presented implicitly defines the value placed on different objectives.

A successful performance measurement system:

• Comprises a balanced set of a limited vital few measures.
• Produces timely and useful reports at a reasonable cost.
• Displays and makes readily available information that is shared, understood, and used by an organization.
• Supports the organization's values and the relationship the organization has with customers, suppliers, and stakeholders.

A good performance indicator:

• Is accepted by and meaningful to the customer.
• Tells how well goals and objectives are being met.
• Is simple, understandable, logical, and repeatable.
• Shows a trend.
• Is unambiguously defined.
• Allows for economical data collection.
• Is timely.
• Is sensitive.

Conventional Performance Indicators

Conventional transport indicators mostly consider motor vehicles traffic conditions. Below are examples.

• Roadway level-of-service (LOS), which is an indicator of vehicle traffic speeds and congestion delay at a particular stretch of roadway or intersection. A higher rating is considered better.
• Average traffic speeds. Assumes higher is better.
• Average congestion delay, measured annually per capita. Lower is considered better.
• Parking convenience and price. Increased convenience and lower price is considered better.
• Crash rates per vehicle-mile. Lower crash rates are considered better.

Because they only consider motor vehicle travel conditions, evaluating a transportation system based on these factors tends to favor automobile-oriented improvements over other objectives and solutions. For example, they justify road and parking facility capacity expansion that tends to create more automobile-oriented transport and land use systems, increasing per capita vehicle travel and reducing the viability of walking, cycling and public transit. This increases per capita vehicle ownership and use, increasing resource consumption, pollution emissions and land consumption, and exacerbating the transport problems facing non-drivers.

Comprehensive Performance Indicators

A more comprehensive set of performance indicators that takes into account a wider range of travel modes and impacts can be used to evaluate transportation system quality. These can be selected and modified as needed to reflect the values, needs and conditions of a particular planning situation. Below are examples.

• Commute accessibility - Average commute travel time. Lower is better.
• Land use mix - Number of job opportunities and commercial services within 30-minute travel distance of residents. Higher is better.
• Land use accessibility - Average number of basic services (schools, shops and government offices) within walking distance of residences. Higher is better.
• Children's accessibility - Portion of children who can walk or bicycle to schools, shops and parks from their homes. Higher is better.
• Electronic accessibility - Portion of population with Internet service. Higher is better.
• Transport diversity - Variety and quality of transport options available in a community. Higher is better.
• Mode split - Portion of travel made by walking, cycling, rideshare, public transit and telework. Higher is better.
• Transit service - Quality of public transit service, including coverage (portion of households and jobs within 5-minute walking distance of 15-minute transit service), service frequency, comfort (portion of trips in which passenger can sit and portion of transit stops with shelters), affordability (fares as a portion of minimum wage income), and safety (injuries per billion passenger-miles).
• Motor transport options - Quantity and quality of airline, rail, public transit, ferry, rideshare and taxi services. Higher is better.
• Congestion delay - Per capita traffic congestion delay. Lower is better.
• Travel costs - Portion of household expenditures devoted to transport. Lower is better.
• Affordability - Portion of household expenditures devoted to transport by 20% lowest-income households. Lower is better.
• Facility costs - Per capita expenditures on roads, traffic services and parking facilities. Lower is better.
• Freight and commercial transport efficiency - Speed, quality and affordability of freight and commercial transport. Higher is better.
• Delivery services - Quantity and quality of delivery services (international/intercity courier, and stores that offer delivery). Higher is better.
• Market principles - Degree to which transport systems reflect market principles, including prices that reflect full costs and neutral tax policies. Higher is better.
• Planning Practices - Degree to which transport institutions reflect least-cost planning and investment practices. Higher is better.
• User rating - Overall satisfaction rating of transport system and services by users. Higher is better.
• Citizen involvement - Public involvement in transport planning process. Higher is better.
• Crash costs - Per capita crash fatalities, disabilities and monetized crash costs. Lower is better.
• Planning process - Range of solutions considered in transport planning. Higher is better.
• Health and fitness - Portion of population that regularly uses active transport modes (walking and cycling). Higher is better.
• Community livability - Degree to which transport activities increase community livability (local environmental quality). Higher is better.
• Cultural preservation - Degree to which cultural and historic values are reflected and preserved in transport planning decisions. Higher is better.
• Horizontal equity (fairness) - Degree to which prices reflect full costs unless a subsidy is specifically justified. Higher is better.
• Progressivity - Degree to which transport policies make lower-income people relatively better off. Higher is better.
• Mobility for non-drivers - Quality of accessibility and transport services for non-drivers. Higher is better.
• Mobility for people with disabilities - Quality of transport facilities and services for people with disabilities, such as wheelchair users and people with visual impairments. Higher is better.
• Nonmotorized transport - Quality of walking and cycling conditions. Higher is better.
• Climate change emissions - Per capita fossil fuel consumption, and emissions of CO2 and other climate change emissions. Lower is better.
• Other air pollution - Per capita emissions of "conventional" air pollutants (CO, VOC, NOx, particulates, etc.). Lower is better.
• Noise pollution - Portion of population exposed to high levels of traffic noise. Lower is better.
• Water pollution - Per capita vehicle fluid losses. Lower is better.
• Land use impacts - Per capita land devoted to transportation facilities. Lower is better.
• Habitat protection - Preservation of high-quality wildlife habitat (wetlands, old-growth forests, etc.) from loss due to transport facilities and development. Higher is better.

4. Transportation Problems, Costs and Objectives

Below are specific transportation problem or cost that can be used as performance indicators for evaluating transportation system quality. Each problem or cost can also be defined as a transportation improvement objective. For example, if traffic congestion is a problem then reducing congestion can be a transportation improvement objective.

• Traffic Congestion refers to the incremental costs resulting from interference among road users. The resulting congestion reduces mobility and increases driver stress, vehicle costs and pollution. Traffic congestion is considered one of the main urban transportation problems (in this case, "urban" includes suburbs, and even small resort communities during tourist season or other major events), and reducing it is one of the most common transportation improvement objectives. Congestion can be measured in various ways, including roadway Level of Service (LOS), average traffic speed, and average congestion delay compared with free-flowing traffic. The capacity of a road depends on various design factors such as lane widths and intersection configurations.
• Road and Parking Facility Costs. Most communities spend hundreds of dollars annually per capita on roads, traffic management services (such as traffic planning, policing and emergency services) and parking facilities. Strategies that reducing these costs (or at least the growth in these costs) can be considered to provide a benefit. For example, a benefit of transit services improvements is that by shifting travel from driving to transit it reduces the need to provide parking facilities at destinations.
• Consumer Transportation Options and Savings. Transportation Options (also called Transportation Choice or Transportation Diversity) refers to the quantity and quality of transportation services available to an individual or group, taking into account their specific needs and abilities. Consumers tend to benefit from having a diverse transportation system which offers them a variety of travel options. Different transportation modes serve different roles. No mode is optional for all purposes. Increasing transportation system diversity tends to create a more efficient and equitable transportation system, because it allows each mode to do what it does best. This is particularly important for providing basic mobility to people who are economically, physically or socially disadvantaged. Most developed regions of the world are increasingly automobile dependent: Driving is relatively affordable, comfort and safety (although in some urban areas driving speeds are reduced at certain time by congestion), and land use patterns tend to be dispersed, which is accessible by automobile but not other modes. As a result, people who can drive and afford an automobile can generally satisfy their basic transportation needs. On the other hand, non-automobile travel options are often inferior. Walking and cycling is often difficult and dangerous. Most households spend thousands of dollars annually on transportation, primarily automobiles. Strategies that reduce transportation costs, improve affordable travel modes (such as walking, cycling, ridesharing and public transit) or that reduce travel requirements (such as creating more accessible land use through more mixed land use) can provide transportation cost savings to consumers. Savings can be especially large if a strategy allows a household to reduce the number of vehicles it owns or to defer the replacement of an older vehicle.
• Traffic Crashes. Road risk is a general term for the costs to society of road traffic crashes. Traffic safety researchers measure crashes (also called collisions, accidents or incidents), injuries, fatalities and damages. Injuries and fatalities together are called casualties. Many road safety experts prefer the term crash to accident, because "accident" implies a random event, while "crash" emphasizes that such events have a cause (driver error, mechanical failure, poor roadway design, etc.) and so are preventable. Crash costs refer to damages (also called losses) caused by collisions, and costs of crash damage avoidance activities. Total crash costs include both of monetary and non-monetary losses. Monetary costs include damages to vehicles, medical costs, lost productivity due to disabilities and death, emergency services, and expenditures on safety programs and equipment to reduce crash damages. Non-monetary costs include pain, grief and lost quality of life due to crash injuries and deaths, and reduced mobility to non-motorized modes due to crash risk. Road risk represents a major cost to society, averaging hundreds of dollars annually per motor vehicle, more than most other costs associated with motor vehicle use.
• Environmental Impacts. Motor vehicles are major energy consumers and sources of air, noise and water pollution. Transportation facilities (roads, parking facilities, rail lines, ports and airports) and the vehicle traffic they carry also impact the environment by displacing greenspace (undeveloped lands and farms), increasing impervious surface and creating barriers to wildlife movement.
• Community Livability. Community livability refers to the environmental and social quality of an area as perceived by residents, employees, customers and visitors. This includes crash risk, noise, local pollutants (e.g., dust), preservation of unique cultural and environmental resources (e.g., historic structures, mature trees, traditional architectural styles), attractiveness of streets, opportunities for recreation and entertainment, and the quality of social interactions, particularly among neighbors. A livable community directly benefits people who live in, work in or visit the neighborhood, increases property values and business activity, and it can improve public health and safety.