SP3 General road improvements

Introduction

These procedures (SP3) provide a simplified method of evaluating the economic costs and benefits of general road improvements, including: road reconstruction, new roads and structures. They specifically exclude seal extension work (SP4), bridge renewals (SP2) and pavement rehabilitation (SP1). The method is for the evaluation of projects that have a capital cost less than or equal to the limits specified in section 4.2.

The procedures are designed to consider one option at a time. All suitable options for the proposed works should be considered in order to select the optimal solution. In most situations this will involve incremental analysis of the benefits and costs of the different options analysed. A description of all options considered should be described in worksheet 1 and included in the incremental analysis; for all other worksheets, only the details for the preferred option needs to be included.

To use the worksheets it is necessary to determine the traffic growth rate for the project. This can be done either by analysing the traffic count data (for at least the last 5 years and preferably for the last 10 years) or by using the default values in appendix A2.5.

The worksheets use a 10% discount rate and 25 year evaluation period. The procedure assumes that funded projects will be completed in the first year and will be in service by the start of year 2. Where costs are common to the do minimum and the options, they are not included in the analysis. All costs are to be exclusive of GST.

Evaluation summary

Explanation for worksheet 1

Worksheet 1 provides a summary of the general data used for the evaluation as well as the results of the analysis.

The information required is a subset of the information entered into LTP online.

1. Evaluator(s)/reviewer(s): Enter the full name, contact details, name of organisation, office location, etc, of the evaluator(s) and reviewer(s).
2. Project/package details: Provide a general description of the project and package (where relevant), describe the problems with the existing road section and the problems to be addressed.
3. Location: A brief description of the project location including:
   • a location/route map
   • a layout plan of the project.
4. Alternatives and options: Describe the do minimum that is usually the least cost option to maintain the road section in an unimproved state. Describe the options assessed and how the preferred option will improve the road section.
5. Timing: The construction start is assumed to be 1 July of the financial year in which the project is submitted for a commitment to funding.
6. Economic efficiency: Enter the timeframe information, the road and traffic data, identify the existing and predicted traffic speed, the existing and predicted roughness (IRI or NAASRA), and the length of road before and after works.
7. PV cost of do minimum: Use worksheet 2 to calculate the PV cost of the do minimum. This should be the lowest cost option that will keep the road in service. It will provide no improvements.
8. PV cost of the preferred option: Use worksheet 3 to estimate the preferred option PV cost.
9. Enter the benefits values from worksheets 4 (travel time savings), 5 (vehicle operating cost savings) and 6 (accident cost savings). To bring the benefits up to the base date values, use the appropriate update factors supplied in appendix A12.3. The base VOC incorporates the CO₂ costs and no separate adjustment is required.
10. The national benefit cost ratio is calculated by dividing the PV of the net benefits (PV benefits of the do minimum subtracted from the PV benefits of the option) by PV of the net costs (PV costs of the do minimum subtracted from the PV costs of the option).
11. First year rate of return (FYRR) is calculated as the benefits in the first full year following completion divided by the project costs. The first year benefits are calculated by dividing the totals at W, Y and Z by the discount factors used on worksheets 4, 5 and 6 respectively, and then multiplying by 0.91 to get the present value.

Note: the discount factor for VOCs and travel time (see explanation for worksheets 4 and 5) is different to the discount factor for accidents (see explanation for worksheet 6).

Worksheet 1 (79.5 kb)

Costs of the do minimum

Explanation for worksheet 2

Worksheet 2 is used to calculate the PV cost of the do minimum. The do minimum is the minimum level of expenditure necessary to keep a road open and generally consists of maintenance work.

1. The annual and periodic maintenance costs should be obtained from maintenance records and resealing records. If pavement rehabilitation is proposed at some future date as part of the do minimum, then:
   1. it must be tested against the option of continued pavement maintenance in order to establish that it is the true do minimum; and
   2. only the costs of basic sealed smoothing work shall be used in the analysis.
2. Calculate the PV of annual maintenance costs (a) for the do minimum by multiplying the annual cost by the discount factor of 9.52.
3. Schedule any periodic maintenance, according to the year in which this work is expected to be undertaken. Apply the appropriate single payment present worth factor (SPPWF) from table 1 below to determine the PV at time zero. Sum the PV of the periodic costs to determine the PV of total periodic maintenance costs (b).
4. Calculate the PV total costs of the do minimum by adding (a) + (b). Transfer the total to A on worksheet 1.

Table 1 Single payment present worth factors (for 10% discount rate)

Single payment present worh factors table (18.6 kb)

Worksheet 2 (53 kb)

Costs of the options

Explanation for worksheet 3

Worksheet 3 is used to calculate the PV costs of the different options. A separate Worksheet 3 is required for each option evaluated. To convert dollar values from different years to base date values, use the update factors in appendix A12.3.

1. Enter the capital cost (including professional services for design and supervision) of the proposed option. The cost is estimated separately on an estimate sheet, which should be attached to this worksheet. Multiply the cost by the discount factor 0.91 and enter at (a).
2. Enter the cost of maintenance for year 1 at (b). As this is assumed to be the year that the proposed option works are carried out, this cost will commonly be the same as that for the existing maintenance strategy, as per step 2 on worksheet 2.
3. Enter the cost for annual maintenance and inspections following completion of the works. Multiply by 8.57 to get the PV of annual maintenance costs (c) for years 2 to 25 inclusive.
4. Enter the costs of periodic maintenance. Determine which years this maintenance will be required (if at all) and enter the year, estimated cost and SPPWF (from table 1 of worksheet 2). Calculate the present value (estimated cost ´ SPPWF) for each cost and sum these to obtain the PV of the total periodic maintenance cost (d).
5. The annual costs (for years 2 to 25) associated with the improved road section, but not maintaining the capital assets, are specified and multiplied by the discount factor of 8.57 to get (e).
6. 6. The sum of (a) + (b) + (c) + (d) + (e) gives the PV total cost of the option, B. Transfer B for the preferred option to B on worksheet 1.

Worksheet 3 (48 kb)

Travel time cost savings

Explanation for worksheet 4

Worksheet 4 is used for calculating travel time cost savings.

1. Circle the road type.
2. Enter the data required to complete the travel time cost savings calculations. Default values for travel time costs are found in the table 1 below.
3. Calculate the annual travel time costs for the do minimum using the formula provided.
4. Calculate the annual travel time costs for the option using the formula provided.
5. The vehicle speed and route length will be the same for both the do minimum and the project option if the work does not either shorten the route or increase vehicle speeds.
6. Calculate the annual travel time cost savings by subtracting the travel time costs for the option (b) from the do minimum travel time costs (a) to get (c).
7. Determine the PV of the travel time cost savings, C by multiplying (c) by the appropriate discount factor from table 2 below. Transfer the PV of travel time cost savings, C for the preferred optionto worksheet 1.

Table 1 Travel time cost for standard traffic mixes for all periods combined (July 2002)

Table 2 Travel time cost discount factors (DF^TTC) for different traffic growth rates for years 2 to 25 inclusive

Travel time cost tables 1 and 2 (24.7 kb)

Worksheet 4 (46 kb)

Vehicle operating cost savings

Explanation for worksheet 5

Worksheet 5 is used for calculating vehicle operating cost (VOC) savings.

1. Enter the base data required for analysis of VOC savings. Table 1 provides the base VOCs (CB) in cents/km for different gradients and mean vehicle speeds, while table 2 provides roughness costs (CR) in cents/km for different road roughness.
2. Calculate the annual VOCs (a) for the do minimum using the formula provided.
3. Calculate the annual VOCs (b) for the option using the formula provided.
4. Calculate the annual VOC savings by subtracting the VOCs for the option (b) from the do minimum VOCs (a) to get (c).
5. Determine the PV of the annual VOC savings D, multiplying (c) by the appropriate discount factor from table 3. Transfer the PV of annual VOC savings, D for the preferred option to D on worksheet 1.

Table 1 Base vehicle operating costs (CB) including CO₂ - in cents/km (July 2002)

Table 2 Roughness costs (CR) in cents/km (July 2002)

Unsealed road roughness before sealing can be assumed to be 6.5 IRI (»170 NAASRA counts) and 2.5 IRI (»66 NAASRA counts) after sealing. If values higher than 6.5 IRI (or 170 NAASRA) for initial roughness of unsealed roads are used these need to be substantiated.

Table 3 VOC discount factors (DF^VOC) for different traffic growth rates for years 2 to 25 inclusive

Table 1, 2 and 3 (50 kb)

Worksheet 5 (54.5 kb)

Accident cost savings

Explanation for worksheet 6

These simplified procedures are suitable only for accident-by-accident analysis (method A in appendix A6). There must be 5 years or more accident data for the site and the number and types of accidents must meet the specifications set out in appendix A6.1 and A6.2. If not, either the accident rate analysis or weighted accident procedure described in appendix A6.2 should be used. The annual accident cost savings determined from such an evaluation are multiplied by the appropriate discount factor and entered in worksheet 1 as total E.

1. Enter number of years of typical accident rate records at (3) and the number of reported accidents in the reporting period for each of the severity categories at (4).
2. Fatal and serious severity ratio: If the number of fatal and serious accidents at the site is greater than the limiting number specified in appendix A6.1, leave line (5) blank and go to line (6). Otherwise, in line (5) enter the ratio of fatal/(fatal + serious) and serious/(fatal + serious) from the table A6.19 series (all movements, all vehicles).
3. Multiply the total fatal + serious accidents (4) by the ratios (5) to get the adjusted fatal and serious accidents (6) for the reporting period. For minor and non-injury accidents, transfer the accident numbers from (4). To get the accidents per year (7), divide (6) by (3).
4. Enter the adjustment factor for the accident trend from table A6.1(a) in line (8). Multiply (7) by (8) to obtain the accidents per year (at time zero) for each accident category (9).
5. Enter the under-reporting factors from tables A6.20(a) and A6.20(b) in line (10). Multiply (9) by (10) to get the total estimated accidents per year (11).
6. Enter the accident costs for 100km/h speed limit (12) and 50 km/h speed limit (13) for each accident category (all movements, all vehicles) from the table A6.21 series. Calculate the mean speed adjustment for the do minimum [((1) - 50) divided by 50] in (14).
7. Calculate the cost per accident for the do minimum (15) by adding (13) plus (14) and then multiplying this by the difference between accident costs in (12) and (13).
8. Multiply accidents per year (11) by (15) to get cost per accident per year (16). Add the costs for fatal, serious, minor and non-injury accidents in line (16) to get the total accident cost per year (17).
9. Determine the forecast percentage accident reduction for each accident category (18). Determine the proportion of accidents remaining [100% minus the percentage reduction in (18)] and record in (19).
10. Calculate the predicted accidents per year (20) by multiplying the accidents per year of the do minimum (11) by the percentage of accidents remaining (19).
11. Repeat the calculations from lines (12) through (15), in lines (21) through (24) using the option mean speed (2), to obtain the cost per accident for the option (24).
12. Multiply the predicted number of accidents per year (20) by the cost per accident (24) to get the total accident costs per year for each accident category in line (25). Add together the costs for fatal, serious, minor and non-injury accidents to get total accident costs per year (26).
13. Calculate the annual accident cost savings by subtracting the values in (26) from (17). Multiply the annual accident cost savings (27) - or the total from the accident rate or weighted accident analysis - by the discount factor in table 1 for the appropriate speed limit and traffic growth rate to determine the PV accident cost savings. Transfer this total, E for the preferred option to worksheet 1.

Table 1 Accident cost discount factor (DFAC) for different traffic growth rates and speed limits for years 2 to 25 inclusive

Accident cost discount factor - table 1 (29 kb)

Worksheet 6 (91 kb)

BCR and incremental analysis

Explanation for worksheet 7

Cost benefit analysis

1. Under benefits, enter the PVs for the benefits for the do minimum and for each option. Then subtract the benefits for the options from the benefits for the do minimum to get the net benefits for each option.
2. Under costs, enter the PVs for the capital, maintenance and operating costs for the do minimum and each option. Subtract the PV costs for the do minimum from the costs for each of the options to get the net costs of each option.
3. Calculate the BCR by dividing the net benefits by the net costs.

Incremental analysis

1. Select the appropriate target incremental BCR from appendix A12.4.
2. Rank the options in order of increasing cost.
3. Compare the lowest cost option with the next higher cost option to calculate the incremental BCR.
4. If the incremental BCR is less than the target incremental BCR, discard the second option in favour of the first and compare the first option with the next higher cost option.
5. If the incremental BCR is greater than the target incremental BCR, the second option becomes the basis for comparison against the next higher cost option.
6. Repeat the procedure until no higher cost options are available that have an incremental BCR greater than the target incremental BCR. The highest cost option with an incremental BCR greater than the target incremental BCR is generally the preferred option.

Worksheet 7 (65 kb)