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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2011. Framework and Tools for Estimating Benefits of Specific Freight Network Investments. Washington, DC: The National Academies Press. doi: 10.17226/14600.
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S U M M A R Y Introduction and Background Over the last several years, freight planning and investment activities have evolved consid- erably. The previous 10 to 15 years saw states and metropolitan planning organizations (MPOs) undertaking efforts to learn about freight movements, freight stakeholders, and freight impacts and to more explicitly incorporate freight-related issues within existing trans- portation planning and programming activities. As a result, these public-sector agencies are now more aware of how freight movements impact the condition and performance of their systems and how improving freight efficiency can impact business attraction and retention efforts, regional and state economies, and quality of life. Now, many states and MPOs have moved beyond the planning stage and are interested in how to address freight-specific needs and implement improvement projects. These agencies are considering where and how it makes sense to invest public dollars in freight improvement projects, who should be involved, and how risks and rewards should be allocated. Attitudes and activities among private-sector freight investment decisionmakers have evolved, as well. Railroads, for instance, have shown a willingness to partner with public-sector entities to make system investments that have demonstrable public and private benefits. In addition, there is increasing interest by private infrastructure developers and concessionaires in making freight transportation investments that promise favorable returns to shareholders. These and other freight stakeholders have begun to realize that freight system investments must involve partnerships between the public sector and the private sector, among a variety of different private-sector entities, and across public-sector jurisdictions and agencies. Devel- oping and sustaining these partnerships require analytical tools that can provide insights into the nature and allocation of freight benefits and costs, as well as how they accrue across modal, jurisdictional, and interest (public/private) boundaries. The NCFRP research project described in this report, NCFRP Report 12: Framework and Tools for Estimating Benefits of Specific Freight Network Investments, developed such a tool. Through the identification of best practices, interviews with public and private freight stake- holders, and an assessment of the data and methods used to evaluate freight investments, this project has developed a Freight Evaluation Framework that represents an integrated analyti- cal approach to supporting and evaluating complex freight investment decisions. This Frame- work defines a wide range of public and private benefits and impacts of freight infrastructure investments and identifies the tools and supporting data necessary to evaluate these benefits and impacts. The Framework is capable of handling projects that span all of the different freight modes and is able to assess benefits from a variety of project types and scales. It distin- guishes how benefits and impacts are evaluated at the local, regional, state, and national level; and in so doing, it recognizes the role that different public-sector entities play in making fund- ing decisions for freight investments. Framework and Tools for Estimating Benefits of Specific Freight Network Investments 1

2The Framework was developed, and is designed to be applied, with the following three main functions in mind: 1. To enhance public planning and decision-making processes regarding freight. State departments of transportation (DOTs) and MPOs are increasingly facing freight plan- ning issues—which by their very nature involve a combination of public interests, pri- vate operator interests, and shipper/industry interests. As a result, freight planners face a growing need to consider the roles and perspectives of these other parties in their public agency decision-making processes, but often are not equipped to do so. The Freight Eval- uation Framework provides a common method to help planners understand the wide range of perspectives and interests in potential freight investments, and to more effec- tively integrate those interests within a decision-making process. 2. To supplement benefit/cost assessment with distributional impact measures. The tra- ditional form of benefit/cost analysis, which compares total benefits and total costs of alternatives, may work for projects that are publicly financed, built, owned, and operated. However, that form of analysis is not always sufficient for freight projects that often require public-sector negotiation with private infrastructure owners and freight service providers. In such situations, there is a real need to consider the distribution of cost bur- dens and benefits among parties, particularly those that have a role in project funding and implementation. 3. To advance public-private cooperation. Often, freight projects can only be implemented if there is cooperation between public agencies and private parties in terms of responsi- bility for infrastructure facility financing, development, operation, and maintenance. That requires some degree of trust that neither party is taking advantage of the other. So, to craft appropriate financial and operating agreements, public agencies and private com- panies need a framework and process that both parties can accept to provide transparency and enable understanding of the concerns of the other. The remainder of this chapter describes the key issues and challenges in evaluating freight investments, and how these challenges were addressed during the development of the Freight Evaluation Framework. An overview of the Framework, along with supporting data and tools that can be used in its application, also are presented. The full NCFRP Report 12: Framework and Tools for Estimating Benefits of Specific Freight Network Investments provides a detailed description of the development, testing, and use of the Framework in assessing freight investments; it also presents case studies illustrating how the Framework can be applied and used for various project types. Key Issues and Challenges in Evaluating Freight Projects Both public- and private-sector freight stakeholders face a number of different challenges when evaluating potential freight investments. The Freight Evaluation Framework was developed to explicitly address these challenges, which are described in this section, within an integrated analytical approach. Addressing the Motivations of Different Types of Stakeholders Many previous research efforts have discussed “stakeholder types” that are involved in the identification, planning, financing, and implementation of freight improvement projects. Typically, these efforts have categorized freight stakeholders as public or quasi-public (DOTs, MPOs, port authorities) and private (shippers and carriers). This structure, however, does

not fully account for the broad range of stakeholders who stand to gain or lose from freight transportation investments, which provides the foundation for determining appropriate ben- efits and impacts. In addition, it does not fully recognize emerging public/private partner- ships and interactions, which are an important (and growing) aspect of freight projects and have blurred the distinctions between public- and private-sector roles. This research resulted in a more nuanced understanding of the types of freight stakehold- ers involved in freight investment decisions, as well as their concerns and interests. This def- inition was critical in understanding the types of benefits about which these stakeholders are most concerned, the methods used to measure them, and how those issues could be addressed within an integrated evaluation framework. In general, freight projects can affect four types of stakeholders that are grouped as follows: 1. Asset providers who develop, lease, maintain, or finance freight investments (both fixed and mobile); 2. Service providers who provide transportation or logistics services for freight shipments; 3. End users who include both shippers/consignees, as well as end customers for finished goods; and 4. Other impacted parties who include neighborhood/community interests, environmental/ land use interests, business interests, and others. Table S.1 describes the typical public- and private-sector roles of these stakeholder types. It is important to note that some freight stakeholders play dual roles. Railroads, for instance, are both asset providers and service providers; commercial real estate developers provide infra- structure and can be impacted by the freight investment decisions made (or not made) by ser- vice providers or end users; and government agencies may be both asset providers and impacted parties representing their citizens. Understanding these and other interrelationships is impor- tant when assessing the types of benefits different stakeholders are concerned with at different points in the investment decision-making process. 3 Stakeholder Type Stakeholder Examples Asset Provider State DOT Concessionaire Railroad Financier Commercial Real Estate Developer Port Service Provider Railroad Trucking Company Logistics Provider End User Freight shipper/consignee End customer Other Impacted Party Neighborhood/Community Residents and Property Owners Environmental Resource Agency Chamber of Commerce/Economic Development Agency Commercial Real Estate Developer Table S.1. Freight investment stakeholder types.

4Stakeholder Perspectives It is also critically important to describe the interest points and perspectives of different stakeholder types—essentially, what “stake” these stakeholders have in the success of a freight improvement project. Understanding the perspectives of different stakeholders— and how they can change depending on the type of project and/or role the stakeholder is playing in the project development—is important in developing an understanding of the types of benefits with which they are most concerned and the adequacy of the tools, tech- niques, and processes to measure them. This research identified the following four types of stakeholder interest/perspectives: 1. Parties with a direct financial stake in the development and performance of a freight invest- ment. These are primarily asset providers (both development and ongoing maintenance/ operation) that have a vested financial interest in a freight improvement project. These stakeholders are providing capital (public funding, in the case of a state DOT; private cap- ital in the case of a concessionaire or developer) in the hope of attaining particular goals, missions, or mandates. Without this group’s concurrence on how a proposed improve- ment meets criteria for moving forward, there is no project. 2. Parties that have an indirect financial stake in the result of a freight investment. These stakeholders typically consist of service providers that operate transportation services on freight infrastructure, as well as shippers who are the true “users” of freight infrastructure capacity and services. In practice, these two groups are connected because service carriers pass on a significant share of their net costs to shippers. Together, these parties have a finan- cial interest in the project outcome, but no direct investment stake in the project itself. However, the interests of these parties are an important consideration in making invest- ment decisions, because impacts and benefits to these stakeholders can influence the net benefit/cost calculation made by those with direct financial stakes. 3. Parties that have a major nonfinancial stake in the result of a freight investment. These typically include nearby landowners and occupants affected by access, noise, safety, or livability impacts or community organizations or resource agencies concerned about broader environmental impacts related to the construction or operation of facilities. There is a clear path in which the project may affect these parties, and those concerns need to be considered as factors in project design and decision making. These impacts can be quantified in monetary terms, although it is sometimes desirable to consider them in the context of nonfinancial tradeoffs. 4. Parties that have a tangential stake in the result of a freight infrastructure project, either financial or nonfinancial. These stakeholders may include private companies (or a con- sortium of companies) affected by indirect and induced economic growth impacts; or local or regional taxpayers affected by project financing strategies. Many of their inter- ests are likely to be in the form of concerns (that can potentially be addressed) and more general policy interests, rather than measurable direct effects of an individual project. These stakeholders should be kept informed and given the opportunity to air their views and provide input to the decision process. Table S.2 describes the interest/perspectives of different stakeholder types. Evaluating Different Investment Types Previous research has focused on classifying freight projects into the following three types:

1. Infrastructure enhancements, 2. Capacity upgrades, or 3. Operational improvements. However, this structure does not fully account for the sophistication of freight decision- making processes, the relationships among different project types, and the sheer number of stakeholder types that they can include. Despite the growing sophistication of freight investment decisions and partnerships, the justification for any investment is still fairly simple, and can usually be explained in terms of enhanced capacity. In fact, although different types of freight stakeholders may explain it using different terms—for example, carriers may discuss improved reliability, while shippers may talk of a decreased need to hold inventory and a DOT may refer to system efficiency— these stakeholders are all, in essence, concerned with enhancing the capacity of the freight system within the following four typical project types: 1. Physical infrastructure projects enhance the capacity, design speed, or volume of freight infrastructure. 2. Productivity projects increase the size, weight, or volume of freight vehicles. 3. Reliability and density projects affect the utilization or safety of freight vehicles. 4. Integration and consolidation projects allow for more efficient communication or transfer of materials between freight vehicles, infrastructure, and facilities. Dividing projects into these four types allows viewing the many types of freight invest- ments in a simpler context that focuses on effective core functionality, rather than long lists of project types. Sample projects that may be included for different modes for each of these four project types are summarized in Table S.3. Evaluating Projects of Differing Scales The size, scope, and timeline of freight investment projects can vary considerably. In the past, freight projects have been completed by stakeholders working independently and on an as- needed basis—for example, railroads have traditionally prioritized investments and fully funded their most pressing capital projects and rolling stock purchases as their revenue streams 5 Stakeholder Type Interest/Perspective Category 1 (Direct Financial) Category 2 (Indirect Financial) Category 3 (Major Nonfinancial) Category 4 (Tangential) Asset Provider Service Provider End User * Other Impacted Party * End users that are shippers or consignees generally translate all impacts into revenue or cost (Category 2) changes. However, infrastructure improvements also may affect passenger travel, in which case, there may be personal time or convenience impacts that fall into Category 3. Table S.2. Interest/perspective of stakeholder types.

6allowed. However, the increased prevalence of new institutional arrangements and strategies, such as multistate coalitions and public-private partnerships, has created new opportunities to engage multiple stakeholders on projects of varying scope, timeline, and cost. Projects such as the Alameda Corridor, although a rail infrastructure project, are able to bring other public and private partners into coordination with the railroads to plan and finance a large infrastructure project with benefits to numerous stakeholders. The project team has categorized freight investments according to three different scales, described as follows and in Table S.4. 1. Site and local—Projects that involve a single site/facility or infrastructure element, or otherwise benefit freight mobility on a local scale; 2. Statewide and regional—Projects that involve statewide or regional operations or infra- structure, or benefit freight mobility on a statewide or multicounty scale; and 3. Multistate or national—Projects that involve infrastructure or operations that span several states or the nation, or that benefit regional or national freight mobility. Accounting for Different Costs, Benefits, and Impacts The types of benefits received by different stakeholder groups also have been discussed in previous studies and research efforts. However, many of these previous efforts tended to focus only on a handful of stakeholder and project types, typically public-sector transportation plan- ning agencies (DOTs, MPOs) or a single carrier mode (such as benefits from Class I and short- line freight railroads). It is important to identify benefits that are of concern to the broader set of freight stakeholders, including infrastructure developers, investment bankers, industrial site selection analysts, supply chain professionals, and others. In general, the types of benefits that are meaningful to these freight stakeholders can be summarized in two categories: cost factors, and benefit and other impact factors. Project Type Sample Project Types across Different Transportation Modes Physical Infrastructure Expanding marine terminals Increasing highway lane width/adding highway capacity Redesigning interchanges or addressing localized bottlenecks Lengthening railway sidings Developing parallel lanes, tracks, or terminal slots Increasing the number or length of runways Productivity Operating longer combination vehicles or larger vessels Lengthening trains Reliability and Density Enhancing turn-outs and emergency pull-outs Implementing controls for vehicle separation, design, and channelization Using information services to reduce vehicle interactions, plan routing, and avoid congestion and incidents Improving incident management techniques Integration and Consolidation Improving/streamlining logistics services Improving efficiency of cross-modal transfers Ensuring interoperability of technology applications Developing shared-use corridors Table S.3. Capacity enhancement project types.

1. Cost factors include: • Facility capital costs, which tend to be dictated by site location and design, as well as the partners involved in the planning process; • Facility maintenance costs, or the ongoing costs of maintaining a facility to ensure safe operations and upkeep; and • Operating costs, such as labor costs, fuel costs, equipment costs, and the time lost to congestion or to the breakdown of efficient supply chains. 2. Benefit and other impact factors include: • Capacity, which includes alleviating the impact of highway and rail system bottlenecks, as well as the throughput attainable on any transportation infrastructure or facility access point; • Productivity, or the ability to operate a supply chain from start to finish with maximum efficiency; • Loss and damage, or maximizing the safety and security of freight operations and movements to minimize loss to the shipper, carrier, or community; • Scheduling/reliability, or the ability to have predictable and timely delivery of goods, allows for streamlined inventories, less disruption in the manufacturing or supply process, and a more efficient supply chain; • Tax revenue, such as that received by new industrial land development, distribution center, or other freight-intensive land uses; • Wider economic development, such as increased jobs that result from a distribu- tion center, transload, or intermodal facility, as well as multiplier effects to regional economies; • Safety, or minimizing of impacts of freight land uses on neighboring communities, and the safe operation of freight vehicles and facilities; and • Environmental quality, such as mitigation of air or water quality impacts, reduction of truck vehicle miles traveled (VMT), and noise or vibration reduction. Although some benefits, such as safety, are likely to be considered by all freight stakehold- ers, it is certainly the case that each stakeholder group will be interested primarily in just a few benefits or impacts. The scale of the benefits or impacts received by a particular freight 7 Project Scale Sample Projects Typical for Stakeholder Type Site and Local Roadway enhancement projects Enhanced signals or use of Intelligent Transportation System (ITS) Site access enhancements or operational improvements Warehouse/development center site development Terminal expansion at nonstrategic land, air, or marine ports Class I classification yard improvements Statewide and Regional Statewide or regional ITS projects Bottleneck alleviation projects Bridge safety or capacity enhancement projects Multistate or National Trade corridor improvement projects Projects to enhance capacity or throughput at strategic land, air, or marine ports that serve as key national entry points Class I railroad double-tracking projects Table S.4. Project scales and sample project types.

8investment strategy will likely be the determining factors as to whether a freight stakeholder chooses to participate in a freight investment strategy or not. As shown in Table S.5, the primary considerations for most freight stakeholder types can be summarized by about two to four benefits. For example, although it is likely that a service provider considers a wide range of variables when determining participation in a freight investment project, the ulti- mate decision generally is determined by the underlying impact on operating costs and sys- tem capacity. Understanding the primary benefits felt by each stakeholder group has several practical applications. First, by understanding who benefits from a freight improvement project, it is easier to assign responsibility for a project at a level that is proportionate to the benefit received. This is very useful when entering into a project where several different stakeholder types, including carriers, public agencies, and communities, are involved in project planning, approval, and financing. In addition, understanding the benefits received by user groups can help to highlight those situations where there may be a compelling public interest in supporting freight network improvements. Understanding Both Public and Private Decision-Making Processes Differences in the types of benefits considered by different stakeholders necessarily lead to different types of freight investment decision processes. The decision-making process employed by public-sector stakeholders is much more “transparent,” and focuses on build- ing consensus on a wide range of issues. In many situations, the number of stakeholders with a vote at the table is quite large, the multiple objectives (and impacts) of a proposed freight investment often may be muddled, the funding sources and mechanisms are numerous and complex, and the final decision to move forward or not with any given proposal rarely rests Benefit Category Cost Factors Facility Capital Costs Facility Maintenance Costs Operating Costs Benefit and Other Impact Factors Capacity (Includes Bottleneck Congestion) Loss and Damage Scheduling and Reliability Business Productivity Tax Revenue Wider Economic Developments Safety Environmental Quality, Sustainability, or Energy Use Key: Less Important Asset Provider Type of Beneficiary Service Provider More Important End User Other Impacted Party Table S.5. Stakeholder types and benefits.

with a single agency or decisionmaker. This complex process has many positive aspects; for example, it has given more people a voice in what happens in their communities, and it is more “fail safe” than the early days of publicly funded transportation investments. At the same time, this highly participatory process often drags out the timeframe for planning and implementa- tion of any significant improvements, and may ultimately kill a project or program through “death by a thousand cuts.” By comparison, the private-sector process is much more narrowly focused on projects that relate directly to business goals and objectives. The process is much less inclusive, and stakeholders and decisionmakers are brought into the process only to address specific issues (e.g., permits, approvals) or to provide specific areas of support (e.g., funding, incentives). As opposed to the public process, the final decision to move forward or not with any given proposal often rests with a single decisionmaker or a collection of senior executives. In addition, different stakeholders assess benefits at different points in the process. The public-sector process typically consists of the following five key steps: 1. Needs identification—When system needs and deficiencies are identified and potential approaches are identified; 2. Plan development—When transportation vision, goals, and strategies are documented; 3. Project programming—When the process of actually implementing transportation improvement projects begins; 4. Project development—When more detailed design and a more formal assessment of the necessary permitting and approval activities occurs; and 5. Project implementation—When final approval is obtained, detailed construction plans are developed, and right-of-way (if necessary) and construction permits are acquired. Within this process, public-sector stakeholders (e.g., infrastructure providers [state DOTs] and impacted parties) typically begin developing a detailed understanding of poten- tial investment benefits only within the project programming and project development stages. However, with the exception of a handful of states, this benefit assessment occurs after a proposed project has entered the pipeline and is generally used to decide among compet- ing investments (both freight-related and nonfreight-related) to build support for an invest- ment or suite of investments among impacted parties, and/or to allocate costs and benefits across different stakeholder types. Among private-sector freight stakeholders (e.g., railroads, shippers, and industrial site developers), potential investment benefits are assessed as a first step in the process. Railroads, for example, immediately assess a project’s potential impact on operations and revenue, and calculate net present value (NPV) of potential investments very early in the process. Similarly, one of the only factors a financial investor or concessionaire will consider within the decision- making process is financial returns, typically via due diligence studies that involve third-party confirmation of market demand and revenue assumptions. This mismatch on when benefits are assessed within the decision-making process can make it difficult for all types of investment stakeholders to focus attention on freight invest- ments that might have benefits for all parties. Assessing Risk Risk assessment has long been a critical component of private-sector investment decision making. Monitoring safety, regulatory compliance, and emissions is important because the costs associated with risk experience can be very high, and sizable loss can be devastating to smaller firms. Risk management metrics also have a role in customer satisfaction, potential 9

10 market development, and market access. All of the functions in this category can have a direct cost (insurance, employee safety and retention, financial penalties and downtime, etc.). On the public-sector side, risk management techniques are typically included in asset management strategies for pavements, bridges, and other investments. Rarely are risk man- agement techniques employed as part of the investment decision-making activities of these agencies, including freight investments. However, risk assessment has taken on increasing importance among public-sector agencies given recent interest in utilizing public-private partnerships or shared asset activ- ities. The emphasis placed on financial evaluation is typical for private-sector projects, but the degree of analysis devoted to risk assessment stands out, and (according to players in this market) exceeds that to which the public sector is accustomed. Public-private part- nerships provide a route to funding and operating a project by accessing private-sector funds and support. It is a partnership that is marked with differences, however, because the public sector is responsible for promoting projects for the good of its constituents and the private sector functions and operates based on its bottom line. Financially, they have evolved separately and rely on different sources of funds. For the private sector to partici- pate, the public-sector agency should have established policies, processes, and frameworks that facilitate a partnership. A Framework for Addressing These Challenges The Freight Evaluation Framework, shown in Figure S.1, addresses the challenges described above by providing a common approach to evaluating freight investments. The Framework allows stakeholders to evaluate the potential benefits of highway, rail, seaport, and intermodal connector projects on an “apples-to-apples” basis using existing data and analytical tools and in a manner that is consistent with the existing decision-making processes of different stakeholders. The Framework consists of four key elements, described as follows: 1. Identify Benefit Categories and Metrics. As described earlier, different stakeholders value different potential benefits. Although there are a few measures, such as transporta- tion cost savings, crash reductions, emission reductions, and pavement/track conditions, that are important across a wide array of stakeholders, others (such as maintenance sav- ings and asset velocity) will be relevant to a smaller set. It is these unique benefits, how- ever, that are likely to drive that stakeholder’s decision on whether to participate in the investment. The Framework recognizes this and reflects the impact or benefit categories that are likely to be most important to different freight stakeholders in determining whether the project is beneficial from that group’s perspective. 2. Calculate Project Costs. The costs of a constructed facility or implemented technology to the owner include both the initial capital cost and the subsequent operation and mainte- nance costs. Each of these major cost categories consists of a number of cost components. The magnitude of each of these cost components depends on the nature, size, and location of the project, as well as the owning organization (i.e., public or private). 3. Calculate Benefits and Impacts. The Framework addresses benefits and impacts proceeds in two parallel tracks: benefit/cost analysis (BCA) and economic impact analysis (EIA). Benefit/cost analysis identifies the benefits of investing (as compared with not investing), and compares these to the project costs. Economic impact analysis, in contrast, compares the overall economic growth (for example, employment, income, and output) in the speci- fied study region with or without investing. For the purpose of both BCA and EIA, all costs

Assess Risks Capital Costs O&M Costs Other Costs Benefit Cost Metrics (NPV, BC ratio, ROI) Total Costs Economic Total Economic Impact Metrics (jobs, income, output, tax base) Change in Travel Distance Change in Travel Time Change in Travel Quality Change in User Operating Costs (by truck, auto, rail, aircraft, and vessel) Change in Crash/ Incident Costs (by truck, auto, and rail) Change in VMT for existing traffic (truck, auto, rail) Change in delay, average speeds, and reliability (trucks, autos, and rail) Change in Environment Costs (by truck, auto, rail, aircraft, and vessel) Change in Time Costs of Delay/ Unreliability (by truck, auto, rail) Change in Time Costs of Transportation (by truck, auto, rail) Change in Loss/ Damage of Cargo Freight Transportation Investment Direct Economic Impacts (value of out-of-pocket benefits) Total Efficiency Benefits (public and private) ID Stakeholders and Modes Benefit Categories and Metrics Costs Benefits and Impacts Risks Figure S.1. Freight Evaluation Framework.

12 and benefits are measured over the project lifecycle to capture the timing of costs and ben- efits. Then the NPV of the costs and benefits is calculated using the appropriate discount rate. 4. Assess Risks. The incorporation of risk into the Framework represents a significant enhance- ment to the freight investment analysis tools, methods, and processes that have been devel- oped as a part of previous research efforts. Risk in the context of a freight investment refers to downside outcomes due to uncertainty. From a financial perspective, investors or bond- holders may experience weaker-than-anticipated returns on their investment. Weak returns can be the result of weaker-than-expected demand for a facility’s services, or higher-than- expected capital or operating costs, or a combination of the two. From the public’s perspec- tive, the project may not yield its anticipated benefits in the form of congestion mitigation or job creation. NCFRP Report 12: Framework and Tools for Estimating Benefits of Specific Freight Network Investments details the specific structure and use of the Framework in each of these key areas. Existing Data and Analytical Tools The Freight Evaluation Framework was developed to utilize the wide array of analysis tools currently employed by different freight stakeholders. These tools provide different functions at different points in time, as shown in Figure S.2 and described as follows (a detailed descrip- tion of these analysis tools is provided in this report): • Strategic planning tools include tools used to assess long-term needs and deficiencies impacting the transportation system and the lifecycle costs of operating and maintaining transportation infrastructure (for asset providers), and longer-term market analyses, pro- duction, and site selection alternatives (for service providers and end users). • Carrier cost and performance analysis tools are operational analysis tools that estimate the operational performance and cost of freight carrier operations under alternative sce- narios to represent the impact of transportation projects, programs, or policies, and pri- marily are used by freight infrastructure providers and carriers. • Shipper cost and performance models estimate the cost and time characteristics of alter- native freight mode and service options, and are intended to represent the total logistics time, cost, and safety/reliability tradeoffs available for a shipment so that optimal shipping decisions can be made. These tools primarily are used by end users (i.e., the businesses that Demand Forecasting Facility Location Risk Assessment Routing Inventory Scheduling Incident Management Operations Production Planning Operations Planning Performance Evaluation Decades Years Months Days Strategic Tactical Daily Tool Functions Figure S.2. Benefit assessment spectrum.

generate outgoing freight or the consignees who receive the freight and ultimately pay the shipper cost). • Transportation system efficiency models, often defined as benefit/cost analysis systems, are intended to evaluate the benefit and cost streams over a specified period of analysis to determine whether a proposed investment will yield benefits in excess of its cost. • Economic development impact models estimate impacts of transportation projects on income and jobs in the economy, and are primarily used by public-sector (local, regional, or state) transportation agencies to explicitly consider business productivity and eco- nomic development impacts that are not represented by transportation system efficiency tools. • Financial impact accounting tools, typically used by those who have a direct stake in the cost of a project, provide estimates on how the proposal will affect outgoing cost streams, incoming revenue streams, cash flow, borrowing or bond requirements, net profit or loss over time, upside/downside risk, and rate of return. • Risk assessment tools assist private-sector asset providers and end users in understand- ing and quantifying critical areas of uncertainty related to making investment decisions. These tools have varying degrees of importance to different stakeholders, as shown in Table S.6. These existing tools make it possible to estimate costs and benefits for a wide range of freight improvement projects within the Freight Evaluation Framework, often well enough to facilitate further discussion between public and private parties. But one of the primary advantages of using the Framework is its ability to allocate those costs and benefits to affected stakeholder groups in a way that can enable further discussion. Figure S.3 shows an exam- ple of how benefits from a freight investment are allocated among different stakeholders (this report provides detailed case studies on how the Freight Evaluation Framework is applied to actual freight investments). Conclusions The Freight Evaluation Framework has proven to provide a method and process for iden- tifying and evaluating the costs, benefits, and impacts of a wide variety of freight invest- ments. The following sections provide an overview of the most critical conclusions and 13 Stakeholder Types Asset Provider Service Provider End User Other Party Impacted Key: Strategic Planning Less Important Carrier Cost Performance and Shipper Cost and Performance Tool Types Transportation System Efficiency Economic Development Impact More Important Financial Impact Risk Assessment Table S.6. Importance of analysis tools to freight investment stakeholders.

14 lessons learned from the research process. This report also details lessons learned and poten- tial next steps. There are numerous available tools that can be used to assess benefits, costs, and risks of freight investments. What is needed are clear procedures that help analysts and decisionmakers integrate these tools and guide the analysis to ensure consistency from project to project. This research uncovered a wide variety of investment decision-making techniques and tools that currently are used to assess user benefits, conduct return on investment assess- ments, and conduct benefit/cost analysis, economic impact analysis, and risk analysis. How- ever, there is general agreement among both public- and private-sector freight stakeholders that the Freight Evaluation Framework is a very useful way to frame an investment decision analysis. Many analysts find it difficult to wade through the variety of tools and data and determine which are the most appropriate for their particular situation. Many also feel that having a structure that guides the analyst through steps of an analysis would be very useful. Some specific features of the Framework that are particularly useful include the following: • Identification of stakeholders and relationships between benefit categories and stakehold- ers. This helps in allocation of costs among beneficiaries. • Categorization of benefits and relationships among benefits, project types, and modes. This essentially provides a checklist for the analyst to make sure he/she has considered all appropriate benefit types for a particular project type. • Ability to conduct multimodal comparisons, as well as to consider cross-modal impacts of projects. • Incorporation of risk analysis. As described earlier, risk analysis is a critical element of private-sector decision making, but it often is not explicitly accounted for in public- sector analyses. Incorporating risk analysis also can help compensate for uncertainty introduced as a result of data or methodology weaknesses. Allocation of benefits and costs among stakeholders is a critical feature of the Freight Evaluation Framework, but could be enhanced. Initial tests of the Framework uncovered a number of issues related to how freight stake- holders are engaged throughout the application of the evaluation framework, including the following: • Disaggregating benefits by stakeholder type. As described earlier, the Freight Evaluation Framework identifies and classifies stakeholders into different groups and then adds a Figure S.3. Typical example of a stakeholder benefit and cost allocation.

table to assign or allocate the various elements of benefit and cost to specific stakeholder groups. However, in carrying out the analysis, it can become a challenge to effectively assign various classes of benefits to specific stakeholders when there are dynamic inter- actions among them. Tracking the string of payments among facility developers, owners, and operators can be challenging, and estimating their final allocations may require the type of risk analysis that is included in the Framework. • Consistency among stakeholders and benefits. Maintaining consistency with how stake- holders are identified and how they might benefit from particular projects will add value to the Framework. For instance, the results and findings from a study can look very dif- ferent depending on the level of detail in which stakeholders are defined and the degree of depth to which their interactions are traced. Both detail and consistency are required to generate useful results. • Accounting for sensitivity differences. Finally, there are potentially large differences in the sensitivity to cost, benefits, and risk among different stakeholder types that are not all captured within the existing Framework. This becomes important if the Frame- work is used to help rank projects from the perspectives of various stakeholder groups. In some cases, there may be “lexicographic preferences” (i.e., issues of such importance to a particular stakeholder group that outweigh any and all other possible costs and benefits to that particular agent). In such cases, group preferences may include factors missing in the current framework. It may be possible for the framework to be expanded to account for, and incorporate, these types of preferences. Alternatively, it may be necessary to just note cases where the Framework does not (or cannot) encompass other major considerations. Solutions to existing problems are easier to measure and assess than “new opportunities.” The Freight Evaluation Framework works well when there is a clearly defined problem to be solved. In these cases, there are clearly defined goals for the project, benefits that are expected, and “success” elements or performance measures. For instance, the Framework is very easy to apply to capacity enhancement projects that are designed to solve a particular problem or issue (e.g., limited double-stack clearance, truck access through local neighbor- hoods). In these cases, it is straightforward to identify the specific baseline conditions and current costs or disbenefits to be resolved. Application of the Framework becomes more challenging for projects that are designed to take advantage of new opportunities (e.g., “greenfield” projects). In many cases, the primary benefit of these types of new (not expanded) capacity investments where there are no existing users is the ability to accommodate additional traffic. Analytical models used to support the original market justification for such projects were often based on unconstrained forecasts and just assumed that operating conditions would worsen without the capital investment. In the real world, that is often not a realistic assumption. For instance, as congestion rises under a no- build scenario, a variety of different outcomes may occur, and hence may be represented by an alternative scenario as follows: • Cases where, without the new investment, businesses will merely stay in place and endure continuing growth of congestion delays and costs; • Cases where, without the new investment, business activity shifts to other shipping modes, routes, or facilities that can offer a second best solution for remaining in place; or • Cases where, without the new investment, some businesses will simply relocate to another location where costs are not as high as would be incurred if they stayed in place. It is both necessary and possible to define both project scenarios and alternative scenar- ios to represent the expected changes in freight demand patterns and business responses to 15

16 them. In addition, the risk analysis method used in these cases shows how alternative assump- tions about key factors such as freight demand growth can be explored and represented in a report on benefit/cost findings. The Framework could benefit from a more consistent approach to identifying the sources of risk and uncertainty that should be incorporated in the analysis. As described earlier, risk analysis often is focused on the market and cost risks that create the greatest uncertainties, and that could lead to different project outcomes. The market risks may be a result of normal fluctuations (such as business cycles), which may be reasonably predictable, or other random events that are important to consider, but difficult to predict. Guidance could be developed to help identify the most typical sources of each type of risk and uncertainty for different types of projects. In addition, guidance could be provided for how to account for methodological uncertainty in the analysis. Given that there are a number of key performance attributes of freight investments that are difficult to predict with currently available tools and data, having a way to assess the level of uncertainty this introduces into investment decisions would be helpful.

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TRB’s National Cooperative Freight Research Program (NCFRP) Report 12: Framework and Tools for Estimating Benefits of Specific Freight Network Investments provides a framework and tools designed to help estimate the private and public benefits of potential freight infrastructure investments.

The evaluation framework is intended to assist public planning and decision-making processes regarding freight; to supplement benefit/cost assessment with distributional impact measures; and to advance public-private cooperation.

The framework is capable of handling projects that span all of the different modes and able to assess benefits from a variety of project types, including those that are designed to improve freight operations, as well as those that would generate more capacity through infrastructure expansion.

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