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Suggested Citation:"Chapter 6 - Using the Framework." 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:"Chapter 6 - Using the Framework." 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:"Chapter 6 - Using the Framework." 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:"Chapter 6 - Using the Framework." 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:"Chapter 6 - Using the Framework." 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:"Chapter 6 - Using the Framework." 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:"Chapter 6 - Using the Framework." 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:"Chapter 6 - Using the Framework." 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:"Chapter 6 - Using the Framework." 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:"Chapter 6 - Using the Framework." 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:"Chapter 6 - Using the Framework." 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:"Chapter 6 - Using the Framework." 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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101 This chapter describes how the Freight Evaluation Frame- work can be used in actual practice to evaluate a wide range of freight-project investment decisions. It begins with a general discussion of the types of situations in which the Framework may need to be used and identifies special con- siderations that are appropriate for each of these situations. In so doing, it also describes the structure of modal modules that have been developed with the Framework in order to take the more general approaches described earlier and make them more specific. This is followed by a series of step-by- step examples of how the Framework can be applied, draw- ing on the case studies discussed in Chapter 5, and providing information about some of the types of tools that are avail- able for use when implementing the Framework for specific project applications. 6.1 When and How the Framework Should Be Applied Types of Applications In discussions with various prospective users during the course of the research for this project, the research team iden- tified three primary applications that were of interest. Each is discussed briefly in the following sections. Making an Investment Decision on a Specific Project This is a decision made by a user on whether or not to invest in a particular project. In most cases, the comparison that will be evaluated with the Framework is a scenario with the pro- posed project and one in which nothing is done (no-build). In some cases, particularly where the decision is exclusively a public-sector decision, there may be a need to compare vari- ous alternatives that may include addressing the issue through an investment in a modal alternative to the proposed project. By providing benefit metrics that are applicable to multiple modes and presenting methodologies for computing benefit metrics for each of the modes, the Framework provides an approach to conducting these multimodal comparisons. As noted in previous chapters, when the investment will include private funding, the framework identifies the types of metrics that typically are used by private entities (such as ROI). The decision processes are fairly well-defined by these organizations to account for costs and benefits that accrue to the investing entity. Public decision criteria are more complex and may take the following factors into account: • Does the project deliver positive net benefits when all public and private benefits and costs are taken into account? • Does the project deliver net public benefits when only pub- lic benefits and costs are taken into account? • Is there a need to weight benefits and costs based on a set of explicit decision criteria? Each of these decision criteria can be applied when com- paring the project to the alternative scenario(s). Prioritizing Investments Quite a few public-sector agencies consulted for this research would like to apply the Freight Evaluation Framework to the prioritization of a number of potential projects beyond a go/ no-go decision on any individual project. The Framework provides a number of advantages for this type of application, as follows: • The Framework can be used to rank a multimodal collec- tion of projects using a single common metric (project net benefits of benefit/cost ratio), focusing on cost-effectiveness to achieve a particular policy or performance objective, or within a portfolio approach. • The portfolio approach might seek to balance the projects in a portfolio by spreading investments across modes, C H A P T E R 6 Using the Framework

geographies, or particular policy objectives. This is facili- tated by the explicit consideration of benefit categories and the relationship between different types of benefits and the stakeholders to whom they accrue. • Another feature of the Framework that can be used in pri- oritizing projects in a portfolio is the risk/uncertainty analysis feature. A group of projects can be analyzed with the same set of risk/uncertainty scenarios and portfolios of projects can be selected that either give priority to those projects that are the least sensitive to project uncertainties or that hedge risk and uncertainty. Allocating Cost Responsibility Freight projects are increasingly the subject of complex public-private funding negotiations and many prospective users have expressed the need to have a tool that can assist them in these negotiations. The feature of the Framework that identifies stakeholders—and the benefits that are most critical to each stakeholder group—was developed as a way of beginning the discussion of who should be responsible for paying for a project. Typically, the initial discussion would be based on allocating costs of a project in proportion to the allocation of benefits, and both public and private stakehold- ers could then reevaluate the investment from the perspective of their own net benefits (based on allocated costs). In addition to the allocation of cost responsibility between public- and private-sector participants, the Framework also allows for consideration of how costs should be allocated for a project that has multijurisdictional impacts. The discussion of project geographic scale earlier in this report indicates how this can be done to show when benefits accrue outside of the immediate jurisdiction of the investment. This can be useful in structuring funding partnerships between state and local governments, as well as in multistate agreements in state/ federal agreements. Framework Modules and Investment Types The Freight Evaluation Framework was developed in mod- ules that are mode-specific, recognizing that the specific bene- fit evaluation tools are often structured this way. However, the Framework also recognizes that many projects will have multi- modal impacts and, as described above, many project evalua- tions may involve multimodal tradeoff decisions. Table 6.1 displays a matrix illustrating the modules of the Framework to be used when evaluating different types of freight investments. The following sections describe the general analytical approach of the highway, rail, port, and cargo handling mod- ules. Later in this section, examples are provided of the types of data and tools that are available to implement the key steps of benefit, cost, and risk assessment. Highway Investments Highway investments will impact both freight and passen- ger travel. Highway investments are expected to lead to travel efficiencies, including reductions in travel time and distance (and thus vehicle operating costs), as well as potential safety and environmental enhancements. These investments also have the potential to improve access to multimodal trans- portation facilities, distribution centers, and economic mar- kets for freight travel as well as work and other destinations for passenger travel. The module within the Framework to be used when assessing highway investment impacts is presented in Figure 6.1. The most direct effect of highway investments 102 Project Type Highway Improvements Intermodal Connector Rail Improvements Grade Crossings Highway to Rail Diversion Port Expansion Impacting Highway and Rail Barge Services Diverting from Highway and Rail Air Impacting Highway Cargo Handling Facility Primary Impact Module Potential Secondary Impact Module Highway Module in Framework Rail Marine Port Airport Table 6.1. Framework modules by investment type.

103 Highway Benefit Module Change in Travel Distance (VMT) Change in Travel Time (VHT) Change in Pavement Quality, Design Standards Capital Costs O&M Costs Other Costs Change in Transportation Costs (Truck, Auto) Change in Delay, Average Speeds and Reliability (Trucks, Auto, and Rail) Total Reduction in Transportation Costs (Public and Private) Benefit Cost Metrics (NPV, BC ratio, ROI) Total Costs Elasticity of Industry Output with Respect to Transportation Cost Savings Economic Simulation Model Total Economic Impact Metrics (jobs, income, output, tax base) Total Reduction in Transportation Costs by Industry Distribution Cost Savings to Industries Increase in Output by Industry Additional Supply Chain Benefits Change in User Operating Costs (by Truck, Auto) Change in Crash/Incident Costs (by Truck,Auto) Change in Environmental Costs (by Truck, Auto) Change in Time Costs of Delay/ Unreliability (by Truck, Auto) Change in Time Costs of Transportation (by Truck, Auto) Change in Loss/Damage of Cargo Figure 6.1. Highway investment evaluation.

is captured through changes in the level of total VHT and VMT by trip purpose. The analytical approach to calculating highway benefits consists of several key steps, described below. Additional detail on the specific tools that could be utilized is provided in Appendix A. • Identify origin-destination patterns for trucks and autos and calculate changes in vehicle miles of travel (VMT) and vehi- cle hours of travel (VHT). This will typically involve the use of travel demand models but in the case of freight analysis may need to be supplemented with data on routed com- modity flows on/through the facility that is the subject of the investment. To the extent that the investment also involves changes in pavement quality or roadway design standards that could lead to reduced loss and damage of cargo trans- ported over the facility, this also should be incorporated in the analysis. • Apply parameters reflecting operating costs per mile and value of time per hour to the VMT and VHT results in the previous step, differentiated by vehicle type and trip pur- pose. Sources for operating costs and value of time can be found in tools such as the Highway Economic Require- ments System (HERS) or a variety of literature on truck value of time. • Calculate total reduction in transportation costs due to highway efficiency improvements by vehicle type and trip purpose. These results are derived from the individual esti- mates of reductions in transportation costs (in dollar val- ues) from the previous step. • Estimate other cost savings, including reduced vehicle oper- ating costs, emissions reduction, safety savings, potential changes in pavement costs, and changes in cargo loss and damage. Guidance for monetizing the nonmonetary bene- fits can be found in a variety of literature but recent guidance was provided in the Transportation Investment Generating Economic Recovery (TIGER) grant programs. • Distribute business-related transport-cost reductions (truck trips, business auto) to industries based on the size of the industry and their demand for trucking services. These transportation-cost savings, along with additional supply chain benefits serve as the direct user benefits for BCA and as input into an economic simulation model to estimate the economic development impacts of the investment. This process results in an estimate of total direct trans- portation user benefits, as well as estimates of total employ- ment, income, output, and tax base expansion impacts. These benefits can be compared to total costs in order to assess the overall return on investment. Rail Investments Similar to the highway impact module, rail investments can result in faster speeds, increased productivity, lower costs, and better access to markets and gateways. Examples of rail invest- ment projects that give rise to these types of benefits include double-tracking, clearance projects that allow for double-stack trains, sidings, signalization, and track upgrades. Rail invest- ments may change time and distance (potentially increasing for some and reducing for others) for both rail and highway traffic. Therefore, the rail module also includes the highway impact module. This is especially important if there is poten- tial for truck-to-rail diversion or vice versa. The Framework module used to assess rail investment impacts is presented in Figure 6.2. The analytical approach to calculating rail benefits consists of several key steps, described as follows: 1. Estimate service and market impacts of rail improve- ment by assessing impacts of improved speed, market share, and reliability. In the best case, this would be done using detailed rail simulation models. However, there is a growing body of literature on how to estimate these benefits using simplified tools such as parametric capacity models. Business-related transport-cost reduc- tions (primarily freight rail) are distributed to industries based on the size of the industry and their demand for rail services. Data on commodity flows for specific rail lines may be able to be estimated with data sources such as the Rail Waybill Sample or other routed commodity flow databases. 2. Estimate additional supply chain and logistics benefits that also may accrue due to improved reliability or cost savings related to reduced shipping costs. 3. Estimate highway system costs and benefits using the high- way module (described above). 4. For the BCA, combine the direct transportation efficiency benefits with project costs to determine the net present value of the benefits. For the EIA, these direct effects serve as input into an economic simulation model to estimate increased business output, employment, income (wages), and tax revenues. Port Investments Investments in airports and marine ports are combined in a single evaluation module. Investments in port facilities are generally aimed at expanding market share via productivity and efficiency enhancements. Growth in trade can be forecast based on how the investments expand capacity and change total costs, where total costs are composed of a combination of travel time/delay, costs, reliability factors, vessel turnaround 104

105 Change in Travel Time Change in Travel Distance Change in Train Size and Weight Change in Operating Cost Change in Capacity Change in Travel Time Costs Change in Asset Utilization Change in Emissions Change in Highway User Efficiencies Using Highway Module Capital Costs O&M Costs Other Costs Total Reduction in Transportation Costs (Public and Private) Benefit Cost Metrics (NPV, BC ratio, ROI) Total Costs Elasticity of Industry Output with Respect to Transportation Cost Savings Economic Simulation Model Total Economic Impact Metrics (Jobs, Income, Output, Tax Base) Total Reduction in Transportation Costs by Industry Distribution Cost Savings to Industries Increase in Output by Industry Additional Supply Chain Benefits Rail Investment Module Figure 6.2. Rail investment evaluation.

time, and port fees and charges. Improvements at ports, including landside connections to major highway and rail routes, may lead to increased market share for the port and lead to increases in total freight volumes in the port region, including both import and export trade flows. Therefore, this evaluation module focuses on two distinct sets of impacts. First, the more localized effects on the volume of cargo and trade in terms of expanding trade-related economic activity (which may be more relevant for local and regional stake- holders as opposed to national stakeholders) are evaluated. Second, it is recognized that port investments may lead to increases in surface transportation traffic for a given region. To capture those impacts, the highway and/or rail investment modules may need to be included within the port module. The Framework module used to assess port investment impacts is presented in Figure 6.3 106 Marine and Airport Expansion/ Improvement Congestion Relief and Reduced Transport Costs Change in Volume of Trade Reduction in Travel Costs to Major MarketsSurfaceTransport Benefits from Rail and/or Highway Module Elasticity of trade attraction with respect to transport time to major markets Percent of Trade Diverted by Cargo Type Change in Port Volumes Mode Split Between Rail and Truck Change in Surface Transportation Impacts by Mode Total Surface Transportation Impacts by Mode Direct Economic Impacts Jobs, Income, Output, Tax Revenue Baseline Forecasts of Total Trade Volumes Number of Jobs per Unit (value, tons, TEU) Change in Employment in Related Industries Direct Transportation Efficiency Benefits Calculation of BCR Total Project Costs Economic Simulation Model Total Economic Impacts Jobs, Income, Output, Tax Revenue Change in Travel Time to and from Major Markets Figure 6.3. Port investment evaluation.

The analytical approach to calculating port benefits con- sists of several key steps, described as follows: 1. Estimate reduced travel times and costs compared to alter- native ports of entry or modes (i.e., highway or rail) based on major freight markets. 2. Estimate mode splits for traffic moving to/from the affected port. A key factor that determines the total reduction in transportation costs from trade diversion is the mode split. The mode split will vary by commodity and market segment and will determine the volume of induced trade handled on the highway and rail systems (which present different per mile costs). The impacts of this increased surface transporta- tion volume is estimated using the highway and rail invest- ment modules. 3. Estimate industry-level and economywide effects by com- bining the effects arising from all of the relevant modes. Cargo Handling Facility Investments Increasingly, states and local governments are being faced with investment decisions related to cargo handling facilities, especially intermodal railyards. Sometimes these decisions are based on a request by a private-sector freight stakeholder or developer; at other times the investments are being pursued as a catalyst for local or regional economic development. What- ever the motivation of the project, it is important that public policymakers undertake a rigorous analysis of the potential benefits, both public- and private-sector benefits. The poten- tial for private-sector benefits will drive the demand for the facility and in turn, the demand will drive the public sector benefits (and in some cases, the disbenefits). As with port investments, investments in cargo handling facilities are likely to have spillover impacts on the highways and rail corridors linking those facilities to markets. Thus, the evaluation of the impacts of these facilities also should include an evaluation of the effects on the surface transportation system. The Frame- work module used to assess cargo handling investment impacts is presented in Figure 6.4. The analytical approach to calculating cargo handling facility benefits consists of several key steps, as follows: 1. Estimate the size of economic activity arising from facili- ties by a combination of trade volumes forecasts as well as findings from qualitative interviews with stakeholders (particularly shippers/end users) throughout the region. 2. For the EIA, estimate the number of jobs at each location based on case study analyses of other inland port/intermodal facilities throughout the United States. Jobs are distributed to industries based on trade activity (i.e., largely transporta- tion, distribution center, and warehousing sectors). 3. Estimate the direct user impacts for highway and rail users. 4. Calculate total economic impacts (including multiplier effects) from increased employment and wages, and changes in travel efficiencies. 5. Calculate improved access to markets derived from improve- ments in freight logistics by applying elasticities to estimate how reductions in travel time to major markets, along with regional competitiveness effects, lead to broader economic development opportunities. Impacts on the surface transportation system are estimated using the framework for highway and rail investments. The output of these analyses will feed into both the BCA and EIA. 6.2 Key Elements of the Framework with Examples of Use In order to help illustrate how the Framework is used, a step- by-step description is provided for the key elements. Examples are drawn from the case studies to illustrate how each step is implemented and the types of data and tools that can be applied. Step 1—Identify Project Type, Modes, and Geographic Scale The first step in using the Framework is to identify the proj- ect type, affected modes, and geographic scale of the project. The project type and affected modes will determine which framework modules should be applied and the types of bene- fits that will need to be evaluated. The Framework classifies project type by the following general categories: • Air impacting highway, • Cargo handling facility, • Highway improvements, • Intermodal connector, • Rail improvements, • Grade crossings; • Port expansion, and • Barge services. Other categorizations may be useful in recognizing that the primary purpose of identifying the project type is to determine the type of improvements being made, the specific perform- ance improvements that are expected, the modes that will be affected, the types of shipments/freight that will be impacted, and the relevant stakeholders. Typically, large freight invest- ments will fall into multiple categories and will affect multiple modes. For example, the Tchoupitoulas Corridor Improve- ment Project at the Port of New Orleans (described in the pre- vious chapter) was primarily a highway improvement project that created a dedicated truckway increasing capacity accessing 107

the port. This also served as a critical intermodal connector improving port access. In addition to the truckway, the proj- ect included the implementation of a chassis pool, warehouse consolidation, and port expansion that increased port capac- ity; and rail track realignment that, in addition to providing general rail operational improvements, eliminated a number of at-grade rail crossings. The project clearly affected highway, rail, and port modes, and would require use of each module in the benefits evaluation. The scale of the project in terms of the area over which investments are being made will affect the type of data and tools that are needed to evaluate the project benefits. The scale 108 Cargo Handling Facility Module Change in Access to Major Freight Markets Productivity Change in Logistics Costs Change in Transportation Time/Delay Change in Trade Related Economic Activity Demand for Facility (Cargo Volumes) Economic Development Potential Size of Cargo Facility Output Effects by Industry Change in Employment by Industry Net Output Effects by Industry Regional Competitiveness and Redistribution Effects Direct Economic Impacts Jobs, Income, Output Tax, Revenue Economic Model Total Economic Impacts Highway Impact Module Rail Impact Module Jobs, Income, Output Tax, Revenue Elasticity of Facility Employment with Respect to Cargo Volumes Output from highway and rail modules Elasticity of Industry Growth with Respect to Transportation Access Figure 6.4. Cargo handling facility investment evaluation.

of freight investments can range from high-level systems proj- ects, such as the Heartland Corridor case study, down to com- munity-level projects, such as the Tchoupitoulas Corridor Improvement case study. In the case of a high-level systems project, benefits are estimated in terms of system-level VMT and VHT impacts and can make use of aggregate measures of impact and project use, which may be obtainable from national data sets. For example, in the case of the Heartland Corridor, data on corridor usage levels, potentially divertible truck traf- fic, and shipper inventory reduction costs all can be obtained from data sets such as the national commodity flow databases and national industry inventory cost data. In the case of a community-level project, more detailed assessment of project impacts using local traffic models (both travel demand models and traffic operations models), along with interviews with local shippers and carriers, is necessary to get an accurate picture of benefits that exist at a much smaller scale. Step 2—Identify Stakeholder Types This is an important step in the Framework and one that distinguishes it from many other approaches to benefit/cost analysis and project evaluation. Understanding who all of the stakeholders are helps focus the analysis on measurement of appropriate benefits and also determines who has an interest in the project when it comes time to allocate cost responsibil- ity. As described earlier, the Framework identifies the follow- ing broad categories of stakeholder types: asset providers, service providers, end users, and other impacted parties. Freight projects often involve varied and complex stake- holder interests that can extend beyond the immediate proj- ect boundaries. Since understanding who the key stakeholders are is an important first step in identifying the critical benefit metrics that need to be considered, some care should be taken with this step. An example is provided by the ReTRAC case study. The case study focused on six stakeholders: Union Pacific (UP) Railroad, Washoe County, the State of Nevada, the City of Reno, regional businesses, and the project area community. It is important to note that since the freight infrastructure investment is a partnership between public- and private-sector agents, stakeholders often hold dual roles. Step 3—Identify and Assess Benefits As noted earlier in this section and in Chapter 4, the analy- sis of benefits of freight investments needs to focus on those benefit categories and metrics that are most important to each stakeholder group because these are the benefits upon which decisions will be based. Determining the relationship between benefits and stakeholder types also is important when project decisions involve allocation of cost responsibility or when the participation of particular stakeholders is essential for the proj- ect to be done (for example, a rail project that has tremendous value to the community and state based on associated eco- nomic benefits may not ever be developed if the railroad that owns the line has no interest in the project—even if the public sector is willing to pay all of the costs). Therefore, the first part of this step involves identifying the critical benefit types and metrics and their relationship to specific stakeholder types. Table 6.2 presents recommended benefit types, metrics, and the stakeholders for whom these benefits are important. Data and Tools Presented below is a summary of some of the commonly used data and tools for assessing some of the most common categories of benefits in freight projects. In general, there are many existing benefit/cost analysis and economic impact analysis tools that provide monetization factors for converting standard transportation user benefits into dollar values. Exam- ples include • Guidance that recently has been issued for the U.S.DOT Transportation Investment Generating Economic Recovery (TIGER) Grant Program. • FHWA has published benefit/cost analysis handbooks for highway evaluation projects that are accessible through the FHWA website. • Many state DOTs require benefit/cost analysis for highway and other transportation projects and have compiled their own tools and monetization factors. These often provide a library of source citations that can be used for further research into monetization factors. • FRA’s GradeDec.Net System includes BCA tools for grade crossing analysis. • FHWA’s ITS Deployment Assessment System (IDAS) is a benefit/cost analysis tool developed primarily for the analysis of ITS investments but does include a library of data for monetizing many standard transportation system benefits. • TREDIS Multimodal Benefit/Cost Module is a proprietary benefit/cost analysis tool that is a product of Economic Development Research Group and was used in several of the case study analyses described in this report. Examples of other data and tools that have been used to ana- lyze project benefits for a wide range of projects are described in detail in Appendix A. A summary of some of the common data used to assess benefits is summarized below. Travel-Time Savings. To estimate route-specific delays in a highway network, travel demand models often are used because they can provide forecasts of changes in VHT as a mea- sure of delay reductions. It is not always necessary to use a travel 109

demand model to estimate delay reductions resulting from an improved facility. In some cases, it may be possible to use cur- rent conditions to calculate speeds without the project and esti- mate future free-flow speeds on the improved facility by applying a forecast of cargo volumes. The difference between the future free-flow speeds and existing conditions can be used to estimate delay reductions. For rail projects, the general approach is to estimate an average speed on a route based on general track rating (aver- age rated speed), train type, and route distance multiplied by either the number of trains or the tons per train to get travel times with and without the project. This may be a function of current values (which can be observed or obtained from par- ticipating railroads) and the project design standards. In a more detailed analysis, train operations can be simulated to obtain changes in train delays. For grade crossing projects, a significant benefit is the reduced delay to vehicles queued at the rail crossing. There are a number of standard formulas for computing delay based on gate downtime (which is itself a function of average speed through the crossing and train volumes and lengths). FRA’s GradeDec.Net tool provides calculation algorithms and data for making these calculations. Grade crossings also may result in reduced delays for the operating railroad, par- ticularly if a number of grade crossings are addressed along a corridor. In this case, benefits would be calculated based on the operating speeds allowed with and without the grade crossing separations and applied to the volume of trains and length of trains experiencing the delay. In cases where a new cargo handling facility is being con- structed, an important benefit may be greater accessibility to a particular cargo market. In this case, estimating the amount of affected cargo and the average distance/travel time to the new and alternative cargo handling facilities can be used to estimate travel-time savings. Vehicle Operating Cost and Shipping-Rate Savings. In addition to travel-time savings, projects also may produce operating cost savings that are a function of reduced VMT. Energy costs are an example of costs that may be a function of mileage rather than time. Energy use per mile can be calculated based on average fuel economy by mode. There are a variety of sources that can be obtained from DOE and EPA to calculate these savings. ATA and the Association of American Railroads (AAR) provide sources for truck and rail operating costs. In a number of the case studies, if shipping from an alterna- tive port or airport was the goal of a project (either by expand- ing capacity at a local port/airport or by improving access to a nearby port/airport) it may be possible to survey the alternative facilities to obtain rates to/from typical origins/destinations to obtain an assessment of potential changes in shipping costs at the new or expanded facility. Inventory and Reliability Savings. Reduced delays asso- ciated with delivery uncertainty can translate into reduced 110 Benefit Type Benefit Metric Public Sector Service Provider Shipper/End User Other Impacted Party Private-Sector Asset Provider Capacity Transportation Cost Savings Safety Crash Reductions Environmental Quality Emission Reductions Scheduling/ Reliability Reliability Improvements Facility Maintenance Costs Pavement/Track Maintenance Savings Loss and Damage Pavement/Track Conditions Productivity Asset Velocity Economic Development Jobs, Income, Industry Output Tax Revenue Tax Base Impact Facility Capital Costs Facility Costs Table 6.2. Benefit metrics by benefit and stakeholder type.

inventory carrying costs. Various benefit/cost analysis tools approach the estimation of reliability benefits differently, but in the case of highway projects, reliability often is estimated as a function of congestion levels (speed or VMT being the appropriate indicator as both can be estimated with a standard travel demand model). New techniques are being developed that measure buffer time, or the amount of time that must be built into a trip to ensure on-time arrival for a desired percent- age of trips. By examining speed variability at different locations as a function of congestion levels, it may be possible to develop a predictor of buffer time. Several studies have made an attempt to estimate the value of inventory costs associated with non- recurrent delay as a function of the type of commodity being shipped. One such approach that was cited in a number of the case studies was the Freight Logistics Factor from the Highway Economic Analysis Tool (HEAT). Modal Diversion. Modal diversion can lead to logistics costs savings for shippers who realize savings by being able to ship by a less expensive mode, but also may result in savings in reduced pavement maintenance costs, reduced emissions per ton-mile, and reduced highway congestion. There are a variety of techniques for estimating potential truck-rail diver- sion. Most require some knowledge of commodity shipments by truck and major origin-destination (O-D) pairs within the corridor of interest and at least some estimate of the capacity for the new modal service to expand its market share for a par- ticular commodity/O-D pair. One tool is U.S.DOT’s Inter- modal Transportation and Inventory Cost (ITIC) Model, described in Appendix A. Safety Benefits. In the case studies, estimates of safety benefits were generally provided for highway projects and grade crossing separation projects. In the case of grade cross- ing projects, a simple approach is based on assuming that cur- rently reported accidents of various types will drop to zero if the grade crossing is separated. An accident rate per train hour at the gate can be estimated from current year data and can be used with forecast train volumes to estimate potential future benefits of the grade crossing separation. In the case of highway safety benefits, a variety of sources provide average crash rates per VMT (for example, these data are available for national averages from BTS). Alternatively, route-specific estimates of crash rates can be estimated from local data sources based on comparable facilities. Emission Reduction Benefits. A variety of sources can be used to estimate an emission factor or rate per vehicle mile to estimate highway emission changes as a function of changes in VMT. These factors are available from standard emission factor models, such as EPA’s MOBILE model. A more sophisticated analysis would take into account changes in vehicle speeds that result from improvements in highway capacity or operations. The emission factor models have the ability to estimate emission rates as a function of average speed or speed bins. EPA also has published data on railroad emission rates per ton-mile assuming a particular duty cycle (or mode of operation). These also do not take into account potential operational improvements that could result from a freight investment. A more sophisticated analysis of railroad emissions benefits would take into account the change in duty cycle and average speed that could be obtained by upgrading track or increasing average running speed and reducing speed cycling. Data on emission rates by power level for different locomotives have been published in various EPA sources. Step 4—Identify Cost Categories and Estimate Costs The costs of a constructed facility or implemented technol- ogy to the owner include both the initial capital cost and the subsequent operation and maintenance costs, as described earlier. Although there are many sources of costs, it is critical to calculate both capital costs (i.e., the expenses related to the initial establishment of a facility) and operations and main- tenance costs (i.e., costs that accrue over the entire project lifecycle). The Heartland Corridor case study in the previous chapter provides a useful illustration of how cost components are cal- culated and included in the analysis. Norfolk Southern had prepared preliminary cost estimates prior to 2005, which did not consider each individual type of improvement and its loca- tion on the corridor. Instead, it used a fixed-unit cost derived from another project for all construction work. In the costing method included within the Freight Evaluation Framework, every type of modification is considered to tailor a cost estimate for improvements for each independent location using prices from contractors currently performing similar work. Step 5—Risk Analysis As described in Chapter 4, the Freight Evaluation Frame- work includes explicit analysis of risk impacts on the invest- ment decision. Assuming that the risk profile does not suggest the potential for catastrophic failure of the project, the risk analysis techniques that should be used will simulate the range of potential outcomes of the benefit/cost analysis given a set of risk scenarios. The major types of risks that will typi- cally be considered are market risks (demand for the project does not meet expectations, thus reducing project benefits) and cost risks (cost overruns or other causes of cost increases relative to initial estimates). In either case, the downside risk will result in lower benefit/cost ratios that might not meet the investment decision hurdle established for the project. 111

The basic technique is to define a set of risk scenarios that bound the likely range of variation in the key risk variables, assume a probability density for this key input variable, and then run various probability-based simulations to determine the probable range of outcome variation. Risk variables are usually developed around a key demand growth rate, cost escalation variable, or other demand and cost variables. An example from the Tchoupitoulas Corridor Improve- ments case study is illustrative of this approach to risk analy- sis. The element of risk is included in the analysis due to uncertainty in future port growth. A close look at the base case benefit analysis indicates that the benefits from the proj- ect depend on both the volume and mix (container versus break bulk split) of port activity. An examination of historic port tonnage and the cargo mix at the port shows consider- able year-to-year variation over the past 15 years. Therefore, there is a risk of insufficient benefit due to uncertainty in future port growth. Uncertainty can come from certain events such as 9/11 or Hurricane Katrina, or be classified as cyclical and random risk (e.g., business cycles, exchange rates, or industry fluctuation). In 1996, after the major section of the truckway was built, cargo volume was 10 million tons. Since volume decreased down to 6 million in 2008 and was forecasted to rise back up to 1996 levels in 2019, a very small growth rate estimate of 0.1% was used in the analysis. To account for fluctuations and uncertainty of cargo growth, a range of 0.1% to 3.0% was used to calculate the upper and lower bounds, as was described in Chapter 5. 112

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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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