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13 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 Table S.6. Importance of analysis tools to freight investment stakeholders. Tool Types Carrier Cost Shipper Transportation Economic Stakeholder Strategic and Cost and System Development Financial Risk Types Planning Performance Performance Efficiency Impact Impact Assessment Asset Provider Service Provider End User Other Impacted Party Key: Less Important More Important

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14 Figure S.3. Typical example of a stakeholder benefit and cost allocation. 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

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15 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

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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.