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2 The 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

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3 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. Table S.1. Freight investment stakeholder types. 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

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4 Stakeholder 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:

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5 Table S.2. Interest/perspective of stakeholder types. Interest/Perspective Category 2 Category 3 Category 1 (Indirect (Major Category 4 Stakeholder Type (Direct Financial) Financial) Nonfinancial) (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. 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

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6 Table S.3. Capacity enhancement project types. 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 Improving/streamlining logistics services Consolidation Improving efficiency of cross-modal transfers Ensuring interoperability of technology applications Developing shared-use corridors allowed. 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.

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7 Table S.4. Project scales and sample project types. 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 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

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8 investment 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 Table S.5. Stakeholder types and benefits. Type of Beneficiary Asset Service End Other Benefit Category Provider Provider User Impacted Party 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 More Important

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9 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