Being Prepared for IROPS: A Business-Planning and Decision-Making Approach (2014)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

1 This guidebook presents a business-planning approach that can be used to prioritize the funding of airport improvements designed to mitigate the disruptive impacts of irregular operations (IROPS). The guidebook describes the principles of business case analysis and provides practical guidance on how to implement an approach based on decision theory. This approach uses the analytic hierarchy process (AHP) methodology to evaluate the effectiveness of the proposed improvements. Instead of assigning monetary values to benefits and costs, as is the case in traditional benefit-cost analyses, this approach combines subjective evaluation with metrics used in traditional business case analysis. The guidebook comes with a CD-ROM that contains an accompanying decision support tool called IRIS (for IROPS Investment Support). Created with Microsoft Excel, this tool can be used by airports to implement the proposed business-planning approach and supports the evaluation of a maximum of five IROPS events with up to five mitigations each. The tool is designed for use at a broad range of airports, from general aviation airports to large hubs. Use of the IRIS decision support tool requires no formal training in AHP or business planning, and it requires no software other than Microsoft Excel. Background IROPS events can have a substantial impact on airport operations and the orderly flow of passengers and freight through the air transportation system. Recent regulatory attention on IROPS has resulted in requirements for the development of contingency plans for extended tarmac delays. An established and growing body of best practices exists for operational preparedness for IROPS; however, no literature addresses how to evaluate investments in IROPS-related mitigation initiatives. Traditional business-planning methods, notably the benefit-cost analysis, provide established methods for determining the economic value of proposed airport improvements. The existing guidance on airport business case analysis focuses on capacity projects, however, and may not be suitable for IROPS-related investments. Additional reasons why a new approach is needed include the following: • Conducting a benefit-cost analysis for an IROPS mitigation initiative is labor intensive, especially if several possible IROPS events must be considered. • Quantifying benefits is difficult, given that IROPS events are associated with an unusu- ally high level of uncertainty. • Not all benefits of IROPS mitigation initiatives can be expressed in monetary values, which is a requirement for computing a benefit-cost ratio. S U M M A R Y Being Prepared for IROPS: A Business-Planning and Decision-Making Approach

2 Being Prepared for IROPS: A Business-Planning and Decision-Making Approach • Airport activity metrics used for benefit-cost analyses focus on the use of averages, which may not capture the volatility in activity during IROPS events. Approach The proposed decision-making approach is conceptually similar to the benefit-cost analysis in that the approach quantifies benefits and compares the resulting values against lifecycle costs. In the approach presented in this guidebook, however, benefits are not expressed in monetary terms. Instead, they are computed as a function of the likelihood of the associated IROPS event, the potential severity of the disruptive impacts, and the effectiveness of the proposed mitigation. The effectiveness, in turn, is evaluated using AHP— a method that provides a structured path for incorporating subjective evaluations. The objective of AHP is to elicit the stakeholders’ true preferences, avoiding some of the weak- nesses normally associated with using subjective input. The proposed decision-making approach presents a hierarchy of evaluation criteria to the user for assessment. The hierarchy consists of criteria grouped into three categories: strategic challenges, user benefits, and tactical complexity. Using pairwise comparisons, the stake- holders’ priorities among these competing criteria are determined and quantified as weights. The individual criteria are then evaluated subjectively using five-step scales. The results from this evaluation are combined with the weights from the pairwise comparisons to compute an overall effectiveness score for each mitigation initiative. The proposed methodology has several advantages. It allows for the quantification of intangible benefits that are normally difficult or impossible to monetize using traditional methods. The approach combines subjective evaluations that draw on the expertise of the airport staff with objective, quantitative measures such as lifecycle cost. The use of pairwise comparisons reduces the bias that is otherwise possible when relying on subjective evaluations. The use of pairwise comparisons also increases differentiation in the evaluation of the effective- ness criteria, which improves the quality of the results. Decision Support Tool The business-planning methodology described in this guidebook has been implemented in the IRIS decision support tool. The IRIS decision support tool is a stand-alone software module developed for use in Microsoft Excel. The IRIS user interface presents a visual map that guides the user through a series of wizards, one for each step in the process. This map creates a structured path through the input requirements. IRIS is designed for users without any background in business planning. The tool includes support for “What if?” analysis, and for saving, exporting, and printing the results and associated input tables. Explanations of the required inputs are provided in the software and are described in more detail in the IRIS User Guide (Appendix B). The main output of the IRIS decision support tool is a summary report that lists the mitigation initiatives in rank order from highest to lowest value. This table can be used to prioritize the airport’s use of funding intended to mitigate IROPS events. The summary report contains the scores used to determine the ranking, including the benefit score and its subcomponents; the impact and effectiveness scores; and a cost score computed from the lifecycle costs. Separate tables document the inputs provided by the user. These tables can be used as back-up material to help justify the investment recommendations made with the assistance of the decision support tool.

Summary 3 Findings An airport outreach effort was conducted as part of ACRP Project 10-14. This effort consisted of a broad-based airport survey, structured interviews, and a demonstration project to validate the decision support tool. The survey responses indicated that the majority of airports do not have a formal process for IROPS-related business planning. The responses also confirmed that airports perceive a need for a business case analysis methodology for IROPS-related investments, although the perceived need varied by airport size. Larger airports expressed a stronger need for formal business-planning processes for IROPS invest- ments than did smaller airports. More than two-thirds of airports indicated a need for a decision support tool to support their IROPS investment analysis. In the demonstration project, four airports were selected as participants, representing a range of geographic location and airport size. Individual familiarization sessions were held with each airport. The airports then used IRIS during the demonstration period, exploring both a structured example and business cases of their own choosing. A formal assessment instrument was used to evaluate the features, usability, and effectiveness of IRIS. Three airports completed the demonstration project and submitted completed assessment instruments. A fourth airport participated in the demonstration but was unable to complete it within schedule because of resource constraints. Although the number of participating airports was small, there was unanimous agreement among the participants that IRIS was effective in meeting the airports’ IROPS business-planning needs and that they likely would use the tool. Feedback from the demonstration project and internal testing were used to make changes to IRIS with a focus on enhancing usability. The use of pairwise comparisons represented a particular challenge to implementation in IRIS. The inputs from the pairwise comparisons must be logically consistent; otherwise, an error is generated. IRIS includes a validation process that checks for logical consistency, but manually identifying and correcting the comparisons occasionally proved difficult for the user. To solve this challenge, an optional feature was added that, in the case of an error, enables the user to elect to have the user inputs adjusted using an iterative process that eliminates any logical inconsistencies. The threshold for validating logical consistency was also relaxed slightly to reduce the likelihood of the error occurring. This project is only a first step in providing best practices and tools for business planning for IROPS, but it has resulted in several significant findings. These findings include the following: • An accepted body of knowledge supports the operational preparedness required to handle IROPS events, but almost no literature exists on business planning for related mitigation initiatives. • A confirmed need exists for business-planning methods to support investment decisions related to IROPS mitigations. • The use of decision theory allows for rapid and effective assessments of the value of IROPS mitigation initiatives by combining subjective evaluations with objective business case analysis metrics. • The proposed business-planning methodology allows for the estimation of benefits under high levels of uncertainty and supports the quantification of intangible benefits. • Pairwise comparisons can be used to reduce biases and increase differentiation between evaluation criteria but can lead to implementation challenges that must be addressed.