Engineering Economic Analysis Practices for Highway Investment (2012)

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.

5 Background Engineering economic analysis applies economic concepts and methods to engineering problems to support decisions on a best course of action. Within highway transportation, these decisions typically involve selection of the preferred alternative among projects or levels of service affecting highways, roads, or streets. Engineering economic analysis provides a way of comparing the economic gains expected from an investment with the cost of that investment; provid- ing an objective understanding of value to be expected for cost incurred. Because the service lives of highway facilities that are properly maintained extend for decades, and the value gained from highway investments and subsequent expendi- tures may not be fully realized until years after the actual out- lays, engineering economic analyses (EEAs) cover a period of time sufficient to capture these positive and negative eco- nomic flows. In contrast with private-sector investments, public-sector projects and services, including those analyzed in highway transportation, do not generate tangible income streams or direct monetary payments as economic gains. Rather, the economic value of a highway project or service is reflected in benefits to the public, typically gauged as reduc- tions in their costs of travel, or in potential costs to the high- way user or the highway agency that are avoided. Avoided costs occur, for example, when an existing level of congestion is reduced, when the potential risk of an accident is removed, when sources of harmful pollution are eliminated, or when potential deterioration of the highway facility is prevented. Engineering economic concepts and methods include, but are not limited to, life-cycle cost analysis (LCCA), benefit– cost analysis (BCA), present-worth analysis, measures of cost-effectiveness, and cost avoidance as a concept of benefit. These may be applied at one or more stages of a proj- ect life cycle, such as planning, project scope development, programming (including ranking, project selection, and bud - geting), resource allocation, best-value procurement, pro j ect design and development [including value engineering (VE) at the preliminary engineering or concept development stage], construction (e.g., analysis of options for accelerated project delivery), and operation and maintenance. Engineering eco- nomic analysis may also be used as a tool following completion of a project or service to infer corrected values of key param- eters. It can provide the framework to synthesize information and knowledge from a completed effort, enabling development of a new analytic tool to analyze similar projects or services in the future. Economic analysis algorithms may be embedded in an agency’s infrastructure management, congestion manage- ment, and safety management systems, or may be part of an overall asset management approach. Analyses of highway investments benefit from EEAs in several ways: • Highway investments provide benefits that extend into the future, typically measured in years or decades. Engineering economic analysis provides the multi-year framework needed to capture these benefits in a fair comparison of benefits to costs. • A level of long-term structural performance can be provided by different patterns of road investment, varying the purpose, magnitude, and timing of capital and maintenance expenditures. Engineering economic analysis provides a way to analyze these alternative investment streams, identifying the most efficient approach to achieving desired performance and road-user costs or benefits. • Budget limits and other constraints may prompt an examination of what level of performance might be sought in a highway investment. Tradeoffs exist among project and corridor location, design concept, level of highway development, maintenance policy, operating policy, and costs and benefits accruing to road users as well as nonusers. Engineering economic analysis pro- vides a way to sort through these options on a level play- ing field, using the common metric of monetary value. • Highway programs consist of different needs and types of projects and services. Tradeoffs exist in the funding of these competing needs, a process state departments of transportation (DOTs) face in programming, budget development and recommendation, and resource allo- cation. Engineering economic analysis can provide information on the consequences of different levels of investment among a diverse set of programs in a con- sistent, monetized framework to help in these decisions. • Highway investments also may entail significant impacts in environment, energy, materials usage, economic vitality, and quality of life, in both monetary and nonmonetary terms. Even when it is not possible to quantify all impacts in dollars, the framework provided by an engi- neering economic analysis can provide a useful point of departure for organizing qualitative as well as quantita- tive information about highway investment options. chapter one IntroductIon

6 • State DOTs recognize their stewardship responsibilities in preserving and operating the significant investment in the existing highway system. Those responsibilities entail informed decisions on how, where, and when to invest public tax dollars to maintain and improve that system. EEA can help at all stages of investment decision making, from long-range planning through best-value bid evaluation, and from VE during initial construction to analysis of alternatives in operations, maintenance, rehabilitation, and reconstruction expen- ditures throughout asset service life. defInItIons The following definitions are used in this report: • Agency costs—Costs borne by a transportation agency for a project or service: typically includes direct and indi- rect costs of planning and design; construction, installa- tion, or service commencement; maintenance; operation; rehabilitation, replacement, or reconstruction; and dis- continuation, abandonment, or salvage if appropriate. • Benefits—Gains, reductions in costs, or costs avoided as the result of performing a project or service. (See also disbenefits.) • Benefit–cost analysis—An analysis comparing the ben- efits generated by a project or service to the costs incurred for the project or service over the period analyzed (the “life cycle”), with results expressed as the ratio of benefits to costs [adapted from AASHTO Transportation Glossary (2009) and Asset Management Overview (2007)]. [Used synonymously with cost–benefit analysis in this report. Results of a benefit–cost analysis, or BCA, are described variously as benefit–cost ratio, B-C ratio, or B/C.] • Cost–benefit analysis (CBA)—Comparison of the costs associated with a specific action to the benefits derived from that action, as compared in an analysis period (the life cycle) [adapted from AASHTO Transporta- tion Glossary (2009) and Asset Management Overview (2007)]. (Cost–benefit analysis, or CBA, is used syn- onymously in this report with BCA.) • Cost-effectiveness—A general measure indicating that a project or service is economical in terms of identifi- able benefits produced for the money spent. The mea- sure is “general” in that benefits may or may not be monetized. For example, an action having an incremen- tal benefit–cost ratio exceeding 1.0, where both benefits and costs are expressed in dollars, may be said to be cost- effective. Actions that maximize nonmonetary benefits; for example, in terms of reduced fatal accident rate per dollar spent, or increase in pavement quality per dol- lar spent, may also be said to be cost-effective [adapted from AASHTO Transportation Glossary (2009) and “Transportation Benefit–cost Analysis” (2010)]. • Disbenefits—Economic losses or increases in costs incurred following performance of a project or service, where benefits might have otherwise been expected. • Discount rate—A percentage rate that accounts for the time value of money when performing an economic analysis of alternatives [adapted from AASHTO Trans- portation Glossary (2009)]. It is interpreted as an opportunity cost of capital; that is, the economic cost of investing money in public works for which no return in direct monetary income is expected (adapted from Winfrey 1969). The discount rate is also referred to in the literature as the economic discount rate and the social discount rate. (See chapter two for further discus- sion of the discount rate.) • Engineering economic analysis (EEA)—An analysis of alternatives for a proposed engineering project or ser- vice to determine the relative worth of net economic gains expected from each alternative in relation to the net economic costs required to produce those gains, all compared for a designated analysis period (adapted from Winfrey 1969). • Economic impact analysis (EIA)—An analysis of the effects that a project or service has on the economy of a defined area, measured by resulting changes in business output, jobs, income, or tax revenue. Positive changes are benefits; negative changes, disbenefits. Although important in the context of local economic prospects, economic impacts are not included in benefit–cost analyses (BCAs) for reasons explained in other sources [e.g., “Transportation Benefit–Cost Analysis” (2010) and Economic Analysis Primer (2003)]. • Financial analysis—An analysis of how to pay for agency projects and services, which encompasses but is not limited to estimates of taxes, fees, and revenues; analysis of options for borrowing and interest payments thereon; consideration of payments or contributions by other organizations or entities; development of agency financial plans (e.g., revenue and expenditure forecasts across projects or programs); assessments of proposed projects and services regarding their eligibility for potential funding sources (“colors of money” analyses); budgeting; and treatment of cost inflation. • Highway user costs—see Road user costs. • Inflation—Discussed in two ways: general inflation and differential inflation: – General inflation—price changes across a broad- based mix of goods and services, often expressed as an annual percentage, although other time periods could be used. – Differential inflation—a price change affecting a par- ticular good or service, which is different from and not reflected materially in the general inflation rate; often expressed as an annual percentage, although other time periods could be used. • Interest—Amount of money paid for use of borrowed money or debt; also referred to as the “rent” or debt ser- vice on a loan. Interest payments are usually expressed as a percentage (e.g., annual or monthly percentage of the total amount borrowed, or of the loan amount or debt remaining).

7 • Life-cycle cost analysis (LCCA)—An economic assessment of competing project or service alternatives, considering all significant costs of ownership (agency costs) and use (road user costs) over the economic life of the project or service, expressed in equivalent dol- lars [adapted from AASHTO Transportation Glossary (2009)]. Also referred to as “whole-life” analysis. An LCCA is in contrast to an “initial cost” or “first cost” analysis, which ignores events and costs following the initial investment. • Road user costs—Costs incurred by personal or com- mercial users of a roadway, typically encompassing costs associated with travel time, vehicle operation, and accidents. [Other cost components may also be included; for example, economic valuations of con- tributions to air, water, and noise pollution; and costs associated with unreliable (or varying) travel times.] • Tradeoffs—Comparisons of alternative solutions and their consequences, typically where these alternatives are generated by reallocating funds among competing programs [adapted from Asset Management Overview (2007)]. These definitions cover key terms used in EEAs generally. Other terms related to specific situations or cases will be explained later in the report, because their definitions and uses are more easily and meaningfully understood in context. As the definitions indicate, this report distinguishes between economic analyses and financial analyses of high- way investments, subjects that both involve streams of dol- lars and therefore can easily become confused in practice. For example, questions may arise in an economic analysis on whether or not to include inflation; whether to use base-year or current-year dollars; the differences between an interest rate and a discount rate; and how to handle funding contributed toward a project by others that reduce the project’s appar- ent cost to the highway agency. Table 1 identifies several of these factors related to project assessment and their inter- pretation in an economic context and in a financial context. Brief explanations highlighting differences between the two analyses are given; further details are covered in subsequent chapters, presenting both recommended guidance and case examples from actual agency applications. It is possible that a project can be economically feasible (it is worth doing), but financially infeasible (it cannot be paid for). The opposite is also true: a project can be economically infeasible (it is not worth the expenditure of taxpayer dollars), but financially feasible (money can be found to pay for it, but it would be a poor use of tax dollars). Table 2 illustrates these and other combinations of economic and financial possibilities to help solidify the differences between the two types of analyses. This synthesis focuses solely on the economic analysis of agency investments. The definitions articulate several types of alternatives that are suitable for economic analyses; for example, road proj- ects, services, and operating policies. Even activities such as data gathering and highway research could be subjects of EEA to analyze decisions among choices. For brevity, all of these options will be referred to simply as “projects” in the remainder of this report. PersPectIves on engIneerIng economIc analyses The concept of an economic benefit resulting from a public investment has long been understood in the U.S. road indus- try. In his textbook on LCCA, Winfrey cites several passages by William Gillespie, a 19th century author of a manual “on the principles and practices of road-making.” Among the citations are the following: . . . Rapidity, safety, and economy of carriage are the objects of roads. They should therefore be so located and constructed as to enable burdens, of goods and of passengers, to be transported from one place to another, in the least possible time, with the least possible labor, and, consequently, with the least possible expense. . . . A minimum of expense is, of course, highly desir- able; but the road which is truly cheapest is not the one which has cost the least money, but the one which makes the most profitable returns in proportion to the amount which has been expended upon it. Source: Quotes of William M. Gillespie cited by Winfrey (1969). Although the nomenclature is somewhat different today, this concept is essentially that of a benefit conferred on road users through the expenditure of public dollars for roads. This notion of benefits justifying costs was eventually codi- fied at the federal level for civil flood control facilities in the Flood Control Act of 1936 (P.L. 74-738, June 22, 1936). The application of a BCA, or equivalent calculation, is now a recognized methodology in many sectors of U.S. public pol- icy, including transportation. Later chapters and appendices provide additional information on the nature of economic- analysis guidance at federal and state levels, and a series of case examples illustrating state DOT application of EEA. Modern applications of EEA to highway systems could be said to have begun in the late 1960s, with the sponsorship by The World Bank of its Highway Design and Maintenance (HDM) Standards study. This study built on active research in road user costs and the emerging technology of computer hardware and software, including programs that addressed highway design, road surface deterioration and maintenance, and highway cost estimation. The result was the Highway Cost Model, a simulation model built on tradeoffs among road design and construction, road maintenance, and road user costs, with the objective to minimize life-cycle costs. This model was subsequently investigated through field studies of different road characteristics and vehicle fleets on several continents, as well as exercises in the economic analysis of road design and maintenance options, funded by The World Bank and other international lending institutions. The World Bank efforts resulted in the HDM series of com- puterized highway analysis systems.

8 Factor Economic Analyses Financial Analyses Remarks Purpose To assess, from an economic standpoint, whether the project is worth doing To determine whether and how project costs can be paid for Monetary measure Constant dollars recommended, calibrated to a defined base year Current (or year-of-expenditure) dollars Refer to FHWA Primers and AASHTO Glossary Interpretation of dollar inflows Benefits to agency and to highway users (and possibly non-users) Funding applied from all sources for which the project is eligible Project-generated revenue stream if applicable Interpretation of dollar outflows Costs incurred throughout the project life cycle, including those for design, permitting and approval, construction, operation, maintenance, and rehabilitation, reconstruction, or replacement Expenditures incurred throughout the project life cycle (see previous column) plus cost of financing (e.g., interest on loans or bonds) and cost escalation or inflation Removal and salvage may also be considered in the project life cycle if appropriate to the category of work. Salvage may reflect a negative cost (i.e., a reduction in cost). Considers general inflation? No, general inflation should be excluded. However, differential inflation related to a given cost item may be considered when substantially different from the general inflation rate (e.g., a differential inflation in specific materials or energy costs). Yes. General inflation affects budget costs and may also affect tax revenues if taxpayer behavior is price-elastic. Differential inflation should also be considered to include possible constraints on materials or energy supplies, and changes in technology affecting price. Representation of time- dependent effects on dollar streams Addressed through a discount rate reflecting the opportunity cost of capital or a time value of money It is recommended that the discount rate not include inflation. Addressed through a rate of inflation reflecting the change in purchasing power of a dollar calibrated to a base year If borrowing is involved, an interest rate captures the charge for borrowing to help fund the project. Refer to chapter two for interpretations of the discount rate and OMB and FHWA guidance, and to chapter three for methods of setting the discount rate used by state DOTs. Applicable time period Duration sufficient to establish periods of equivalent performance among alternatives, encompassing initial construction plus later maintenance, operating, and rehabilitation actions as well as a period in which project benefits accrue to the agency and to road users. Duration sufficient to encompass the period for which a firm is responsible for financial performance of a project. The period may encompass the time of project expenditures for initial construction plus later maintenance, operation, and rehabilitation; the period of repayment of borrowed funds, if any; and a period in which revenues are generated by the project. Are partial payments (funding contributions) by others included in project “costs” (e.g., as part of a B/C analysis)? Any payment for this project incurs an opportunity cost— it cannot be used for another purpose. Since economic analyses deal with project worth, all payments by whoever are included in project “costs.” Payments by others reduce an agency’s financial commitment to the project—i.e., they reduce its own budgeted costs. Financial plans and budgets would therefore assign only the reduced cost to the agency. Example methods Net present value; equivalent annual costs and benefits; incremental benefit-cost analysis; incremental rate of return analysis Cash-flow analysis of pay-as- you-go financing; repayment analysis for bonding or loans. See report text (chapter two) for references to economic methods, and chapter three for case examples. Note: OMB = Office of Management and Budget. TABLE 1 COMPARISOn OF ECOnOMIC AnD FInAnCIAL AnALySIS FACTORS

9 Work proceeded through the 1970s to broaden applica- tions of computerized systems to life-cycle economic analy- ses of highway investments, including developments in road preservation (e.g., pavement management and bridge man- agement systems), mobility (e.g., urban travel demand mod- els, intercity surface transportation planning models, and congestion models), and safety (e.g., work zone safety mod- els). Several case examples in chapter three discuss software currently used by respective agencies to generate economic results, illustrating the mature products that have resulted from this history. Computerization of life-cycle economic calculations has not only permitted economic analyses to be done efficiently, but has also facilitated additional capabili- ties in risk analysis by speeding the production of sensitivity and scenario analyses, Monte Carlo simulations under risk and uncertainty, and bracketed sets of analyses (all of these to be explained in chapter two). Today there is a renewed interest in economic analyses that is driven by the increas- ing focus on performance accountability as well as experi- ments with new methods of nationwide project competition for funding [specifically the FHWA’s TIGER (Transporta- tion Investment Generating Economic Recovery) grant pro- cess, which likewise will be covered in chapter two]. This synthesis updates NCHRP Synthesis 142: Methods of Cost- Effectiveness Analysis for Highway Projects (Campbell and Humphrey 1988). This history notwithstanding, research has shown that there is a good deal of variability nationwide in how state DOTs now use the information produced by EEAs, and at what organizational levels. The value of economic con- cepts and methods—in terms of the discipline and rigor they impose on structuring a solution, their analytic capability to address a number of practical problems, and the insights they provide to decision makers—is not always appreciated or understood. Underlying these generalizations is a varied set of practices: • Many pavement management systems (PMSs) have cost-estimation algorithms that forecast agency costs for pavement maintenance, rehabilitation, and recon- struction. Some PMSs also include road user costs, which forecast the economic costs of congestion delays in work zones. This user-cost computation adds a pre- TABLE 2 ECOnOMIC VERSUS FInAnCIAL ASSESSMEnTS OF CAnDIDATE PROJECT SOLUTIOnS Financial Feasibility Economic Justification Financially Feasible Financially Infeasible Economically Justified Solution is economically worth doi ng. Its benefits justify its cost. Am ong the alternatives considered, the solution maximizes benefits to the public. Solution is financially feasible; i.e., funding is available in the amount and ti mi ng needed to pay for the candidate project, including anticipated cost inflation. Im plication: with good ma nagem ent of delivery, a worthwhile project can be co mp leted for the available budget. Solution is economically worth doi ng. Its cost s are justified by its benefits to th e public. However, funding is not sufficient to cover estim ated costs including inflation, or the candidate project is ineligible for funding in the amount and schedule needed. Implication: while the solution would be worth im plem enting, it cannot be paid for given the current design and funding forecast. The candidate project should not be recomm ended. Other solutions to the need/problem that are feasible financially should be explored. Economically Not Justified Solution is economically not worth doi ng. Its benefits do not justify its cost. Unless justified by other, noneconom ic considerations the project could be seen as a waste of taxpayer money. Funding is available to support the candidate project if it were worthwhile to do. Implication: consider revisiting the original need/problem to explore other solutions that are stronger econom ically; i.e., that increase benefits or reduce costs. Ot herwise, consider redirecting the funding to viable project candidates that address other needs. Solution is neither economically nor financially defensible. Even if there were other, noneconom ic reasons to consider the solution, funding in the am ount and ti ming needed is not available. Implication: reassess the original need/problem to gauge its priority relative to other needs. If priority is relatively high, develop new, econom ically viable solutions and consider other financing options (including innovative funding mechanism s or redirecting funding from lower priority project candidates) to fund the solution. Otherwise, m ove on to other needs and solutions.

10 mium to the cost of pavement repairs, encouraging strategies that provide longer-lasting pavement per- formance. Analytic tools have also been developed for pavement type selection, a consideration in pavement design. Type-selection analyses appear to be the most widely accepted, consistently applied demonstrations of LCCAs in U.S. highway program practice. One of the case examples in chapter three presents survey find- ings by others on this topic and reviews the type-selection practices of two state DOTs. • Other highway infrastructure assets are not as widely subjected to decisions based on economic criteria, even when relevant management systems include built-in life-cycle analyses. NCHRP Synthesis 397 found that although agencies do use economic methods to varying degrees in managing bridge programs, overall the prac- tices do not represent wide use, particularly at senior management levels (Markow and Hyman 2009). • Regarding other highway assets such as signs, signals, pavement markings, culverts, sidewalks, and roadway lighting, NCHRP Synthesis 371 found that LCCAs are performed to some degree on a case-by-case basis to evaluate alternatives in components or materials. Sev- eral areas of potential improvement include a need for more definitive and reliable data to support LCCA of these assets, a need for measures of benefits and other impacts of decisions, and incorporation of LCCA within decision-support tools (Markow 2007). • A number of agencies apply BCAs to safety improve- ment projects (Hanley 2004). The challenges in ana- lyzing the economics of safety projects are to develop realistic forecasts of accident frequencies and the con- tributions of safety projects to reducing these frequen- cies, and to quantify the economic costs attributable to different severities of collisions. • In its review of capital programming and project selec- tion methods, NCHRP Synthesis 243 found that 70% of agencies responding to that survey applied BCAs, and more than 50% reported using other cost-effectiveness methods. However, the programs or projects to which these methods were applied differed among agencies and did not represent a consistent pattern of use. The tendency was to use benefit cost on major capacity additions, other high-cost projects, and safety projects. Cost-effectiveness methods were used across a wide range of project categories, with no single one standing out nationwide (neumann 1997). This study’s Scope of Work summarizes the current situa- tion as follows: “There are [U.S.] transportation agencies that are proficient in integrating economic analysis of their invest- ment options into their asset management strategy using a variety of tools and processes. However, other agencies lack the resources, guidance, and understanding to perform such evaluations.” Case examples in chapter three describe success- ful state DOT applications of EEA across a number of decision points in project and program development and delivery. study aPProach The Scope of Work has specified the type and range of inves- tigations to be conducted in this synthesis as follows: The project has identified and described current practices for per- forming EEA by U.S. state transportation agencies to evalu- ate highway investment decisions. Information that has been gathered includes the following: • Current practices in applying EEA in the decision- making process, such as analyses for benefit cost, life- cycle cost, cost-effectiveness, cost-avoidance, and economic aspects of asset management. • Current guidance on how to perform EEAs correctly and efficiently within the transportation arena. • The level of the highway system at which such prac- tices are used; for example, in an individual highway project-, corridor-, program-, or network-level of deci- sion making. • Identification of the stages of planning, programming, project development, and project delivery in which an economic analysis is performed. • Measures used in assessment; for example, benefit–cost ratio, net present value, return on investment, or other measure. • How the analysis influences the decision process. • Who performs the analysis: agency personnel, consul- tants, or other parties? • Recent case examples of the use of EEA at various stages of decision making. Data collection focused on state transportation agencies that perform highway network and/or project-level economic analyses as part of their normal decision-making process. Information was gathered through literature reviews and web searches, including those covering international prac- tice. Input on potential case examples was also solicited from the synthesis topic oversight panel and members of the TRB Transportation Economics Committee (ABE20) and the TRB Asset Management Committee (ABC40). Interviews were conducted with candidate agencies, complemented by addi- tional literature reviews and web searches. Interviews were also conducted with agency representatives knowledgeable of current engineering economic practices, particularly at FHWA. A further effort to identify potential case example candidates consisted of a screening survey. The screening questionnaire was sent to the AASHTO Standing Committee on Highways (SCOH) member in each state, with a copy to that state’s AASHTO Research Advisory Committee (RAC) member. A corresponding questionnaire was also sent to the FHWA division office in each state. This report summarizes the findings of these investi- gations. It identifies methods and techniques, business processes, and agency resources now being used for EEA. The emphasis is on state DOT practice, although interest- ing and instructive examples from other agencies have been

11 included. The focus is on innovative, unique, or comprehen- sive applications of EEA for highway investments specifi- cally, recognizing that corresponding examples exist for other surface transportation modes such as rail and transit. The case examples in chapter three are the focal point of this report. They illustrate not only the application of engineering eco- nomic methods to various decisions in highway investment, but also the particular practices used by agencies in build- ing such analyses; for example, compiling data, selecting a discount rate, accounting for risk or uncertainty in estimates, and defining alternatives. As such, they satisfy a majority of study objectives set forth in the Scope of Work. This use of case examples as the primary means of documenting current practice is in contrast to that of many other nCHRP synthe- ses, which typically provide a nationwide summary of exist- ing practice among a large sample of state DOTs together with a comprehensive explanation of conventional meth- ods, procedures, and analytic tools. The body of literature on EEA is extensive and it would be difficult in a report of this size and scope to treat every relevant topic exhaustively. Instead, brief descriptions of the most important topics with references to other sources have been provided for conven- tional methods and tools (refer to chapter two). The report also describes work now in progress that may lead to future advances in the state of practice and expanded application of economic methods. Existing gaps in current knowledge have been translated into recommendations for future research. synthesIs organIzatIon This synthesis report is organized as follows: Chapter two presents information on guidance and methodology related to EEAs, including sources providing national-level guidelines, references to useful texts, a discussion of international usage of these techniques, results of the survey conducted under this synthesis plus survey results completed by others, and discussion of the challenges in implementing EEAs. Chap- ter three presents a series of case examples illustrating the application of these methods to a range of highway investment decisions. Each case includes agency-level context, relevant data and analytic tools, and roles of eco- nomic analysis within business and decision processes. Chapter four discusses the benefits of implementing engi- neering economic methods, organizational capabilities help- ful in promoting wider and more effective use of these methods, and factors instrumental in creating a supportive organizational culture. Chapter five concludes the report. A list of abbreviations and acronyms used in the report precedes the References and Bibliography. Appendix A contains the questionnaire used in the screening survey. Appendix B contains the interview guide used in case exam- ple development. Appendix C lists survey participants: state DOTs and FHWA division offices. Appendix D compiles relevant federal laws specifying the use of BCA for high- way investments.