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Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor Investments (2017)

Chapter: Appendix E - Benefits, Valuation Methodology, and Valuation Basis

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Page 140
Suggested Citation:"Appendix E - Benefits, Valuation Methodology, and Valuation Basis." National Academies of Sciences, Engineering, and Medicine. 2017. Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor Investments. Washington, DC: The National Academies Press. doi: 10.17226/24680.
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Page 140
Page 141
Suggested Citation:"Appendix E - Benefits, Valuation Methodology, and Valuation Basis." National Academies of Sciences, Engineering, and Medicine. 2017. Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor Investments. Washington, DC: The National Academies Press. doi: 10.17226/24680.
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Page 141

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140 A p p e n d i x e Benefits, Valuation Methodology, and Valuation Basis Benefit Type Valuation Methodology Valuation Basis Transportation Economic Efficiency (TEE) User Benefits-Carriers/Operators Travel time savings (all modes) Factor cost Wages Operating cost changes (fuel/non-fuel) (all modes) Factor cost Fuel/diesel prices; Operating costs Reliability (all modes) Willingness to pay - Stated or revealed preference analysis Value of reliability (truck freight); Value of delay/operating and shipping costs per hour Maintenance costs Asset maintenance costs Observed cost (as included in reports such as the Federal Highway Cost Allocation Study) Maintenance cost per mile TEE User Benefits- Carriers/Shippers Cargo Transit Time Savings Inventory and logistics costs Willingness to pay- Stated or revealed preference analysis Shipping cost per hour; value of freight time Safety Externalities Safety/accident cost savings Willingness to pay Value of statistical life Environmental Externalities Emission cost savings Social opportunity cost- Damage cost avoided per ton Cost per ton Health benefits Damage costs avoided. Other methods like contingent valuation can be used. Cost per ton. Only possible with special concentration- response models, but if used emission cost savings should not be included separately. CO2 (GHG) Social cost of carbon Social opportunity cost of carbon- Discount rate Noise Cost per mile or cost per decibel over a threshold. Hedonic methods to value noise. Cost per mile or benefit transfer methods Security Valuation of the probability of a loss or hazard to affected community from HAZMAT flows along populated freight corridors Avoided economic costs and losses Wider economic benefits (WEBs) for Large Projects-Strategic and Transformative Imperfect competition Price-cost mark up Mark up factor Changes in access to markets and trade flows Productivity gains. Challenges remain Logistical/supply chain benefits Inventory costs/logistical costs remain. Should be considered carefully without duplicating cargo transit time benefits. Trade Volumes (domestic and international) Productivity gains. Challenges Table E1. Benefits, valuation methodology, and valuation basis.

Benefits, Valuation Methodology, and Valuation Basis 141 Table E2. Reliability in freight BCA-international practice. Valuation Component and Use in BCA UK Sweden Netherlands Germany Norway Valuation of Time (Labor) Included in value of time (VOT) Included in VOT- labor time Included in VOT- labor time Included in VOT- labor time - Valuation of Vehicle Not considered cost Included in VOT-vehicle use cost Included in VOT- vehicle use cost - Valuation of Cargo Not considered Included in VOT-cargo. Logistics factor of 2. Inventory carrying cost assuming 20% interest rate and assuming the availability of the logistics system for 3600 hours out of 8760 hours in the year. The logistics factor accounts for cost reduction in buffer stock. Included in VOT-cargo No Average values per trainload (not commodity specific) Valuation of Reliability Not for freight yet logistics factor (2) VOFTR (trucks)= VOT x reliability ratio (1.2) - VOFTR (trucks) = VOT x reliability ratio Freight Reliability Use in BCA Not used in Freight BCA yet. Metrics not discussed. VOFTR recommended along with standard deviation, but use has been limited VOFTR along with expected effect on standard deviation. Alternatively, a 25% markup is used when no effect on reliability can be obtained. No Unclear Included in VOT-vehicle use VOFTR= VOT-cargo x

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TRB's National Cooperative Freight Research Program (NCFRP) Research Report 38: Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor Investments explores how to conduct benefit-cost analyses (BCAs). A BCA is an analytical framework used to evaluate public investment decisions including transportation investments. BCA is defined as a collection of methods and rules for assessing the social costs and benefits of alternative public policies. It promotes efficiency by identifying the set of feasible projects that would yield the largest positive net benefits to society.

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