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Suggested Citation:"Chapter 4 - Common Costs." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Suggested Citation:"Chapter 4 - Common Costs." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Page 38
Page 39
Suggested Citation:"Chapter 4 - Common Costs." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Page 39
Page 40
Suggested Citation:"Chapter 4 - Common Costs." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Page 40

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37 Financial Costs Total Project Costs The total project cost, or life-cycle cost, is the amount of money a project costs for pre-construction planning and design; required property acquisition; construction of the project; O&M costs throughout the life of the project, including periodic repairs or replacement costs; and disposal or decommissioning costs at the end of the project’s life. O&M costs can be positive, negative, or zero, depending on whether the project will increase, decrease, or have no net effect on O&M costs compared with existing costs. FHWA’s Life-Cycle Cost Analysis Primer (https://www.fhwa.dot.gov/asset/lcca/010621.pdf) provides detailed information about calculating life-cycle costs for a project. All life-cycle costs need to be discounted to their NPV. Therefore, activities that will occur in the future, such as O&M, should be discounted using the NPV techniques described in Chapter 2. Construction costs are typically discounted using the mid-point of construction, so if a construction project will start 1 year from now and will last 2 years, it should be discounted by 2 years, which is the 1-year start date plus half of the 2-year duration. Cost worksheets are included in Appendix D. Common sources of data for these costs include • Historic cost data. Data from similar projects that were previously completed are likely to be included in an agency’s records and can often be a good source of cost information on which to base estimates for the current project under consideration. Some agencies maintain databases of project costs, which can provide useful information (for example, Utah’s system has cut project design costs by 50 percent by making such information and many of the following data sources dynamically available). • Published unit costs. Engineering News-Record and private construction-cost companies publish and maintain information about current costs for different industry sectors, asset and facility types, and geographic locations. • Contractor bids. Recent bids from public projects may be published or requested from the sponsoring agency and can provide a basis for estimating project costs, particularly for projects such as culvert installations. • Real estate assessments. Online property tax records as well as publicly accessible real estate websites (such as Zillow or Redfin) contain information regarding tax rates and the values of property sites. • Maintenance personnel. An agency’s maintenance personnel are usually a reliable source for costs and frequencies associated with O&M of transportation system assets. These personnel might also use work order databases to track the status of work order requests; these databases can also provide information about costs associated with operating and maintaining certain assets, as well as the procedures required to complete the work. C H A P T E R 4 Common Costs

38 Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook Delays During Construction and Implementation Construction of a transportation project might cause delays for system users, in some cases necessitating detours. The costs associated with these delays and detours will be included in the costs of the project (Equation 4 and Equation 5). The duration of service losses or delays and the number of impacted transportation facility users is typically documented based on the proposed project design and construction schedule. The cost of passenger time is based on regional average hourly wage rate data from the Bureau of Labor Statistics and U.S. DOT guidance. Addi- tional mileage costs are based on the additional distance traveled and the federal mileage rate in effect for privately owned vehicles, which can be found on the General Services Administra- tion’s website (http://www.gsa.gov/travel/plan-book/transportation-airfare-pov-etc/privately- owned-vehicle-pov-mileage-reimbursement-rates). Equation 4. Cost of detours during construction. Cost of Detours Vehicle Mile Number of Impacted Vehicles Duration Detour is in Effect Additional Mileage Vehicle = $ ( ) ( ) ( ) ( ) × × × Equation 5. Cost of delays during construction. Cost of Delays passenger hour hour of delay day number of passengers number of days delays occur = $( ) ( ) ( ) ( ) × × × Residual Value and Salvage Value (Negative Cost) Residual value is the estimated value of project assets at the end of the period of analysis. Salvage value is the estimated value of an asset that has a market for selling it. In some cases, a project alternative might have an end-of-project value that is substantial enough relative to total project costs that components might be worth salvaging and selling or reusing. For exam- ple, buses or train cars that are no longer needed but are still operational might be sold. The net residual or salvage value of such projects or assets is be included in the CBA as a negative cost. The residual or salvage value will have the greatest impact on a CBA if the life spans of alterna- tives are significantly different or if physical components of the alternatives being considered are much different (http://bca.transportationeconomics.org/costs/end-of-project-costs.). The residual or salvage value is calculated by estimating the remaining useful life of the asset or component beyond the analysis period and determining its percentage relative to the total life of the asset (Equation 6). The percentage of life remaining is multiplied by the initial capital cost of the asset or component, converted to a present value, and subtracted from the initial capital cost (thus it is a negative cost) (MnDOT, 2017). Equation 6. Salvage value calculation for assets with remaining useful life. Salvage Value Remaining Useful Life Total Useful Life Capital Cost= × Climate change may erode the underlying land value and ability to maintain the transpor- tation infrastructure in a given locale as sea levels rise or the frequency of nuisance flooding increases. These costs are of a higher magnitude, as the base for construction may no longer exist. Again, many further expenses and investments are structured around the transportation investment (initial road or rail line, etc.) The public and legislature need to be kept informed of long-term risks to and erosion of public assets so they may make timely alternate choices, if desired.

Common Costs 39 Environmental and Social Costs Construction of a transportation project could have short- and long-term environmental and social impacts. Potential short-term impacts associated with the act of constructing the project would generally be included with construction costs. For example, a project that requires air quality monitoring is likely to include the monitoring costs in the construction costs; however, some other impacts could be long term, for example, the loss of a wetland or habitat, loss of trees, or increased ambient noise from traffic or operations. Determining some of these values can be challenging. Typically, environmental costs are determined by an environmental economist, as these costs can vary widely by type of impact and geographic location. If a project is expected to increase noise in the project area and a noise wall is constructed to help abate the increase, the cost of the noise wall will be included in the overall project cost. Significant increases in noise themselves are considered a detriment, and will be incorporated as a negative benefit (see Chapter 5). Update to the Scenario Based on the future flows estimated to account for the impacts of climate change from the selected planning scenarios, the Virginia DOT determined to evaluate three possible adaptation strategies: • Enlarge the existing culvert, • Add multiple culverts, or • Replace the existing culvert with a box or arch culvert with additional capacity. The new culverts would be designed for the future 50-year event (presently they are designed for the current 50-year event). The DOT developed cost estimates to design, construct, and maintain each of the three options under consideration based on bids received from similar recent projects as well as from cost-estimating software (Appendix E). The costs for each alternative are summarized in Table 7. Existing Culvert Base Construction Cost 400,000$ Additional Cost to Address Climate Change 150,000$ Discount Rate (%) 7.00% Present Value Coefficient (PVC) 13.80 COSTS Cost Data Input Enlarge Existing Culvert Add Multiple Culverts Install Box/Arch Culvert Replace-in-Kind Pre-construction cost (design, permitting, land acquisition, etc.) 42,000$ 50,000$ 60,000$ 40,000$ 000,024tsocnoitcurtsnocesaB $ 500,000$ 600,000$ 400,000$ Ancillary costs (OH&P, contingency, escalation) 105,000$ 125,000$ 150,000$ 100,000$ 000,36noitcurtsnocgnirudsyaledfotsoC $ 83,500$ 100,200$ 66,800$ -eulavegavlaS $ -$ -$ -$ 000,036stsoCtcejorP-latotbuS $ 758,500$ 910,200$ 606,800$ 003,6stsocM&OlaunnA $ 7,585$ 9,102$ 6,068$ 05050505)sraey(efillufesutcejorP 549,68stsoCM&O-latotbuS $ 104,679$ 125,614$ 83,743$ 717)000,1(tnemtsujdAffodnuoR $ 863$ 1,036$ 691$ TOTAL PROJECT COSTS (BCA - Roundoff) 717,000$ 863,000$ 1,036,000$ 691,000$ PROJECT TYPE OH&P = Overhead and profit. Table 7. Example scenario summary of costs of design alternatives using 7 percent discount rate.

40 Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook For this particular project, the Virginia DOT determined that the social and environmental costs would be negligible; no critical habitats will be adversely impacted, nor will any permanent noise or air quality issues arise. Costs were also evaluated using a 3 percent discount rate, as shown in Table 8. Data needed at this stage include • Design concepts of adaptation strategies, • Cost estimates for each adaptation strategy (life-cycle costs, including any long-term adverse impacts from the adaptation strategy), and • Identification of any non-quantifiable costs associated with the project. Existing Culvert Base Construction Cost 400,000$ Discount Rate (%) 3.00% Present Value Coefficient (PVC) 25.73 COSTS Cost Data Input Enlarge Existing Culvert Add Multiple Culverts Install Box/Arch Culvert Replace-in-Kind Pre-construction cost (design, permitting, land acquisition, etc.) 42,000$ 50,000$ 60,000$ 40,000$ 000,024tsocnoitcurtsnocesaB $ 500,000$ 600,000$ 400,000$ Ancillary costs (OH&P, contingency, escalation) 105,000$ 125,000$ 150,000$ 100,000$ 000,36noitcurtsnocgnirudsyaledfotsoC $ 83,500$ 100,200$ 66,800$ -eulavegavlaS $ -$ -$ -$ 000,036stsoCtcejorP-latotbuS $ 758,500$ 910,200$ 606,800$ 003,6stsocM&OlaunnA $ 7,585$ 9,102$ 6,068$ 05050505)sraey(efillufesutcejorP 890,261stsoCM&O-latotbuS $ 195,160$ 234,192$ 156,128$ 297)000,1(tnemtsujdAffodnuoR $ 954$ 1,144$ 763$ TOTAL PROJECT COSTS (BCA - Roundoff) 792,000$ 954,000$ 1,144,000$ 763,000$ PROJECT TYPE Table 8. Project costs for adaptation alternatives for example culvert replacement scenario using 3 percent discount rate.

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Extreme weather events and a changing climate increasingly boost costs to transportation agencies and to the traveling public. While Departments of Transportation (DOTs) are taking into account changing climate and extreme weather when making infrastructure decisions, they typically are not using a formal set of tools or cost-benefit analyses (CBAs) to address climate resilience because they may be too time-consuming and expensive to conduct routinely.

The TRB National Cooperative Highway Research Program's NCHRP Research Report 938: Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook was developed to try to fill the gaps identified by DOTs. It is intended to provide a consolidated resource for transportation practitioners to be able to more readily consider CBAs as a tool in their investment-decision making processes when considering different climate and extreme weather adaptation alternatives.

This report has additional resources, including a web-only document NCHRP Web-Only Document 271: Guidelines to Incorporate the Costs andBenefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change, a Power Point presentation that describes the research and the results, a spreadsheet tool that provides an approximate test to see if it would be cost-effective to upgrade assets to the future conditions posed by climate change, and a spreadsheet tool that uses existing conditions without climate change only to calculate the new return period for future conditions with climate change.

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