A Framework for Economic Evaluation of Highway Development Projects Based on Network-Level Life Cycle Cost Analysis

Ziari, Hassan; Behbahani, Hamid; Amini, Amir Ali · 2015 · Crossref

DOI: 10.7307/ptt.v27i1.1553

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Summary

This paper addresses the limitations of traditional project-level Life Cycle Cost Analysis (LCCA) in highway development, which often fails to capture the broader economic impacts of infrastructure decisions. The authors argue that decision-making for highway agencies involves conflicting criteria such as safety, mobility, and environmental impact, requiring a holistic approach that considers trade-offs across a geographical area larger than the project site and a timeframe exceeding the implementation interval. To resolve this, the study proposes a framework for Network-Level Life Cycle Cost Analysis (NL-LCCA). This approach shifts the evaluation question from selecting the best alternative for a single project to determining which development projects are most economically suitable for the entire highway network. The proposed framework consists of four major phases and fourteen steps. The first phase, Network Identification, involves selecting the highway network, defining an analysis life cycle (typically 10–50 years), dividing the network into budgetary zones, and categorizing sites by type and function. The second phase, Network-Level Life Cycle Costing, estimates the costs of the base scenario ("do nothing") across five modules: planning, design, construction, operation, and maintenance. The authors note that cost estimation may require a combination of analogy, parametric, engineering, and cost accounting models due to varying data quality. The third phase involves proposing new development projects or evaluating existing candidates to identify those that maximize NLCC reduction. The final phase applies economic appraisal methods—specifically Net Present Value (NPV), Equivalent Annual Annuity (EAA), Net Savings (NS), and Saving to Investment Ratio (SIR)—to rank projects and optimize budget allocation under constraints. The paper reviews existing literature to contextualize the framework, noting that while LCCA is well-established for building and civil infrastructure, its application in highways has largely been limited to project-level comparisons. Previous studies have utilized probabilistic models, fuzzy logic, and genetic algorithms to handle uncertainty and optimize pavement management. However, these approaches often lack a unified network-level perspective. The NL-LCCA framework integrates these concepts by treating the highway network as a single system, allowing for the assessment of how individual projects affect overall network costs, including user costs like vehicle operation and time delays, as well as agency costs. The significance of this work lies in providing a structured decision-support tool for highway administration agencies. By adopting NL-LCCA, agencies can evaluate the economic effectiveness of existing network sites, propose cost-effective development projects, and optimize budget allocation across the entire network. This method enables a more comprehensive economic appraisal that accounts for the time value of money and diverse stakeholder costs, facilitating better strategic planning and resource distribution. The framework allows for "what-if" scenario analysis to evaluate network policies and strategies, ultimately aiming to maximize total network benefits while minimizing life cycle costs.

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