Road safety program appraisal

1. Road safety program appraisal Hossein Naraghi CE 590 Special Topics Safety June 2003 Time spent:10 hrs

2. Road safety program appraisal • The appraisal and implementation of programs involving road safety engineering will be investigated • Ranking of sites in priority for treatment and project selection • Programming and implementing countermeasures

3. Ranking and project selection • The previous discussions helped us to identify and investigate phases of hazardous road location program • The culmination of these phases will be a listing of hazardous locations • Then with the knowledge about the potential effectiveness of a range of traffic engineering or highway design measures, a decision can be made about the most suitable measures to be adopted for those locations

4. Ranking and project selection (continued) • Should these measures be implemented? • If so, in what priority order since we have limited resources • The Institution of Highways and Transportation in its road safety guidelines, outlines seven steps to be followed in systematically selecting projects for hazardous road location program • Determine the range of measures which are likely to influence the dominant accident types and road features

5. Ranking and project selection (continued) • Examine the measures to ensure that • Reduction in accidents is likely to occur • No future increases are possible in other accident types • No unacceptable effects are likely on traffic or environment • Economic assessment of costs and benefits • Select the measures which are likely to give the greatest benefits • Public consultation to ensure acceptance by the community affected

6. Ranking and project selection (continued) • Amend proposals if necessary • Select sites for priority treatment and develop action plans • Use of formal economic appraisal is an invaluable aid in ranking locations and prioritized work program • It is wise to apply some prior judgment and common sense in order to develop a listing of locations for treatment • Some sites may have a clear accident pattern, so analyst can propose an obvious solution and be confident about that

7. Ranking and project selection (continued) • In some other sites the accident pattern is more diffuse and the appropriate treatment is not so clear • So it is necessary to spend further resources investigating the nature of the problem • e.g. a traffic conflict study • Use of sensitivity test • While the site which has obvious solution should presumably be treated, subject to it performing favorably against other candidate sites, sites with more diffuse accident pattern should not be forgotten • An interim, low cost solution may be appropriate

8. Ranking and project selection (continued) • It becomes both possible and more common to perform a formal appraisal for the following reasons • Governments are requiring road and safety agencies to show that investment in such projects is worthwhile • Data to permit a more rigorous form of appraisal are becoming available

9. Ranking and project selection (continued) • Broadly speaking, such appraisal are of two types • A formal economic appraisal in which costs and benefits are calculated and compared • A goal achievement approach • Such as cost-effectiveness approach • Projects are ranked, but no attempt is made to assess their economic benefits against their costs

10. Economic appraisal of road safety projects • Economic appraisal indicates not only the project is worthwhile, but also indicates which is the best project • Economic appraisal consists of six stages • Identification of relevant benefits and costs • Valuation of benefits and costs • Reduction of all future benefits and costs to their equivalent present values • Comparison of benefits and costs according to an explicit decision criterion • Sensitivity testing when values are uncertain or risks are high • Presentation of results

11. Benefits and costs • The benefits of road safety engineering program comprise • Saving in road accident costs which are estimated to result from the construction or introduction of a road safety measure by • Reduction in the number of crashes • Reduction in the severity of the crashes • Sometimes both • There will be other consequences of the treatments in some cases • On-going maintenance cost • Maintenance of signs or roadside furniture

12. Benefits and costs (continued) • On-going operation costs • Operation of traffic signals • In some cases, there will be cost related to mobility which result from the measure • Delays to motorists • Additional fuel consumption • Where these economic consequences are significant in comparison with the accident savings and project costs, they should be estimated and brought to calculation • The net annual benefit need to be calculated over the evaluation period

13. Benefits and costs (continued) • The best and most unambiguous definition for the costs of project are its initial capital cost • Costs which are incurred up-front as the project is designed and built • Other cost definitions such as the road agency’s expenditure whenever it is incurred have been used • Whatever definition is used, it must be consistent to avoid double-counting

14. Valuation of costs and benefits • The valuation of costs is usually is straight forward if we use the recommended definition of cost • The engineering estimate of the cost of the job • The valuation of benefits is more difficult since it involves placing an economic value on accidents and thus accident savings • The UK approach to economic evaluation is typical • It is based on average cost of accident by location (rural, urban, motorway) and by severity (fatal, serious, slight)

15. Valuation of costs and benefits (continued) • The more powerful approach is based on the calculation of the average cost of particular accident types • Since the analysis of hazardous road location relies upon the analysis of current accident pattern and the forecast of what will happen if particular remedial treatment is implemented, this method will help to evaluate the benefits of those treatments directly • Knowing the accident type at any location, an estimate can be made of the effect on these accident types of proposed treatments

16. Valuation of costs and benefits (continued) • This enables a more detailed analysis of the benefits • In instances where there is a little effect upon accident frequency, but a significant effect upon accident severity • It also overcomes the problem of having a fatal accident distorting the analysis because of its high cost • This approach has been pioneered by Andreassen 1992 • Average standardized costs for nineteen accident type groups, based on 1987-88 data for the state of Victoria, Australia are shown in Table 16.1 pg. 421

17. Discounting • Future cash flow need to be reduced to equivalent present-day values • The appraisal period needs to be carefully assessed • At one extreme, a short appraisal period may be used • It is reasonable to assume traffic and other conditions remain unchanged • There is some confidence in the inputs to the appraisal process

18. Discounting (continued) • A longer period can be used which may run over the life of the project • It is necessary to make estimates of future traffic flows and other conditions, as these affect accident frequencies, operating costs and so on • Typically for traffic engineering work, an appraisal period of about 5 years is used • A longer period is appropriate if traffic is expected to be reasonably stable • One decision criterion implicitly uses only a one year appraisal period • One decision criterion is the first year rate of return

19. Decision criteria • Calculated net present value will be used to calculate an index which is used • To assess the worth of treatment • To rank it against other candidate projects • In general 5 criteria are in use for the economic appraisal of the projects • Net present value • Benefit:cost ratio • Internal rate of return • Payback period • First year rate of return

20. Decision criteria (Net present value, NPV) • The net present value must be determined for each alternative • All alternatives which have a positive NPV can be regarded as economically worthwhile • Community is better off to undertake them than not to undertake them • All other things being equal, the alternative with highest NPV will be the best solution to the project in question • There are no capital, social, political, environmental or other reasons for doing otherwise

21. Decision criteria (Net present value, NPV) • There is a major methodological advantage of the NPV method compared to other methods • With other method, it is necessary to perform pair wise comparisons to ensure the marginal benefits outweigh the marginal increment in cost • This is not necessary with NPV method, if the NPV increases when moving from a lower cost alternative to a higher cost one, then the marginal increase in benefit must increase as well, otherwise NPV would not have increased • The NPV method is useful when there is a budget constraint and the objective is to select the most beneficial sets of projects

22. Decision criteria (benefit:cost ratio, BCR) • This method uses NPV method to measure benefits and costs • Instead of calculating an aggregate value for each alternative, the BCR calculates a ratio of benefits against costs • A positive benefit:cost ratio indicates that the alternative is worthwhile, but it says nothing about whether that project should undertaken • The benefit:cost ratio can not be used to rank alternatives • Ranking involves a pair-wise comparison of all alternatives with a BCR greater than 1

23. Decision criteria (benefit:cost ratio, BCR) • All alternatives with BCR less than 1 should be eliminated and list the remainder in order of ascending cost • The marginal benefit:cost ratio is determined by pair-wise comparison of alternatives, starting with lowest cost and second lowest cost alternatives • The pair-wise comparison continues until all but one alternative is eliminated, which is the most economical alternative • The BCR approach is more cumbersome than NPV approach and may produce misleading results, so its use is not recommended

24. Decision criteria (conclusion) • The net present value method is recommended as the best of five techniques for economic analysis of the alternatives • It is subject to least ambiguity • It produces information which is readily understood • It is less likely to be affected by assumptions • Especially the definition of benefit and cost • It is the easiest to calculate • As a value in itself • As a means of comparing alternatives

25. Sensitivity test • An appraisal should always be subject to a sensitivity test • To assess how strong the result is to changes in its assumptions used in calculating • In particular a range of expected accident reduction should be assessed • Since one can never be confident what the actual outcome will be • Using a low and a high estimate of possible outcomes is always good practice • If the outcome is favorable, we can be confident that the project is worthwhile • Favorable under optimistic assumptions and unfavorable under pessimistic assumptions requires more work to try and get a better forecast

26. Presentation of the result • The final phase of appraisal will be the presentation of the results of analysis to decision makers • Tabular or graphical presentations • Highlighting the economic benefits • Highlighting the accident savings • Expected performance against accident reduction targets

27. Goals achievement approach to project appraisal • This is an alternative to economic appraisal approach • The objective is to show the extent to which alternative proposals achieve a range of pre-set goals • The goals may be • Quantifiable • Economic • Non-quantifiable • Social and environmental • The objective of evaluation is to present the decision-maker with information about consequences of alternative course of action

28. Goals achievement approach to project appraisal (continued) • The main focus of this technique involves the development of a table which shows the extent to which each alternative achieves the pre-determined objectives • Figure 16.1 page 429 • In the context of road safety engineering, two specific approach within this generic form are relevant • The goals achievement matrix • The cost-effectiveness approach

29. Goals achievement approach to project appraisal (continued) • Goals achievement matrix • This approach takes a matrix of the form shown in figure 16.1 • Extent to which each alternative will meet pre-set objectives • A modification of this approach is to use a simple assessment scale to determine if alternative • Contributes towards goal achievement (+) • Detracts from goal achievement (-) • Has no effect (0) • Weight may introduce for each criterion and an overall index calculated

30. Goals achievement approach to project appraisal (continued) • For example: Cambridgeshire County in the UK uses a weighting scale to reach an overall assessment of the score of a proposed project based on • Number and severity of accidents • Congestion • Cyclists and pedestrians convenience and safety • Environmental effects on residence, schools and shopping centers • Environmental effects of the project • Trees, open space, signing, etc) • The advantage of this technique is that it assist the decision maker to make decision in situation where there are disparate objectives, which can not easily converted to single measure of effectiveness, such as dollars

31. Goals achievement approach to project appraisal (continued) • Cost effectiveness • This approach is more applicable where • There is a fixed budget, and the objective is to achieve the maximum benefits from expenditure • There is a specified objective, and the goal is to determine the cheapest way of achieving it • The cost effectiveness approach has relevance to road safety projects appraisal only to the extent which assist in ranking alternatives, that can be assessed with respect to single objective such as reduction in number of crashes

32. Checklist • Economic appraisal of proposals is likely to be increasingly required of road safety engineering projects. A useful checklist provided by Andreassen, 1992 • I have identified the project costs in terms of capital, maintenance and operating costs • I have carefully chosen an appraisal period • I have chosen a discount rate • I have defined the effects on various accident types • I have differentiated between the effects of this treatment on crash frequency and on fatality outcomes

33. Checklist (continued) • I have used local studies to estimate the effects of this treatment on the frequency of accident types and included this in my report • I have made an estimate based on studies from other localities of the effects of this treatment on the frequency of accident types and included this in my report • I have identified the accident types in which this treatment is likely to have its greatest effect on fatality outcomes • I have identified other accident types in which this treatment may have some effect on the fatality outcome