In order to help decision-makers weigh up the positive and negative impacts of an ITS proposal, many of the impacts are expressed in monetary terms. The monetary evidence is captured from market research based surveys or from the behaviour of transport users – for example by valuing time savings based on people’s preferences when faced with the choice of saving time by using a faster tolled route.
For specific projects, modelling and simulation techniques may be useful in estimating likely benefits. A transport model will often be used to provide an initial estimate of the majority of the benefits of an ITS application. Outputs from the model are typically expressed in terms of:
Most transport models also provide estimates of changes in carbon emissions – because of the relationship between traffic speed, fuel consumption and vehicle emissions that forms part of all formal transport models. (See Traffic Models)
The main effect of some ITS applications is to reduce the costs incurred by the highway authority or another government agency. For example, the use of ITS to check goods vehicle weights and to discourage freight operators from overloading their vehicles reduces road damage – and highway maintenance costs – as well as contributing to road safety and to fair competition between freight operators.
In most transport models, the value of time savings in monetary terms is combined with the monetary-based costs incurred by users of the road network. This includes fuel costs, distance related vehicle operating coats and toll and parking charges.
The sum total of the time-based and the monetary-based elements of a trip is known as the generalised cost of the trip.
The majority of transport models make use of an assumption – based on evidence of transport users’ behaviour – that in their decisions about the trips that they make, transport users generally seek to minimise the generalised cost of their journey. They will respond to opportunities – such as those provided by ITS – to reduce the generalised cost of travel and to change their route, mode or even destination.
Many applications of ITS will have a useful life of 10 years or more. Transport appraisal methods – which are also applied to longer-life infrastructure projects – make use of forecasts of future demand and of a process of discounting, to place present costs and future benefits on an equal basis.
The process of expressing most of the costs and benefits in monetary terms provides the basis for a Benefit-Cost Ratio (BCR) – which is a widely used metric for indicating the value of the scheme to transport users and the wider community. In general, the greater the benefits relative to the costs, the better the case for implementing the scheme.
The importance attached to the BCR differs between countries – although, before a project can be approved, most will require a scheme to have a BCR in excess of one (unity) based on the value of current (“present”) benefits exceeding the current value of the costs.
Conventional methods of economic appraisal do not generally identify the final beneficiaries of a transport investment, since they take a national perspective of the case for the investment. Regional or local decision-makers – if responsible for allocating funds raised by national taxation – may use a narrower set of objectives and focus on a different set of outcomes. This could take the form of the creation of local employment as a result of better transport infrastructure encouraging firms to relocate or establish themselves in accessible locations.
The context is always a key determinant of both costs and benefits. Specific benefits and costs can vary greatly from one country to another, depending on economic, cultural and social factors as well as transport priorities.
The US Federal Highway Administration has developed the ITS Deployment Analysis System (IDAS) that can be used in planning for (ITS) deployments. State, regional, and local planners can use IDAS to estimate the benefits and costs of ITS investments – which are either alternatives to – or enhancements of – traditional highway and transit infrastructure (http://idas.camsys.com/).
The US Joint Program Office for ITS has developed a useful reference for current costs and benefits which gives detailed unit costs and benefits – largely for specific ITS in the USA – as well as case studies of whole system applications:
These data are useful as a guide, but cannot be adopted without first checking that they are relevant to local conditions and circumstances. Similarly the benefits data may not transfer to a different context.
The USDOT website also offers lessons learned – including estimates of the lifespan of each type of system. This has important cost implications. If something needs to be replaced every five years, then the costs associated with that must be considered against the benefits gained. Technological advances may mean rapid obsolescence of ITS hardware and software, which will require more frequent replacement and higher costs. See http://www.itskrs.its.dot.gov/
A source of information on values that have been used in transport appraisal in the European Union is the HEATCO study. It reviewed the different approaches used in Member States with the objective of developing guidelines for the harmonisation of these methods for use when appraising cross-border schemes. See: http://heatco.ier.uni-stuttgart.de
A more recent review of appraisal methods used in a selection of countries which have been active in researching these techniques, is published on the UK government’s Department for Transport’s website at https://www.gov.uk/government/publications/international-comparisons-of-transport-appraisal-practice