Cost Benefit Analysis: Applications and Future Opportunities

Cost Benefit Analysis (CBA or Benefit Cost Analysis — BCA) is an evaluation tool that state transportation agencies can use to compare infrastructure project options across transportation modes and gauge if the discounted value of benefits exceed the costs. CBA lets policymakers compare alternative project proposals to a baseline scenario, or status quo case, under which no investments are made. CBA is used to select which proposal is the most sensible investment — ideally, the project that maximizes benefits while minimizing costs should be chosen. As the use of CBA to evaluate projects and grant applications (e.g., Transportation Investments Generating Economic Recovery (TIGER) Discretionary Grants) continues to grow, state transportation agencies must gain knowledge of CBA methodologies, especially if they want to remain competitive for federal funding. This study documents historical trends in CBA from literature and past studies, provides background on how CBA’s are performed, and describes the purpose and basic function of CBAs. The researchers investigated CBA applications and programs that the Kentucky Transportation Cabinet (KYTC) could potentially use to prioritize projects and identify other investment opportunities. This report serves as a primer on the basic elements of CBA, describes what costs and benefits are typically incorporated into analysis, and gives an overview of the formulas that are used to derive costs and benefits. In the transportation context, most benefits are derived from travel time savings and crash reductions. Typical costs include construction and subsequent maintenance. Researchers developed a simple workbook application that KYTC personnel can use to run a CBA. The workbook calculates present value of costs and benefits and makes both net present value (NPV) and benefit-cost ratio (BCR) available to the user.

  • Record URL:
  • Corporate Authors:

    Kentucky Transportation Center

    University of Kentucky
    Lexington, KY  United States  40506

    Kentucky Transportation Cabinet

    Frankfort, KY  United States  40622

    Federal Highway Administration

    1200 New Jersey Avenue, SE
    Washington, DC  United States  20590
  • Authors:
    • Gibson, Bryan
    • Wallace, Candice
  • Publication Date: 2016-6

Language

  • English

Media Info

  • Media Type: Digital/other
  • Features: Figures; References; Tables;
  • Pagination: 46p

Subject/Index Terms

Filing Info

  • Accession Number: 01605676
  • Record Type: Publication
  • Report/Paper Numbers: KTC-16-04/SPR16-517-1F
  • Contract Numbers: SPR 16-517
  • Files: TRIS, ATRI, USDOT, STATEDOT
  • Created Date: Jul 20 2016 10:33AM