Economic Benefit-Cost Analysis
An economic analysis may be performed to determine possible alternative improvements that could be made at a highway ‑rail crossing. The FHWA Highway Safety Benefit Cost Analysis Guide(43) and companion Highway Safety Benefit Cost Analysis Tool(44) and support materials available at the FHWA Highway Safety Improvement Program (HSIP) website can be used by practitioners to evaluate safety improvement alternatives. Practitioners need to assemble information on the following elements, using the following best available facts and estimates:
•Collision costs
•Service life
•Initial improvement costs
•Maintenance costs
•Salvage value
•Traffic growth rates Other considerations include the effectiveness of the improvement in reducing collisions and the effects on travel, such as reducing delays. The selection of collision cost values is of major importance in economic analyses. Considerable care should be used in establishing values for these costs. The following are the two most common sources of collision costs:
•National Safety Council (NSC)
•NHTSA 131The NSC costs include wage losses, medical expenses, insurance administrative costs, and property damage. The NHTSA includes the calculable costs associated with each fatality and injury plus the cost to society, such as consumption losses of individuals and society at large caused by losses in production and the inability to produce. Many States have developed their own State ‑specific values. Whichever is selected, the values should be consistent with those used for other safety improvement programs. An appropriate method of discounting should be used to account for inflation and opportunity cost. The selected discount rate should be informed by current practices and should be documented as part of the analysis. The service life of an improvement should be equal to the time that the improvement can affect collision rates. Both costs and benefits should be calculated for this time. Hence, the service life is not necessarily the physical life of the improvement. For highway-rail crossings, however, it is a reasonable assumption that the improvement would be equally effective over its entire physical life. Thus, selecting the service life equal to the physical life would be appropriate. The selected service life can have a profound effect on the economic evaluation of improvement alternatives; therefore, it should be selected using the best available information. Project costs should include initial capital costs and maintenance costs and should be considered life-cycle costs; in other words, all costs are distributed over the service life of the improvement. The installation cost elements include the following:
•Preliminary engineering
•Labor
•Material
•Lease or rental of equipment
•Miscellaneous costs The maintenance costs are all costs associated with keeping the system and components in operating condition. The salvage value may be an issue when a highway is upgraded or relocated, or a railroad line is abandoned. Salvage value is defined as the dollar value of a project at the end of its service life and, therefore, is dependent on the service life of the project. For crossing signal improvement projects, salvage values are generally very small. Due to the characteristics of crossing signals and control equipment as well as the liability concerns that arise from deploying signal equipment that has already been used, it is assumed that there is zero salvage value after 10 years.