CENG 6309*:

Road safety
Engineering
Ambo University Hachalu Hundessa
Institute of Technology
SCEE, Civil Engineering
Prof. Emer T. Quezon
C.Eng., M.ASCE, MSc., PhD
Dr.-Ing(hc)
Email: quezonet09@gmail.com
emer.tucay@aastu.edu.et
Webpage:
https://scholar.google.com/citations?user=I
6QHv7UAAAAJ&hl=en
 Chapter 7
Economic Appraisal
Introduction
• Economic appraisals are performed to compare
the benefits of potential crash countermeasure to
its project costs.
Two (2)- Types of Economic Appraisal
1) Benefit-Cost analysis
2) Cost-Effectiveness analysis
 In benefit-cost analysis, the expected change in
average crash frequency or severity is converted
to monetary values, and compared to the cost of
“implementing” the countermeasure.

 In cost-effectiveness analysis, the change in

crash frequency is compared directly to the cost
of “implementing” the countermeasure.
• As outcome of the economic appraisal process,
the countermeasures for a given site can be
organized in descending or ascending order by
the following characteristics:
1. Project costs
2. Monetary value of project benefits
3. Number of total crashes reduced
4. Number of fatal and incapacitating injury crashes
reduced
5. Number of fatal and injury crashes reduced
6. Net Present Value (NPV)
7. Benefit-Cost Ratio (BCR)
8. Cost-Effectiveness Index
• Ranking alternatives for a given site by these
characteristics can assist highway agencies in
selecting the most appropriate alternative for
implementation.
OVERVIEW OF PROJECT BENEFITS AND COSTS
• In addition to project benefits associated with a
change in crash frequency, project benefits such as:
a) travel time,
b) environmental impacts, and
c) congestion relief are also considerations in project
evaluation.
• The HSM predictive method provides a reliable method
for estimating the change in expected average crash
frequency due to a countermeasure.
• After applying the predictive method to determine
expected average crash frequency for existing
conditions and proposed alternatives, the expected
change in average fatal and injury crash frequency is
converted to a monetary value using the societal cost
of crashes.
• Similarly, the expected change in property damage
only (PDO) is converted to monetary value
DATA NEEDS
 ASSESS EXPECTED PROJECT BENEFITS
Estimating Change in Crashes for a Proposed Project
1. Method 1 – Apply the predictive method to estimate the
expected average crash frequency of both the existing and
proposed conditions.
2. Method 2 – Apply the predictive method to estimate the
expected average crash frequency of the existing condition
and apply AMF to estimate the safety performance of the
proposed condition.
3. Method 3 –use SPF to estimate the expected average crash
frequency of the existing condition and apply AMF to
estimate the expected average crash frequency of the
proposed condition.
4. Method 4 – Use observed crash frequency to estimate the
expected average crash frequency of the existing condition,
and apply AMF to the estimated expected average crash
frequency of the existing condition to obtain the estimated
expected average crash frequency for the proposed
condition.
ASSESS EXPECTED PROJECT BENEFITS
1) Calculate Annual Monetary Value
2) The following data is needed to calculate annual monetary value:
 Accepted monetary value of crashes by severity
 Change in crash estimates for:
1. Total Crashes
2. Fatal/Injury Crashes
3. PDO Crashes
3) In order to develop an annual monetary value, the societal cost
associated with each crash severity is multiplied by the corresponding
annual estimate of the change in crash frequency.
Sample Problem:
ASSESS EXPECTED PROJECT BENEFITS
Convert Annual Monetary Value to Present
Value:
Two (2) - methods that can be used to convert
annual monetary benefits to present value.
1. 1st Method: is used when the annual benefits
are uniform over the service life of the
project.

2. 2nd Method: is used when the annual

benefits vary over the service life of the
project.
Method-1: Convert Uniform Annual Benefits to a
Present Value
 When the annual benefits are uniform over the service
life of the project, the following equations can be used
to calculate present value of project benefits.
Sample Problem:
Method-2: Convert Non-Uniform Annual Benefits to
Present Value
 The following process is used to convert the project benefits
of all non-uniform annual monetary values to a single
present value:
1. Convert each annual monetary value to its individual present
value. Each future annual value is treated as a single future
value; therefore, a different present worth factor is applied to
each year.

2. Sum the individual present values to arrive at a single present

value that represents the project benefits of the project.
ESTIMATE PROJECT COSTS
 The cost of implementing a countermeasure or set of
countermeasures could include a variety of factors.
These may include:
1. Right-of-way acquisition,
2. Construction material costs,
3. Grading and earthwork,
4. Utility relocation,
5. Environmental impacts,
6. Maintenance,
7. Other costs including any planning and engineering
design work conducted prior to construction.
 Project costs are expressed as present values for use in
economic evaluation.
 Project construction or implementation costs are
typically already present values, but any annual or
future costs need to be converted to present values
ECONOMIC EVALUATION METHODS FOR INDIVIDUAL
SITES
Two (2) main objectives for the economic evaluation of a
countermeasure or combination of countermeasures:
1. Determine if a project is economically justified (i.e., the benefits
are greater than the costs), and
2. Determine which project or alternative is most cost-effective.

Procedures for Benefit-Cost Analysis

Net Present Value (NPV)
1. This method is used to express the difference between
discounted costs and discounted benefits of an individual
improvement project in a single amount.
2. The term “discount” indicates that the monetary costs and
benefits are converted to a present value using a discount
rate.
Applications
 The NPV method is used for the two basic functions listed below:
1. Determine which countermeasure or set of countermeasures
provides the most cost-efficient means to reduce crashes.
Countermeasure(s) are ordered from the highest to lowest
NPV.
2. Evaluate if an individual project is economically justified. A
project with a NPV greater than zero indicates a project with
benefits that are sufficient enough to justify implementation of
the countermeasure.
Method
1. Estimate the number of crashes reduced due to the safety
improvement project
2. Convert the change in estimated average crash frequency to an
annual monetary value to representative of the benefits.
3. Convert the annual monetary value of the benefits to a present
4. Calculate the present value of the costs associated with
implementing the project
5. Calculate the NPV using:

6. If the NPV > 0, then the individual project is economically justified.

Benefit-Cost Ratio (BCR)
1. A benefit-cost ratio is the ratio of the present-value
benefits of a project to the implementation costs of the
project (BCR = Benefits/Costs).
2. If the ratio is greater than 1.0, then the project is
considered economically justified.
3. Countermeasures are ranked from highest to lowest BCR.
4. An incremental benefit-cost analysis is needed to use
the BCR as a tool for comparing project alternatives.
Applications
1. This method is used to determine the most valuable
countermeasure(s) for a specific site, and is used to
evaluate economic justification of individual projects.
2. The benefit-cost ratio method is not valid for prioritizing
multiple projects or multiple alternatives for a single
project;
Method
1. Calculate the present value of the estimated change in
average crash frequency
2. Calculate the present value of the costs associated with
the safety improvement project
3. Calculate the benefit-cost ratio by dividing the estimated
project benefits by the estimated project costs.

4. If the BCR is greater than 1.0, then the project is

economically justified.
Procedures for Cost-Effectiveness Analysis:
 Cost - effectiveness is the annual cost per crash
reduced. The lower the cost per crash reduced,
the more effective the treatment.
Method
1. Estimate the change in expected average
crash frequency due to the safety
improvement project
2. Calculate the costs associated with
implementing the project
3. Calculate the cost-effectiveness of the safety
improvement project at the site by dividing the
present value of the costs by the estimated
change in average crash frequency over the
life of the countermeasure.
ECONOMIC EVALUATION METHODS FOR INDIVIDUAL SITES
NON-MONETARY CONSIDERATIONS
Non-monetary considerations include:
1. Public demand;
2. Public perception and acceptance of safety
improvement projects;
3. Meeting established and community-endorsed
policies to improve mobility or accessibility along
a corridor;
4. Air quality, noise, and other environmental
considerations;
5. Road user needs; and,
6. Providing a context sensitive solution that is
consistent with a community’s vision and
environment.
Sample Problem:
• The sample problem presented here illustrates the
process for calculating the benefits and costs of
projects and subsequent ranking of project
alternatives by three of the key ranking criteria:
1) Cost-effectiveness analysis,
2) Benefit-cost analysis, and
3) Net present value analysis.
• Economic Appraisal
1. Background/Information
2. The roadway agency has identified
countermeasures for application at Intersection 2.
Exhibit 7-8 provides a summary of the crash
conditions, contributory factors, and selected
countermeasures.
Sample Problem
Sample Problem
Question:
1. What are the benefits and costs
associated with the countermeasures
selected for Intersection 2?
The Facts
Intersections:
1. AMFs for installing a single-lane
roundabout in place of a two-way
stop controlled (TWSC) intersection:
a) Total crashes = 0.56; and,
b) Fatal and injury crashes = 0.18
Sample Problem
Assumptions
 The roadway agency has the following
information:
1. Calibrated SPF and dispersion parameters for the
intersection being evaluated;
2. Societal crash costs associated with crash
severities;
3. Cost estimates for implementing the
countermeasure;
4. Discount rate (minimum rate of return);
5. Estimate of the service life of the countermeasure;
and,
6. The roadway agency has calculated the EB-
adjusted expected average crash frequency for
each year of historical crash data.
Sample Problem
Sample Problem
Method:
The following steps are required to solve the problem:
• STEP 1 - Calculate the expected average crash
frequency at Intersection 2 “without” the roundabout.
• STEP 2 - Calculate the expected average crash
frequency at Intersection 2 “with” the roundabout.
• STEP 3 - Calculate the change in expected average
crash frequency for total, fatal and injury, and PDO
crashes.
• STEP 4 - Convert the change in crashes to a monetary
value for each year of the service life.
• STEP 5 - Convert the annual monetary values to a
single present value representative of the total
monetary benefits expected from installing the
countermeasure at Intersection 2.
STEP 1 - Calculate the expected average crash frequency at
Intersection 2 WITHOUT the roundabout.
 See Exhibit 7-9
STEP 2 - Calculate the expected average crash frequency at
Intersection 2 WITH the roundabout.
STEP 3 - Calculate the expected change in crash
frequency for total, fatal and injury, and PDO
crashes.
 STEP
4 - Convert Change in Crashes to a
Monetary Value
1. AM(PDO) = ΔNexpected (PDO)*CC(PDO)
2. AM(FI) = ΔNexpected (FI)*CC(FI)
3. AM(TOTAL) = AM(PDO) + AM(FI)
 STEP5 – Convert Annual Monetary Values to a
Present Value
Results:
• The estimated present value monetary benefit of
installing a roundabout at Intersection 2 is $33,437,850.
• The roadway agency estimates the cost of installing the
roundabout at Intersection 2 is $2,000,000.
• If this analysis were intended to determine whether the
project is cost effective, the magnitude of the monetary
benefit provides support for the project.
• If the monetary benefit of change in crashes at this sites
were to be compared to other sites, the BCR could be
calculated, and used to compare to other projects to
identify the most economically-efficient project.
ANY QUESTIONS
PLEASE ??