This research project addressed the economic evaluation of operations activities with a particular focus on the suitability of economic evaluation procedures and the development of a framework to carry out economic assessment of operations activities. These activities relate to the day-to-day management and operation of the transport system — including real-time management and operation systems, the management of planned and unplanned events, provision of traveller information, and the collection and utilisation of business intelligence. The purpose of this project was to investigate and establish economic evaluation principles and techniques for the evaluation of these activities. The initial phase of the project involved clarifying the scope of the research, identifying operations activities in the context of this project, carrying out an international literature review into the practices and approaches to economic assessment of operations, and establishing core economic principles and processes for assessment of the benefits of operations activities. The second phase included the development of the economic framework and application of this framework to three case studies. Operations activities are playing an increasingly important role in the delivery, management and optimisation of our transport systems. In the New Zealand context, these activities are largely covered by the regional transport operations centres (TOCs) for urban areas for all modes of travel. The TOCs and their activities were determined to be a reasonable proxy for the scope of this research and, generally, there is a focus towards urban operations covering the whole network and all travel modes. Historically, assessments of the economic benefits of operations activities have not been carried out extensively. In more recent years, some appraisals have been carried out but these have been largely limited to specific examples (e.g. signal optimisation and motorway intelligent transport system management techniques) that are of somewhat limited scope. In comparison, economic appraisal of ‘typical’ transport schemes (infrastructure, public transport, etc.) follows well-developed and documented procedures and analysis techniques. A review of New Zealand and overseas literature, research, examples and practices identified the following key points in relation to the economic appraisal of operations activities: * There is an overwhelming use of standard cost-benefit analysis (CBA) procedures, deriving a benefit-cost ratio (BCR), for the evaluation of economic benefits of operations activities. * Economic procedures adopted cover essentially the same types of project benefits as are included in the NZ Transport Agency’s Economic evaluation manual (EEM) (predominantly used for evaluating infrastructure projects). * There is a tendency for economic evaluations to be relatively light (e.g. not covering alternative options and not assessing the full range of economic measures), and focused on the short-term lifespan of the activity. * There is a tendency for the types of schemes evaluated, particularly signal optimisation projects, to demonstrate relatively low costs and high economic benefits (resulting in high BCR estimates). A trend identified from the international review and examples from New Zealand is a tendency for the economic benefits of operations activities to be analysed using a post-implementation evaluation process. Typically this involves carrying out on-street data measurements before the activity is implemented and repeating the data collection exercise following the activity to establish the benefits. This differs from the more common transport scheme economic assessment focused on a pre-implementation appraisal, where the benefits of the scheme are commonly forecast either through desktop analysis or often with the use of transport modelling. The NZ Transport Agency business case approach to assessments supports the need to consider operations activities within the suite of potential solutions and treatments — potentially to extend the lifespan of existing or planned infrastructure. This approach places emphasis on assessing operations within a pre-implementation appraisal framework. The agencies which carry out operations activities, such as the regional TOCs, typically work in an ‘agile’ environment which focuses on immediate on-street changes and (perceived) low-cost approaches. This tends to favour quick turnaround of analyses, which may be limited compared with fuller scheme assessments, using post-implementation evaluation processes with on-road data collection approaches. The economic framework for operations activities has been developed to be flexible and practical in its application. The procedures are adaptable to both pre-implementation approaches, including the application of transport models, and post-implementation approaches utilising on-road traffic data collection methods. Consideration of on-road data techniques and transport modelling approaches plays an important part in the assessment of the economics of operations activities. Considerations relating to these aspects have been documented within the main body of the research report (specifically chapter 1) and referenced within the framework. Aside from the decisions around using a pre-implementation (eg modelling) or post-implementation (before and after measured data), there are three key considerations relating to the economic appraisal of operations activities: * The definition of the ‘do minimum’ scenario: This is often as straightforward as reflecting a ‘do nothing’ situation. However it may involve careful consideration of the scenario without the intervention (eg when incident management or traveller information systems are implemented and in assessing optimisation strategies) and the specification of a ‘base level’ of operational upkeep. * The lifespan of the activity: The length of the activity lifespan needs to consider the type of activity and typically the lifespan and evaluation period will be significantly shorter than the standard economic scheme appraisal length (e.g. for traffic management activities, incidents and planned events if the lifespan is the length of the event). For optimisation this may be the length of time over which it is anticipated that activity will continue to deliver benefits. For traveller information this requires case-by-case consideration. * Fully assessing the costs of the operations scheme: Including both external costs (consultancy contracts, equipment etc.) and allowance for the operating agencies’ internal resources (staff time, running costs, software etc.). The background research investigation reached a number of conclusions which form the basis of the development of the economic assessment framework. The key conclusions from this project were: * Key outcomes established through this project form principles which underpin the transport economic value of day-to-day TOC and journey manager work. * This research project and economic framework provides a practical tool for business case assessments where solutions may, and should often, consider operations treatments to extend the lifespan of existing infrastructure and potentially delay more costly capital expenditure. * The economic framework for evaluating the benefits of operations activities is practical, flexible and not onerous to apply and therefore fits with the agile TOC approach. * The operations economic framework fits within the overall NZ Transport Agency assessment framework, and notably can be included within business case assessments. * A key consideration in assessing the benefits of operations is the assessment approach adopted, notably whether pre-implementation appraisal or post-implementation evaluation is carried out. The framework is applicable to both approaches. * Social CBA is an appropriate framework for assessing the economic benefits of operations activities, with the main ranking criterion being the BCR. * The economic impacts that are relevant to operations are all covered by the EEM. * It is appropriate to adopt the EEM procedures and parameters for the economic evaluation of operations activities (unless there are good reasons to the contrary in any particular case). An economic evaluation framework was developed and applied to three case studies. The case studies tested the practical application of the framework, sensitivities, and formed the material for completing the research report. The development and application of the framework to the case studies identified the following key outcomes from the research project: * Definition of the do minimum and development of option costs are key components of economic assessment of operations. * Considering and evaluating the lifespan of the activity is often a critical aspect of an operations economic assessment. * Before and after data measurement can be an effective technique for measuring the benefits of operations activities. This needs to be balanced against the risk of this approach and the robustness of measurements from the data collection system. * Microsimulation transport modelling is an effective mechanism for evaluating the economic benefits of the majority of operations activities, either alongside on-street data measurement or as a standalone approach. This needs to consider the added-value and potential risk reduction of this approach. * It is relatively straightforward to include operations activities within the suite of potential solutions to identify problems and to assess the economic returns of these options within NZ Transport Agency policy and economic evaluation frameworks. * Generally operations activities are highly cost-effective transport treatments. The research project identified the following recommendations for further investigation and research (further details are provided in section 8.3): * Consideration and exploration into the optimal funding strategy for generalised operations activities, systems and tools relative to small-scale capital works (e.g. minor efficiency projects). * Further research into the suitability of alternative transport modelling approaches to measuring economic benefits of operations against real-world measurements (refer section 4.2.2 and appendix C). * Further research into the suitability of on-street data collection systems for establishing robust travel time measurements (refer case study 1, section 6.2.3 and appendix B). * Review of areas of the New Zealand network where incident management systems may offer benefits to travellers (refer case study 1, section 6.2.5). * Wider application of economic assessment of (generalised) TOC activities may identify efficiencies and wider economic gains. Potentially more generic ‘strategies’ could be developed and applied across wider areas based on case studies of highly cost-effective activities. * Testing the economic framework against pedestrian and public transport (PT) operations projects. PT or pedestrian case study examples were not identified by the research Steering Group or TOC staff, but can easily be assessed from application of the framework using the appropriate pedestrian/PT economic parameters. * Risk assessment of modelling compared with before/after on-street data measurement approaches. (Author/publisher)
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