The private and public sectors are constantly making investments in various tangible or intangible things (thereafter projects) in an attempt to achieve organizational goals. The primary investment goal of the private sector is creation of wealth for its owners. Thus, the merits of privately undertaken projects can be measured through economic/financial analyses. The motivation for the public sector to invest in projects is less straightforward. Some projects are undertaken because they are deemed necessary for social cohesion and are so crucial that private enterprise can not be relied upon to undertake them (ex. homeland security, fundamental scientific research, etc). Others are undertaken because of more narrow political interests (ex., the bridge to nowhere, etc). Finally, some projects are undertaken based on their utility, the monetary value of their benefits to society. The methodology historically used by public sector transportation agencies to select and prioritize safety and other projects is not consistently defined among agencies and can lead to inappropriate investment decisions. Application of a methodology based on net present value (NPV), widely used in the private sector and well documented by academe, would lead transportation agencies to make more informed and supportable investment decisions. This methodology is compelling given the increasing fiscally constrained and performance oriented environment in which such agencies must function. This paper presents a methodology for the selection and prioritization of projects that are justified based on their utility to society. These include transportation safety projects that produce benefits (crashes prevented) at a cost (capital and recurring investments). (A). For the coveringabstract of the conference see E216632.
Abstract