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Handbook for Pavement Design, Construction, and ManagementPavement Type Selection and LCCA

Handbook for Pavement Design, Construction, and ManagementPavement Type Selection and LCCA

6. PAVEMENT TYPE SELECTION

Pavement type selection is the process used to determine the most appropriate and cost-effective (barring any other overriding factors) pavement or rehabilitation type for a specific project. In general, it involves the identification of feasible pavement/rehabilitation alternatives that meet the needs and constraints of the project, a detailed evaluation of the economics of each alternative, and a rational, systematic assessment of other important factors (e.g., traffic, soils, construction considerations, past performance, future maintenance) that may influence the selection of the preferred alternative.

A key component of the pavement type selection process is a life-cycle cost analysis (LCCA). LCCA is “a process for evaluating the total economic worth of a usable project segment by analyzing initial costs and discounted future cost, such as maintenance, user, reconstruction, rehabilitation, restoring, and resurfacing costs, over the life of the project segment (USDOT 1998).” It attempts to identify the best value (i.e., the lowest long-term cost that satisfies the performance objective being sought) for investment expenditures (Walls and Smith 1998).

Federal Policy Regarding Pavement Type Selection and LCAA

At the Federal level, policy statements for both pavement type selection and LCCA procedures are available. These policies are subject to change and users should confirm that they are accessing the latest version.

Pavement Type Selection

There are essentially two pavement-related policies in effect at the Federal level (Wathne 2011). The FHWA Policy Regarding Pavement Type Selection and LCCA (FHWA 1999) sets pavement design policy for federal-aid highway projects, essentially stating that pavements should be designed to accommodate current and future traffic needs in a safe, durable, and cost-effective manner. The policy indicates that the analysis period should be long enough to include at least one pavement rehabilitation. The FHWA Pavement Type Selection Policy Statement (FHWA 1981) addresses pavement type selection specifically (Wathne 2011). It indicates that (a) pavement type selection should be based upon an engineering evaluation considering the factors contained in the 1960 AASHO publication titled An Informational Guide on Project Procedures, (b) pavement type determination should include an economic analysis based on LCCA of pavements, and (c) economic analysis and pavement type selection should be updated just prior to advertising. Each agency should have a rational method for pavement type selection, one method of which is contained in this guide.

LCCA

The National Highway System (NHS) Designation Act of 1995 specifically required States to conduct LCCA on NHS projects costing $25 million or more (Walls and Smith 1998). The Federal Highway Administration (FHWA) position on LCCA was further defined in its Final Policy Statement on LCCA published in 1996 stating that LCCA is a decision support tool, and the results of LCCA are not decisions in and of themselves (Walls and Smith 1998). In 1998, the Transportation Equity Act for the 21st Century (TEA-21) removed the requirement for LCCA on NHS projects. However, interest in and progress toward developing standard procedures has continued, particularly at the State level (Lamptey et al. 2005; Demos 2006; Rangaraju, Amirkhanian, and Guven 2008; Caltrans 2010; WSDOT 2010).

Furthermore, non-regulatory guidance provided under FHWA 23 CFR 626, Pavement Policy (which sets forth pavement design policy for Federal-aid projects) recommends an engineering economic analysis, which involves considering alternative pavement design strategies and conducting a life-cycle cost analysis (Stephanos 2008).

Guidance for Pavement Type Selection

The American Association of State Highway and Transportation Officials (AASHTO) current guidance on pavement type selection is found in Appendix B of the AASHTO Guide for Design of Pavement Structures (AASHTO 1993). Figure 6-1 outlines the pavement type selection process contained in the 1993 AASHTO Guide. The flowchart in this figure represents the basic process that is followed in whole or in part when making pavement type selection decisions.

Figure 6-1. Pavement-type selection process (AASHTO 1993) Used by permission.

Historically, most transportation agencies have been responsible for pavement design, pavement type selection, construction material selection, the level of service at which the pavement is to be maintained, and the timing of rehabilitation (Hallin et al. 2011). Policies governing pavement design, construction, and maintenance have typically consisted of internal guidelines. In addition, agencies have largely been responsible for materials and construction quality control/quality assurance (QC/QA). Contractors, in general, have not been involved in the pavement type selection and design process, but instead have focused on the construction of the pavements as part of a competitively bid contract (referred to as design-bid-build contracts).

Over the last couple decades, a gradual shift in responsibilities from the highway agency to consultants and contractors has occurred due to smaller operating budgets and the corresponding need for more innovative ways of designing, building, and maintaining roads. Initially, such shifts included the outsourcing of design to private consultants and increased involvement on the part of contractors in performing materials and construction QC/QA testing. Subsequent shifts took the form of non-traditional contracting techniques, such as cost-plus-time bidding (sometimes called A+B bidding), lane rental, design-build, and warranty practices) (FHWA 2002). And, more recently, other forms of alternative contracting (e.g., alternate bidding, design-build-maintain/operate, public private partnerships) have been used which have resulted in contractors and contractor-designer consortiums (i.e., concessionaires) playing a more substantive role in pavement selection and design.

Updated guidance on pavement type selection is outlined in the Guide for Pavement Type Selection (Hallin et al. 2011). Key steps in the pavement type selection process include:

1. Agency planning and programming.

a. Determine contracting type (for additional information see Anderson and Damnjanovic 2008).

i. Traditional design-bid-build – traditional agency-based selection process or alternate pavement-type bidding where the agency generally identifies equivalent alternatives.

ii. Design-build – agency determined pavement type or contractor selected based on specified criteria.

iii. Operate and maintain – typically based on contractor-based selection and generally include agency input for identifying feasible alternatives.

b. Establish a pavement-type selection committee

i. Representatives from design, materials, construction, and maintenance.

ii. Provides a formal mechanism for the pavement-type selection process.

2. Identify feasible pavement alternatives.

a. Develop list of potential alternatives, taking into consideration:

i. National and state research studies.

ii. Regional experience.

iii. Type and size of project.

b. Develop list of alternatives based on project specific details, taking into consideration:

i. Functional class.

ii. Traffic level/composition.

iii. Existing pavement condition and historical condition trends.

iv. Existing pavement properties (structure, drainage, surface characteristics).

v. Roadway peripherals.

c. Develop pavement life-cycle strategies, service lives, and future treatments.

i. Structural and functional performance.

ii. Initial construction.

iii. Preservation and rehabilitation treatments.

3. Conduct the life-cycle cost analysis.

a. Agency costs.

b. User costs.

c. Net present value.

4. Evaluate economic and noneconomic factors

a. Economic factors include initial costs, preservation costs, maintenance costs, user costs, and life-cycle costs.

b. Noneconomic factors include such items as geometrics, pavement continuity, conservation of materials/energy, noise, safety, and sustainability.

5. Select the most-preferred pavement type.

The FHWA also provides guidance for conducting pavement type selection at the project level in the Life-Cycle Cost Analysis in Pavement Design (Walls and Smith 1998). This guidance centers on a 10-step process and is conducive to both traditional and alternate bidding approaches (see Figure 6-2).

Figure 6-2. Process for conducting project-level pavement LCCA (Walls and Smith 1998).Guidance for Life Cycle Cost Analysis

The analytical framework that LCCA fosters is as important as the results themselves. Although LCCA is occasionally used at the network level for project programming/selection, it is predominantly used at the project level to compare different design alternatives, including new and rehabilitation designs involving different pavement surface types, different mix and cross-sectional thickness designs, different subsurface and shoulder designs, and so on (Walls and Smith 1998).

Furthermore, although the concepts and principles of LCCA are fairly uniform, the application of LCCA in practice varies considerably according to agency philosophy, policy, and preferences. This means that different cost factors, different inputs and bases, and different analysis periods may be used by different highway agencies, who may also employ different software programs and interpretive tendencies (Walls and Smith 1998).

Development of Components/Inputs

A number of components/inputs are needed for conducting an LCCA. These include the analysis period, the economic formula, the discount rates, various cost factors (i.e., agency costs and user costs), computational approach, pavement performance period, and life-cycle expenditure models, all of which are further described in this section.

Analysis Period

Analysis period is the time over which future costs are analyzed. The analysis period should be sufficient to reflect long-term cost differences associated with the identified design strategy alternatives; that is, in general, the analysis period should be somewhat longer than the pavement design life and at least long enough to include one rehabilitation activity, except in the case of extremely long-lived pavements where multiple rehabilitation activities would be included (Walls and Smith 1998).

The FHWA’s LCCA Policy statement (FHWA 1996) recommends a minimum analysis period of 35 years for all pavement projects. However, a shorter analysis period may sometimes be appropriate, such as when a rehabilitation is being performed as a stopgap measure until total reconstruction, when the terminal serviceability of all alternatives are less than 35 years, or when the analysis could benefit from simplified salvage value calculations (Walls and Smith 1998). Other sources (Hallin et al. 2011) recommend an analysis period of 40 to 50 years for new and reconstructed pavements, while rehabilitation projects should consider a period of at least 30 years. Regardless, the analysis period used should be the same for all alternatives. Figure 6-3 shows a typical analysis period for a pavement design alternative.

Figure 6-3. Illustration of analysis period for a pavement design strategy (redrawn from Walls and Smith 1998).

Economic Formulas

LCCA is a form of economic analysis focusing on the relationship between costs, timings of costs, and discount rates used to evaluate the long-term economic efficiency between alternative investments. Once all costs and their timing have been developed, future costs must be discounted to the base year and added to the initial cost to determine the Net Present Value (NPV), or Net Present Worth (NPW) for each alternative (Walls and Smith 1998). The basic NPV formula for discounting discrete future amounts at various points in time back to some base year is shown in Equation 6-1.

(6-1)

where:

NPV=net present value

Initial Cost=initial construction cost

Rehab Cost=future rehabilitation cost(s)

i=discount rate

n=year of expenditure

A=analysis period

Salvage=salvage value at the end of the analysis period.

Alternatively, the equivalent uniform annualized cost (EUAC) may be used to express LCCA. The EUAC represents the NPV value of all discounted costs distributed evenly over the analysis period (see Equation 6-2).

(6-2)

where:

EUAC=equivalent uniform annualized cost

NPV=net present value (determined using Equation 6-1)

i=interest rate

A=analysis period

Discount Rate

The discount rate is critical to LCCA as it represents the real value of money over time and is used to convert future costs to present-day costs. “Real” discount rates reflect the value of money with no inflation premium and should be used in conjunction with non-inflated dollar cost estimates of future investments, while “nominal” discount rates include an inflation component and should only be used in conjunction with inflated future dollar cost estimates (Walls and Smith 1998). Most agencies use non-inflated or “real” dollar costs estimates, and consequently must use “real” discount rates. Discount rates can significantly influence the analysis result, and thus, a reasonable discount rate reflecting historical trends over long periods of time should be used (Walls and Smith 1998). Equation 6-3 may be used to calculate the discount rate. The discount rate may also be estimated as the difference between the market interest rate (commonly the US treasury rate) and inflation (commonly the consumer price index), using constant dollars.

(6-3)

where:

d=discount rate

i=interest rate

In 1995 and 1996, the FHWA Office of Engineering, Pavement Division, conducted a national pavement design review and found that the discount rates used by many DOTs were in the range of 3- to 5- percent (Walls and Smith 1998). Table 6-1 shows trends in real discount rates for analysis periods published over the last 14 years. The last few years indicate a discount rate closer to 2-percent reflects recent trends.

Table 6-1. Recent trends in real interest treasury (discount) rates (OMB 2014)

Year

Analysis Period (years)

3

5

7

10

20

30

2000

3.8

3.9

4.0

4.0

---

4.2

2001

3.2

3.2

3.2

3.2

---

3.2

2002

2.1

2.8

3.0

3.1

---

3.9

2003

1.6

1.9

2.2

2.5

---

3.2

2004

1.6

2.1

2.4

2.8

3.4

3.5

2005

1.7

2.0

2.3

2.5

3.0

3.0

2006

2.5

2.6

2.7

2.8

3.0

3.1

2007

2.5

2.6

2.7

2.8

3.0

3.0

2008

2.1

2.3

2.4

2.6

2.8

2.8

2009

0.9

1.6

1.9

2.4

2.9

2.7

2010

0.9

1.6

1.9

2.2

2.7

2.7

2011

0.0

0.4

0.8

1.3

2.1

2.3

2012

0.0

0.4

0.8

1.3

1.7

2.0

2013

-1.4

-0.8

-0.4

0.1

0.8

1.1

Average

1.5

1.9

2.1

2.4

2.5

2.9

Std Dev

1.3

1.2

1.1

0.9

0.7

0.7

Agency Costs

Agency costs include all costs incurred directly by the agency over the analysis period. These costs typically include initial preliminary engineering, contract administration, construction supervision and construction costs, as well as future routine and preventive maintenance, resurfacing and rehabilitation, and associated administrative costs (Walls and Smith 1998).

Construction costs are directly related to the design of both the initial structure as well as that of the anticipated rehabilitation activity. The first step in estimating agency costs is to determine construction quantities and unit prices. Unit prices can be determined from historical data on previously bid jobs of comparable scale (Walls and Smith 1998).

Routine maintenance cost data are normally not available; fortunately, such costs are generally low. Furthermore, what data exists regarding routine maintenance costs seem to indicate little difference between most alternative pavement strategies, and thus have negligible effect on NPV and can generally be ignored when discounted to the present (Walls and Smith 1998).

Agency costs also include maintenance of traffic cost and can include operating cost such as pump station energy costs, tunnel lighting, and ventilation (Walls and Smith 1998).

Salvage Value

Salvage value represents the value of an investment alternative at the end of the analysis period. The two fundamental components associated with salvage value are residual value and serviceable life (Walls and Smith 1998):

· Serviceable life represents the more significant salvage value component and is the remaining life in a pavement alternative at the end of the analysis period. It is primarily used to account for differences in remaining pavement life between alternative pavement designs at the end of the analysis period. For example, over a 35-year analysis period, Alternative “A” reaches terminal serviceability at year 35, while Alternative “B” requires rehabilitation (with a 10-year design life) at year 30. Thus, the serviceable life of Alternative “A” at the end of the analysis period would be 0, while Alternative “B” will have 5 years of serviceable life. The value of the serviceable life of Alternative “B” at year 35 can be calculated as a percent of design life remaining (5 of 10 years or 50 percent) multiplied by the cost of rehabilitation at year 30.

· Residual value refers to the net value from recycling the pavement. The differential residual value between pavement design alternatives is generally not very large, and thus, tends to have little effect when discounted.

Supplemental Costs

A third aspect of agency costs is the supplemental costs associated with construction and maintenance and rehabilitation activities. These costs can be categorized into administrative, engineering, and traffic control costs. Their inclusion in the LCCA depends on whether substantive differences can be identified among the alternative pavement strategies. If the supplemental costs of the different alternatives are approximately the same, then these costs can be ignored. If there are significant differences, the process of developing estimates for all events should proceed. Because estimating these costs can be difficult and time-consuming, an alternative method to consider is to specify them as a percentage of the total project-level pavement costs.

User Costs

User costs are the costs associated with construction/congestion delay, vehicle operation (VOC), and crashes. Vehicle delay and crash costs are unlikely to vary among alternatives except during periods of construction, maintenance, and rehabilitation activities (Walls and Smith 1998). Overall, there are five primary mechanisms of user costs (Hallin et al. 2011):

· Time delay costs—costs incurred as a result of travel delays due to work zones (i.e., lane restrictions, road closures). Time delay costs represent the value of other activities that cannot be completed because of the extra time taken traveling.

· VOCs—costs associated with fuel and oil consumption, tire wear, emissions, maintenance and repair, and depreciation due to work zone-related delay and/or significantly rough roads. VOCs typically involve the out-of-pocket expenses associated with owning, operating, and maintaining a vehicle.

· Crash costs—costs associated with additional crashes brought about by work zones or by rough or slippery roads. Crash costs are primarily comprised of the costs of human fatalities, non-fatal injuries, and property damage.

· Discomfort costs—costs associated with driving in congested traffic or on rough roads.

· Environmental costs—costs associated with traffic noise and construction equipment operation.

There are user costs associated with both normal operations and work zone operations. “Normal operations” reflect costs associated with using a facility during construction-free periods, and are primarily a function of pavement performance (i.e., roughness) of the alternatives. “Work zone operations,” however, reflect costs associated with using a facility during periods of construction, including maintenance and/or rehabilitation activities, all of which typically restrict capacity and disrupt normal traffic flow (Walls and Smith 1998). Additional information on these types of user costs are described below.

Normal Operations

If pavement alternative performance curves and levels differ substantially, significant vehicle operating cost differentials can develop. Figure 6-4 depicts an example of two alternative pavement design strategies.

Figure 6-4. Alternatives performance curve comparison(redrawn from Walls and Smith 1998).

Alternative “A” represents a strategy with rehabilitation implemented on a 15-year cycle, while Alternative “B” represents minimal treatment every 5 years. As can be seen from the figure, there is differential performance between each alternative represented by the gap between Alternative A’s solid line and Alternative B’s dotted line at a particular year. Slight differences in VOC rates caused by differences in pavement performance characteristics (primarily roughness), when multiplied by several years of vehicle miles traveled (VMT), could result in significant VOC differentials over the analysis period (Walls and Smith 1998). To calculate these differences, however, the analysis must be able to: (1) accurately estimate differences in pavement performance over time, and (2) quantify the difference in VOC rates for differences in pavement performance, even at relatively high performance levels.

Work Zone Operations

User costs are heavily influenced by roadway operating characteristics in that they are directly related to the current and future traffic demand and facility capacity, especially with respect to the timing, duration, and frequency of work zone-induced capacity restrictions, including any extra mileage resulting from detours. Thus, directional hourly traffic demand forecasts for the analysis year in question are essential for determining work zone user costs (Walls and Smith 1998).

In many cases, as long as the work zone still provides enough capacity to satisfy vehicle demand, user costs are typically manageable. However, when demand exceeds capacity, the facility operates under forced-flow conditions and user costs can quickly accumulate, and often overwhelm the agency costs. Queuing costs can account for more than 95 percent of work zone user costs (Walls and Smith 1998).

Several software tools have been developed to determine the impact to the users of the facility due to workzone operations. These include:

· QUEWZ – Estimates traffic impacts, emissions, and road user costs without and with lane closures due to work zone activities (TTI 1998).

· CA4PRS – Scheduling and traffic analysis tool for assisting in the selection of effective, economical rehabilitation strategies (Caltrans 2007a).

Currently, it is recommended that only those costs associated with time delay and vehicle operating costs due to construction work zones be included as part of the user cost determination (Hallin et al. 2011). This is primarily due to the ability to reasonably estimate these costs and that they comprise the largest portion of the total user cost. In addition, it is also recommended that only the differential user costs between the alternatives be used in the economic analysis (Hallin et al. 2011).

Computational Approach

There are two approaches to preparing an LCCA: deterministic and probabilistic. The methods differ in the way they address the variability and uncertainty associated with inputs such as activity cost, activity timing, and discount rate.

Deterministic Approach

The deterministic approach assigns each input variable a fixed, discrete value; that is, a single value is selected for each input (such as performance period, discount rate, and so on) that is believed to be the value most likely to occur, based on historical evidence or professional judgment. However, it fails to convey the uncertainty associated with the estimate.

The results of deterministic analysis can be enhanced using sensitivity analysis, which involves changing a single input, such as discount rate or initial cost, over the range of its possible values while holding all others constant. Each resulting estimate reflects the effect of the change, and each input may be ranked according to its impact, which is important to understanding the variability associated with each alternative (Walls and Smith 1998). Additionally, it provides a way for identifying those critical factors warranting special attention with regards to how accurately they must be estimated prior to input.3

Probabilistic Approach

Probabilistic LCCA allows the value of individual analysis inputs to be defined by a frequency (probability) distribution (Walls and Smith 1998). Inputs with uncertain values are identified and a sampling distribution of possible values is developed for each input. Software simulation (repeated thousands of times) randomly draws values from the probabilistic description of each input and uses these values to compute a single forecasted LCCA estimate. From this iterative process, the probability distribution (as well as the average) of an alternative’s LCCA estimate is generated (see Figure 6-5). The resulting distribution can then be compared with other alternatives’ distributions and the most economical option may be determined for any given risk level (Walls and Smith 1998).

Figure 6-5. Example probability distribution.

Unlike deterministic LCCA, probabilistic LCCA accounts for uncertainty and variation in individual inputs and allows for differing assumptions for many different variables at the same time. It also conveys the likelihood (probability) that a particular LCCA estimate will actually occur (Walls and Smith 1998).

Pavement Performance Period

All pavements (new, reconstructed, or rehabilitated) deteriorate due to traffic- and environmental-related stresses, which prompts various maintenance activities during the pavement’s life to sustain the structural integrity (and capacity) and functional characteristics. For each alternative, the expected performance life must be determined for the initial construction and any treatment anticipated to occur within the analysis period. Thus, the sequence and timings of future treatment activities can be accounted for, as illustrated in Figure 6-6.

Figure 6-6. Example of expenditure stream diagram.

A pavement’s service life is the time from initial construction until the structural and/or functional integrity of the pavement is deemed unacceptable and rehabilitation or replacement is required. In Figure 6-6, for example, the service life of the initial asphalt pavement is 17 years, corresponding to the timing of the first asphalt resurfacing activity. Furthermore, the service life of that first resurfacing is 10 years, corresponding to the timing of the second resurfacing.

Pavement service life can be estimated in various ways, from using the opinions of experienced engineers to reviewing historical performance records to using pavement performance prediction models.

Identification of Economically Feasible Alternatives

After computing the NPV for each alternative, the alternatives can potentially be reevaluated for possible modifications to develop more cost-effective options (Walls and Smith 1998). For example, designs could be revised to increase the structural design to minimize the frequency of rehabilitation and/or include features that reduce the impact rehabilitation will have on the structural capacity (Walls and Smith 1998).

LCCA results are just one of many factors that influence the ultimate selection of a pavement design strategy. The final decision may include a number of additional factors outside the LCCA process, such as local politics, availability of funding, traffic control options, overall constructability, industry capability to perform the required construction, and agency experience with a particular pavement type, as well as the accuracy of the pavement design and rehabilitation models.

Life-Cycle Expenditure Models

Expenditure stream diagrams are graphical representations of expenditures over time. They are generally developed for each pavement design alternative to help visualize the scope and timing of expenditures. Figure 6-7 shows a typical expenditure stream diagram.

Figure 6-7. Example expenditure stream diagram for a pavement design alternative.

Normally, costs are depicted as upward arrows at the time they occur during the analysis period, and benefits are represented as negative cost or downward arrows. Generally, the only negative cost (downward arrow) is the cost associated with any salvage value.

Once the expenditure stream for each alternative has been developed, projected life-cycle costs are calculated. For deterministic analysis, this is a simple matter of converting all future costs (including negative costs, i.e., salvage) to present worth values using the specified discount rate. Sensitivity testing of selected inputs, such as the discount rate or key unit costs, can also be performed to examine the effects on life-cycle costs of varying these inputs. On the other hand, probabilistic analysis involves (1) randomly selecting a value from each input’s probable distribution, (2) using these values and the NPV formula to compute a life-cycle cost, and (3) repeating steps 1 and 2 many times to generate an array of forecasted costs.

Evaluation of LCCA Results

As previously described, LCCA should include a sensitivity analysis to address the variability within major analyses input assumptions and estimates. Traditionally, sensitivity analysis has evaluated different discount rates or assigned value of time, normally evaluating a ‘best’ and ‘worst’ case scenario. A primary drawback of the sensitivity analysis is that the analysis gives equal weight to any input value assumptions, regardless of the likelihood of occurring. In other words, the extreme values are unrealistically given the same likelihood of occurrence as the expected value (Walls and Smith 1998).

The ultimate extension of sensitivity analysis is a probabilistic approach, which allows all significant inputs to vary simultaneously (Walls and Smith 1998). The FHWA’s Life-Cycle Cost Analysis in Pavement Design advocates the use of a probabilistic approach, also known as Risk Analysis, to LCCA, incorporating analysis of the variation within the input assumptions, projections, and estimates. Risk analysis is a technique that exposes areas of uncertainty, typically hidden in the traditional deterministic approach, and it allows the decision maker to weigh the probability of the outcome actually occurring. The risk analysis approach combines probability descriptions of uncertain variables and a computer simulation technique, generally known as Monte Carlo Simulation, to characterize uncertainty.

Additionally, the analysis should examine the implications of contractor work hours on queuing costs as well as the anticipated maximum queue lengths and delay times.

Analyzing Deterministic Results

In analyzing deterministic LCCA results, it is common to compute the percent difference in life-cycle costs of each alternative. If the percent difference between the cost strategies is greater than some established minimum requirement—usually set according to the tolerance for risk (5 to 15 percent are common)—then the lowest cost strategy is accepted as the most economical one. If, on the other hand, the percent difference is less than the minimum requirement, then the life-cycle costs of the two strategies are deemed equivalent, thereby leaving the analyst with the option of reevaluating the strategies or allowing other factors to drive the selection process (Hallin et al. 2011).

Analyzing Probabilistic Results

The results of probabilistic LCCA simulation can be analyzed and interpreted in different ways. Approaches may include (ARA 2008):

· Trial-by-trial comparisons of forecasted NPV/EUAC values—Tally the number of “wins” for each alternative (i.e., the total number of iterations for which the alternative has the lowest LCCA), divide the number of wins by the total number of iterations, and multiply by 100, to determine the overall probability for each alternative to have the lowest LCCA. The alternative with the highest overall probability is the favored strategy, but additional evaluation is needed to determine if it is the most economical one.

· Statistical analysis of mean values—The LCCA mean and standard deviation values are computed for each alternative and used to determine if significant differences exist between the alternative means. Between two competing alternatives, the difference in means is evaluated using the t-test; for three or more, an analysis of variance (ANOVA) test is performed. If the alternative with the lowest mean LCCA is shown to be statistically significantly lower than all other alternatives, then it can be accepted as the most economical strategy.

· Risk assessment of forecasted NPV/EUAC distributions—If the results of statistical analysis are not definitive, then risk assessment should be performed to identify any distinguishing probability characteristics that play to or against an agency’s propensity for risk-taking. This could include the generation of “tornado plots” that indicate those factors that are strongly driving the analysis results. For example, Figure 6-8 illustrates a tornado plot showing that the agency cost for activity 1 has the greatest effect on the LCCA results. With this information an agency may choose to further investigate the methodology used for determining these cost and identify strategies for reducing the associated risk and potential uncertainty in the cost estimate.

Figure 6-8. Example tornado plot.

LCCA Software

The FHWA RealCost LCCA software tool was developed to automate the computations described in the Life-Cycle Cost Analysis in Pavement Design technical bulletin. The program, officially released in 2002, utilizes a Microsoft Excel® platform that incorporates the @RISK add-in software with built-in probabilistic functions. Among some of the primary features of the program are both deterministic and probabilistic analyses, work zone user cost calculation, an optional user cost analysis, and risk analysis functionality (FHWA 2010).

The software does not calculate agency costs or service lives for individual construction or rehabilitation activities. These values can be established separately by the agency and then entered into RealCost program. Alternatively, a user can create a worksheet(s) within the program to enable such calculations, which can then be linked to the appropriate input fields (FHWA 2010).

Software programs such as MicroBENCOST and QUEWZ are also available for conducting LCCA on routine pavement rehabilitation projects. MicroBENCOST, developed by the Texas Transportation Institute (TTI) is capable of evaluating various highway improvement categories, which include capacity improvement, bypass construction, intersection/interchange improvement, pavement rehabilitation, bridge improvement, safety improvement, and railroad grade crossing improvement. The MicroBENCOST analysis compares the estimated annual average daily traffic volumes for through traffic with and without the proposed improvement and calculates benefits in relation to user travel times, vehicle operating costs, and crashes (Caltrans 2007b). Similarly, QUEWZ, also developed by TTI, estimates traffic impacts, emissions, and road user costs without and with lane closures due to work zone activities (TTI 1998). Outputs of the QUEWZ program include road user costs and a recommended lane closure schedule to minimize excessive congestion (TTI 1998).

References

American Association of State Highway and Transportation Officials (AASHTO). 1993. Guide for Design of Pavement Structures. American Association of State Highway and Transportation Officials, Washington, DC. Used by permission.

Anderson, S. D. and I. Damnjanovic. 2008. Selection and Evaluation of Alternative Contracting Methods to Accelerate Project Completion. NCHRP Synthesis 379. Transportation Research Board, Washington, DC. Available online at: http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_syn_379.pdf.

Hallin, J. P., S. Sadasivam, J. Mallela, D. K. Hein, M. I. Darter, H. L. Von Quintus. 2011. Guide for Pavement Type Selection. NCHRP Report 703. Transportation Research Board, Washington, DC. Available online at: http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_703.pdf.

California Department of Transportation (Caltrans). 2007a. California Department of Transportation – Construction Analysis for Pavement Rehabilitation Strategies Caltrans ‘Rapid Rehab’ Software. http://www.dot.ca.gov/newtech/roadway/ca4prs/index.htm.

California Department of Transportation (Caltrans). 2007b. California Department of Transportation - Division of Transportation Planning. http://www.dot.ca.gov/hq/tpp/offices/ote/benefit_cost/models/microbencost.html.

California Department of Transportation (Caltrans). 2010. Life-Cycle Cost Analysis Procedures Manual. California Department of Transportation, Sacramento, CA. Available online at: http://www.dot.ca.gov/hq/maint/Pavement/Offices/Pavement_Engineering/PDF/LCCA_Manual_09_01_2010_Final.pdf.

Demos, G. 2006. Life Cycle Cost Analysis and Discount Rate on Pavements for the Colorado Department of Transportation. CDOT-2006-17. Colorado Department of Transportation, Denver, CO. Available online at: http://www.coloradodot.info/programs/research/pdfs/2006/discountrate.pdf/view.

Federal Highway Administration (FHWA). 1981. 23 CFR Highways, Federal Highway Administration, Washington, DC. Available online at: http://www.fhwa.dot.gov/hep/23cfrchapter1.htm.

Federal Highway Administration (FHWA). 1996. Final Policy Statement. Federal Highway Administration, Washington, DC. Available online at: http://www.gpo.gov/fdsys/pkg/FR-1996-09-18/html/96-23870.htm.

Federal Highway Administration (FHWA). 1999. Pavement Design Considerations. Federal Highway Administration, Washington, DC. Available online at: http://www.fhwa.dot.gov/pavement/cfr06261.cfm.

Federal Highway Administration (FHWA). 2002. Briefing On FHWA Innovative Contracting Practices, Special Experimental Projects No. 14 (SEP-14)–Alternative Contracting (Formerly Innovative Contacting). Federal Highway Administration, Washington, DC. Available online at: http://www.fhwa.dot.gov/programadmin/contracts/sep_a.cfm.

Federal Highway Administration (FHWA). 2010. Life-Cycle Cost Analysis RealCost User Manual, for version 2.5, draft. Federal Highway Administration, Washington, DC. Available online at: http://www.fhwa.dot.gov/infrastructure/asstmgmt/lccasoft.cfm.

Lamptey, G., M. Ahmad, S. A. Labi, and K. Sinha. 2005. Life Cycle Cost Analysis for INDOT Pavement Design Procedures. FHWA/IN/JTRP-2004/28, Indiana Department of Transportation, West Lafayette, IN. Available online at: http://docs.lib.purdue.edu/cgi/viewcontent.cgi?article=1609&context=jtrp&sei-redir=1#search="Life+Cycle+Cost+Analysis+for+INDOT+Pavement+Design+Procedures".

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Rangaraju, P. R., S. Amirkhania, and Z. Guven. 2008. Life Cycle Cost Analysis for Pavement Type Selection. South Carolina Department of Transportation, Columbia, SC. Available online at: http://www.clemson.edu/t3s/scdot/pdf/projects/SPR656Final.pdf.

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6-1

6-19

1. Are there

overriding

principal factors

which dictate

pavement type

2. Develop

preliminary

designs for

typical sections

3. Economic

Analysis of

typical sections.

Is one type

clearly superior?

4. Evaluate

secondary

factors

8. Select final

pavement type

and design

7. Is design

reasonably close

to typical design

used in analysis

6. Perform

detailed

pavement

design

5. Preliminary

pavement type

selection

No

Yes

No

Yes

Yes

No

Selection of Preferred Pavement Strategy

(consider other factors)

Step 9. Analyze ResultsStep 8. Compute Life-Cycle CostsStep 7. Develop Expenditure Stream DiagramStep 6. Estimate Indirect/User CostsStep 4. Determine Expected Pavement Performance and Maintenance and Rehabilitation

Activity Timings

Step 3. Develop Alternative Pavement StrategiesStep 5. Estimate Direct/Agency CostsYESNOStep 1. Define Project ScopeStep 2. Establish LCCA FrameworkStep 10. Reevaluate Pavement Strategies(Is the most economical

strategy identified?)

Analysis PeriodRehabilitationTerminal Serviceability

Pavement LifePavement Condition

A

N

k

n

N

k

k

i

i

NPV

å

ú

û

ù

ê

ë

é

+

-

å

ú

û

ù

ê

ë

é

+

+

=

=

=

1

1

1

1

Salvage

1

1

Cost

Rehab

Cost

Initial

ú

û

ù

ê

ë

é

+

+

=

-

1

)

1

(

)

1

(

A

A

i

i

i

NPV

EUAC

Pavement Life (years)

0 5 10 15 20Alternative ATerminal Serviceability

Pavement Condition

Alternative B

0.000.100.200.300.400.500.600.700.800.901.004,0005,0006,0007,0008,0009,000

Probability ScaleAgency Cost Present Value ($1000)

Alternative 1Alternative 2

Time, years403020100Crack SealAsphalt Pavement10 in. Asphalt8 in. Aggregate BaseResurfacing2 in. Mill2 in. Asphalt OverlayResurfacing2 in. Mill3 in. HMA OverlayResurfacing2 in. Mill2 in. HMA OverlaySurface TreatmentCrack SealCrack SealSurface TreatmentSurface Treatment

Analysis PeriodRehabilitationInitial Construction

Cost ($)Time

Salvage Value

0.95-0.23-0.15-1.0-0.50.00.51.0Activity 1: Agency CostDiscount RateActivity 1: Service LifeCorrelation Coefficient