Step 1:
This efficiency analysis will examine the efficiency of widen an intercity highway in Los Angeles from four lanes to six lanes with the intention of reducing traffic congestion. Already the existing highway has four lanes. However, due to congestion, the project team proposed the idea to widen the highway to accommodate six lanes.
Step 2:
In this case, the main purpose of the economic efficiency analysis is to determine whether the project is viable for its entire lifetime. Any major infrastructure works within a city are very expensive. In addition, infrastructure projects have a life expectancy and they are expected to work efficiently for their entire lifetime. Apart from the initial costs of construction, major projects will also incur significant costs over their lifetime due to factors such as maintenance (Sinha & Labi, 2011). For instance, widening the highway will work to reduce traffic congestion in the short term. However, people might be encouraged to use their vehicles as a result of less congestion which will ultimately lead to the same congestion problems in time. The economic analysis looks at many economic factors related to the project to determine whether it is viable in the long term.
Step 3:
The base case is to widen the highway from the existing four lanes to six lanes. This is a 50% increase in the capacity of the highway. This means that at any one time, the highway will be able to handle more traffic.
Alternatives to the solution are to leave the highway as it is and instead develop a mass transit system. Developing a mass transit system to run parallel with the existing highway will discourage people to leave the congested highway and opt for the transit system, which will be faster as it will not be affected by traffic (DeMeyer, Pich, & Loch, 2013).
Step 4:
The area under study is the city of Los Angeles. The economic efficiency analysis seeks to determine the impact of the new highway on the residents of the city.
Step 5:
A period of five ten years has been selected for the study. The period is long enough to accommodate all the data needed to make the judgment on the costs and benefits of the new project. During the study period, traffic data on the highway will be collected in order to determine the growth in traffic in the past, which can be a good indicator of future projections.
Step 6:
The impact type for the project will be both direct costs. These will include the costs of widening the highway as well as the revenues that can be collected from its users. Impact will also be assessed on indirect benefits and costs. For instance, widening of the highway is expected to reduce travel times by 25%. This can be monetized as time saving for an individual, which means that they are more productive.
Step 7:
The economic analysis criteria will cover the costs of widening the highway, any additional costs such as compulsory purchase of land among other things. The benefits will be measured in terms of time saved over the lifetime of the new road. Additionally, as mentioned earlier, impact will also be assessed on indirect benefits and costs. For instance, widening of the highway is expected to reduce travel times by 25%.
Step 8:
In the base case, commuters using the highway are seen to prefer using private motor vehicles for travel. This has contributed to the high levels of traffic witnessed on the road. Widening the highway will offer relief in the short term with reduced travel times. However, if the factors that contribute to the public preferring private motor vehicles are not interrogated, there is likelihood that the road would become clogged again in the future.
The alternative is to leave the road as it is and instead develop a mass transit system to run parallel to the road. It will be a faster alternative and people may be discouraged from using private means and instead rely on the mass transit system. An additional benefit of the mass transit system is that it is cleaner for the environment as the energy cost of transporting an individual is significantly lower than in private motor vehicles (DeMeyer, Pich, & Loch, 2013).
Step 9:
Project cost = $ 2,000,000,000
Project user benefits
Savings in vehicle operating cost = $ 50 per vehicle
Travel-time savings = $ 10 per vehicle
Maintenance costs = $ 40 per vehicle
Travel-time savings = $ 65 per vehicle
Increased safety = Safety is set to increase by 60% as a result of the new highway
References:
DeMeyer, A., Pich, M. T., & Loch, C. (2013). Managing the unknown: A new approach to managing high uncertainty and risk in projects. Hoboken, N.J: Wiley.
Sinha, K. C., & Labi, S. (2011). Transportation decision making: Principles of project evaluation and programming. Hoboken, N.J: John Wiley.
