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Updated August 27, 2007

This chapter describes transportation evaluation methods and how they can be used to evaluate the value of TDM programs. Transportation Demand Management evaluation requires more comprehensive analysis than is often used for transportation planning. This chapter discusses the travel changes caused by different types of TDM strategies, the impacts (benefits, costs and equity effects) that result, and how information in this Encyclopedia can help rate TDM strategies in terms of their ability to achieve various objectives.

Index

Introduction. 2

General Steps in Economic Evaluation. 5

TDM Impacts. 6

Performance Evaluation. 9

Transportation Improvement Objectives. 13

Congestion Reduction. 13

Road and Parking Facility Cost Savings. 13

Consumer Savings. 13

Transport Options. 13

Safety Impacts. 13

Environmental Protection. 13

Efficient Land Use. 13

Community Livability. 13

Evaluating TDM Costs. 13

Evaluating Equity Impacts. 13

Evaluating Transportation System Quality. 13

Conventional Versus Comprehensive Evaluation. 13

Special Considerations. 13

Cumulative and Synergistic Impacts. 13

Consumer Surplus Analysis. 13

Determining Incremental Impacts. 13

Analysis Perspective and Scale. 13

Choosing Units for Comparison. 13

Accuracy Versus Precision. 13

Changes Over Time. 13

Resource Costs and Economic Transfers. 13

Valuing Travel Time Changes. 13

Economic Development Impacts. 13

Double-Counting. 13

Common Errors When Comparing Capacity Expansion and TDM Options. 13

Example. 13

Best Practices. 13

Related Chapters. 13

References And Resources For More Information. 13

You Too Can Be A Policy Analyst or Planner!

When evaluating a public policy or project, most people ask, “How does it directly affect me?” A policy analyst or planner takes a broader perspective. They consider different perspectives, groups and geographic scales. They consider indirect and long-term impacts. They consider how a particular short-term action relates to a community’s overall strategic objectives.

A policy analyst or planner is a professional worrier, always thinking about what could go wrong, and the worst possible conditions that could result.

Good policy analysis and planning help communities avoid problems. Unfortunately, this tends to be a thankless job because beneficiaries never experience the problems they would otherwise suffer. A doctor who encourages patients to stop smoking, eat a healthier diet and exercise more is considered bothersome, while a surgeon who performs a heart transplant after a patient becomes ill is considered a hero, although a preventive medical approach usually provides far greater overall benefits. Similarly, good public policies provide tremendous benefits, but little glory.

It’s often a difficult job, but somebody must do it. And the more knowledge, skill, respect for others and community spirit you can bring, the better for everybody involved.

Introduction

Life is full of tradeoffs. There are only so many hours in a day or dollars in a budget. Economics is the discipline concerned with such trade-offs, that is, how resources can be used to provide the greatest possible benefit.

Economic Evaluation (also called Appraisal or Analysis) refers to methods to determine the value of a planning option to support decision making. Economic evaluation is often applied to transportation decision-making (EEB, 1994; Edwards, 1998; Small, 1999; Schreffler, 2000; Litman, 2001; USDOT, 2003; CUTR, 2007). Specific evaluation methods are described below:

· Cost-Effectiveness compares the costs of different options for achieving a specific objective, such as building a particular road or delivering a particular amount of freight. The quantity of outputs (benefits) are held constant, so there is only one variable, the cost of inputs.

· Benefit-Cost Analysis compares total incremental benefits with total incremental costs of each option. It is not limited to a single objective or benefit. For example, potential highway routes may differ in construction costs and the quality of service (speed and safety) they provide.

· Lifecycle Cost Analysis is Benefit-Cost Analysis that incorporates the time value of money. Lifecycle Cost Analysis allows programs or projects to be compared that have benefits and costs occurring at different times. For example, one option may be quicker to implement but has greater costs or lesser benefits than an alternative. Lifecycle cost analysis is important for determining the best long-term infrastructure maintenance program (FCM, 2002).

· Least Cost Planning is a type of Benefit-Cost Analysis that considers demand management on equal terms with capacity expansion. Least Cost Planning allows TDM to be implemented when it is cost effective.

· Multiple Accounts Evaluation is an analysis method that incorporates both quantitative and qualitative criteria, and can be used when some impacts cannot be monetized. Each option is rated for each criterion.

These methods evaluate the economic impacts (costs and benefits) of a policy or project to determine net benefits or net value (incremental benefits minus incremental costs). Economic analysis is not limited to market (monetary) impacts; it can also incorporate non-market impacts such as travel time, crash risk, environmental impacts and equity objectives. Various techniques are used to determine the monetized value (i.e., how much people would be willing to pay) for these non-market goods (Litman, 2006a). See Cobb, Halstead and Rowe (1999), GDRC (2000) and Bhasin (2005) for other evaluation methods that also take into account factors such as health, quality of life and development.

Transportation decisions often have various levels of impacts. For example, increasing roadway capacity has direct impacts of reducing traffic congestion and increasing vehicle traffic speeds. A second-level impact is that this increased speed and convenience may attract additional travel from other routes and times (Rebound Effects), and it may create barriers to walking and cycling (Nonmotorized Evaluation). A third level impact may be that over the long run, land use patterns change as people and businesses respond to more convenient driving and less convenient nonmotorized travel (Land Use Impacts).

When evaluating transportation management strategies it is helpful to differentiate between their travel impacts (the change per affected person or business) and take up (also called penetration), which reflects how broadly the strategy is applied. For example, Parking Cash Out typically reduces automobile use by 15-20% among commuters where it is applied, but it is not widely applied, so its effects on total travel been small. Critics sometimes complain that TDM is ineffective, citing continued transportation problems such as congestion and pollution in cities that claim to have TDM programs. However, this does not reflect a lack of impacts where TDM is implemented, rather it is a lack of take up of the strategies: few motorists actually face TDM strategies such as Parking Cash Out, Parking Pricing or Road Pricing.

In most planning situations, evaluation concerns incremental impacts, such as an improvement or reduction in transportation facilities or services. For example, planners may want to compare the incremental benefits and costs of a new pedestrian bridge, roadway capacity expansion or improved transit services. This is called a marginal analysis. It is seldom necessary to calculate the total value of transportation facilities or services, such as the total benefits from all pedestrian, roadway or transit travel.

Marginal Analysis

Economic evaluation should be based on marginal analysis, that is, the incremental impacts (costs and benefits) of an additional unit of consumption. Marginal analysis means that all costs and benefits are considered, and that impacts are calculated for each mode, vehicle, location and time (although as a practical matter these are often grouped into a few major categories). Marginal analysis means that the costs of increasing system are assigned only to peak-period travelers, since those are the users that require it. Marginal impacts often differ significantly from average impacts. Highway costs may average just 5¢ per vehicle-mile, but the marginal cost of additional urban-peak vehicle trips may be ten or twenty times higher because it requires increasing roadway capacity.

An evaluation framework specifies the basic structure of the analysis for clear and consistent evaluation and comparison. A framework usually identifies:

· Evaluation method, such as cost-effectiveness, benefit-cost, lifecycle cost analysis, etc.

· Evaluation criteria, which are the factors and impacts to be considered in the analysis, including indirect and long-term impacts. Impacts can be defined in terms of objectives or their opposite, problems (for example, congestion reduction is an objective because congestion is considered a problem), or they can be defined in terms of costs and benefits (for example, congestion reduction benefits can be measured based on reductions in congestion costs). Planners tend to use the terms objectives and problems (which are more qualitative), while economists tend to use the terms benefits and costs (which are more quantitative), all of which can be considered different approaches for evaluating the same impacts, as illustrated in the table below.

Table 1 Ways to Describe An Impact

	Positive	Negative
Qualitative	Objective	Problem
Quantitative	Benefit	Cost

Objective, Problem, Benefit and Cost are different ways to describe an impact.

· Modeling techniques, which predict how a policy change or program will affect travel behavior and land use patterns.

· The Base Case, meaning what would happen without