Least-Cost Transportation Planning

Creating An Unbiased Framework For Transport Planning


TDM Encyclopedia

Victoria Transport Policy Institute


Updated 18 July 2017

This chapter describes transportation planning and investment reforms that allow demand management strategies to be implemented when they are cost effective, taking into account all benefits and costs.




Least-Cost Planning (or Integrated Planning) is a planning framework that:



Least Cost Planning reflects best practices in transport Evaluation and Planning. Current planning practices tend to overinvest in road and parking capacity and undervalue TDM strategies (Market Principles). When all impacts are considered, TDM is often the most cost effective solution to transportation problems (Why TDM?). Least-Cost Planning first developed in the field of energy planning, when decision-makers realized that it can be cheaper to invest in conservation than to build additional electrical generation and distribution capacity. The same approach is now being applied to transportation planning.


For example, Least Cost Planning means that transit improvements, rideshare programs, or road pricing can be implemented instead of roadway capacity expansion if they improve mobility at a lower total cost, including costs to governments, businesses, consumers and the environment. If a particular demand management strategy can reduce traffic or parking demand by 10%, it is considered to be worth at least as much as a 10% increase in road or parking facility capacity, and often more when indirect impacts, such as environmental and safety impacts, are considered. 


Least-cost planning involves the following steps:


1.       Identify goals (general things that you want to achieve), objectives (ways to achieve those goals) and targets (measurable outcomes that you want to achieve).


2.       Identify various strategies that can help achieve the objectives and targets. These can include both projects that increase capacity and demand management strategies.


3.       Evaluate the costs and benefits of each strategy (including indirect impacts, if any), and rank them according to cost-effectiveness or benefit/cost ratios.


4.       Implement the most cost-effective strategies as needed to achieve the stated targets.


5.       After they are implemented, evaluate the programs and strategies with regard to various performance measures, to insure that they are effective.


6.       Evaluate overall results with regard to targets to determine if and when additional strategies should be implemented.



Least Cost Planning methods can be applied to many different types of problems. For example, they can be applied to find the most cost effect way to increase safety, improve mobility options for non-drivers or reduce air pollution emissions. Many TDM strategies can help achieve a variety of planning objectives, and so tend to receive a high rating when evaluated using Least Cost principles (Win-Win Solutions).


For example, a roadway expansion project may have an annualized cost (the additional annual payment needed to pay off capital costs and any additional operating costs) of $1 million dollars and be able to accommodate 2,000 additional peak-period travelers, which works out to be $500 per additional vehicle-year, $2.00 per additional vehicle-day (assuming 250 annual work days). This is the unit benefit provided by the roadway expansion.


Transportation Demand Management can provide comparable benefits by reducing congestion or avoided roadway expansion costs. For example, if Road Pricing or Public Transit Improvements reduce peak-period traffic volumes by 2,000 vehicles, this has the same congestion reduction benefit as roadway expansion, and provides additional benefits such as reduced downstream congestion, reduced parking costs, consumer cost savings, reduced accidents, improved mobility options for non-drivers, energy conservation and emission reductions. The exact impacts vary depending on circumstances, and not all TDM strategies provide all of these benefits. For example, Road Pricing benefits depend on the type of travel responses since shifting vehicle travel from peak to off-peak times, or to less congested routes, provides only a few benefits. Reductions in total vehicle travel and shifts to alternative modes tend to provide far more benefits.


Table 1            Evaluating Multiple Benefits

Planning Objective

Road Expansion

Congestion Pricing

Transit Improvement

Congestion reduction




Reduced downstream congestion




Parking cost savings




Consumer costs savings




Reduced traffic accidents




Improved mobility options




Pollution reductions




Energy conservation




Smart growth land use objectives




Total Benefits




Roadway expansion reduces congestion and may cause small reductions in pollution emissions and energy consumption, but provides few other benefits. Congestion pricing that shifts travel to alternative times and routes may provide some additional benefits, such as reduced downstream. However, transit service improvements that attract motorists provide a wide range of benefits, including some that may be difficult to quantify, such as improved mobility for non-drivers and support for smart growth land use planning objectives.



In fact, roadway expansion tends to provide even smaller net benefits over the long term due to Induced Vehicle Travel, which reduces congestion reduction benefits and increases other problems such as downstream congestion, accidents, energy consumption and pollution emissions over the long run.


Least Cost planning recognizes that there is usually no single strategy that will address problems, and it is not always possible to predict the effectiveness of a particular management strategy or anticipate all future conditions. It allows Contingency-Based Planning, that is, planning that addresses uncertainty by deploying solutions on an as-needed basis. For example, a transportation plan may identify 5 strategies to implement immediately, another 4 to implement in two years if stated targets are not achieved, and another 3 can be implemented in the future if needed. This tends to be cost effective and flexible, because strategies are only deployed if they are needed, and additional strategies can be ready for quick deployment if unexpected changes create additional needs. This approach is ideal for medium and long-range transportation and land use planning.


Current planning and funding practices often favor capital expenditures over maintenance and Traffic Operations, and highway expenditures over transit or TDM programs (Beimborn and Puentes 2003). Capital projects are considered prestigious and some government funds may only be used for major capital improvements. This encourages jurisdictions to expand infrastructure and implement major new projects even when they have inadequate resources to maintain and operate existing facilities, or when incremental improvements to existing facilities and demand management strategies would provide greater economic benefits. Several omissions and distortions in current transportation planning practices tend to violate least-cost planning principles (Comprehensive Transportation Planning).









The Case For Economic Neutrality in Transport Planning

Imagine that a teacher favored boys over girls and tall students over short students. This is not only  unfair, it is also inefficient, because some smart short girls may be discouraged from preparing for higher education, leaving less qualified but taller boys to fill those slots. As a result, the pool of physicians, lawyers and engineers would be smaller than optimal.


Similarly, it is both unfair and inefficient for decision-makers to arbitrarily favor one mode over others, for example, automobile transport over walking and cycling or public transit, because this would favor some people (those who drive a lot) over others (those who drive little or prefer alternative modes), and because it can result in resources being allocated in ways that are not optimal. Perhaps, out of their personal prejudice, local officials are willing to devote $1,000 worth of public resources (money, municipal employee time, or land devoted to roads and parking facilities) to accommodate an automobile commute trip, but only $100 to accommodate commuting other modes. The result would be a bias in the quality of services available to non-drivers, and to the degree that travelers respond to such favoritism, economically-excessive amounts of automobile travel, and less walking, cycling and public transit travel than is optimal.


There are many possible causes of bias in transportation decision-making. For example, a particular mode may receive extra support because it tends to be used more by influential people (busy professionals, such city councilors and agency administrators). A particular problem may receive extra attention because it is easier to measure (traffic congestion is easier to measure than delay to pedestrians and cyclists). A particular type of transport improvement may be easier to finance because, through accidents of history, it has dedicated funding unavailable to other options. For example, it may be easier to finance road and parking facilities than sidewalk and path improvements or mobility management programs, even if they are more cost effective overall.


Because transport planning decisions are often mutually exclusive (road widening improves vehicle travel but often degrades walking and cycling conditions, and a location that optimizes automobile access is often difficult to reach by other modes), even modest bias can have large total effects. For example, zoning codes that mandate generous parking supply not only create more automobile-oriented, dispersed land use development, it also tends to prevent parking pricing (a basic rule of economics is that increased supply reduces prices), reducing the feasibility of access by other modes.


Below are types of bias common in Conventional Transport Planning. In practice, most of these biases tend to favor mobility over accessibility and automobile travel over other modes.

  • Range of options considered. Investments in alternative modes and motility management strategies are often overlooked.
  • Planning integration. Improvements to accessibility and alternative modes often require planning that is coordinated between different sectors (such as transportation and land use planning) and jurisdictions.
  • Project financing. Dedicated funding often favors a particular mode.
  • Modeling practices. Conventional transport modeling tends to favor motorized travel over other modes and accessibility options, because it overlooks certain impacts, including generated traffic, service quality factors such as convenience and comfort (as opposed to travel speed and price), and impacts on non-motorized travel.
  • Range of impacts considered. Conventional project evaluation tends to overlook many costs that result from increased vehicle travel, and benefits from improved alternatives, such as downstream congestion, vehicle ownership costs, parking costs, accidents, energy consumption, environmental impacts, public fitness and health, and the quality of accessibility for non-drivers.



How it is Implemented

Least-Cost Planning implementation usually involves policy Changes by state, provincial, regional or local governments, and changes in administrative practices within a transportation agency. It may require legislation to reform transportation planning and funding practices (Puentes and Prince 2003). Some U.S. states have constitutional limitations on how fuel taxes may be used, which can restrict Least Cost Planning, although there is often some flexibility if demand management is shown to benefit road users (Comprehensive Transportation Planning). For example, dedicated roadway funds can sometimes be used transit improvements if they reduce highway congestion (Transit Evaluation), or for bicycle and pedestrian facilities that are within roadway rights-of-way.


A LCP transportation planning approach should display these technical attributes (CH2M Hill and HDR 2010):

  1. Costs and benefits are measured in terms that facilitate the comparison of planning options (such as monetary equivalent units).
  2. The approach makes use of quantitative and qualitative evidence.
  3. Impacts on users (for example, commuters using a new transit system along a previously congested corridor) and nonusers (for example, members of the general public who do not travel within the corridor, but may benefit from improvements in air quality in the vicinity of that corridor) are estimated.
  4. The approach accounts for indirect effects such as changes in local employment and land use.
  5. Interactions (“synergies”) among planning options are considered.
  6. The approach explicitly accounts for risks and uncertainty in forecasts and cost and benefit calculations.



“Fix It First” means that transportation planning and funding give top priority to maintenance, operations and incremental improvements to existing transportation facilities, and major capital projects are only implemented if there is adequate additional funds (NGA 2004). This can be incorporated into LCP.



Travel Impacts

Least-Cost Planning provides a foundation for TDM strategies to compete equally with capacity-expansion for resources. Its travel impacts depend on how it is implemented, which TDM strategies are implemented, and how effective they are at achieving their objectives. Research by Johnston and Ceerla (1995) indicate that applying least-cost planning practices to regional highway funding would result in significant shifts from investments in roadway capacity expansion to various travel demand management programs, resulting in about a 10% reduction in regional vehicle travel. Additional funding and travel shifts could occur if least cost planning were applied to local transportation and parking planning decisions.


Table 2          Travel Impact Summary




Reduces total traffic.


Usually increases support for TDM.

Reduces peak period traffic.



Shifts peak to off-peak periods.



Shifts automobile travel to alternative modes.



Improves access, reduces the need for travel.



Increased ridesharing.



Increased public transit.



Increased cycling.



Increased walking.



Increased Telework.



Reduced freight traffic.



Rating from 3 (very beneficial) to –3 (very harmful). A 0 indicates no impact or mixed impacts.



Benefits And Costs

Benefits include more balanced and efficient transportation, more cost-effective investments, more flexible solutions, and a more diverse transportation system (Least-Cost Planning is by definition more economically efficient than planning that restricts the range of solutions that can be applied to transportation problems). A more diverse and efficient transportation system tends to increase consumer savings and choice. A less automobile-dependent transportation system tends to reduce road risk and environmental costs.


Costs include transition costs and any additional administrative activities required to incorporate more factors in transportation planning.


Table 3          Benefit Summary




Congestion Reduction


Allows the most cost effective congestion reduction solution.

Road & Parking Savings


Allows most cost effective solutions to road and parking problems.

Consumer Savings


Tends to improve transport choice.

Transport Choice


Tends to increase modal choices.

Road Safety


Tends to reduce automobile use.

Environmental Protection


Tends to reduce automobile use.

Efficient Land Use


Tends to encourage more efficient land use.

Community Livability


Tends to reduce automobile use.

Rating from 3 (very beneficial) to –3 (very harmful). A 0 indicates no impact or mixed impacts.



Equity Impacts

Least-Cost Planning tends to provide equity benefits by creating more neutral public policies with respect to transportation investments. A more efficient and diverse transportation system tends to benefits lower-income and transportation disadvantaged people by improving their mobility options and increasing access for non-drivers.


Table 4          Equity Summary




Treats everybody equally.


Allows alternative modes to be considered and funded.

Individuals bear the costs they impose.


Can reduce unjustified subsidies for automobile travel.

Progressive with respect to income.


Usually improves affordable transport options.

Benefits transportation disadvantaged.


Increases transport options for non-drivers.

Improves basic mobility.


Usually improves transport options.

Rating from 3 (very beneficial) to –3 (very harmful). A 0 indicates no impact or mixed impacts.




Least-Cost Planning can be applied by any government agency involved in transportation planning. It is particularly appropriate in urban areas with significant congestion and environmental problems.


Table 5          Application Summary





Large urban region.


Federal government.


High-density, urban.


State/provincial government.


Medium-density, urban/suburban.


Regional government.




Municipal/local government.


Low-density, rural.


Business Associations/TMA.


Commercial center.


Individual business.


Residential neighborhood.




Resort/recreation area.


Neighborhood association.






Ratings range from 0 (not appropriate) to 3 (very appropriate).




Policy Reform



Relationships With Other TDM Strategies

Least-Cost Planning and investment practices support most other TDM strategies. It is closely related to Institutional Reforms, Comprehensive Transportation Planning, Prioritizing Transportation, Traffic Operations, TDM Programs, Change Management, Contingency-Based Planning, and Comprehensive Market Reforms.




Government policies and agencies are the key stakeholders for implementing Least-Cost Planning. Transportation planners, educators and consultants may need to change their practices. The public may become more directly involved in transportation decision-making.



Barriers To Implementation

There are a variety of political and institutional barriers to Least-Cost Planning. Some jurisdictions (particularly U.S. states) restrict fuel tax revenue to highway expenditures, which can prevent some Least-Cost Planning activities. Many transportation professionals and decision makers are unfamiliar with Least-Cost Planning principles.



Best Practices

Guides listed below describe how to implement Least-Cost Planning. The least cost planning methodology can be broken down into seven basic steps:


  1. Develop comprehensive transport Modeling and Evaluation techniques for accurately evaluating transportation options, including alternative modes, TDM strategies and land use management.


  1. Forecast customer’s needs for transportation services.


  1. Define goals for meeting customer’s transportation needs


  1. Develop a complete list of options for supplying transportation services and the characteristics of those options and their costs.


  1. Select the best mix of transportation options. This selection is based on comparing the benefits and cost of the options, the flexibility of the options in the uncertain future, and the options’ unity with environmental and social goals and constraints.


  1. Develop an action plan for the optimal list of transportation options.


  1. Implement the action plan.


  1. Evaluate the results. The results are then combined with new demand forecasts and the process begins again, as needed.



Wit and Humor

How many efficiency experts does it take to replace a light bulb?

None. Efficiency experts replace only dark bulbs.



Case Studies and Examples

Oregon DOT Least Cost Planning Program (www.oregon.gov/ODOT/TD/TP/LCP.shtml)

In 2009, the Oregon Legislature defined least cost planning and directed the state Department of Transportation to work with stakeholders to develop least cost planning for transportation decision-making. Section 6 of House Bill 2001 discusses least cost planning:

SECTION 6. (1) As used in this section, “least-cost planning” means a process of comparing direct and indirect costs of demand and supply options to meet transportation goals, policies or both, where the intent of the process is to identify the most cost-effective mix of options.

(2) The Department of Transportation shall, in consultation with local governments and metropolitan planning organizations, develop a least-cost planning model for use as a decision-making tool in the development of plans and projects at both the state and regional level.


A consultant’s report explains the issue (CH2M Hill and HDR 2010):


At its core, least cost planning (LCP) is about comparative analysis and cost effectiveness. The utility industry, which coined the term, has had tremendous success using its methods to identify the least expensive options for providing a finite amount of electricity to its customers. In the utility industry, LCP considers a wide variety of options—from the demand as well as the supply side, from peak period pricing to offering energy‐efficient light bulbs to customers for free or at a discounted price. As a result of this success, many have urged that the LCP process be translated for use in the transportation industry. However, this translation has proved difficult, as tradeoffs in transportation are more complex.


With electricity, all decisions come down to one common unit: kilowatt‐hours. In transportation, individuals make trips each day from varied origins and destinations. Trip‐related decisions are made seemingly on the fly—time of travel, route selected, mode choice, and stops in between the origin and destination. Crafting a process to assess a project or network of projects of least cost, considering all of these factors, is no small task. As part of House Bill 2001 the Legislature asked that ODOT consider “direct and indirect costs of demand and supply options to meet transportation goals, policies or both, where the intent of the process is to identify the most cost‐effective mix of options.”


The study concludes:



TravelSmart Program: Kamloops, British Columbia (www.city.kamloops.bc.ca/transportation/plans/travelsmart.shtml)

The TravelSmart program in Kamloops, British Columbia, promotes changes in travel behaviour and encourages sustainable community development in order to minimize demands on the municipal transportation system. Kamloops’ population, which is expected to increase from 85,000 to 120,000 by 2020, is placing increased demands on the city's transportation system and causing growing concern about quality of life amongst residents. Launched in January 1997, TravelSmart includes these ongoing initiatives:


Land use integration: Recognizing the strong links between transportation and land use, the city's official plan was revised to minimize the demand for car travel by influencing growth patterns. The plan now favours a compact form of development, situating accommodation close to employment and community services, and increasing density of the central area.


Less expensive road structure alternatives: To avoid expensive improvements to road networks, the city has slowed or halted development in some areas and identified underutilized arterial corridors for access to the downtown core. Rather than building bypasses over the busy highway that runs through town, the city encourages residents to use alternatives to the highway.


Improved public transit: A comprehensive travel plan was developed to improve the Level of Service and provide alternatives to the single occupant vehicle. Some improvements include increased frequency of service to outlying communities and the use of smaller buses that feed into the main system.


Promoting bicycle use: The Kamloops Bicycle Plan identifies $6 million worth of additional cycle routes and initiatives for businesses to provide "end of trip" facilities to cyclists, such as showers and bike racks.


Promotional programs: Transportation alternatives, such as carpooling, biking and walking, are promoted through workshops and seminars in workplaces; the "Safe Routes to School" program in schools; "Go Green" billboards on commuter streets; and door-to-door neighborhood education by city staff. The plan recognizes the need for an ongoing awareness campaign and community involvement to sustain TravelSmart.


Total project planning costs $300,000, of which $245,000 was funded by the city and $55,000 by the province. The full program is funded through city's general revenue, development cost charges, the B.C. Transportation Financing Authority, specific developers and BC Transit.

TravelSmart will be updated every five years as one component of "Kamplan", the city's growth management strategy.


After three years of operation, the program has improved air quality and reduced planned road expenditures by 75 per cent. Economic and environmental benefits:

·         Anticipated road expenditures were reduced from $120 million to $14 million.

·         Annual energy consumption is expected to decline from 128 to 125 gigajoules per capita.

·         Carbon monoxide is expected to decline from 116 to 111 kg/capita/year, and carbon dioxide from 7,200 to 7,000 kg/capita/year.



Multi-Modal Funding (www.smartgrowth.org/news/article.asp?art=7215&state=52)

To help remove bias between funding of roads and transit the U.S. Senate Transportation, Housing and Urban Development (THUD) Appropriations Subcommittee augmented the FY 2010 THUD appropriations bill with a provision to make the Federal Transit Administration (FTA) count local investments in multi-modal projects and treat them as wholes in its cost-benefit analyses rather than qualify each mode separately for federal funds. This reform will help finance multi-modal improvements to the Columbia River Crossing (CRC) between Oregon and Washington states.

''This provision puts the Columbia River Crossing (CRC) in a strong position to compete for federal funding,'' stressed Subcommittee Chair Patty Murray. ''It will ensure that instead of using outdated, conventional methods to rate transit projects the FTA takes into account all of the benefits this multi-modal project brings to the region's commuters and economy.''

The light-rail portion of the $4.1 billion CRC project, which includes some $3 billion in highway widening and intersection improvement costs could now receive $750 million in federal money, and the road portion could get $400 million, with more than $1 billion expected from bridge tolls, and the rest covered locally. Transportation officials in both states applaud the provision.

''We can't thank Senator Murray enough for her wisdom in crafting legislative language that will enable the I-5 Columbia River Crossing to compete more effectively for federal dollars,'' said Washington State Department of Transportation Secretary Paula Hammond. ''We believe the project embraces a modern way of thinking about improving our nation's transportation infrastructure by integrating light rail and highway needs into the same solution.''

Oregon Department of Transportation Federal Affairs Advisor Travis Brouwer pointed to the artificiality of FTA evaluation of the Vancouver light rail extension along the planned bridge as a separate, stand-alone project. The highway component accounts for most of the whole project's costs, he observed, but its light rail adds ''no benefit from the FTA's perspective.''



Sacramento Region Transportation Savings (Rodier and Johnston, 1997)

In one case study researchers estimated that Sacramento regional governments could justify spending $37 million per year on TDM programs if doing so could delay the need for anticipated roadway capacity expansion by seven years.



Smart Infrastructure

by Alex Marshall, Editor, Spotlight on the Region, Vol. 7, No. 23, Dec. 2008 (www.rpa.org/2008/12/work-smarter-not-harder-with-public-works.html)  


This year, the president of Duke Energy, James Rogers, made headlines when he advocated that his company be paid for getting their customers to use less power. Also this year, Janette Sadik-Khan, New York City's transportation Commissioner, made headlines when she put tables and chairs and bike lanes in the middle of busy streets and said that the highest and best use of a thoroughfare was not necessarily more cars. 


A little more quietly, the City released a Sustainable Stormwater Management Plan last week, joining managers of waterworks around the country in seeking to expand capacity of a water and sewer system not by building more plants or pipes, but by investing in decentralized conservation systems and better maintenance. 


Question: how are these three different events or trends related? 


They are all examples of what I and others are calling "smart," "green" or some other descriptive term placed in front of the word "infrastructure." The labels vary, and none so far has caught the exact spirit of this connected but still disparate movement. But something is happening, something that cuts across disciplines as disparate as roads and power, parks and airports. 


Traditionally, infrastructure has been about laying lots of pipe, asphalt, train tracks, cables, water lines and making the big machinery that serves them. The job was to build the world's skeleton, and more was always better than less.


But the smart infrastructure guys and gals are now concluding that more is not always better. Good infrastructure is about figuring out why people need something, and trying to meet those needs in a more strategic, efficient - and often cheaper - way. 


So when it comes to roads, it's understanding that people don't just drive or move for the sake of it, but because they are seeking access to goods, services and other people. Building new roads is just one way of providing this access - and often it is not the most efficient or affordable way of doing it. And so more and more DOTs are thinking more innovatively about access and choosing to build transit, sidewalks, bike paths and selected road investments, where conventional big-road projects would have been built just a few years ago. 


With power, it means understanding that people want light and heat, but that that need can be met in a variety of ways. So power companies, like ConEdison or Duke Energy, are handing out low-energy use light bulbs, and more radically, exploring more comprehensive ways to get power companies in the business of conserving energy. What's in it for ConEd and Duke - a more reliable grid that doesn't black out on high-demand days, without needing to build expensive new infrastructure.


With water, it means understanding that people want clean, fresh water to drink and bathe in, but that need can be met by plugging leaks in pipes, installing low-flow toilets, and protecting land around reservoirs rather than building billion-dollar filtration plants or tapping more lakes and rivers. 


Technology is big in this movement, when it's used to do more with less - technologies like the Smart Grid, which will integrate broadband communications with the electrical grid, allowing real-time pricing information to reach consumers, so they can scale back energy use in peak periods. The Smart Grid also allows for distributed generation, power generation in every home or business, and the ability to sell power back to the grid. 


It helps to understand that the roots of this movement go deep. Albert Appleton, Commissioner of the New York City Department of Environmental Protection (i.e. water commissioner) in the 1990s pioneered many of the conservation strategies that allowed the city to meet rising population and net demand without expanding capacity. Now, the average New Yorker uses substantially less water per capita today than two decades ago. 


To be sure, smart and green infrastructure is not happening everywhere and not overnight. 


Falling oil prices in recent months have also started to reverse the dynamics that were pushing cities, states and countries to manage their infrastructure needs more efficiently. Still, smart infrastructure does not rest on oil prices alone, or any other single factor. And most good trends involve two steps forward, and one step back. Whether it's called smart, green or some other moniker, my sense is that this trend is here to stay.



Preventive Maintenance (FCM, 2002)

A primer on preventive infrastructure maintenance provides guidelines for applying least-cost planning to roads. It explains, “Preventive maintenance is intended to treat small problems before they require more expensive repairs. By slowing the rate of deterioration, treatment can effectively increase the useful life of pavement. However, the practice of systematically identifying payments that would benefit most from preventive maintenance, and of implementing treatments in a timely manner, is often neglected.”



Washington State: What Is Least-Cost Planning? (WSDOT, 1999)

Least Cost Planning is a process of comparing direct and indirect costs of transportation demands and supply options to meet transportation goals and/or policies. The intent of the process is to identify the most cost effective mix of options.


Where did Least Cost Planning come from?

Least cost planning is a process that was developed by the electric utility industry. The utility industry set out to develop a process designed to maximize efficiency while lowering electrical costs to the customer. Energy-conservation programs are an example of this. After a decade of development, least cost planning methodology is still changing and evolving in the utility industry.


Why are we doing Least Cost Planning?

The Washington State Growth Management Act requires each Regional Transportation Planning Organization (RTPO) to develop a regional transportation plan based on a least cost planning methodology that identifies the most cost-effective transportation facilities, services and programs for their region. Regional Transportation Plans adopted after July 1, 1995 should incrementally incorporate least-cost planning methodologies as they are updated. All RTPs developed or updated and adopted after July 1, 2000 must be based upon a least-cost planning methodology.


The least cost planning process can also fulfill federal mandates for consideration of the cost-effectiveness of alternative transportation modes and transportation demand management alternatives as promoted by the Intermodal Surface Transportation Efficiency Act and its’ successor, the Transportation Equity Act for the 21st Century.



References And Resources For More Information


Edward Beimborn and Robert Puentes (2003), Highways and Transit: Leveling the Playing Field in Federal Transportation Policy, Brookings Institute (www.brookings.edu).


CH2M Hill and HDR (2010), History and Application of Least Cost Planning for Transportation from the Mid-1990s, Oregon Department of Transportation (www.oregon.gov); at www.oregon.gov/ODOT/TD/TP/Reports/History%20and%20Application.pdf.


Patrick DeCorla-Souza, Brian Gardner, Jerry Everett & Michael Culp (1999), A Least Total Cost Approach to Compare Infrastructure Alternatives, Transportation Modeling Improvement Program, FHWA (http://tmip.fhwa.dot.gov).


DfT (2009), NATA (New Approach for Transport Appraisal) Refresh: Appraisal for a Sustainable Transport System, UK Department for Transport (www.dft.gov.uk); at www.dft.gov.uk/pgr/economics/integratedtransporteconomics3026


Tony Dutzik, Benjamin Davis and Phineas Baxandall (2011), Do Roads Pay for Themselves? Setting the Record Straight on Transportation Funding, PIRG Education Fund (www.uspirg.org); at www.uspirg.org/news-releases/transportation-news/transportation-news/washington-d.c.-myth-busted-road-costs-not-covered-by-gas-taxes.


ECONorthwest and PBQD (1995), Least-Cost Planning: Principles, Applications and Issues, FHWA (www.fhwa.dot.gov/environment); at www.vtpi.org/LCPpaper.pdf.


FCM (2002), Timely Preventive Maintenance for Municipal Roads - A Primer, National Guide to Sustainable Municipal Infrastructure (www.infraguide.ca).


FHWA (2002), Economic Analysis Primer, Federal Highway Administration (www.fhwa.dot.gov/infrastructure/asstmgmt/primer.htm).


ISF (2003), Least Cost, Greatest Impact: A Discussion Paper On The Applicability of Least Cost Planning To Transport In Australia, Institute for Sustainable Futures, University of Technology Sydney (www.isf.uts.edu.au).


Robert A. Johnston and Raju Ceerla (1995), Effects of Land Use Intensification and Auto Pricing Policies on Regional Travel, Emissions, and Fuel Use, Paper 269, University of California Transportation Center (www.uctc.net).


Todd Litman (1999), Transportation Market Distortions – A Survey, VTPI (www.vtpi.org).


Todd Litman (2001), What’s It Worth? Life Cycle and Benefit/Cost Analysis for Evaluating Economic Value, Presented at Internet Symposium on Benefit-Cost Analysis, Transportation Association of Canada (www.tac-atc.ca), available at VTPI (www.vtpi.org). 


Todd Litman (2005), Win-Win Transportation Solutions: Cooperation for Economic, Social and Environmental Benefits, Victoria Transport Policy Institute (www.vtpi.org); at www.vtpi.org/winwin.pdf.


Todd Litman (2006), Win-Win Emission Reduction Strategies: Smart Transportation Strategies Can Achieve Emission Reduction Targets And Provide Other Important Economic, Social and Environmental Benefits, Victoria Transport Policy Institute (www.vtpi.org); at www.vtpi.org/wwclimate.pdf.


Kathy Lindquist and Michel Wendt (2012), Least Cost Planning in Transportation: Synthesis, Strategic Planning Division, Washington State Department of Transportation (www.wsdot.wa.gov); at http://bit.ly/2rHxFkF.   


Ward Lyles (2005), Where Do We Go From Here? Wisconsin Transportation at the Crossroads, 1000 Friends of Wisconsin & The Land Use Institute (www.1kfriends.org/documents/1KFriendslegislat_001.pdf).


NGA (2004), Fix it First: Targeting Infrastructure Investments to Improve State Economies and Invigorate Existing Communities, National Governors Association (www.nga.org).


PSRC (1995), Least-Cost Planning: Principles, Applications and Issues, Puget Sound Regional Council (www.psrc.org); at www.vtpi.org/LCPpaper.pdf.


Robert Puentes and Ryan Prince (2003), Fueling Transportation Finance: A Primer on the Gas Tax, Center on Urban and Metropolitan Policy, Brookings Institute (www.brookings.edu/es/urban).


Caroline Rodier and Robert Johnston (1997), “Incentives for Local Governments to Implement Travel Demand Management Measures,” Transportation Research A, Vol. 31, No. 4, pp. 295-308.


Justine Sears (2015), Least-Cost Transportation Planning, Vermont Energy Investment Corporation (www.veic.org); at www.veic.org/resource-library/least-cost-transportation-planning.


Jerry B. Schutz (2003), Applying Least Cost Planning Principles to a Rural Regional Transportation Plan, Institute of Transportation Engineers (www.ite.org) Annual Meeting (http://trid.trb.org/view.aspx?id=700587); at http://library.ite.org/pub/e2264edc-2354-d714-513c-7d8f3456816f.


Brian Taylor (2000), “When Financing Leads Planning: Urban Planning, Highway Planning, and Metropolitan Freeways in California,” Journal of Planning Education and Research, Vol. 20, No. 2, pp. 196-214.

This Encyclopedia is produced by the Victoria Transport Policy Institute to help improve understanding of Transportation Demand Management. It is an ongoing project. Please send us your comments and suggestions for improvement.




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“Efficiency - Equity - Clarity”