Economic Evaluation & Accidents

UNIT-IV part 2

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 Overview

• Economic Evaluation
– Transport cost & benefits,
– Benefit cost ratio
– Net present value
– Rate of return, and their relative comparison
• Accidents
– Causes, methodologies for accident causing
precautions to minimize the accidents

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Economic Evaluation of Highway Projects

– Highway economic evaluation also known as

Highway Project Appraisal / Benefit Cost Analysis
– It is a technique whereby the costs and the
benefits from a scheme are quantified over a
selected time horizon and evaluated by a common
yardstick

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Purpose served by Economic Evaluation

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Transportation system- Cost Components

• Agency cost
– Cost incurred by govt./private for construction and
maintenance
• User cost
– Vehicle operating cost
– Traffic congestion and restraint
– Accident cost
– Cost of travel time

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Agency cost

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 User cost
• Vehicle operating cost
– Fuel, Lubricants, Tyre, Spare parts, maintenance etc

• Accident cost
– Cost of fatality, injury, property damage

• Cost of travel time

– Time value of vehicle occupants, goods and vehicles in transit

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Highway Improvement-Benefits

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 Economic Evaluation/Project appraisal
Methods
1. Net present value
2. Rate Of Return
3. Benefit cost ratio

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 Discount Rate Vs. Interest Rate
• Rs.100,000 invested at a 3% interest rate today will be worth
roughly Rs.115,927 in 5years
– C=P*(1+r/100)n

• Rs.100,000 an anticipated benefits 5years from now is worth

roughly Rs.86,260 today, when discounted by 3%
– P=C*{1/(1+d/100)n}

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 NPV Method
• Net Present Value, is a discounted cash flow technique
• It is often used to compare the viability of different projects
• It is based on computing the Present Value (PV) of all future cash inflows
and outflows
• Benefits treated as +ve, Costs as –ve
• Projects with positive or highest NPV acceptable

• NPV0= (B0-C0)/(1+d)0+(B1-C1)/(1+d)1+(B2-C2)/(1+d)2 +--(Bn-Cn)/(1+d)n

where Bi=benefit of ith year
Ci=Cost of ith year
n=Number of years,
d=discount rate per annum

1/(1+d)n is called discount factor

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 NPV Method
Advantages of using NPV
• It considers time value of money
• All future cash flows are compared in today’s values
• Considers whole time span of project, from beginning to end
• Can simulate what-if using different values

Disadvantages of using NPV

• Its accuracy is based on the accuracy of estimates of future cash flows and
the discount/interest rate
• Does not consider non-financial data
• Has bias towards short term projects
• Uses a fixed interest rate

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Which project is most viable?

Inflow=Benefit, B
Outflow=Cost, C
Cash flow=B-C

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 Benefit Cost Ratio Method

• The ratio of the present value of net project benefits and net project costs
is called the benefit– cost ratio (BCR)
• This method is used in situations where it is desired to show the extent to
which an investment in a transportation project will result in a benefit to
the investor

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 BCR Method
• Correct application of the BCR method requires that costs for each
alternative be converted to Present Worth values. The proposals must be
ranked in ascending order of capital cost, including the do-nothing
alternative, which usually has little, if any, initial cost

• The incremental BCR is calculated for pairs of projects, beginning with the
lowest cost alternative. If the higher cost alternative yields a BCR less than
1, it is eliminated and the next-higher cost alternative is compared with
the lower cost alternative.

• If the higher cost alternative yields a BCR equal to or greater than 1, it is

retained and the lower cost alternative is eliminated. This process
continues until every alternative has been compared

• The alternative selected is the one with the highest initial cost and a BCR
of 1 or more with respect to lower cost alternatives and a BCR less than 1
when compared with all higher cost projects 15
 Internal Rate of Return (IRR) Method
• IRR is a significant factor, which will help to assess the feasibility of
investing in a project from the financial angle

• If the IRR of a project is 5% and you can get 8% interest from the bank in
your savings account, would you not make more profit by depositing
money with the bank instead of undertaking a project that has a 5% IRR

• The simplest definition of IRR is that it is the interest rate at which an

investment of money will return a zero Net Present Value for the project.

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 IRR Method
• IRR is calculated in an attempt to nullify the impact of time value of money
on the proposed project. IRR shows the interest/discount rate at which
the project will break even

• It is Arrived at by trial and error by calculating the NPV for the project at
different interest rates with the aim of finding that interest rate at which
the NPV will be zero

• The higher the IRR the better the project as it is a measure of the return
on investment

• To reduce the project's NPV calculate using a higher interest rate

• The higher the project's IRR the better is the return on your money and
the project falls in the 'Go' mode.
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 IRR Method
• The interest rate at which the Present Worth of reductions in user and
operation costs B2/1 equals the Present Worth of increases in facility costs
C2/1 is the rate of return.

• If the ROR exceeds the interest rate (referred to as minimum attractive rate
of return), the higher cost project is retained. If the ROR is less than the
interest rate, the higher-priced project is eliminated.

• The procedure for comparison is similar to that used in the BCR method.

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IRR Method

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 Comparison of Different Methods
• NPV expresses profitability in absolute terms IRR expresses it
as a percentage.

• NPV: Projects with positive or highest NPV acceptable

• IRR: Higher the IRR better the project as it is a measure of

return on investment

• BCR: alternative selected is one with highest initial cost and a

BCR of 1 or more with respect to lower cost alternatives and a
BCR less than 1 when compared with all higher cost projects

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 ROAD ACCIDENTS
Terminology
1. Fatal traffic accident is one which involves a person who dies as a result of
an injury sustained in the accident (usually within 30 days); it excludes
confirmed suicides

2. Serious accident involves a person who is detained in hospital as an in-

patient, or who suffers any of the following injuries: fractures, concussion,
internal injuries, crushings, severe cuts and lacerations, or severe general
shock, that require medical treatment

3. Slight accident is one involving a person who is only slightly injured, e.g. a
person who sustains a sprain, bruise or cut, which is not judged (by the
police) to be severe, or slight shock requiring only roadside attention

4. Damage-only accident does not involve people who sustain personal injuries

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 ROAD ACCIDENTS
Facts
• 70% of the fatal road accidents in India occurred in the eight States only

• UP 12%; TN 11%; AP+TS 10%; MH10%; KA 8%; RJ & MP 7% each state and
GJ 5%

• 1/3rd of road accidents occurs on NHs only whereas the percentage share
of NHs in the total road network in India is merely 2% (1.7%)

• 45% of the road accidents LMVs involved and 55% of road accidents
attributed to HMVs

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 ROAD ACCIDENTS
Facts

• Over 80% vulnerable road users (pedestrians, bicyclists, users of two

wheeler/auto) are killed in road accidents in India

• Nearly 90% of the road accidents are attributed to the drivers (human)
fault leaving only 10% due to other factors like poor road geometry, lack of
safety elements, poor conditions of the vehicles and bad weather etc.

• about 50% road accident victims age group of less than 40years
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 Causes of Road Accidents
Factors Involved in Transportation Crashes
• Driver or Operator Action:
– Major contributing cause of many crash situations is the performance of the
driver of one or both
• Vehicle Condition:
– Mechanical condition of a vehicle can be the cause of transportation crashes
• Roadway Condition:
– The condition and quality of the roadway, which includes the pavement,
shoulders, intersections, and the traffic control system, can be a factor in a
crash
• Environment:
– The physical and climatic environment surrounding a transportation vehicle
can also be a factor in the occurrence of transportation crashes

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Types of Crashes- Probable Causes

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Types of Crashes- Probable Causes

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 Types of Crashes- Probable Causes

Considerable proportion of accidents occur on relatively short

sections called Black Spots or Black sites 30
 Accident studies
• As traffic safety is the primary responsibility of the traffic
engineer, the focused study of accident characteristics, in terms
of system wide rates, relationships to causal factors and at
specific locations, is a critically important function

• Various objectives of the accident studies may be listed as:

– To study the causes and to suggest corrective treatment
– To evaluate existing designs
– To support proposed designs
– To carryout before and after studies and to demonstrate the
improvement in the problem
– To give economic justification for the improvements suggested by the
traffic engineer

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 Accident records
• Location files
– Useful to keep a check on the location of accident and to identify points
of high accident incidence (Black spots)
• Spot maps
– Accident location spot maps show accident by spots, pins or symbols on
the map
• Condition diagram
– It is drawn to scale showing all important physical conditions of an
accident location to be studied
– Important features are: road way limits, kerb lines, bridges, trees and all
details of road way conditions, obstruction to vision, signs, signals e.t.c
• Collision diagram
– Diagrams showing the approximate path of vehicles and pedestrians
involved in the accidents
– Most useful to compare accident pattern before and after remedial
measures have been taken 32
 Accident Analysis

common types of analyses include:

• Trends over time

• Stratification by highway type or geometric element

• Stratification by driver characteristics (gender, age)

• Stratification by contributing cause

• Stratification by accident type

• Stratification by environmental conditions

• TEAAS-Traffic Engineering Accident Analysis System: a Software used to

analyze the accident data

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 Approaches to Highway Safety

Strategies that may be employed to improve highway traffic

safety
1. Exposure control
2. Accident prevention
3. Behavior modification
4. Injury control
5. Post-injury management
6. Road Safety Audit

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 Approaches to Highway Safety
Exposure control
• Reduce the travel by motorists
• Efforts to reduce auto use and travel cover a wide range of
policy, planning, and design issues.
• Policies and practices that attempt to reduce Auto/Vehicle use
include:
– Diversion of travel to public transportation modes
– Substitution of telecommunications for travel
– Implementation of policies, taxes, and fees to discourage auto
ownership and use Reorganization of land uses to minimize travel
distances for various trip purposes
– Driver and vehicle restrictions through licensing and registration
restrictions

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 Approaches to Highway Safety
Accident prevention
• Accident prevention involves a number of policy measures,
including
– Driver and pedestrian training
– Removal of drivers with “bad” driving records and
– Provision of better highway designs and control devices that
encourage good driving practices and minimize the occurrence of
driver error
• Risk control, or reduction of severity, often involves the design
and protection of roadside and median environments
• Proper guardrail and/or impact-attenuating devices will
reduce the impact energy transferred to the vehicle in an
accident, and can direct the path of a vehicle away from
objects or areas that would result in a more serious collision
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 Approaches to Highway Safety
Behavior Modification
• Behavior Modification is an important component of strategies for
Accident prevention and Exposure reduction

• Providing very high-class and convenient public transportation alternatives

• Implementing policies that make public transportation a much more

attractive alternative than driving

• Driver and pedestrian training programs

• Very effective strategy in behavior modification is enforcement

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 Approaches to Highway Safety
Injury control
• Seat belts and shoulder harnesses, and laws to enforce their use
• Child-restraint seats and systems, and laws requiring their use
• Anti-burst door locks
• Padded instrument panels
• Energy-absorbing steering posts and crumple zones
• Side door beams
• Air bags
• Head rests and restraints
• Shatterproof glass
• Forgiving interior fittings

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 Approaches to Highway Safety
Post-injury management
1. 50% of traffic fatalities occur with in few minutes of accident
2. 35% with in 1-2hours of accident
3. 15% with in 30days in hospital
• There is little that can be done for deaths occurring during the accident or
immediately thereafter
Biggest opportunity for improvement is in the 2nd category, Deaths within 1-2
hours of an accident can be reduced by
• Speedy emergency medical responses
• High-quality emergency care at the site and during transport to a hospital
• Speedy notification of emergency services
• Fast dispatch of appropriate equipment to the site
• Well-trained emergency medical technicians attending to immediate
medical needs of victims, and
• well staffed and equipped trauma centers at hospitals
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 Approaches to Highway Safety
Road Safety Audit (RSA)
• RSA is the formal safety performance examination of an
existing or future road or intersection by an independent,
multidisciplinary team
• It qualitatively estimates and reports on potential road safety
issues and identifies opportunities for improvements in safety
for all road users
The aim of an RSA is to answer the following questions:
• What elements of the road may present a safety concern: to
what extent, to which road users, and under what
circumstances?
• What opportunities exist to eliminate or mitigate identified
safety concerns?
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 3Es to minimize accidents
1.Engineering 2.Enforcement and 3.Education

• Engineering
– Road Design and Maintenance (Civil)
Segregation of traffic
Lighting system
Speed
Double white lines
Alignment
Road Surface
Margins
– Vehicle Design and maintenance (Auto-Mech)

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 3Es to minimize accidents
• Enforcement
– Speed control
– Traffic control
– Training and supervision
– Medical check
– Compulsion to wear Helmet, seat belt

• Education
– Road users (pedestrians, drivers) training, education
– Traffic rules, traffic safety week programs etc.

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 References
• Traffic Engineering by Roger Roess, Elena and McShane 3rd Edition

• Traffic and Highway Engineering by Garber and Hoel 4th Edition

• IRC 106-1990 Guidelines for Capacity of Urban roads in plain areas

• IRC SP30 Manual on Economic Evaluation of Highway Projects in India

• NPTEL

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 Assignment questions 4,5 Units
1. What is the need of evaluating transportation projects? Explain NPV and
IRR methods of economic evaluation?
2. what are the various methodologies available for analyzing the
accidents? Describe various precautions to be taken to minimize the
accidents?
3. State the scope of traffic management system in regulating the urban
traffic flow
4. Mention the uses of fallowing software
1. Highway Capacity Software package (HCS)
2. AIMSUN
3. Autoturn
4. MXRoad
5. HDM-III

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