Economic Analysis

HIGHWAY ENGINEERING
HighwayBrief description of Bidding Process

1.2.1 The Authority has adopted a two-stage process (collective

in accordance with the provisions of this RFQ (the "Applicant.
Brief description of Bidding Process

1.2.1 The Authority has adopted a two-stage process

(collectively referred to as the "Bidding Process") for selection
of the bidder for award of the Project. The first stage (the
"Qualification Stage") of the process involves qualification (the
“Qualification”) of interested parties/ consortia who make an
Application in accordance with the provisions of this RFQ (the
"Applicant.
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 Introduction

 Practice
of engineering involve many choices
among alternative designs, procedures, plans, and
methods.
 Question – will the benefit of the project worth the
cost? (Will it pay?)
 Basicquestions and issues – what approach to be
taken, what data are needed, what analytical
techniques to be used.
 Net Present Worth (NPW)

   NPW = -Co - [ - ] (P/A - i – n)

Co : capital cost / first cost

Cn : continuing costs (maintenance, operating, etc)
Bn : benefits ( saving, salvage, revenues etc)
(P/A - i – n): P = A [ ]
 Example

 The department of Traffic is considering three improvement plans for a

heavily traveled intersection within the city. The intersection
improvement is expected to achieve three goals : to improve travel
speeds, to increase safety and to reduce operating expenses for
motorists. The annual dollar value of savings compared with existing
conditions for each criterion as well as additional construction and
maintenance costs is shown in table. If the economic life of the road is
considered to be 50 years and the discount rate is 3 percent, which
alternative should be selected? Solve the problem using the NPW
methods for economic analysis.
 Benefit Cost Ratio

 The ratio of the present worth (PW) of Net project benefits (all of the savings, revenue
& etc) and Capital costs is called the benefit – cost ratio (BCR).
 BCR used to show extend to which investment will result in benefit to society
 Negative flows are considered costs and positives flows as benefits.
 The saving in the transport cost are considered as benefits.
 If the B/C ratio is more than one, the project is worth undertaking.
 Need to do comparison to determine added benefit with added investment
BCR 2/1 = (B2 – B1) / (C2 – C1)

B/C = benefit in the reference year / Capital costs

 BCR l/DN = [(-1500 + 5000 + 3000 + 500) / (185 000 x (A/P -3-50)]
 BCR ll/DN = ?
 BCR lll/ll or BCR lll/DN =