Applying Economic Concepts from Life-Cycle Cost Analysis to Pavement Management Analysis

Abstract

In recent years, FHWA has made a concerted effort to develop guidelines for the use of life-cycle cost analysis by transportation agencies and to promote the use of multiyear prioritization in pavement management. These efforts resulted in the development of a Technical Bulletin and Demonstration Project course materials that have been presented to state highway agencies throughout the country. A key part of multiyear prioritization is emphasis on the use of life-cycle cost information in cost-effectiveness calculations. An agency implementing multiyear prioritization as part of its pavement management system would naturally attempt to utilize the FHWA’s guidelines in developing the cost component of its economic analysis. However, because of the types of analyses required in pavement management and the ways in which cost information is reported and used, the recommendations provided in FHWA’s Technical Bulletin cannot be applied directly. The types of economic analyses that are used in an incremental benefit-cost analysis and the types of economic considerations that must be taken into account are discussed. Several of these economic considerations differ from the recommendations made in FHWA’s Technical Bulletin, so the reasons for these variations are also described.