Evaluation of Low Volume Roads Rodrigo Archondo-Callao Senior Highway Engineer, ETWTR January 10, 2008 The World Bank

World Bank Technical Paper No. 496

Road Transport “Tracks”“Roads”“Highways”

Functional Classification

Primary Road Network Roads with 2 or more lanes Paved roads Traffic greater than 500 AADT Long distance traffic Essentially serves an economic function Focus is the reduction of transport costs Cost Benefit Analysis (CBA) using the HDM-4 model

Secondary Road Network Road with 1.5 to 2 lanes Unpaved roads or paved roads Traffic less than 500 AADT Medium distance traffic Economic and social function Focus is the reduction of total transport costs, measuring also the social impact Cost Benefit Analysis (CBA) using RED model or HDM-4 model

Tertiary Road Network Roads with 1 to 2 lanes Unpaved roads and tracks Traffic lower than 50 AADT difficult to measure Short distance traffic Essentially serves a social function Focus is the social impact, measuring the efficiency of the investments and/or a multi- criteria index Cost Efficiency Analysis (CEA) or Multi- Criteria Analysis (MCA)

Analytical Instruments Cost Benefit Analysis (CBA)  Net Present Value Cost Efficiency Analysis (CEA)  Total Beneficiary Population per Investment Multi Criteria Analysis (MCA)  Priority Index

Cost Benefit Analysis (CBA) Total Society Costs Improve Standard Government Costs Road User Costs CBA

Comparison of Alternatives with CBA To compare project alternatives, the Net Present Value is used to select the optimal alternative (the one with higher NPV) and to eliminate project that are not economically feasible (NPV<0) The Internal Rate of Return (IRR) or the Benefit/Cost and NPV/Investment ratios are not recommended to compare project alternatives Alternatives NPV Optimal Alternative: Higher NPV Project CBA

Comparison of Projects with CBA To compare the economic priority of projects, it is recommend the use of the indicator NPV per Investment or a budget constraint optimization algorithm, such as EBM-32 contained on the HDM-4 and RED models. Projects Selected Alternative Overlay Reseal Overlay NPV / Investment PRIORITYPRIORITY CBA

Projects Eligibility with CBA To define if a project is eligible, it is recommended to utilize the NPV (NPV > 0) or the IRR (IRR > x%), at a given x% discount rate. Projects Eligible Not Eligible NPV IRR % % % CBA

Cost Efficiency Analysis (CEA) It compares the cost of interventions with its predicted impacts and it is used in the situations where the benefits cannot be measured in monetary terms, or where the measurement is difficult. It includes provisions that (a) the objectives of the intervention are indicated and are clearly part of a ampler program of objectives (such as reduction of the poverty); and (b) the intervention represents the smaller cost alternative of obtaining the indicated objectives. It produces efficiency indicators such as Total Beneficiary Population per Investment. CEA

Comparison of Alternatives with CEA To compare project alternatives, the investment cost is used to select the optimal alternative The selected alternative will be the one with the lowest investment cost that will provide the road all-weather access Alternatives Investment Optimal Alternative: Lower Investment Project CEA

Comparison of Projects with CEA To compare the economic priority of projects, it is recommended the use of the efficiency indicator Total Beneficiary Population per Investment Projects Alternative with Lowest Cost Resurface Grading Resurface Total Beneficiary Population / Investment PRIORITYPRIORITY CEA

Projects Eligibility with CEA To define if a project is eligible it is recommended to define a minimum acceptable efficiency indicator Total Beneficiary Population per Investment Projects Total Beneficiary Population per Investment Eligible Not Eligible CEA

Projects Eligibility with CEA CEA

CEA Indicators Investment Cost per Total Beneficiary Population 100 US$ per person Total Beneficiary Population per Investment Cost 0.01 persons per US$ Total Beneficiary Population per Investment Cost in thousands of dollars 10 persons per 1,000 US$ CEA

Multi Criteria Analysis (MCA) It adopts criteria such as traffic, proximity to educative, health, and economic centers, which receive weights (points) concerning their perceived importance. The added number of the points that each section receives is computed simply adding the points assigned for each criterion, or with the use of a more complex formula. MCA

Multi Criteria Analysis Example Inhabitants benefited per km Percentage of extreme poverty Productive area Average traffic Functional classification Location in the optimal network Number of health centers Number of schools Existence of public transport Environmental feasibility MCA

Multi Criteria Analysis Example Factor = Value / Maximum Value MCA