Benefit-Cost Analysis: Is the Project Worth It?
Limited funds, deteriorating infrastructure, and an ever-expanding list of roadway improvements. Sounds familiar, doesn’t it?
The American Society of Civil Engineer’s 2025 Report Card grades America’s roadway infrastructure a D+, despite historic levels of investment through the 2021 Infrastructure Investment and Jobs Act. Municipalities and agencies around the country face significant fiscal challenges and are primarily focused on preservation and maintenance of roadway infrastructure. Benefit-cost analysis is one tool that can be utilized to financially justify investments to infrastructure.
Transportation is integral to the built environment, how our communities are shaped, and a place’s economic prosperity. But, transportation is not cheap—we’re in the midst of a higher cost-of-capital environment and the cost to operate and maintain existing infrastructure continues to increase.
We need to direct our attention to data-driven processes that can be universally applied to prioritize infrastructure improvements with the highest returns on investment to our communities.
The Role of Benefit-Cost Analysis in Transportation Decision Making
Benefit-cost analysis is a systematic data-driven process to identify, quantify, and compare expected benefits and costs of a proposed investment in infrastructure. The United States Department of Transportation requires benefit-cost analyses for many of their competitive grant programs, as do many state agencies. Unlike economic impact, financial, or distributional analyses, benefit-cost analyses focus on the economic efficiency or overall societal benefit of a proposed project.
Although benefit-cost analyses serve as a useful tool for government, municipal, and transportation agencies in evaluating and comparing potential infrastructure investments, they are typically performed only when required. Sound decision making is crucial to transportation spending and to our communities, and decision making at the local and State level can be improved through the expansion of benefit-cost analyses for all infrastructure projects, independent of size, scale, and funding.
Renewed Emphasis on Benefit-Cost Analysis
On January 29, 2025, USDOT issued an order emphasizing all grantmaking, lending, policymaking, and rulemaking activities shall be based on analysis supported by rigorous benefit cost requirements and data-driven decisions. A project’s benefits must outweigh the costs.
Preparing Your Benefit-Cost Analysis
AKRF can prepare a benefit-cost analysis when a project is in the planning or design phase, once certain information is available:
- Project description, including the purpose and need for the project.
- Roadway improvement solutions, including the no build alternative.
- Related analyses, which can include but are not limited to, traffic analyses, crash analyses, and emissions analyses.
The analysis will evaluate a variety of project benefits against various types of immediate and recurring project costs. The extent of project benefits and project costs evaluated will be unique to each project. The benefit-cost analysis provides another data point to support a client’s decision-making process and can also provide information needed to obtain input and gain consensus from the public.
The infographic shown to the right—taken from a benefit-cost analysis prepared for the Town of Queensbury’s Adaptive Signal Control Technologies Study—illustrates the potential benefits associated with improved signal technologies along a congested corridor. As seen in this example, benefit-cost analyses are also used to compare roadway projects involving interchanges, corridors, and/or intersections.
The analysis can be prepared in accordance with USDOT guidance, even if the project is not subject to USDOT, State DOT, or municipal requirements. Regardless of the framework used, municipalities and other public entities should mandate that benefit-cost analyses be prepared for all infrastructure projects to maximize return on investment.
AKRF provides a scalable solution to support your transportation decision-making process.
As an extension of our municipal and DOT consulting services, we’re able to prepare benefit-cost analyses to provide important insights for planning studies, design projects, and multiple types of grant applications.
Now Is the Time to Improve Your Decision-Making Process
Benefit-cost analyses are a favorable solution to improve your infrastructure investment decision-making processes. They are not time intensive and can be incorporated into the current schedule of a project. However, solutions are only good if utilized and benefit-cost analyses should be standardized and regularly conducted for all types of infrastructure projects.
A comparison of capital costs alone does not tell the story. A higher capital cost alternative may look larger and impressive on paper, but may not provide the largest social benefit to your community.
So, back to the original question—is the project worth it? Our team is ready to help you answer that question and inform your decision-making process. Feel free to reach out to cmojica@akrf.com for more information.
