Highway Project Level Life-Cycle Benefit/Cost Analysis under Certainty, Risk, and Uncertainty: Methodology with Case Study

One of the key steps in the highway investment decision-making process is to conduct project evaluation. The existing project level life-cycle cost analysis approaches for estimating project benefits maintain limited capacity of probabilistic risk assessments of input factors such as highway agency costs, traffic growth rates, and discount rates. However, they do not explicitly address cases where those factors are under uncertainty with no definable probability distributions. This paper introduces an uncertainty-based methodology for highway project level life-cycle benefit/cost analysis that handles certainty, risk, and uncertainty inherited with input factors for the computation. A case study is conducted to assess impacts of risk and uncertainty considerations on estimating project benefits and on network-level project selection. First, data on system preservation and expansion, usage, and candidate projects for state highway programming are used to compute project benefits using deterministic, risk-based, and uncertainty-based analysis approaches, respectively. Then, the three sets of estimated project benefits are implemented in a stochastic optimization model for project selection. Significant differences are revealed with and without uncertainty considerations.