Road Network Operations
& Intelligent Transport Systems
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Appraisal Methodology

Many countries and other institutions have published guidance on transport appraisal. All follow similar principles and the main variations due to differences in the economic circumstances of countries – impacting on values assigned on criteria such as travel time savings, safety benefits and improvements in reliability.

Appraisal starts from the identification of a problem that requires an intervention. Problems on the highway network are usually well understood by highway engineers who interpret the information they collect about the performance of the network. This information includes data on speeds on each link in the network – and data on the variations in speeds across the day and over longer periods, as an indicator of levels of congestion and of reliability. Accident data provides a further information on the safety of the network. Stakeholders will also have views about the performance of the network. Evidence of the poor performance of the network supports the case for making a change.

Appraisal helps to provide policy makers with the information they need for different types of decision. In many cases the choice is about incremental investment in existing ITS applications – such as upgrading or extending a network of intelligent traffic signals. Appraisal can also inform policy makers about new options which depend on ITS – such as the implementation of a managed motorway scheme as an alternative to new construction. New policies – such as options for managing traffic through pricing or for funding inter-urban roads by tolling – also rely on appraisal to help decision-makers understand the likely effects of introducing the policies.

Appraisal methodology involves a number of factors:

Option selection

A wide range of options for reducing the impact of the problem identified should be considered – ranging from new infrastructure to doing nothing. If ITS solutions are not addressed, it is not possible to demonstrate that ITS is the most effective option:

  • in some cases there will be existing designs for infrastructure schemes which were drawn up when there was a prospect of funding being available
  • in other cases, judgements will be needed to develop a set of options, which could be developed in consultation with stakeholders

A benefit of public consultation at an early stage is that it helps to rule out or modify options which are not acceptable to the public – and which, if adopted, might lead to protests and delay progress on the scheme.

In many cases an ITS option enables a network operator to make better use of the existing infrastructure and may delay the need for capital investment and other expenses such as new construction.

The costs saved by deferring substantial investment – such as a new road – can be very significant, while the loss of benefits due to deferral might be rather less. The use of ITS to ‘sweat the assets’ buys policy makers time, delaying the more difficult decision on investment. It also provides flexibility if there is a change in policy

Appraisal of ITS Schemes in UK

There are examples of ITS schemes, which were regarded when introduced, as no more than a short-term fix pending more substantial investment in new road capacity – becoming permanent, due to a change in public opinion whereby building new roads was considered unacceptable. An example is the “Red Routes” in London – where red lines on roads are used to indicate priority routes with a high level of enforcement to prevent stopping, parking, loading and unloading, or boarding and alighting from a vehicle.

In many cases a long list of possible options will be narrowed down to those which meet certain criteria, including those of:

  • affordability
  • technical feasibility
  • deliverability
  • public acceptability
  • initial estimate of performance against objectives

Guidance on option selection and on reducing the number of options is provided in the documentation of the UK Department for Transport’s Early Assessment and Sifting Tool (EAST) – See

Forecasting Road Traffic Growth

The rationale for investment in ITS is to provide benefits to road users and, in some cases, to the road network provider – which are valued as greater than the initial investment and on-going costs. Since an ITS installation has a life of up to 10 years or more, a forecast of the traffic likely to benefit from the investment in ITS is required to estimate the expected benefits over the life of the investment (See Benefits of ITS).

There are a number of approaches to forecasting road traffic, ranging from extrapolation of recent trends to more advanced models which are derived from identifying and analysing the causes of traffic growth. An example of the modelling approach to traffic forecasting is provided on the UK Government website at

The process of appraisal requires both:

  • a prediction of the future volumes of road traffic that will benefit from an ITS application or investment scheme
  • an estimate of the benefits that each user of the highway network, affected by the scheme, will derive from it

A traffic or transport model is used to show:

  • how traffic flows will evolve as the volume of traffic increases over time:
    • the performance of the network, in terms of journey times, levels of congestion, reliability and emissions, is based on the concept of a speed/flow curve
    • the speed/flow curve shows the relationship between the capacity of the network, in terms of the number of lanes and design of the intersections, the volume of traffic in terms of the number of vehicles per hour (or shorter time period) – and the speed that can be achieved
  • the improvements to vehicle speeds, reliability and other impacts delivered by the ITS, the responses of drivers to these improvements and – through the application of the forecasts – the volume of traffic likely to benefit

Forecasts are needed for each option, including the ‘do-nothing’ reference case, to provide a comparison of the costs and benefits of options as well as a comparison between any option and the reference case.

Traffic models are set up so as to represent two or more future years with and without the ITS project to show the volume or quantity of benefits, when compared with the reference case, over the life of the project.

Running the model for each year of a project’s life is time consuming and costly. It is common practice to run the transport and economic appraisal models for just two forecast years – one shortly after the planned opening date of the scheme and the other perhaps seven or ten years later. The costs and of the benefits for intermediate years are estimated (by interpolation based on the trend between the two dates). If the life of the infrastructure extends beyond the final forecast year, costs and benefits have to be extrapolated based on the same trend.

Time Horizons and Discounting

Most ITS applications have lives of ten years or longer before any decision is required about whether the application should be upgraded or renewed. The capital investment is incurred at the start of the project and this results in a stream of revenues or other benefits – and a stream of costs for maintaining and operating the system over the life of the assets. A process is needed to convert these future benefits into a value that can be compared with the initial costs of the investment.

Society tends to value future costs and benefits lower than they value the equivalent benefit if it occurs now for a number of reasons:

  • future generations can expect to be richer and so will value any commodity less than the present generation
  • people have a preference for getting something now – and prefer not to have to wait because the future is uncertain

A discount rate is applied which progressively reduces the value of a given level of benefit in all future years. The discounted future benefits can then be added together and expressed as a current (“present”) value of future benefits for comparison with costs. Ongoing costs, such as the costs of operating, maintaining and renewing the ITS equipment over its life, are discounted on the same basis and expressed as current value costs – and then added to the estimate of the capital costs.

The discount rate used in transport appraisal differs between countries and the appropriate national value should be used in appraisal to ensure comparisons can be made between different investment projects.

Metrics and the decision-making process

Subtracting the current (“present”) value of costs from the current value of the benefits, provides an estimate of the project’s net present value. A project with a positive net present value will – in absence of other unquantified impacts – be beneficial to the society which implements it.

Projects with a higher NPV are preferable to those with a lower NPV – but the size of the NPV is not always a useful indicator for the decision-makers who need to decide which project, from a large number of possible projects, they should approve and allocate a part of their transport budget.

Use of the NPV as a metric for prioritisation does not help to differentiate between:

  • whether a large positive NPV is the consequence of a small inexpensive scheme with large returns relative to its costs
  • or whether it is a high cost scheme with comparably large absolute returns – but which are low in relation to the sum invested

In many countries decision-makers are presented with a Benefit Cost Ratio (BCR) – the present value of the benefits divided by the present value of the costs. A BCR helps to rank schemes according to returns/per unit of money invested. Having comprehensive information on the capital costs of all of the feasible schemes, enables decision-makers to allocate budget to those schemes which deliver the greatest benefits.

Unquantifiable costs and benefits

Not all of the impacts of a transport investment can be quantified or measured in monetary terms and expressed as a component of the Benefit Cost Ratio (BCR). Advances have been made in recent years in valuing many of the environmental impacts of transport schemes – including carbon emissions and changes in the levels of traffic related noise and local air quality.

No adequate method has been devised for assigning monetary values to impacts such the effect of new transport infrastructure on the landscape or the natural environment. While ITS schemes can be expected to have a more limited impact on the natural environment than a new road – there may be cases where the gantries and masts that are often part of an ITS scheme, will be regarded as having an adverse environmental impact.

More importantly, perhaps, is the failure of conventional transport appraisal methods to identify who benefits from the scheme.

Most transport models contain data on – and forecasts for – the origins and destinations of trips on the network. The model does not, though, help the decision-maker to understand, for example:

  • whether the employers in a city served by a specific ITS scheme benefit because their workers now arrive on time and less frustrated
  • or whether house owners in the city’s travel to work area benefit from higher house prices because the area has become a more attractive location for commuters

While land use/transport models can provide some indication of the likely incidence of the benefits, the use of such complex models is only justified in the case of major infrastructure schemes.

Not all of the impacts of a transport scheme can be captured in the BCR. Where they cannot be valued in monetary terms but are likely to be significant, decision-makers will want to take them into account. They will not want to be restricted to only prioritising schemes and selecting options on the strength of a BCR alone. Analysts can help decision-makers by providing as much information as possible about these unquantifiable impacts. This might include information about the consequences of choosing a scheme with a lower BCR – and assigning funds to it that might otherwise been spent on a scheme with a higher BCR.

Presentation of the Options

Decision-makers and stakeholders need to be informed about the expected impacts of a project in a way which is neither unnecessarily complex nor risks concealing important information.

Presenting the Results of Appraisals

The UK Department for Transport has published a note which explains a process by which decision-makers can make a judgement as to whether the unquantified costs or benefits are of sufficient magnitude to change the BCR – so that it exceeds a value of 2.0:1.0 (indicating benefits that are valued at twice the costs)

Since the majority of all transport investment is spent on schemes for which the BCR – including an allowance for unquantified impacts – exceeds 2.0, schemes that do not reach this threshold are unlikely to be approved.

A template for summarising the appraisal is presented in the UK Department for Transport’s “Appraisal Summary Table”. It can be downloaded as an EXCEL spreadsheet from:

The information about the unquantifiable impacts included in this table helps decision-makers to weigh up these impacts with the benefits that are quantified in monetary terms and which constitute the BCR.


Reference sources

No reference sources found.