Most of engineering projects involve large amount of funds. The funds are normally provided either from the government or non-government institutions. Different projects involve different engineering aspects that are normally evaluated. The level of evaluations required depends on the amount of data available and the nature of safety aspects involved. Additionally, different engineering aspects drives different engineering decisions. The engineering decisions can only be taken after evaluating their cost-benefit analysis (O’Brien and Ponticelli, n.d.).
The cost benefit analysis is undertaken to understand the cost implications for each of the decisions that are valid for a given scenario. As such, a lot of data is gathered and the related cost vs benefits computed. In this way, it becomes easy to visually understand the cost of different options that can be used to solve a single problem. A similar case is presented in this paper.
In this project, the cost benefit analysis is undertaken to evaluate different decisions. So far, there are four options that are considered valid for the project. Each options is evaluated separately in relation to the data already gathered. The final decision on which option to settle will then be determined by the top management (O’Brien and Ponticelli, n.d.).
The project involved flood mitigation options that are considered for a given road. At the moment the road is considered to suffer from regular floods which not only force the users to divert to other roads but also increases the repair costs for the concerned government agencies. There are different options that are available for solving the problem at hand (O’Brien and Ponticelli, n.d.).
The first option involves the zero costs on the agency side. As such, the road will continually be closed on such periods when floods occur. The users will then be forced to make long detours. The second options involves construction of a low-level causeway that will reduce the level of flooding. The second option will experience occasional floods although it will be cheaper to build. The third option involves the construction of a medium-level causeway that will cope with all but worst floods. This options is considered to be costly although it will eliminate most of the floods on the road. The fourth and final decision will involve construction of a high-level bridge. This option will eliminate occurrence of any form of floods on the road. It is however, considered to be costly and also time consuming. The selection of a given option to execute for the case at hand requires further analysis on the data available in order to determine the best possible way forward (O’Brien and Ponticelli, n.d.).
Data required for decision making
The options mentioned in the previous section can only be quantified and analyzed when there is relevant data available. Some of the data may cut across a number of options which will make it easier for comparison. The data required should relate to both the users and the agency utilization and underlying costs (O’Brien and Ponticelli, n.d.).
The road utilization data is considered to be the most vital data that is required for this kind of analysis. There is a variety of road data that can assist to understand the engineering aspects that should be incorporated in the final decision. There is need to understand the nature of the traffic that is normally involved on the vehicle. The traffic involves the total amount of the vehicles that use the road per day. An average amount of vehicles that use the road will assist to understand the level of inconveniences that arise as a result of the diversions experienced if option one is undertaken. Additionally, the types of the vehicles that are using the road can also be considered. Different types of vehicles have different occupancy levels. This implies that the determination of the type of vehicles that normally use the vehicle can assist to understand the total population that is affected by the road in case of floods per day. Further different vehicle are associated with different maintenance costs. As such, the impact of the road on the maintenance cost of the vehicles can equally be analyzed (Kuster et al., n.d.).
The other engineering aspects that are considered critical in determining the final decision include the trip length and the average speed of different vehicles using the road. The trip length defines the time that is taken to go through the road on a normal day. The time spent on the road can then be compared to the time that can be taken when a diversion is taken. As such, the extra amount of fuel that is used when a diversion is taken can assist to know the additional costs that are involved as a result of the unavailability of the road. It is important to note that the average trip length also depends on the average speed that different vehicles have on the road (Kuster et al., n.d.).
Perhaps the lifespan of the road can also be important in making the final decision. The lifespan defines the number of years that the road was designed for. As such, an evaluation on the period of utilization remaining against the benefits that have already been accrued from the project is paramount. The road can easily be considered for an upgrade when it has already provided the anticipated level of utilization. However, new roads may require further analysis to determine the amount of money that will have been wasted as a result of early demolition (Kuster et al., n.d.).
It can also be noted that the number of crashes that are experienced during the floods is critical in evaluating the final decision. This is the engineering aspects that considers the safety aspects related to the floods that occur on the road. The crashes can then give a hint on the number of lives that have been lost on the road as a result of its current status. It can further provide an idea on the level of vehicle damages that have been experienced as a result of the status of the road. These aspects are considered critical in evaluating the best option that can be undertaken to not only reduce the safety related incidents on the road but also reduce the maintenance costs that are incurred both by the road users and the agency.
Cost Benefit Technique
The project can further be evaluated using the cost benefit technique. The cost benefit analysis considers all the costs implied against the benefits before selecting the final decision. As such, all the necessary data that had been outlined in the previous section will be analyzed and their costs and benefits realized before selecting the final decision. It can further be noted that the model computes the incremental costs and benefits for the project in relation to the different options available. As such, the costs and the benefits associated with each option are compared with the base-case option. This clearly explains why the BCR is considered to be a sum of all non-capital costs and benefits divided by the underlying capital expenditure (Karlson, 2015).
For instance the cost of implementing the second option is evaluated on the basis of the maintenance costs that are anticipated to be incurred every year by the agency if the option is implemented. As such, any resulting repair costs that are projected after the construction and also the maintenance costs are included in the final decision. The decision made therefore tends to focus not only on the capital costs that will be incurred to implement the option but also the future costs that will arise as a result of the same option. The technique will also evaluate the benefits that will be accrued on the road users and the safety standards associated with the option. This can be measured in terms of the frequency of the diversions that are incurred in the course of the year. Since the average utilization parameters of the road are known it then becomes easier to compute the actual costs involved. Note that the second option involves the construction of a low-level causeway that will mitigate the frequency of the floods experienced on the road. The number of crashes reported in a year can also be used to analyze the benefits accrued from this option. This implies that the BCR will focus on the comparison of the number of crashes reported before and after the implementation of the option. Similar analysis will be done for both option 3 and option 4. The results obtained from the BCR analysis will then be used to determine the viability of the options (Karlson, 2015).
Discussion on the CBA results
There are four techniques that were used to evaluate the viability of the three options proposed for the flood mitigation. The techniques were applied on the data already gathered and computed for the project. The four techniques used are the benefit-cost ratio, the net present value, and the internal rate of return and the first year rate of return. An excel spread sheet was used to compute the values and the graphical presentation for each of the parameters associated with the results of the techniques (Karlson, 2015).
The output measures have been calculated for each of the options used in the project. The basic parameters including the rate of discount, the projected growth rate of the traffic of the vehicle, the capital cost of each of the options and the share of LCV and HV were adjusted accordingly before the start of the computation. The output measures for each option was compared and then rated in reference to the other output measures. The following graphs can be used to show the result of the different output measures that were evaluated for the project. Discussion on the results of the output measures is then provided in reference to each of the decision options;
Figure 1 Results for NPV
As can be seen from the above results the net present value of option 1 has a net effect of a positive of 1265. This implies that the benefits that can be accrued from this options exceed the costs that can be incurred in implementing it in relation to the current road conditions. The road agency costs however have a negative NPV value. This can be attributed to the fact that the costs are considered to reduce the value of the net present value. The total net road agency costs had a value of -729 against the benefits associated with the current traffic levels of 1994. This was achieved after using a discounting rate of 4% (Cost Effectiveness Analysis of Quasi-Static Wireless Power Transfer for Plug-In Hybrid Electric Transit Buses, 2015).
The second options similarly has negative NPV for the road agency costs. The road amount of costs incurred however for the second options are more negative as compared to the first option. This can be associated with the extra costs that will be incurred in constructing an middle level causeway to mitigate the floods on the road. The value of the NPV for the road agency costs is -1563 against the benefits that are having a value of 5982. The net effect on the NPV for this option therefore evaluates to a positive value. It can however be mentioned that the NPV for the second option is more positive when compared to the first option (Cost Effectiveness Analysis of Quasi-Static Wireless Power Transfer for Plug-In Hybrid Electric Transit Buses, 2015).
The third option has a negative agency costs in the value of -6823 against the benefits that are valued at 7976. The high costs that are incurred in this option is as a result of the high costs that are anticipated if the high level causeway is constructed. There are many benefits that are associated with this option. Unfortunately there are equally many costs that are involved in implanting the option. In overall the NPV technique can be used to recommend the second option since has the largest marginal benefits compared to the rest of the options explored in this project (Cost Effectiveness Analysis of Quasi-Static Wireless Power Transfer for Plug-In Hybrid Electric Transit Buses, 2015).
The following figure can be used to illustrate the results that were obtained from the output measures of the Benefit-Cost ratio technique;
Figure 2 BCR output measures
The BCR equally was used to evaluate the options valid for the project. As can be seen from the project the benefits that can be accrued from the second options are more compare to the costs involved in relation to the options that are valid for this project. The first option has a ratio of 2.74, the third option has a BCR value of 1.17 while the second option has a BCR value of 3.83. In relation to the BCR technique the second option is again recommended for implementation as a result of the ratio of the benefits involved in relation to the underlying costs (Cost Effectiveness Analysis of Quasi-Static Wireless Power Transfer for Plug-In Hybrid Electric Transit Buses, 2015).
The following figure can be used to illustrate the output measures of the internal rate of return;
Figure 3 Illustration of IRR results
The above results indicate that the second option has the highest internal rate of return in comparison with other options valid for this project. This further implies that the second options has a return rate on the capital costs incurred in the implementation much higher compared to the rest of the options. The third options is noted to have the least rate of return on the capital that is invested in implementing the options. As such, this technique again recommends the implementation of the second option if there is desire to have return on the investment much earlier (Cost Effectiveness Analysis of Quasi-Static Wireless Power Transfer for Plug-In Hybrid Electric Transit Buses, 2015).
The following figure can be used to illustrate the results of the output measures obtained for the first year rate of return technique;
Figure 4 Illustration of the results for FYRR
In reference to the results shown above the second option is considered to have the highest rate of return in the course of the first year after its implementation in relation to other options explored in this analysis. The second option is capable of returning 16.6% of the costs incurred for the first year only. This is the highest rate of return that is realized on the project in regard to the other options being explored on this project. The FYRR therefore recommends the implementation of the second option since it has the highest rate of return for the first year after its implementation (Barker and Cole, n.d.).
It can be noted that the changes in the different parameters in regard to the three options explored in the project indicate that the second option surpasses all other options. As such, the second option is highly recommended for implementation when a careful consideration is made on the results obtained (Barker and Cole, n.d.).
The paper has explored different options that are available for implementation on the mitigation aspects of the flooding currently experienced on the road. The paper has provided discussion on the different parameters that are relevant for evaluation on this project. Both the engineering and financial aspects have been considered in the decision. The cost benefit analysis is undertaken to understand the cost implications for each of the decisions that are valid for a given scenario. As such, a lot of data is gathered and the related cost vs benefits computed. In this way, it becomes easy to visually understand the cost of different options that can be used to solve a single problem. A similar case was presented in this paper.
The paper also presented the cost benefit analysis to evaluate different decisions. So far, there are four options that were considered valid for the project. Each options was evaluated separately in relation to the data already gathered. In reference to the output measured results the second options was highly recommended for implementation.
Barker, S. and Cole, R. (n.d.). Brilliant project management. 1st ed.
Cost Effectiveness Analysis of Quasi-Static Wireless Power Transfer for Plug-In Hybrid Electric Transit Buses. (2015). 1st ed. Washington, D.C.: United States. Office of the Assistant Secretary of Energy Efficiency and Renewable Energy.
Karlson, L. (2015). Corporate Value Creation. 1st ed. New York: Wiley.
Keane, P. and Caletka, A. (2015). Delay Analysis in Construction Contracts. 1st ed. Hoboken: Wiley.
Kuster, J., Huber, E., Lippmann, R., Schmid, A., Schneider, E., Witschi, U. and Wüst, R. (n.d.). Project Management Handbook. 1st ed.
Milošević, D. and Martinelli, R. (n.d.). Project management toolbox. 1st ed.
O’Brien, W. and Ponticelli, S. (n.d.). Computing in civil engineering 2015. 1st ed.
Project 2015. (2002). 1st ed. Albany: New York State Office for the Aging.
Rossberg, J. (n.d.). Agile project management using Team Foundation Server 2015. 1st ed.
Walker, A. (n.d.). Project management in construction. 1st ed.