CHAPTER 8.  CVISN BENEFIT/COST ANALYSIS

 

 

            This chapter describes a comprehensive benefit/cost analysis (BCA) that has been carried out for the CVISN MDI.  Benefit/cost analysis is a public sector evaluation tool that compares all of a project’s benefits to society to all of the project’s costs to society.  The question to be answered in a BCA is:  Do these benefits exceed the costs?  If the answer is yes, the benefit/cost ratio (BCR) is greater than one, and the project is said to be economically “feasible” or economically “justified.”  Commercial feasibility, the analogous private sector criterion, is much narrower in the benefits and costs it compares.  Benefits are restricted to commercial revenue, and costs are limited only to those paid directly by the project developer.

 

 

8.1       Approach

 

            In the case of CVISN, considerable public benefits can be expected.  However, revenue paid by CVISN users is essentially zero since CVISN is intended to make a regulatory system operate at lower cost and increased effectiveness to both its users and to society.  The benefits quantified for inclusion in this BCA do not include every conceivable public benefit of CVISN, but they do include the major categories of benefits:

 

·        Roadside Enforcement [including safety information exchange (SIE) and electronic screening]

-     Crashes avoided

-     Transit-time savings [including operating and maintenance (O & M) and air and noise pollution]

 

·        Electronic Credentialing

-     Operating cost savings to states

-     Operating cost savings to carriers

-     Inventory cost savings to carriers

 

            The costs included in the BCA include:

 

·        Roadside Enforcement

-     One-time start-up costs to states

-     Replacement capital costs to states in future years

-     Increased operating costs to states

-     Increased operating costs to carriers

-     Increased out-of-service (OOS) costs to carriers

 

·        Electronic Credentialing[1]

-     One-time start up costs to states

-     Replacement capital costs to states in future years

 

            All costs and benefits occurring each year between 2000 and 2025 are included in the BCA and each is discounted back to 2000 using both a 4 percent and 7 percent real discount rate to calculate the present values of the benefits and costs in 1999 dollars.  The use of a 4 percent real discount rate in these benefit/cost calculations has been recommended by economists in both the public and private sector.[2]  The use of a 7 percent real discount is a more stringent test and has been required for nearly two decades for use in BCAs of federal programs by the U.S. Office of Management and Budget (OMB).

 

            The categories of benefits and costs are different and more limited for electronic credentialing (EC) than for roadside enforcement (RE).  For the former, they include only costs and cost savings, while for roadside enforcement, the over-the-road operations of motor carriers are directly affected.  This leads to a more extensive array of costs and benefits including crashes avoided and truck transit-time savings.  For these reasons, we have conducted the BCA separately for three CVISN roadside enforcement (RE) scenarios and two electronic credentialing (EC) scenarios.  The scenarios represent varying options and layers or phases of CVISN deployment, and also various possible effects that CVISN technologies may have on state enforcement and motor carrier/driver behaviors and operations.  Each scenario is described below.

 

Roadside Enforcement Scenarios

 

            Three national scenarios are evaluated for CVISN’s roadside enforcement element.  These consist of increasingly more comprehensive application and effectiveness of CVISN components.

 

            Scenario RE 1.  Upgrade of fixed inspection sites to Aspen capability, including PCs and printers to provide improved data for selecting high-risk vehicles for inspection.  However, no electronic screening capability is included.

 

            Scenario RE 2.  Electronic screening and all inspections focused on high-risk vehicles, with no assumed change in compliance rates.  Improvements include those in Scenario RE 1 plus automated vehicle identification, mainline weight-in-motion, electronic signs, loop detectors, electronic snapshot capability, wireless communication, SAFER mailbox, CVIEW or equivalent, and in‑truck transponders for low‑risk vehicles.

 

            Scenario RE 3.  Scenario RE 2 with the assumption of a 25 percent decrease in motor carrier safety regulation violation rates. 

 

Finally, to assess the sensitivity of the findings to changes in assumptions, one additional roadside scenario is defined as

 

Scenario RE 3*.  Scenario RE 2 with the assumption of a 10 percent decrease in motor carrier safety regulation violation rates.

 

Electronic Credentialing Scenarios

 

            Two scenarios are evaluated for electronic credentialing.

 

            Scenario EC 1.  End‑to‑end IRP credentialing for those states with in-house credentialing interface systems (i.e., currently not using VISTA), as well as end-to-end IFTA and the IRP clearinghouse.

 

            Scenario EC 2.  End‑to‑end IRP credentialing with VISTA for those states currently using VISTA, as well as (again) end-to-end IFTA and the IRP clearinghouse.

 

Descriptions, deployments, and costs of each of these improvements are presented in detail in Chapters 2, 3, and 6.

 

            Section 8.1 summarizes the results of the BCA.  Section 8.2 gives additional background on the factors used in the BCA, and the approach to analyzing these factors.  Section 8.3 details the results of the analysis as projected for the years 2000 to 2025.  Section 8.4 presents the results of a qualitative discussion of reduced pavement damage as a related benefit of increased targeting of overweight trucks.  Supporting data and economic modeling tables for the BCA appear in Appendices D.1 through D.3.

 

 

8.2       Summary of Results

 

            Tables 8-1a to 8-1e summarize the results of the BCA for each of the five scenarios using the more stringent 7 percent discount rate.

 

            For the three roadside enforcement scenarios, Tables 8-1a to 8-1c show that the BCRs range from 0.62 to 5.0, depending on the scenario.  For the simplest roadside enforcement scenario, RE 1, which is the upgrade to Aspen without electronic screening, the BCR is less than 1.0, showing that Aspen by itself is economically not worthwhile.  For the two roadside enforcement scenarios that involve electronic screening, RE 2 and RE 3 (and RE 3*), the BCRs increase considerably, as do the present values (NPVs) of the net benefits of these improvements.  For Scenario RE 2, which assumes no change in compliance behavior, the NPV is over $2.5 billion.  With improved compliance behavior, which is an important objective of these systems, the increase in the NPV is truly impressive, totaling $5.7 and $10.4 billion for Scenarios RE 3* and RE 3, respectively.  Therefore, the systems involved in the two roadside enforcement scenarios that include electronic screening and travel time savings to carriers are economically well justified, even with the use of the more stringent 7 percent real discount rate.  All costs are expressed as U.S. dollars in 1999.

 

Table 8-1a: Scenario RE 1:  Upgrade to Aspen Only

 

Total Benefits Total Costs	$69,076,000 111,591,000
Net Present Value	! $42,515,000
Benefit/Cost Ratio	0.62

 

 

Table 8-1b: Scenario RE 2:  Electronic Screening with No Change in Violation Rates

 

Total Benefits Total Costs	$5,301,300,000 2,635,900,000
Net Present Value	$2,665,400,000
Benefit/Cost Ratio	2.0

 

 

Table 8-1c: Scenario RE 3 (RE 3*):  Electronic Screening with a 25 percent (10 percent) Decrease in Safety Violation Rates

 

	RE 3	RE 3*
Total Benefits Total Costs	$12,995,000,000 2,601,000,000	$8,379,000,000 2,622,000,000
Net Present Value	$10,394,000,000	$5,757,000,000
Benefit/Cost Ratio	5.0	3.2

 

Table 8-1d: Scenario EC 1:  EC in States without VISTA

 

Total Benefits Total Costs	$557,700,000 44,500,000
Net Present Value	$513,200,000
Benefit/Cost Ratio	12.5

 

Table 8-1e: Scenario EC 2:  EC in States with VISTA

 

Total Benefits Total Costs	$339,300,000 8,400,000
Net Present Value	$330,900,000
Benefit/Cost Ratio	40.4

 

            The electronic credentialing scenarios are characterized by huge BCRs as shown in Tables 8-1d and 8-1e.  For Scenario EC 1, the benefit/cost ratio is 12.5, meaning the total benefits of electronic credentialing for states not using VISTA are over 12 times as large as the total costs.  For states using VISTA (Scenario EC 2), Table 8-1e shows that the BCR is over 40.  Therefore, the electronic credentialing elements of CVISN easily pass the important BCA criterion for determining whether such systems are economically justified.

 

            Finally, as noted earlier, electronic credentialing’s impacts are all costs or cost savings.  This allows us to report the BCA results of electronic credentialing as a function of the level of deployment, as shown in Figure 8-1.  The figure also shows that the benefit/cost ratio will vary with the percent deployment (i.e., percent of accounts/transactions handled electronically) and that there is a breakeven deployment percentage at which the BCR will equal 1.0 [i.e., at which the costs of EC will equal the baseline (pre EC) costs].

 
 

Figure 8-1.     Costs of Electronic Credentialing With and Without CVISN

 

Where a = one-time statewide start-up costs to deploy EC.

 

            For EC in states currently operating without VISTA, the breakeven deployment size in percentage terms is less than 10 percent.  This is easily seen from Table 8-1d when it is considered that the total costs are start-up and replacement capital costs that are fixed statewide, while the cost saving benefits vary linearly with the number or percent of carriers using EC.  Thus, the line representing “Costs with EC” in Figure 8-1 is really flat.  For Scenario EC 1, the breakeven percentage deployment (equal to the inverse of the BCR) is 8 percent at a 7 percent real discount rate.  Similarly for EC in states with VISTA (Scenario EC 2), the breakeven percent deployment is only 2.5 percent.  At deployments above these levels, electronic credentialing is economically justified with rapidly increasing BCRs, reaching the BCRs in Tables 8‑1d and 8‑1e at 100 percent deployment.

8.3       Background and Approach

 

            An important objective of this evaluation of the Commercial Vehicle Information Systems and Networks (CVISN) Model Deployment Initiative (MDI) is to conduct a rigorous benefit/cost analysis (BCA) to determine the net economic benefits, if any, of the CVISN MDI.  This chapter describes this BCA.  In the public sector, BCA helps maximize economic efficiency, or the total net benefits to the public from an investment.  The electronic credentialing and roadside enforcement elements of CVISN are expected to make commercial vehicle credentialing less costly, and safety inspections more effective.  The electronic screening of commercial vehicles is also expected to save transit time for trucks with good safety compliance records by enabling them to bypass inspection stations at highway speeds in most cases.  It is also hoped that this benefit will motivate carriers to improve their safety compliance behavior.

 

            Trucks bypassing inspection stations will not only experience time savings for themselves and their cargo, but also they provide energy savings and air and noise pollution benefits for the public.  Of most importance to the public, however, are the cost savings and productivity increases of electronic credentialing to the states and carriers, and the improved targeting for inspection of unsafe vehicles enabled by the new information systems that make up the roadside enforcement element of CVISN.  The benefits of crashes avoided by removing unsafe trucks from highways include the value of lives saved, injuries avoided, reduced property damage to trucks, their cargo, and to other vehicles, and reduced delay to all vehicles from congestion due to crashes.  These public benefits from CVISN are obviously important in justifying the expenditures needed to implement and operate these systems.

 

            The question to be answered in this BCA is whether all the benefits exceed all the costs.  This means that all the benefits and costs input to a BCA must have some inherent value to society.  It is important for government to consider all such impacts, even if the private sector does not.  And, while the actual summing of the benefits and costs in a BCA is straightforward, identifying the right inputs and observing or estimating their values is not.

 

            In particular, for a benefit or cost to be included in a BCA, it must be:

 

·        Quantifiable

 

·        Monetizable

 

·        Not duplicative

 

·        Not a transfer.

 

            Benefits must be quantifiable in order to attach a monetary value to them.  However, not all quantifiable benefits have economic value to society.  Not duplicative means that we cannot double count the same benefits and costs, even though they may appear to some not to be duplicative.  And, finally, transfers between affected groups are not net changes in benefits to society, and, therefore, cannot be included in a BCA.

 

            Each of the benefits and costs in a BCA is discounted to a present value over the economic life of a project.  For the CVISN MDI, benefits are assumed to begin immediately with the one-time start-up costs in the year 2000, and extend for a 25-year period through 2025.  This allows 25 years of economic returns for the project, which will include one or more replacement cycles for equipment and software at appropriate intervals.

 

The Benefits and Costs Included in the BCA

 

            The benefits included in this BCA are as follows:

 

·        Roadside Enforcement (including safety information exchange and electronic screening)

-     Crashes avoided

-     Transit-time savings (including operations and maintenance and air and noise pollution)

 

·        Electronic Credentialing

-     Operating cost savings to states

-     Operating cost savings to carriers

-     Inventory cost savings to carriers

 

            The costs included in the BCA are:

 

·        Roadside Enforcement

-     One-time start-up cost to state

-     Replacement capital costs to states

-     Increased operating costs to states

-     Increased operating costs to carriers

-     Increased out-of-service (OOS) costs to carriers

 

·        Electronic Credentialing[3]

-     One-time start-up cost to states

-     Replacement capital costs to states in future years

 

            All of the benefits and costs included in the BCA are derived from the hypothetical impacts of the CVISN pilots on the customers of CVISN.  The CVISN project may alter the administration of commercial vehicle enforcement and regulatory processes in various ways, but the net economic benefits cannot be assessed until the impacts are translated into the measures listed above.  These impacts are the result of changes in accidents, administrative and compliance costs, motor carrier behavior, and other changes in commercial vehicle regulatory administration and transportation activities.  These evaluation measures determine the type of data that need to be collected and analyzed in the CVISN evaluation.  The process of identifying the benefit measures listed above is described below for each of the five traditional ITS goal areas (safety, efficiency, productivity, mobility, and energy/environment).

 

            Since the five ITS goal areas double count some benefits, and include benefits that make no contribution to economic efficiency (and, thus, have no economic value), only four of the five ITS goal areas include potential benefits (or disbenefits) that should be input to the CVISN BCA.  The reasons for this are explained below under efficiency benefit measures.

 

BCA Safety Benefit Measures

 

            The anticipated safety benefits of CVISN from increased motor carrier compliance with state safety regulations are extremely important.  The benefits consist primarily of reductions in truck‑related crashes caused by violations of vehicle or driver safety regulations.  The crashes are avoided either because additional trucks or drivers are placed out of service due to more efficient enforcement practices or the number of violations is reduced in response to enhanced enforcement (the indirect effect).  The safety benefit will take the form of decreased fatalities and personal injuries, and decreased property damage costs from accidents. Note that in quantifying this benefit, we include the total cost to society of crashes, including the losses and delays to other motorists due to these accidents[4].  We do not subtract the costs covered by insurance from the cost savings since the cost savings will lower insurance costs for everyone and all the accident cost savings should be included in this benefit.

 

BCA Efficiency Benefit Measures

 

            A major source of confusion on the proper inputs to an ITS BCA stems from the fact that economists and engineers sometimes use the same term to mean different things.  Most importantly, in economics, efficiency means maximizing total net benefits from an investment or policy.  This means that the economic efficiency goal includes all the ITS goals that have (a dollar) value to society.  However, engineers use the term efficiency much more narrowly to mean more output per unit of input (“engineering efficiency”).

 

            The efficiency goal that is well accepted as one of the five major ITS goals is the engineering efficiency goal, not the economic efficiency goal. Measures of achievement of the engineering efficiency goal do not enter into a BCA.  This is because increased output per unit of input is best measured in transportation as increased throughput or capacity (e.g., vehicles per hour, inspections per hour, inspections per person-hour).  Converting this benefit to a dollar value to society falls under the productivity goal in the form of cost savings.

 

BCA Productivity Benefit Measures

 

            Productivity means lower costs to produce a given level of output.  Cost savings are an important measure of achievement of the CVISN productivity goal (e.g., cost per vehicle registration, reduced truck transit time, etc.).  This benefit includes the savings to motor carriers and government agencies that result from CVISN.  These cost savings certainly have value to society and enter into a BCA to calculate the net worth of CVISN investments.

 

            With regard to roadside enforcement, the productivity-related cost savings to compliant motor carriers results from saving time by bypassing inspection sites at highway speeds.  We do not assume any shortening of the time to inspect each truck selected for inspection, nor is it assumed that the number of truck inspections will change.  Rather, CVISN may be expected to result in a better targeting of truck inspections since more of these trucks will have been prescreened for violations using the real-time access to timely and accurate data for targeting high-risk carriers provided by CVISN.  Therefore, rather than a cost savings to states, the benefit to the states is increased numbers of out‑of‑service (OOS) violations and improved compliance resulting in fewer crashes.  Cost savings to states are foregone for the benefit of increased output from the inspection process in the form of increased safety as measured by fewer crashes.  This increased output provided by CVISN is an important benefit.  Government officials, including law enforcement officials, would like to be evaluated not only by the costs they cut, but by what they do.  On the other hand, there will be a cost to some motor carriers to improve their compliance and/or deal with increased numbers of OOS violations.

 

            With regard to electronic credentialing, the benefits of CVISN to both states and motor carriers are limited to cost savings (possibly substantial).  States can change their credentialing output only with legislative changes in the number of transactions required.  Such changes are exogenous to the CVISN MDI and do not enter this BCA.  Similarly, motor carriers can benefit from the cost savings that electronic credentialing’s speed and increased operating flexibility provides them.  The benefits include both direct operating cost savings and increased fleet utilization from the increased speed with which carriers can get their trucks on the road due to faster credentialing.

 

            With regard to the latter, this BCA assumes carriers can register new trucks faster and, thus, save on truck inventory costs.  Registration renewals are assumed to be scheduled, with or without EC, to keep existing truck fleets in service.  Also, oversize/overweight (OS/OW) permits were not included in the EC portions of the CVISN MDI, so no benefits for faster credentialing of these permits were included in the BCA.  Finally, significant or measurable levels of increased revenue to motor carriers from goods shipped are not anticipated as a result of the CVISN program.  This is discussed in the mobility section below.

 

            Another potential productivity cost savings to states is pavement cost savings (increased pavement life or productivity) from fewer un-permitted overweight trucks on the road.  This is a savings that can be expected to materialize over the long term, well beyond the term of the CVISN MDI.  For these reasons, we exclude it from the quantitative results of this BCA.  However, a discussion of this issue with some rough benefit estimates is included in this chapter.

 

            Other productivity-related outcome measures may have economic value to some, but should be excluded from a BCA because they represent transfers of benefits.  For example, CVISN may increase the fee revenue “production” from more effective regulatory enforcement and compliance with CVISN.  However, this should not be treated as a net benefit that enters into a BCA, since it is really a transfer from the carriers to state government.

 

            Finally, as explained under the mobility and energy/environment goal areas below, certain benefits that fall under other goal areas are included in the calculation of productivity benefits due to the way unit costs are calculated in the available literature.  Examples of these are:

 

·        Reduced delay to the motoring public from CV accidents (mobility goal area benefit included in accident cost saving)

 

·        Gallons of fuel saved by motor carriers (energy goal area cost included in the truck transit-time operating cost saving).

 

BCA Mobility Benefit Measures

 

            Mobility is measured by the net benefits to travelers or other transportation consumers from a transportation improvement.  To avoid double counting, the most important measure of achievement of the mobility goal is purposely omitted as an input to our BCA.  This is the portion of the CVISN motor carrier productivity cost savings benefit (if any) that is passed on to the shipper/receiver (e.g., a value-added manufacturer, wholesaler, retail store), or to the final consumer.  We can avoid the very difficult problem of collecting data on some elusive cost savings passed on to customers by including in the BCA the entire direct CVISN productivity benefit (the cost savings to motor carriers).  Whether these cost savings are passed on to customers is immaterial for the BCA since the total benefit to society is the same.

 

            Three non-motor carrier cost saving mobility measures are valid inputs to a CVISN BCA:

 

·        Reduced highway delays to the public due to reduced motor carrier (truck) crashes.

 

·        Reduced time in transit that reduces shipper/receiver inventory costs.

 

·        Increased shipper/receiver satisfaction with carriers (e.g., use of safety rating data).

 

            The first measure impacts the public in a different way than the CVISN productivity measure, (i.e., it impacts public benefits differently from the costs of the shipped goods).  It is included in the accident cost saving benefit since the literature includes this in the cost of accidents.  Similarly, the value to shippers/receivers of decreasing time in transit to reduce inventory costs is included in the motor carrier value of truck travel time.  With regard to the third measure, to the extent that shippers are willing to pay separately for (i.e., that they value) the safety rating data, this benefit is additive to the carrier cost savings from reduced accidents.  However, we have not been able to measure it in this evaluation.  Also, the third measure can affect the volume of carrier business and, therefore, revenues.  However, additional revenues are presumably mostly transfers, not increases in output or total goods shipped.  Therefore, they do not provide net benefits for input to a BCA.[5]

 

BCA Energy and Environment Benefit Measures

 

            Energy savings in the form of decreased fuel use are included in the value of transit‑time‑related operating cost savings to motor carriers.  Similarly, the values of air and noise pollution reductions from CVISN are separately calculated, but included in the transit‑time‑related benefits input to the BCA.

 

Benefits Summary

 

            Table 8-2 summarizes the evaluation benefit measures for input to the CVISN BCA arranged by the customers who benefit.  States and motor carriers are the primary beneficiaries of the most important productivity (cost saving) and safety benefits.  Shippers/receivers and the public benefit as well from these impacts of CVISN.  However, the BCA values these benefits in the aggregate to assess the total net worth of a project.  This minimizes any tendency to double count these benefits.

 

Table 8-2.    Classifications of Benefits and Their Incidence

 

Benefit Description	Customer Impacted
	State	Carriers (and Shippers)	Public
Roadside Enforcement:
Ÿ         Safety
-     Crashes avoided		3	3
Ÿ         Productivity/Mobility
-     Cost savings
o  Transit-time savings (including O&M)		3	3
-     Increased output (included in safety benefit)		3	3
Ÿ         Energy/Environment
-     Fuel use (included in transit-time savings)		3
-     Air/noise pollution (included in transit-time savings)			3
Electronic Credentialing:
Ÿ         Productivity
-     Cost savings
o        Faster credentialing	3	3
o     New truck inventory		3

 

 

            The benefits of CVISN’s roadside enforcement noted in Table 8-2 are:

 

·        Safety:  Crashes avoided through improved inspection, plus reduced accident costs, including delays to the motoring public from fewer truck accidents.

 

·        Productivity/Mobility:  Cost savings to motor carriers from electronic screening transit‑time savings, including O&M.  Reduced delays to the motoring public from accidents (mobility goal area benefit included in accident cost savings).  Increased output from more productive inspections measured by crashes avoided with benefits (again) to motor carriers and the public.

 

·        Energy/Environment:  Energy/fuel savings to motor carriers included in value of transit‑time savings.  Air and noise pollution savings from transit‑time savings calculated separately, but included in the value of transit‑time savings.

 

            Some of the above benefit measures are in natural units other than dollars.  They are converted to dollar values (“monetized”) for input to the BCA using the values found in the “Literature Search on Valuation of CVISN Benefit Measures” which is included as Appendix D.1.

 

            Table 8-2 shows a relatively simpler set of benefits of CVISN’s electronic credentialing, namely, cost savings to both the state and to motor carriers, and improved carrier fleet utilization from faster credentialing of new trucks.

 

Costs

 

            The five ITS goal areas deal only with benefits (including cost savings).  The cost of CVISN for the purpose of this BCA consists of the one-time start-up costs and the ongoing costs of CVISN programs, including equipment replacement at appropriate intervals.  More specifically, these CVISN costs include the incremental capital and operating costs of the hardware and software, including computers and electronic data communications, and labor and administrative overhead costs for performing the functions associated with CVISN.  In contrast to defining the cost saving benefits of CVISN, defining the incremental expenditures of resources on CVISN is relatively straightforward.  Chapter 6 of this report provides our detailed findings on CVISN costs.

 

            Table 8-3 shows who bears the costs for CVISN.

 

Table 8-3.    Classification of Costs and Their Incidence

 

Cost Description	Customer Impacted
	State	Carriers (and Shippers)	Public
Roadside Enforcement:
Ÿ         CVISN start-up costs:
-     Equipment/housing/training	3
Ÿ         CVISN replacement capital costs	3
Ÿ         CVISN operating costs	3	3
Ÿ         (Increased) costs of compliance:
-     Out-of-service (OOS)		3
Electronic Credentialing:
Ÿ         CVISN start-up costs:
-     Equipment/housing/training	3
Ÿ         CVISN replacement capital costs	3

 

            For both roadside enforcement and electronic credentialing, there are start-up and replacement capital costs in future years to both the states and carriers.  However, for roadside enforcement, it is assumed that a vendor will charge $45 per year per truck[6]for all costs, including in-truck equipment required for electronic screening, thus eliminating start-up or replacement capital costs for carriers. 

 

For purposes of the benefit-cost analysis, this $45 is treated as the annual operating cost to motor carriers for electronic screening.  However, this simplifying assumption is not expected to remain valid as the various electronic screening programs expand and evolve.  Furthermore, it does not apply to all participating carriers and states.  For example, motor carriers enrolled in PrePass pay a fee of 99 cents per pass, up to a maximum of $4 per day.  Also, NORPASS and Green Light states are free to adjust or eliminate the fees they charge motor carriers to encourage them to enroll in the program.

 

For electronic credentialing, it is assumed that essentially all carriers have PCs, and, therefore, that the start-up and replacement capital costs are essentially zero for carriers.  States, on the other hand, need to install the equipment and software to enable electronic credentialing to take place.  Finally, there are costs to the carriers from improved roadside enforcement.  These will take the form of increasing OOS violations for high-risk carriers, and possible indirect costs of changing their behavior to improve their compliance rates.  The latter cost has not been possible to estimate in this evaluation.  However, since less compliant carriers are more likely to incur increased OOS costs, this cost is likely to be included at least partly in their increased OOS cost.

 

            For a variety of reasons, we have conducted the BCA separately for the two CVISN MDI components.  These reasons include the fact that the categories of benefits and costs are different and more limited for electronic credentialing (EC) than for roadside enforcement (RE).  For the former, they include only costs and cost savings, while for roadside enforcement (including SIE), the over-the-road operations of motor carriers are directly affected.  Also, investment decisions are likely to be made separately for these two CVISN elements.  In fact, a variety of investment scenarios can be envisioned for each of these CVISN elements.

 

 

8.4       Results

 

            All benefits and costs occurring each year between 2000 and 2025 are included in the BCA and each is discounted back to 2000 using both a 4 percent and 7 percent real discount rate to calculate the present values of the benefits and costs in 1999 dollars.  The use of a 4 percent real discount rate in these benefit/cost calculations has been recommended by economists in both the public and private sector.[7]  The use of a 7 percent real discount is a more stringent test and has been required for nearly two decades for use in BCAs of federal programs by the U.S. Office of Management and Budget (OMB).

 

Roadside Enforcement

 

            Tables 8-4 to 8-7 show the results of the BCA for the three roadside enforcement scenarios.  The tables show the present values of all the benefits for roadside enforcement that we have included in the BCA and compare these to the total system costs.  Listing the benefits and costs in the format in these tables show how they are aggregated in their common dollar units to calculate the net benefits and the benefit/cost ratio (BCR) for each investment alternative or scenario.  In each case, the benefits and costs that are received and paid at different times over the course of the next 20 years have been discounted back to 1999 dollars using both four (4) and seven (7) percent real discount rates.  Discounting future values to calculate a present value in 1999 dollars is necessary to be able to compare these future streams of costs and benefits.

 

Table 8-4.    Benefit/Cost Comparison for Roadside Enforcement (Present Value in $1999).  Scenario RE 1

 

Benefits Crashes avoided Transit‑time savings (including O&M and air and noise pollution) Total benefits Costs One time start-up cost to states Replacement capital costs to states Increased operating costs to states Increased operating costs to carriers Increased OOS costs to carriers Total costs   Total (Net Present Value)   Benefit/Cost Ratio	Discounted at 4%	Discounted at 7%
	$90,740,000	$69,076,000
	$0	$0
	$90,740,000	$69,076,000
	$30,980,000	$30,980,000
	$72,890,000	$51,208,000
	$12,490,000 $0 $26,130,000 $142,490,000   ! $51,750,000   0.64	$9,512,000 $0 $19,891,000 $111,591,000   ! $42,515,000   0.62

 

 

Table 8-5.    Benefit/Cost Comparison for Roadside Enforcement (Present Value in $1999).  Scenario RE 2

 

Benefits Crashes avoided Transit‑time savings (including O&M and air and noise pollution) Total benefits Costs One time start-up cost to states Replacement capital costs to states Increased operating costs to states Increased operating costs to carriers Increased OOS costs to carriers Total costs   Total (Net Present Value)   Benefit/Cost Ratio	Discounted at 4%	Discounted at 7%
	$636,000,000	$484,300,000
	$6,328,000,000	$4,817,000,000
	$6,964,000,000	$5,301,300,000
	$99,500,000	$99,500,000
	$124,700,000	$86,400,000
	$234,700,000 $2,800,500,000 $183,100,000 $3,442,500,000   $3,521,500,000   2.0	$178,700,000 $2,131,900,000 $139,400,000 $2,635,900,000   $2,665,400,000   2.0

 

 

Table 8-6.    Benefit/Cost Comparison for Roadside Enforcement (Present Value in $1999).  Scenario RE 3

 

Benefits Crashes avoided Transit‑time savings (including O&M and air and noise pollution) Total benefits Costs One time start-up cost to states Replacement capital costs to states Increased operating costs to states Increased operating costs to carriers Increased OOS costs to carriers Total costs   Total (Net Present Value)   Benefit/Cost Ratio	Discounted at 4%	Discounted at 7%
	$10,742,000,000	$8,178,000,000
	$6,328,000,000	$4,817,000,000
	$17,070,000,000	$12,995,000,000
	$99,500,000	$99,500,000
	$124,700,000	$86,400,000
	$234,700,000 $2,800,500,000 $137,300,000 $3,396,700,000   $13,673,300,000   5.0	$178,700,000 $2,131,900,000 $104,500,000 $2,601,000,000   $10,394,000,000   5.0

 

 

Table 8-7.    Benefit/Cost Comparison for Roadside Enforcement (Present Value in $1999).  Scenario RE 3*

 

Benefits Crashes avoided Transit‑time savings (including O&M and air and noise pollution) Total benefits Costs One time start-up cost to states Replacement capital costs to states Increased operating costs to states Increased operating costs to carriers Increased OOS costs to carriers Total costs   Total (Net Present Value)   Benefit/Cost Ratio	Discounted at 4%	Discounted at 7%
	$4,680,000,000	$3,562,000,000
	$6,328,000,000	$4,817,000,000
	$11,008,000,000	$8,379,000,000
	$99,500,000	$99,500,000
	$124,700,000	$86,400,000
	$234,700,000 $2,800,500,000 $164,800,000 $3,424,200,000   $7,853,800,000   3.2	$178,700,000 $2,131,900,000 $125,500,000 $2,622,000,000   $5,757,000,000   3.2

 

 

            The discount rates of 4 and 7 percent are applied to the future benefits and costs estimated in real (constant 1999) dollars, not inflated dollars.  If the future benefits and costs were estimated in inflated (current) dollars, the “nominal” discount rate would have to be 4 percent or 7 percent plus the rate of inflation.  If we assume today’s modest 2.5 percent annual inflation rate going forward, the 4 percent and 7 percent real discount rates are equivalent to 6.5 percent and 9.5 percent nominal discount rates, respectively.

 

            For the three roadside enforcement scenarios, Tables 8-4 to 8-7 show that the BCRs using the more stringent 7 percent discount rate range from 0.62 to 5.0, depending on the scenario.  For the simplest roadside enforcement scenario, RE 1, which is the upgrade to Aspen without electronic screening, the BCR is less than 1.0, showing that Aspen by itself is economically not worthwhile.

 

            For the roadside enforcement scenarios that involve electronic screening, RE 2, RE 3, and RE 3*, the BCRs increase considerably, as do the NPVs of the benefits of these improvements.  For Scenario RE 2, which assumes no change in compliance behavior, the NPV ranges from $2.6 billion to $3.5 billion, depending on the discount rate used.  With improved compliance behavior, which is an important objective of these systems, the increase in the value of the net benefits (NPV) is truly impressive, ranging from nearly $3 billion to over $13 billion for Scenarios RE 3 and RE 3*, depending on the discount rate and the level of improvement in FMCSR compliance rates that is achieved.  Therefore, the systems involved in the two roadside enforcement scenarios that include electronic screening are economically well justified, even with the use of the more stringent 7 percent real discount rate.  The detailed tables listing the actual year‑by‑year benefits and costs and their discounted values using 4 and 7 percent real discount rates is included in this report as Appendix D.2.

 

            The make up of the benefits and costs varies, depending on the roadside enforcement investment scenario.  Table 8-4 for Scenario RE 1, which involves only Aspen with no electronic screening (ES), shows there are no transit‑time savings for low-risk carriers, and no costs to the carriers for using ES to bypass inspection and weigh stations.  The costs involved in this RE scenario are small compared to the RE 2 and 3 scenarios involving ES, with less than 20 percent of the costs borne by the carriers in increased out of service (OOS) costs.  The importance of the increased OOS rate in scenario RE 1 is reflected in the value of the crashes avoided benefit, which is well over 3 times the higher OOS cost to the carries.

 

            Tables 8-5 and 8-6 show the differences between scenarios RE 2 and RE 3 (or RE 3*) to be only in the values of the crashes avoided benefit and the increased OOS costs to the carriers.  This results from the 25 percent (10 percent) decrease in violation rate assumed as the only difference between the scenarios.  Otherwise, the costs to implement the “investments” are the same, and no change is assumed in the number or percentage of trucks deemed to be low-risk and, therefore, able to benefit from (and pay for) the electronic screening.  Note that in RE 3 (RE 3*), the increased OOS cost to carriers decreases from the cost in RE 2 by the 25 percent (10 percent) decrease in violation rate, while the crashes avoided benefit increases dramatically with the assumed change in compliance behavior.  This shows the potential benefit from the combined “carrot” (ES) and “stick” (better inspection targeting) incentives possible with CVISN.  The carrot is actually much larger than shown in Tables 8-5 and 8-6.  These tables reflect the assumption of no change in total time spent by all trucks in inspection and weigh stations, since this is indeed the case—the same number of trucks are inspected.  Only the targeting of high‑risk trucks for inspection is improved.  In a BCA, we use the total costs and benefits to society to evaluate the investment alternative.

 

            However, if the 52 percent of trucks that earn the right to bypass the inspection stations (saving 2.81 minutes per bypass[8]) also avoid spending an (weighted) average of 22.21 minutes being weighed and/or inspected, their benefit is valued at nearly $3.3 billion per year.  This is nearly 20 times the $168 million cost per year to the low-risk carriers to equip their 52 percent of the nation’s 7.2 million heavy trucks at $45 per truck per year.  This is a powerful incentive to carriers to increase their compliance behavior and make the nation’s highways safer.

 

Electronic Credentialing

 

            Tables 8-8 and 8-9 show that the two electronic credentialing scenarios are characterized by huge BCRs.  For Scenario EC 1, the BCR is 12.5 using the 7 percent discount rate, meaning that the total benefits of electronic credentialing for states not using VISTA are over 12 times as large as the total costs.  For states using VISTA (Scenario EC 2), Table 8-9 shows that the BCR is over 40.  However, an examination of the make up of the benefits and costs of the two EC scenarios shows the major contribution to the difference in the BCR is the much lower start-up cost to the states with VISTA.  VISTA provides credentialing services to the states under contract so that its capital costs are amortized over time as operating charges to the states.  The present value of the non‑VISTA scenario, EC 1, is actually about 50 percent higher than the VISTA scenario, EC‑2, in part because the number of trucks and carrier accounts is much greater in the non‑VISTA system than in the VISTA system.  In any event, both the VISTA and non‑VISTA scenarios for the electronic credentialing element of CVISN easily pass the important BCR and positive NPV criteria for determining whether such systems are economically justified.

Table 8-8.    Benefit/Cost Comparison for Electronic Credentialing without VISTA (Present Value in $1999).  Scenario EC 1

 

Benefits Operating cost savings to states Operating cost savings to carriers Inventory cost savings to carriers Total benefits   Costs One time start-up cost to states Replacement capital costs to states Total costs   Total (Net Present Value)   Benefit/Cost Ratio	Discounted at 4%	Discounted at 7%
	$338,800,000	$257,900,000
	$74,500,000	$56,700,000
	$319,300,000	$243,100,000
	$732,600,000	$557,700,000
	$42,140,000	$42,140,000
	$3,460,000	$2,340,000
	$45,600,000   $687,000,000   16.1	$44,480,000   $513,220,000   12.5

 

 

Table 8-9.    Benefit/Cost Comparison for Electronic Credentialing with VISTA (Present Value in $1999).  Scenario EC 2

 

Benefits Operating cost savings to states Operating cost savings to carriers Inventory cost savings to carriers Total benefits   Costs One time start-up cost to states Replacement capital costs to states Total costs   Total (Net Present Value)   Benefit/Cost Ratio	Discounted at 4%	Discounted at 7%
	$316,300,000	$240,800,000
	$24,500,000	$18,600,000
	$104,900,000	$79,900,000
	$445,700,000	$339,300,000
	$7,200,000	$7,200,000
	$1,800,000	$1,200,000
	$9,000,000   $436,700,000   49.5	$8,400,000   $330,900,000   40.4

 

 

            Finally, as noted earlier, electronic credentialing’s impacts are all costs or cost savings.  This allows us to report the BCA results of electronic credentialing as a function of the level of deployment, as shown in Figure 8-1 (presented earlier).  The figure also shows that the BCR will vary with the percent deployment (i.e., percent of accounts/transactions handled electronically) and that there is a breakeven deployment percentage at which the BCR will equal 1.0 (i.e., at which the costs of EC will equal the baseline (pre EC) costs).

 

            For EC in states currently operating without VISTA, the breakeven deployment size in percentage terms is less than 10 percent.  This is easily seen from Table 8-7 when it is considered that the total costs are start-up and replacement capital costs that are fixed statewide, while the cost saving benefits vary linearly with the number or percent of carriers using EC.  Thus, the line representing “Costs with EC” in Figure 8-1 is really flat.  For Scenario EC 1, the breakeven percentage deployment (equal to the inverse of the BCR) is 8 percent at a 7 percent real discount rate.  Similarly for EC in states with VISTA (Scenario EC 2), the breakeven percent deployment is only 2.5 percent.  At deployments above these levels, electronic credentialing is economically justified with rapidly increasing BCRs, reaching the BCRs in Tables 8-7 and 8-8 at 100 percent deployment.  Thus, even with a slow take-up of electronic credentialing, with or without VISTA, it is prudent to proceed with deploying such systems.

 

 

 

8.5       Cost Savings From Reduced Pavement Damage:  An Additional Roadside Enforcement Benefit

 

            As discussed earlier, a significant benefit of improved targeting of overweight trucks is a reduction in the rate of pavement deterioration.  This is a (pavement) productivity benefit that can be expected to materialize over the long term, well beyond the term of the CVISN MDI and our ability to observe this benefit directly.  For this reason, and because a detailed study quantifying this benefit in the abstract is well beyond the scope of this evaluation, we have not included it in the BCA.  Rather, we provide here a qualitative discussion of this additional roadside enforcement benefit, with some rough estimates to highlight its importance.

 

            A large body of evidence demonstrates that heavy trucks cause a major portion of pavement wear.[9]  An often quoted rule of thumb is that pavement damage increases as the fourth power of axle weight.  Thus, a 10 percent increase in axle weight would result in a 46 percent increase in pavement wear.  Expenditures solely for pavement rehabilitation and reconstruction are not reported separately in national spending statistics.  However, it is likely that such expenditures in the U.S. total several billion dollars annually today.[10]  A number of studies and the annual cost of increasing allowable axle loadings, or allowing 80,000‑pound GVW trucks on all main roads, estimate annual national pavement damage cost increases in the tens and hundreds of millions of dollars.[11]

 

            The roadside enforcement scenarios included in this BCA resulted in 8 percent and 30 percent increases in OOS orders for Scenarios RE 1 and RE 2, respectively, and Scenario RE 3 assumed a 25 percent decrease in overall violation rates.  If we assume an average overloaded condition of 10 percent for an OOS order, and that 10 percent of trucks in use are weight checked on any given day, a rough calculation of the percent of trucks put out‑of‑service due to an OW condition for Scenarios RE 1 and RE 2 would be 0.08 percent and 0.3 percent, respectively.  Scenario RE 3 assumes a 25 percent decrease in violations for 100 percent of the trucks.  If pavement damage due to trucks increases by 46 percent for a 10 percent increase in loading, Scenarios RE 1, 2 and 3 would result in 0.4 percent, 1.4 percent, and 11.5 percent reductions in pavement wear due to large trucks, respectively.  If pavement wear due to large trucks was, say, half of all pavement wear, and $10 billion per year is being spent on pavement rehabilitation, the annual cost savings benefit could range from $20 million to nearly $600 million per year.  These are in the same range as the cost impacts of the earlier mentioned proposals to allow increased axle loadings or use of more non-interstate roads by heavy trucks (but in the opposite direction).

 

            Discounted at the 7 percent real interest rate, the NPV of these pavement cost saving benefits equals approximately $250 million, $900 million, and $8 billion for the three RE scenarios, respectively.  These benefits (with the assumptions stated above) are greater than the value of the annual crashes avoided benefit for the first two RE scenarios, and approximately equal to the crashes avoided benefit for RE 3.  These are, of course, very significant benefits.