CVISN Cost Analysis

CHAPTER 6. CVISN COST ANALYSIS

The purpose of the cost analysis component of the CVISN MDI evaluation is to assess the effects CVISN is likely to have on CVO costs to states and motor carriers. Specifically, this analysis covers deployment and annual operating costs (i.e., nonrecurring and recurring costs, respectively) associated with credentials administration and two aspects of roadside enforcement operations: electronic screening and safety information exchange. In addition to supporting the CVISN Benefit/Cost Analysis (Chapter 8), the cost data presented in this chapter constitute part of the information needed by states and motor carriers to make CVISN implementation decisions. Therefore, the intended audience for this cost analysis chapter consists of

· State administrators responsible for CVO activities, especially those embarking on CVISN deployment

· Motor carrier managers, especially those considering electronic credentialing.

We begin in Section 6.1 with a brief overview of the major findings. The study goals and cost measures are described in Section 6.2 and the approaches to data collection and analysis are summarized in Section 6.3. Section 6.4 contains a summary of the deployment and annual operating costs to states for various components of CVISN Level 1 deployment. The detailed cost breakdowns are provided in Section 6.5. Projected costs and cost savings to states under various CVISN deployment scenarios are presented in Section 6.6. Motor carrier costs related to electronic credentialing are discussed in Section 6.7. Finally, Section 6.8 summarizes and discusses the relevance of cost information that was published in previous studies. Supporting appendices in Volume II provide additional background on state deployment status (Appendix B.1), interview guides for states and motor carriers (Appendix B.2), and cost elements/calculations used in this chapter (Appendix B.3).

Limitations of Findings

To obtain information for this chapter, Battelle staff conducted in-person interviews with officials from commercial vehicle regulatory and enforcement agencies in four states that have actually deployed CVISN technologies. Contacts were also made with a limited number of motor carriers who participated in pilot studies of CVISN credential systems. The methodology for analyzing and presenting the cost information acknowledges that each participating state has unique characteristics and policies. No attempt was made to determine if these costs are applicable to other states. Officials evaluating CVISN technologies may benefit from contacting their counterparts in states that have begun deployment, to determine the extent to which each state’s needs and expectations are comparable to those of their own state.

The results presented in this chapter have important limitations: only a few states have enough experience with CVISN to provide adequate data for this analysis. Thus, the study focused on those states with the most advanced deployment of the system or that were expected to make significant progress in deploying CVISN for credentialing and/or roadside enforcement operations. Because this is the first study of CVISN systems as actually deployed, it is expected that the preliminary findings presented here will be expanded and refined in later DOT publications as deployment proceeds.

Two prototype states (Maryland and Virginia) and three pilot states (Kentucky, Connecticut, and Oregon) were initially targeted for date collection efforts. Kentucky, Maryland, and Connecticut were the three main states whose cost data are presented in this analysis. Unfortunately, no cost data were available from Oregon and only limited data came from Virginia. Some additional cost data came from separate studies of the I-95 Corridor Coalition states (Connecticut, Maryland, Massachusetts, New York, Pennsylvania, and Rhode Island) and of seven states participating in a study of the International Registration Plan (IRP) Clearinghouse (Arizona, Arkansas, California, Kansas, Kentucky, Maryland, and Virginia).

Some states targeted for data collection provided detailed data from their commercial vehicle operations, highway infrastructure, and CVISN systems. These data, as analyzed here, should provide sufficient cost information for future decision-makers in other states to determine the applicability of costs from this evaluation to their situations. Wherever possible, costs are expressed as recognizable units (e.g., one patrol car, one weigh station, statewide computer system) associated with key investments or activities. Costs are also presented at various layers or levels of deployment (e.g., CVISN Level 1). States attempting to adapt or extrapolate the costs and cost elements reported here should first determine if there are significant differences in operating procedures compared with the states participating in this study.

6.1 Overview of Findings

Costs to States

Credentialing. The analysis of actual deployment and operation costs in two states, Kentucky and Maryland, demonstrated that electronic credentialing could offer states substantial cost savings, depending on the level of motor carrier participation. Up-front investments averaging $700,000 were required for one state to deploy an end-to-end IRP credentialing system. However, annual operating costs to the states, which ranged from $63 to $138 for each carrier account before CVISN, can be reduced by almost 35 percent for each participating carrier. Assuming states can achieve a 50 percent participation rate by motor carriers, the annual cost savings to each state after deployment is expected to be between $40,000 and $140,000. Table 6‑3 (below) and Section 6.4 summarize the unit costs to the states, Section 6.5 details the unit cost derivations, and Section 6.6 presents the statewide cost projections.

Both states were in the process of deploying electronic credentialing systems for IFTA. It was estimated that, for the additional investment of $65,000, states could realize additional annual cost savings of approximately $150,000, assuming 50 percent of the accounts file IFTA credentials electronically. The deployment cost for IFTA electronic credentialing is lower than the cost for a comparable IRP system in part because IFTA processing uses many of the same systems developed for IRP.

Additional cost savings are expected when trip-related credentials (HAZMAT, OS/OW, etc.) are filed electronically. However, neither state had begun deployment of these systems.

Electronic Screening. For electronic screening at the roadside, the one-time capital cost to deploy basic screening equipment (AVI and WIM) at a single weigh station was reported by Kentucky to be $150,000. This does not include the cost of land, buildings, or fixed scales. Upgrading this site further to electronic snapshot capability was reported to result in nearly $375,000 in one‑time deployment costs. The cost to equip additional sites with the same electronic screening capability would be lower, because part of the start-up cost at the first site is for software development that would not need to be repeated. Incremental costs for full electronic screening capabilities at one site were reported to be approximately $300,000, a savings of $225,000 per site compared to the cost of the first screening site. Annual capital replacement and operating costs would increase by approximately $75,000 per site to support full CVISN electronic screening.

To illustrate the cost impacts, assume that a state wished to equip and staff five existing roadside weigh stations for CVISN electronic screening. Based on pre-CVISN annual capital and operating costs, plus salary and benefits for three full-time staff per weigh station, a state would already be incurring nearly $700,000 in annual costs for these five sites before CVISN technology was introduced. The deployment costs for full electronic screening capabilities at five sites is approximately $1,725,000. The total annual capital replacement and operating costs at these five sites (not counting one-time start-up costs) would increase by nearly $400,000. Table 6‑3 (below) and Section 6.4 summarize the unit costs to the states, Section 6.5 details the unit cost derivations, and Section 6.6 presents the statewide cost projections.

Safety Information Exchange. For Safety Information Exchange at the roadside, a statewide upgrade to Aspen capability was reported by Connecticut to cost the state $31,000 for infrastructure upgrades, plus $4,800 for equipment and training for each enforcement unit (one patrol car and one officer or inspector). Upgrading to wireless telecommunication and SAFER mailbox capability adds an additional cost of $1,000 per unit. Statewide deployment of CVIEW or equivalent was reported by Kentucky to cost $325,000. Accompanying increases in annual capital and annual operating costs (again assuming no change in the state’s labor costs for enforcement patrol officers/inspectors following CVISN deployment) were reported to be approximately $88,000 per state and approximately $1,400 per mobile unit.

Assuming a state has 50 mobile enforcement units, the one-time start-up costs for full CVISN deployment of safety information exchange statewide (including wireless telecommunication, SAFER Data Mailbox, and CVIEW) would be $650,000. Looking at post‑CVISN annual operating and annual capital costs, a statewide deployment including 50 mobile units would result in increased costs to the state of $160,000, which is only 6 percent of the estimated $2.7 million that such a state spends in labor and annual operating costs for 50 officers or inspectors and their vehicles pre-CVISN. Table 6-3 (below) and Section 6.4 summarize the unit costs to the states, Section 6.5 details the unit cost derivations, and Section 6.6 presents the statewide cost projections.

Summary of Costs to Motor Carriers

Motor carriers participating in pilot tests of electronic credentialing reported saving between 60 and 75 percent of their costs for credentialing, with minimal start-up costs. For the motor carrier, only a desktop personal computer is required; many carriers already use computers with internet access in their business. Straightforward user interfaces are assumed capable of keeping training time and costs to a minimum. The reported time savings to the motor carriers is also substantial, at greater than 60 percent. One of the best benefits of electronic credentialing is the capability for carriers to print their own credentials without waiting for the mail or traveling to the state agency offices. This enables carriers to put new vehicles into operation more quickly. Savings are expected to be greater for new credentials than for renewals, because of the additional data entry that accompanies new applications processed via paper-based systems. Electronic credentialing, which offers database access to carrier information, processing templates, and automated error checking capabilities, promises to yield great savings to motor carriers. Section 6.7 presents the detailed results of the motor carrier cost evaluation.

Determining motor carrier costs and cost savings related to roadside enforcement activities was outside the scope of this evaluation project due to funding limitations – especially when considering the technical challenges in getting accurate operations cost data from motor carriers. However, some additional information on motor carrier costs, based on literature-derived projections, is presented in the benefit/cost analysis in Chapter 8.

6.2 Study Goals and Measures for CVISN Cost Analysis

The cost analysis considered three major cost-related questions:

1. What are/were the baseline costs associated with CVO processes prior to CVISN technology deployment?

2. What are the one-time start-up costs to the states to deploy CVISN systems, and what are the key drivers or major elements contributing to those costs?

3. What annual capital and labor, operating, and maintenance costs do states incur as they use CVISN technologies, and what are the key drivers or major elements contributing to those costs?

In addition, two hypotheses were tested:

· CVISN credentialing systems will result in reduced time, costs, and uncertainties involved with handling (applying for and administering) commercial vehicle credentials for both state agencies and motor carriers

· The deployment of CVISN systems for roadside enforcement operations will result in capital cost increases to state agencies, but is expected to improve (1) inspection efficiency for states and motor carriers and (2) highway safety.

The first hypothesis and the cost impacts associated with the second are discussed in this chapter. The inspection efficiency and safety impacts are discussed in Chapter 5 (CVISN Safety Benefits). Formal benefit/cost analyses under various deployment scenarios involving CVISN credentialing and roadside systems are presented in Chapter 8.

Baseline Costs

Baseline costs include annual capital costs and annual operating costs. With a few exceptions as noted, the term “baseline” refers to operating procedures that do not use CVISN or similar ITS/CVO technologies, even if the state used these technologies prior to the start of the CVISN MDI. Baseline systems use conventional (mostly paper‑based) administrative or roadside technology. Baseline systems are sometimes referred to as “legacy” systems, especially in the case of computer technologies.

Credentialing. The baseline cost elements for credentialing include

· Labor and fringe benefits for staff who process new, supplemental, and renewal credential and permit applications

· Operation and maintenance of pre-CVISN, paper-based credentials administration equipment and facilities

· Communication, mailing, and reporting.

Roadside Enforcement. The operating costs of “baseline” activities are presented in order to provide a perspective on the added costs of CVISN. For example, the costs of baseline activity associated with electronic screening included staffing and operating costs for fixed weigh stations. The cost of baseline activities related to safety information exchange includes salaries of enforcement officers and vehicle costs.

The actual deployment date for a device or system was not the sole factor that determined whether a cost was classified as baseline or post-CVISN. For example, Connecticut was well advanced in using electronic safety data exchange technologies prior to becoming a pilot state in the CVISN MDI. But the systems they deployed were essentially CVISN. Therefore, Connecticut’s costs for electronic devices were treated as post-CVISN costs.

In states where the operation of an existing CVISN-like technology is completely modified to conform to CVISN standards, the pre-existing situation was considered a baseline case. “Post-CVISN” refers to the situation after the modification. For example, Kentucky had an electronic mainline screening capability as part of the Advantage I-75 program prior to becoming a CVISN pilot state. Under CVISN systems deployment in Kentucky, the screening system and its operation have been completely modified to be CVISN compatible. Costs for such modifications are classified as post-CVISN.

Attempts were made to isolate costs devoted to CVISN functions or their corresponding baseline activities before CVISN deployment. However, baseline costs do not include certain capital equipment and facilities costs. For example, the capital costs of computer resources for baseline credentialing activities are excluded because they are often shared with other state agencies and are difficult to isolate. Also excluded are the costs of land and buildings for fixed weigh stations. The requirements for these types of facilities vary significantly from state to state.

CVISN Deployment Costs

Deployment (one-time start-up or nonrecurring) costs associated with CVISN include

· Up-front purchases of equipment, goods, and services, such as hardware acquisition and software development costs

· Systems integration, consultant fees, planning, and design

· Outreach efforts

· Training for staff to use the new technologies.

Some costs to the states are expected to remain the same following CVISN deployment (e.g., roadside staff labor rates or the costs to install and operate a fixed weigh scale). These figures, assumed to be the same for both pre- and post-CVISN in this analysis, should help put the incremental costs for CVISN deployment in the context of overall state CVO costs.

Post-CVISN Costs

Recurring costs to the states following deployment of CVISN technologies included annual capital costs and annual operating costs.

Annual Capital Costs. The start-up (deployment) costs for purchasing capital equipment were used to calculate annual capital costs. To simplify the presentation of costs in this chapter, the annual capital costs were determined by dividing the original purchase price of the equipment by the estimate of the expected replacement life of that equipment (in years). For example, a desktop personal computer having a service life of 5 years and costing $2,000 to purchase new was assumed to carry with it an annual capital cost of $400. This $400 is believed to represent a fair value for periodic replacement of that equipment. The formal benefit/cost analysis presented in Chapter 8 uses appropriate discount factors to determine the true costs at given points in time.

Vehicles were assumed to have a life of 3 years; personal or laptop computers and printers were assumed to have a life of 5 years. All other capital equipment (e.g., scales, computer network database servers, modems, AVI readers) was assumed to have a life of 10 years.

Inferring annual capital costs from one-time start-up costs may seem to be double‑counting. However, this approach was considered reasonable in that, once a state makes an up-front capital investment in equipment, the state will also want to plan for the cost of replacing the original equipment when it reaches the end of its useful life.

Annual Operating Costs. Recurring (annual) operations costs incurred after CVISN technology deployment generally include operations and maintenance (O&M) costs such as

· Labor and fringe benefits for credentialing, roadside, and administrative staff

· Operation and maintenance of the CVISN systems

· Communication

· Equipment and software replacement or upgrades.

In some cases, as noted below, labor is excluded from the O&M cost values. This usually means that CVISN deployment is not expected to affect labor costs significantly.

In general, cost data are presented for activities that correspond with CVISN Level 1 deployment. When firm cost data were unavailable, informed estimates of the costs were used. For example, only about 1 percent of credentialing volume was being handled with CVISN systems at the time of the evaluation, so post-CVISN credentialing labor costs were estimated. Any such estimates, their bases, and their limitations are identified in this report.

Detailed descriptions of the baseline and CVISN systems in place in each state at the time of data collection are presented in Appendix B.1.

6.3 Cost Data Collection and Analysis Approach

The CVISN cost study presented in this chapter consisted of the following activities: data collection, preparation of representative scenarios, and data analysis. Two data collection approaches were used: a literature review and a series of on-site, in-person interviews. Reference materials were obtained from the states, vendors, and publications prior to the site visits. Materials included case study evaluations, system studies, and empirical databases. In-person interviews were the primary source of cost data.

Literature Review Summary

The following sources were consulted in the literature review:

· National Governors’ Association (NGA) Study (Apogee 1997)

· American Trucking Associations (ATA) Foundation Study (1996)

· Maryland Benefit/Cost Study (Bapna et al. 1998)

· Washington State CVISN Pilot Project report (1998).

The NGA study, based on states’ advance estimates of project deployment costs, covered the same three functions as the CVISN cost study: credentialing, electronic screening, and SIE. The study estimated low and high ranges of start-up and annual costs, based on the systems identified for deployment in the individual states and their deployment schedules.

The ATA Foundation study assessed the impacts of ITS technology on regulatory compliance costs for motor carriers. ITS/CVO user services for which costs and benefits were evaluated include (1) administrative processes, (2) electronic clearance, (3) automated roadside safety inspections, and (4) on‑board safety monitoring.

A benefit/cost study conducted in Maryland assessed the benefits of CVISN deployment. The study tested the hypothesis that the net benefits of CVISN deployment are positive and substantial, but vary among system components and between the state and motor carrier industry. Both qualitative and quantitative analyses of benefits and costs were conducted. The costs consist of CVISN investment, maintenance and operating costs to the state, and costs to motor carriers (e.g., transponders, computers, and software).

The Washington State Patrol departments of Licensing and Transportation conducted a feasibility study to determine the effects of continuing implementation of the CVISN pilot project. Effects on state administrative and enforcement functions were assessed, as were effects on motor carriers, commerce, and the traveling public. Incremental and 10‑year costs for the pilot project were estimated. The study also evaluated benefits to the various stakeholders.

Comparisons of CVISN costs reported in this evaluation with the cost impacts predicted in the literature are presented in Section 6.8.

In-Person Interviews

The objective of the interviews with state agencies was to collect information on

· Costs associated with the current credentialing processes and roadside screening and inspection activities

· Costs associated with deploying and operating various CVISN systems

· Resources (staff and equipment) committed to CVISN deployment.

Interviews were also conducted with representatives of selected motor carriers participating in the pilot testing of CVISN systems. The objectives of these interviews were to

· Gather information on the costs incurred (or savings realized) by the motor carrier industry resulting from CVISN systems deployment

· Learn about the impacts of CVISN systems on the efficiency and productivity of the motor carrier industry, as they affect costs.

All interviews were fact-finding, interactive discussions aimed at gaining an understanding and collecting data on the costs of CVISN systems. The interview guides were developed based on the evaluation strategy, evaluation data requirements plan, experiences from similar studies (e.g., NGA), and information gathered from the literature review. The interview guides are included in Appendix B.2.

Battelle staff summarized the data gathered from the interviews and then confirmed the summaries with the officials who provided the information, prior to data analysis.

Cost information in this chapter was drawn mainly from interviews with state transportation officials from four states: Kentucky, Maryland, Connecticut, and Virginia. Table 6‑1 shows which states provided input on baseline costs (pre-CVISN), CVISN deployment or start-up costs, and post-CVISN annual costs. Information collected from some states was insufficient to be included in the cost analysis. Besides these four states, supporting information was drawn from several other states, including those in the I-95 Corridor Coalition and those participating in an evaluation of the IRP credentialing clearinghouse (IRP CH), as shown in Table 6‑1.

Table 6-1. States Participating in Cost Analysis of Various CVISN Technologies

State	Role	Credentialing, Administration		Roadside Operations
State	Role	Baseline	Post-CVISN	Baseline	Post-CVISN
Kentucky	CVISN Pilot, IRP CH	l	l	l	l
Maryland	CVISN Prototype, IRP CH	l	l		¢
Connecticut	CVISN Pilot	l			l
Virginia	CVISN Prototype, IRP CH	¢	¢		l
Massachusetts	I-95 Coalition				¢
New York	I-95 Coalition				¢
Pennsylvania	I-95 Coalition				¢
Rhode Island	I-95 Coalition				¢
Arizona	IRP CH	¢	¢
Arkansas	IRP CH	¢	¢
California	CVISN Pilot, IRP CH	¢	¢
Kansas	IRP CH	¢	¢

Key: l = primary data sources ¢