4.0 Motor Carrier Economic Analysis of CVISN Technology Adoption

The benefits and costs that would be incurred by a motor carrier that elects to deploy CVISN technology for electronic credentialing and electronic screening were estimated (FHWA 2007). Motor carriers were asked to provide both one-time, startup costs for deploying CVISN technologies and recurring, annual costs for operations and maintenance of CVISN technologies. The following sections provide the summary-level, bottom-line, return-on-investment data for both electronic credentialing and electronic screening, plus tabulated data for two hypothetical scenarios. Further details—including governing assumptions, cost and benefit factors, primary and secondary information sources, the original survey or interview guide, and a simplified return-on-investment calculator tool for carriers—can be found in FHWA (2007).

4.1 Costs and Benefits of Electronic Credentialing for Motor Carriers

Table 3 presents the return on investment (ROI) analysis results for a scenario using the mean values from the motor carrier companies providing data for the economic analysis. As a point of reference, the mean number of power units per motor carrier in the economic analysis was 7,451. Over the 10-year ROI time horizon, total net benefits per carrier are estimated at $3.6 million ($360.5 thousand average annual), resulting in an overall return on investment of 2,971:1 and a payback period of less than one month. The base year of the analysis in Table 3 is 2007, and all monetary values are presented in constant 2007 dollars. The declining values from year to year are the result of the application of a 7% discount rate used to achieve constant dollar expressions.

Most of the surveyed motor carriers indicated that both the startup and annual recurring costs associated with electronic credentialing were minimal. Startup costs totaled $275 per company, with the main contributors being system training and computer technical support. Annual recurring costs totaled $125, consisting again of needed training and technical support.

Table 3. Results of electronic credentialing ROI analysis, mean value scenario ($2007)¹

Year	Benefits				Costs			Net Benefits
	Labor	Materials and Postage	Increased Fleet Utilization	Total	Initial	Recurrent	Total
2007	$10,347	$2,508	$413,065	$425,920	$275	125	$400	$425,520
2008	9,958	2,414	397,546	409,918	-	117	117	409,801
2009	9,584	2,323	382,610	394,518	-	109	109	394,408
2010	9,224	2,236	368,236	379,696	-	102	102	379,594
2011	8,877	2,152	354,401	365,430	-	95	95	365,335
2012	8,544	2,071	341,086	351,701	-	89	89	351,612
2013	8,223	1,993	328,271	338,488	-	83	83	338,404
2014	7,914	1,919	315,938	325,771	-	78	78	325,693
2015	7,617	1,846	304,068	313,531	-	73	73	313,459
2016	7,330	1,777	292,644	301,752	-	68	68	301,684
Total	$87,618	$21,241	$3,497,866	$3,606,725	$275	$939	$1,214	$3,605,511

On the benefits side, compared with the conventional (legacy or paper-based) method of obtaining credentials, carriers adopting CVISN technology were assumed to save $4.13 per transaction in administrative labor costs, plus $1 per transaction in material and postage costs.

The most significant reported benefit of electronic credentialing is the time value of increased fleet utilization, meaning that a carrier is able to put a new truck into service more quickly when using electronic credentialing. Motor carriers stated that electronic credentials reduced the time required to place new trucks into service by 3 to 4 days, at a savings of $371 per truck ($106 * 3.5). The dollar values were based on financing costs of purchasing a new truck. If the truck is idle at the trucking terminal, then it is assumed not to be generating any revenue for the company. The share of the fleet required to wait for new credentials in a given year was estimated at 15 percent based on data presented in the CVISN Model Deployment Initiative (MDI) Final Report (FHWA 2002). The concept of the fleet utilization benefit was also based on the 2002 MDI report.

Evidence collected from motor carriers suggests that the level of savings associated with increased fleet utilization will differ from company to company. For example, if there are other parallel activities required to place a truck into service (painting, equipment installation, etc.) that can be performed while awaiting credentials, the actual difference in service time between the legacy (paper-based) system and electronic credentialing may be less. Based on contacts made with motor carriers and a credentialing broker in support of this study, additional conclusions regarding the increased fleet utilization estimate include the following:

• Motor carriers generally work diligently to ensure that trucks never sit idle for extended periods of time for any reason, including waiting for credentials
• Cost savings will vary by State based on the number and types of credentials required, and the time required for the State to process credentials and issue plates
• Temporary registrations are available in some States and can be distributed via fax or e-mail for use while the carrier waits for permanent plates to be delivered
• Larger carriers have generally streamlined the process of placing new trucks into service and would not experience long waiting periods; smaller carriers could find it more difficult to expedite the credentialing process and could wait several days for credentials
• One credentialing broker indicated that she could work with dealers to obtain copies of required paperwork with all relevant vehicle information, and obtain and send all permits and plates to the motor carrier before the new owner takes possession of the vehicle.

As shown in Table 3, however, even assuming that a company achieves no "fleet utilization benefit" from deploying CVISN electronic credentialing, the company would realize a significant return on its investment (approximately 90:1 over 10 years) from the labor and material/postage savings alone.

Using the same factors described above, Table 4 illustrates the savings from adopting electronic credentialing for a hypothetical carrier with 1,000 power units. As the table shows, there would be benefits for the year of about $57,000 per carrier or $57 per power unit. The added costs for the first year shown would only be about $275. Once again, the greatest part of the benefits results from increased utilization for newly credentialed trucks that would be put into service more quickly than would have been possible without CVISN.

Table 4. Benefit/cost analysis from adopting electronic credentialing through CVISN for hypothetical fleet with 1,000 power units^a

Startup Costs of Computer Upgrades/Training(per carrier)	Increased Utilization	Labor and Material/Postage Savings Per Transaction	Savings in First Year of Program
$275	$371 per truck for 15% of fleet (150 trucks) affected Total Utiliz. Benefit for Fleet: $55,650	$1.74 saving per power unit [($4.13 labor + $1.00 postage = $5.13 per transaction) *0.34 transactions per power unit = $1.74] Total Labor/Postage Benefit for Fleet: $1,744	Added Cost: ($275) or about $0.28/power unit First-Year Total Benefit: $57,394/fleet First-Year Net Benefit: $57,119 for fleet or $57/power unit

4.2 Costs and Benefits of Electronic Screening for Motor Carriers

Table 5 shows the return on investments (ROI) obtained by motor carriers that were surveyed for the 2007 business case report. The benefits estimates are based on the number of transponders in service for a motor carrier. Of the 18 carriers shown in the table, all but one have ROI ratios (investment compared to benefits) ranging from 6.1:1 to 15.9:1. The data in the table clearly show that the adoption of electronic screening by carriers results in far more financial benefits than costs and that, especially for larger carriers, utilizing CVISN electronic screening would pay significant financial dividends. Table 5 is sorted according to the number of power units equipped with transponders.

Table 5. Results of electronic screening ROI analysis

For-Hire or Private	Number of States Operated Within	Truckload, Less-than-Truckload (LTL)	Units Equipped with Transponders	Annnual Benefit	Startup Costs	Annual Recurrent Costs	Total Present Value 10-Year Benefits	Total Present Value 10-Year Costs	ROI Ratio	Payback Period
For-Hire	13	LTL	200	233,949	-	33,600	1,895,652	272,255	7.0	N/A
Both	11	Truckload	212	247,986	-	33,072	2,009,391	267,977	7.5	N/A
For-Hire	48	Truckload	475	$555,630	-	$91,200	$4,502,173	$738,978	6.1	N/A
For-Hire	48	Truckload	500	585,108	-	72,029	4,741,025	583,637	8.1	N/A
For-Hire	48	Truckload	1,000	1,169,747	657	780,000	9,478,258	6,320,862	1.5	<1 year
For-Hire	39	Not Known	1,103	1,289,646	109,148	145,530	10,449,780	1,288,352	8.1	<1 year
For-Hire	48	Truckload	1,400	1,637,646	-	184,800	13,269,562	1,497,402	8.9	N/A
For-Hire	50	Both	1,452	$1,698,473	$1,095	$192,448	$13,762,431	$1,560,468	8.8	<1 year
For-Hire	48	Truckload	2,500	2,924,368	-	330,000	23,695,646	2,673,933	8.9	N/A
For-Hire	48	Truckload	2,900	3,392,267	-	382,800	27,486,949	3,101,762	8.9	N/A
For-Hire	15	Both	3,300	3,860,166	-	396,000	31,278,253	3,208,719	9.7	N/A
For-Hire	48	Truckload	3,395	3,971,292	-	407,400	32,178,687	3,301,091	9.7	N/A
For-Hire	48	LTL	5,589	6,537,425	-	410,000	52,971,616	3,322,159	15.9	N/A
For-Hire	33	LTL	8,550	10,001,338	-	747,700	81,039,109	6,058,483	13.4	N/A
For-Hire	49	LTL	9,000	10,527,725	4,950,000	900,000	85,304,325	12,242,544	7.0	<1 year
For-Hire	48	Truckload	9,100	10,644,699	902,279	1,277,500	86,252,151	11,253,639	7.7	<1 year
For-Hire	50	Truckload	9,800	11,463,522	-	823,200	92,886,932	6,670,247	13.9	N/A
For-Hire	48	Both	25,500	29,828,553	-	2,754,000	241,695,588	22,315,184	10.8	N/A

Two anomalous values appear in the Startup Cost column of Table 5. One carrier representative indicated that it cost their company $550 per power unit to begin electronic screening, including the cost of a toll transponder system for use in the Midwest and Northeast. This same carrier also reported operating 9,000 power units, for a total startup cost of $4.9 million. A different carrier reported investing $900,000 in transponder hardware plus 80 hours of labor related to deploying transponders, plus 24 hours of labor related to starting membership in screening program(s), for a total startup cost of $902,279. No further details on these unusually high reported startup costs were obtained during the calls. The majority of carriers responding to this survey reported incurring low or no startup costs for electronic screening.

The results of the electronic credentialing analysis suggests that large operations are able to reduce the per-unit costs associated with recurrent membership fees and transponder maintenance, thus increasing their return on investment. Figure 3 demonstrates that motor carrier operations are achieving positive returns to scale as it relates to investment in electronic screening technology. Note that data from one company with 25,500 power units and an ROI ratio of 10.8 was excluded from Figure 3 due to its impact on the scale of the x-axis and the visual appearance of the figure.

Assumptions to compare the costs and benefits associated with electronic screening were made based on literature values and information collected from motor carriers in the business case interviews. The time saved per bypass was assumed to be between 3 and 5 minutes, and an average truck enrolled in a screening program was assumed to make 135 bypasses per year (PrePass 2007). The operating cost for a heavy truck was assumed to be $2.16 per minute, based on ATA data from 2003, inflated to 2007 dollars (Oregon Department of Transportation 2006). Recurring costs for belonging to e-screening program (typically charged pro rata based on the number of power units enrolled per carrier) are shown as reported by responding motor carrier companies.

Table 6 illustrates the savings from adopting electronic screening for a hypothetical carrier with 1,000 power units, assuming that 60% of the company's power units are equipped with a transponder. As the table shows, there would be operating cost savings for the year of about $1,171 per truck equipped with a transponder, or a total benefit of over $702,000 for the company operating 600 transponder-equipped trucks. The added costs would only be about $130 per year for each transponder-equipped truck, or $79,200 for the company. The net benefit in the first year (total benefits minus total costs) would be more than $620,000 for this hypothetical company.

Figure 3.  Relationship between the number of power units and ROI ratio

Table 6. Benefit/cost analysis from adopting electronic screening through CVISN for hypothetical fleet with 1,000 power units (60% enrollment in e-screening)^a

Costs of Transponder	Savings in Truck Waiting Time at Weigh Stations	Savings From Average Number of Bypasses	Savings Per Truck With a Transponder in Carrier Fleet	Total Annual Cost for Transponder Operation	Total Savings for Fleet: 60% of Trucks Equipped with Transponders
Initial: No Cost Annual: $132 per transponder	4 minutes * 135 Bypasses = 540 minutes per truck per year	135 * $8.68 per Bypass	$1,171	$79,200 with 60% of trucks equipped with transponders	Total Benefit $702,600 for fleet of 600 enrolled trucks Benefit minus annual costs $623,400

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