DEVELOPING FINANCIAL DECISION SUPPORT FOR HIGHWAY INFRASTRUCTURE SUSTAINABILITY
By Kai Chen Goh B.Sc Construction (Hons), M.Sc Construction Management (UTM)
A thesis submitted in partial fulfillment of the requirements for the degree of
Doctor of Philosophy
SCHOOL OF URBAN DEVELOPMENT FACULTY OF BUILT ENVIRONMENT AND ENGINEERING
QUEENSLAND UNIVERSITY OF TECHNOLOGY 2011
II
STATEMENT OF ORIGINAL AUTHORSHIP
DECLARATION
The work contained in this thesis has not been previously submitted for a degree or diploma at any other higher education institution. To the best of my knowledge and belief, the thesis contains no material previously published or written by another person except where due reference is made.
Signed : _____________________ Date
: _____________________
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ACKNOWLEDGEMENTS I wish to express my sincerest appreciation and gratitude to Professor Jay Yang for his wisdom, patients, calmness in my PhD journey. Without his persistent support, this thesis may never have been completed on time nor would I have survived it. Professor Jay Yang through his mentoring enabled me with passionate and self possessed that this journey was indeed possible to complete. My deepest appreciation also to Dr. Johnny Wong for his invaluable help in developing ideas, checking sources and for his great and precise attention to detail and for willingly sharing his expertise and in-depth knowledge. I wish to also thank my fellow PhD student colleagues Melissa Chan, Mei Yuan, Mei Li, Hu Yuan Luo and Riduan Yunus, who have helped to make this journey somewhat easier through their friendship, continuous encouragement, sharing of ideas and constructive feedback. Special thanks also to my first best mates in this journey Asrul Masrom, Tien Choon Toh, Anna Wiewiora, Zhengyu Yang and Soon Kam Lim for their support and friendship. I would also like to make special mention to those individuals and organisations that benevolently contribute their support, guidance, encouragement and contribution to this research project. My appreciation and thanks to all. Finally, I wish to acknowledge the support and encouragement received from my wife, Nyuk Sang Kiew, my brothers, my parents and friends throughout this course of study.
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ABSTRACT The development of highway infrastructure typically requires major capital input over a long period. This often causes serious financial constraints for investors. The push for sustainability has added new dimensions to the complexity in the evaluation of highway projects, particularly on the cost front. This makes the determination of long-term viability even more a precarious exercise. Life-cycle costing analysis (LCCA) is generally recognised as a valuable tool for the assessment of financial decisions on construction works. However to date, existing LCCA models are deficient in dealing with sustainability factors, particularly for infrastructure projects due to their inherent focus on the economic issues alone. This research probed into the major challenges of implementing sustainability in highway infrastructure development in terms of financial concerns and obligations. Using results of research through literature review, questionnaire survey of industry stakeholders and semi-structured interview of senior practitioners involved in highway infrastructure development, the research identified the relative importance of cost components relating to sustainability measures and on such basis, developed ways of improving existing LCCA models to incorporate sustainability commitments into long-term financial management. On such a platform, a decision support model incorporated Fuzzy Analytical Hierarchy Process and LCCA for the evaluation of the specific cost components most concerned by infrastructure stakeholders. Two real highway infrastructure projects in Australia were then used for testing, application and validation, before the decision support model was finalised. Improved industry understanding and tools such as the developed model will lead to positive sustainability deliverables while ensuring financial viability over the lifecycle of highway infrastructure projects.
Keywords: sustainability, highway, infrastructure, life-cycle costing analysis, decision support.
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TABLE OF CONTENTS STATEMENT OF ORIGINAL AUTHORSHIP ................................................... II ACKNOWLEDGEMENTS..................................................................................... III ABSTRACT .............................................................................................................. IV TABLE OF CONTENTS.......................................................................................... V LIST OF ABBREVIATIONS ................................................................................. XI DEFINITION OF TERMS .....................................................................................XII LIST OF FIGURES .............................................................................................. XIII LIST OF TABLES ................................................................................................. XV
CHAPTER 1:
INTRODUCTION .......................................................................... 1
1.1
Research Background .................................................................................... 1
1.2
Research Questions ....................................................................................... 4
1.3
Research Objectives ...................................................................................... 5
1.4
Significance of the Research ......................................................................... 6
1.5
Scope and Delimitation ................................................................................. 7
1.6
Research Framework ..................................................................................... 9
1.6.1
Stage 1 - Developing a preliminary model ............................................ 9
1.6.2
Stage 2 - Developing the survey .......................................................... 10
1.6.3
Stage 3 - Developing a decision support model ................................... 11
1.7
Thesis Organisation ..................................................................................... 14
1.8
Chapter Summary ........................................................................................ 15
CHAPTER 2: 2.1 2.2
LITERATURE REVIEW ............................................................. 17
Introduction ................................................................................................. 17 Sustainability and Transport ........................................................................ 17
2.2.1
Sustainable development principles and evolution .............................. 20
2.2.2
Highway infrastructure development in Australia ............................... 23
2.3
Long-Term Financial Prospects in Highway Development ........................ 25
2.3.1
Principle of engineering economics ..................................................... 25
2.3.1.1
Benefit cost analysis ..................................................................... 25
VI
2.3.1.2
Life-cycle costing analysis (LCCA) ............................................. 26
2.3.1.3
Differences between BCA and LCCA .......................................... 28
2.3.1.4
Decision support ........................................................................... 29
2.3.2
Life-cycle costing analysis and its application in highway infrastructure ………………………………………………………………………...30
2.3.2.1
Current LCCA models and programs in highway infrastructure .. 31
2.3.2.2 Limitations of existing LCCA studies in adopting sustainable measures …………………………………………………………………...36 2.3.3 Significance of incorporating sustainability-related cost components in LCCA ………………………………………………………………………...38 2.4
Cost Implications in Highway Infrastructure .............................................. 40
2.4.1.
2.5
Sustainability-related cost components in highway projects ............... 40
2.4.1.1
Agency category ........................................................................... 42
2.4.1.2
Social category .............................................................................. 45
2.4.1.3
Environmental category ................................................................ 47
Research Gap ............................................................................................... 51
2.5.1
Challenges to improve long-term financial decisions .......................... 51
2.5.2
Critical cost components in Australian highway investments ............. 52
2.6
Chapter Summary ........................................................................................ 53
CHAPTER 3:
RESEARCH METHODOLOGY AND DEVELOPMENT ......... 55
3.1
Introduction ................................................................................................. 55
3.2
Selection of Research Methods ................................................................... 56
3.2.1.
Survey................................................................................................... 58
3.2.2.
Case study ............................................................................................ 59
3.3
Research Process ......................................................................................... 61
3.3.1.
Literature review .................................................................................. 63
3.3.1.1.
Literature review purposes ............................................................ 63
3.3.1.2.
Literature review development ..................................................... 64
3.3.2.
Questionnaire ....................................................................................... 65
3.3.2.1.
Purposes of questionnaire ............................................................. 66
3.3.2.2.
Selection of questionnaire respondents ......................................... 67
3.3.2.3.
Questionnaire development .......................................................... 68
3.3.2.4.
Data analysis ................................................................................. 70
3.3.3.
Semi-structured interview .................................................................... 73
3.3.3.1.
Semi-structured interview purposes .............................................. 75
3.3.3.2.
Selection of interview respondents ............................................... 75
VII
3.3.3.3.
Interview development ................................................................. 76
3.3.3.4.
Data analysis ................................................................................. 78
3.3.4.
Model Development ............................................................................. 79
3.3.5.
Case Study............................................................................................ 81
3.3.5.1.
Case study purposes ...................................................................... 82
3.3.5.2.
Selection of case projects .............................................................. 82
3.3.5.3.
Case study development ............................................................... 84
3.3.5.4.
Data analysis ................................................................................. 86
3.4
Ethical Considerations ................................................................................. 87
3.5
Chapter Summary ........................................................................................ 87
CHAPTER 4:
COST IMPLICATIONS FOR HIGHWAY SUSTAINABILITY –
SURVEY STUDIES .................................................................................................. 89 4.1
Introduction ................................................................................................. 89
4.2
Profile of Respondents ................................................................................ 91
4.2.1
Respondents’ profiles - questionnaire survey ...................................... 91
4.2.2
Respondent’s profiles - semi-structured interview .............................. 94
4.3
Results and Findings ................................................................................... 95
4.3.1
Questionnaire survey results and findings ........................................... 95
4.3.1.1
Sustainability-related cost components: perspective of consultants …………………………………………………………………...96
4.3.1.2
Sustainability-related cost components: perspective of contractors …………………………………………………………………...98
4.3.1.3 Sustainability-related cost components: perspective of government agencies and local authorities ...................................................................... 100 4.3.1.4 studies
Integration of sustainability-related cost components in LCCA ………………………………………………………………….102
a.
Agency category .......................................................................................... 104
b.
Social category ............................................................................................. 105
c.
Environmental category ............................................................................... 106
4.3.2
Summary of the questionnaire survey results and suggestions .......... 107
4.3.3
Semi-structured interview results and findings .................................. 109
4.3.3.1.
Current industry practice of LCCA application .......................... 109
4.3.3.2.
Ways to quantify cost related to sustainable measures ............... 117
4.3.3.3. Challenges in integrating costs related to sustainable measures into LCCA practice ............................................................................................. 120 4.3.3.4.
Suggestions for enhancing sustainability in LCCA practice ...... 121
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4.3.4 4.4
Summary of semi-structured interview results and suggestions ........ 123
Chapter Summary ...................................................................................... 124
CHAPTER 5:
A DECISION SUPPORT MODEL FOR EVALUATING
HIGHWAY INVESTMENT .................................................................................... 127 5.1
Introduction ............................................................................................... 127
5.2
The Model Structure and Application ....................................................... 130
5.2.1.
The model structure and development: stage 1 .................................. 130
5.2.2.
The model structure and development: stage 2 .................................. 132
5.3
The Fuzzy Analytical Hierarchy Process .................................................. 133
5.3.1.
Fundamentals of Fuzzy AHP ............................................................. 135
5.3.2.
Fuzzy AHP assessment procedure ..................................................... 136
5.4
Life-Cycle Cost Analysis........................................................................... 144
5.4.1.
Life-cycle cost analysis in highway infrastructure ............................. 144
5.4.2.
LCCA calculation procedure .............................................................. 146
5.5
Final Decision Making Process ................................................................. 149
5.6
Sensitivity Analysis ................................................................................... 151
5.7
Chapter Summary ...................................................................................... 152
CHAPTER 6:
MODEL APPLICATION THROUGH CASE STUDIES .......... 155
6.1
Introduction ............................................................................................... 155
6.2
Selection of the Case Study Projects ......................................................... 157 6.2.1
Case study A: Wallaville bridge ..................................................... 157
6.2.2
Case study B: Northam bypass ....................................................... 159
6.3
Significance of the Case Projects .............................................................. 161
6.4
Model Application in Case Study A - Wallaville Bridge .......................... 162 6.4.1
Project alternatives ......................................................................... 162
6.4.2
Fuzzy AHP for qualitative indicators ............................................. 163
6.4.2.1
Evaluation of criteria weight ................................................................ 163
6.4.2.2
Evaluation of alternatives ..................................................................... 166
6.4.2.3
Final scores of alternatives ................................................................... 169
6.4.3
LCCA calculation for quantitative indicators ................................. 171
6.4.4
Final decision making..................................................................... 174
6.4.5
Sensitivity analysis ......................................................................... 175
6.4.5.1
Sensitivity analysis for Fuzzy AHP ...................................................... 175
IX 6.4.5.2
6.5
Sensitivity analysis for LCCA ............................................................. 176
Model Application in Case Study B - Northam Bypass ............................ 178 6.5.1
Project alternatives ......................................................................... 179
6.5.2
Fuzzy AHP for qualitative indicators ............................................. 180
6.5.2.1
Evaluation of criteria weight ................................................................ 180
6.5.2.2
Evaluation of alternatives..................................................................... 183
6.5.2.3
Final scores of alternatives ................................................................... 186
6.5.3
LCCA calculation for quantitative indicators................................. 187
6.5.4
Final decision making .................................................................... 190
6.5.5
Sensitivity analysis ......................................................................... 191
6.5.5.1
Sensitivity analysis for Fuzzy AHP ..................................................... 192
6.5.5.2
Sensitivity analysis for LCCA ............................................................. 193
6.6
Summary of Model Application ................................................................ 195
6.7
Validation of the Model ............................................................................ 196
6.8
Chapter Summary ...................................................................................... 197
CHAPTER 7:
FINDINGS AND MODEL FINALISATION ............................ 201
7.1
Introduction ............................................................................................... 201
7.2
Synthesising Phases 1 to 4 for Interpretation and Discussion ................... 202
7.3
Critical Sustainability-Related Cost Components ..................................... 203
7.3.1.
Agency dimension of sustainability ................................................... 204
7.3.2.
Social dimension of sustainability ..................................................... 205
7.3.3.
Environmental dimension of sustainability........................................ 205
7.4
Enhancement of LCCA for Sustainability Measures ................................ 206
7.4.1.
Industry practice of LCCA ................................................................. 208
7.4.2.
Challenges of incorporating sustainability into LCCA ...................... 210
7.5
Model Finalisation ..................................................................................... 212
7.6
Chapter Summary ...................................................................................... 217
CHAPTER 8:
CONCLUSION........................................................................... 219
8.1
Introduction ............................................................................................... 219
8.2
Review of Research Objectives and Development Processes ................... 219
8.3
Research Objectives and Conclusions ....................................................... 220
8.3.1.
Research objective 1 .......................................................................... 220
8.3.2.
Research objective 2 .......................................................................... 222
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8.3.3. 8.4
Research objective 3........................................................................... 223
Research Contributions.............................................................................. 224
8.4.1.
Contribution to academic knowledge ................................................. 224
8.4.2.
Contribution to the industry ............................................................... 225
8.5
Study Limitations ...................................................................................... 225
8.6
Recommendations for Future Research ..................................................... 226
8.7
Summary.................................................................................................... 227
REFERENCES ....................................................................................................... 229 APPENDIX A1: INVITATION LETTER-QUESTIONNAIRE ........................ 246 APPENDIX A2: SAMPLE OF QUESTIONNAIRE ........................................... 248 APPENDIX B1: INVITATION LETTER- SEMI-STRUCTURED INTERVIEW .................................................................................................................................. 255 APPENDIX B2: SAMPLE OF CONSENT FORM ............................................ 257 APPENDIX B3: SAMPLE OF INTERVIEW ..................................................... 258 APPENDIX C1: INVITATION LETTER- FUZZY AHP QUESTIONNAIRE .................................................................................................................................. 260 APPENDIX C2: SAMPLE OF FUZZY AHP QUESTIONNAIRE ................... 262 APPENDIX D: LIST OF PUBLICATIONS ........................................................ 266
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LIST OF ABBREVIATIONS Austroads
=
BCA BCR BTCE BTRE Cal B/C CCP-PLUS CCPTM DEA FHWA Fuzzy AHP GEH HDM-4 HDM-III ISOHDM IUCN LCCA LCCOST LCCP LCCPR MCDM PRLEAM QUT RTA UN US WCED WSM
= = = = = = = = = = = = = = = = = = = = = = = = = = =
Association of Australian and New Zealand road transport and traffic authorities Benefit Cost Analysis Benefit Cost Ratio Bureau of Transport and Communications Economics Bureau of Infrastructure, Transport and Regional Economics California Life-Cycle Benefit/ Cost Cities for Climate Protection, Australia Cities for Climate ProtectionTM Data envelopment analysis Federal Highway Administration Fuzzy Analytic Hierarchy Process Great Eastern Highway Highway Design and Maintenance Standards Model Version 4 Highway Design and Maintenance Standards Model Version III International Study of Highway Development and Management International Union for Conservation of Nature Life-cycle cost analysis Pavement Life Cycle Cost Analysis Package Life-cycle cost analysis program-Flexible Pavement Life-cycle cost analysis program-Rigid Pavement Multi-Criteria Decision-Making Pavement Rehabilitation Life-Cycle Economic Analysis Queensland University of Technology, Australia Road and Transport Authority, Australia United Nations United States World Commission on Environment and Development Weighted Sum Model
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DEFINITION OF TERMS For clearer understanding of the terms used in this research, the meanings are extrapolates as follows:
Sustainable development – Sustainable development refers to a pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for generations to come. Life-cycle costing analysis (LCCA) - LCCA involves the analysis of the costs of a highway infrastructure over its entire life span. Long-term financial management – Long-term financial management means a long term financial planning for entities providing services from infrastructure assets, especially long lived (> 10 years) assets to assist these entities in managing service delivery from infrastructure assets. Cost component – Cost component involves sustainability-related cost elements (quantifiable) and issues (qualitative), yet causing impacts to the environment, society and economics. Stakeholder – A stakeholder refers to a person, group, organisation, or system that affects or can be affected by an organisation's actions.
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LIST OF FIGURES Figure 1.1: Variances leading to a sustainability-based life-cycle cost analysis model ...................................................................................................................................... 4 Figure 1.2: Structured infrastructure investment review process (DTF 2011) ............ 8 Figure 1.3: Stage 1 - Developing a preliminary model .............................................. 10 Figure 1.4: Stage 2 - Surveys development ............................................................... 11 Figure 1.5: Stage 3 - Developing a decision support model ...................................... 12 Figure 1.6: Research plan chart .................................................................................. 13 Figure 2.1: Sustainability criteria for the transport sector (Basler and Partner 1998) 18 Figure 2.2: UK sustainable development indicators (Bickel et al. 2003) .................. 19 Figure 2.3: The three pillars of sustainable development (Koo 2007)....................... 21 Figure 2.4: Life-cycle costing procedure ................................................................... 27 Figure 2.5: Typical life cycle of a road asset (Rouse and Chiu 2008) ....................... 43 Figure 3.1: Spectrum of interview types (Fellows and Liu 2008) ............................. 57 Figure 3.2: Breadth vs. depth in ‘question-based’ studies (Fellows and Liu 2008)... 57 Figure 3.3: Research process ..................................................................................... 62 Figure 3.4: Questionnaire research flow chart (Statpac 1997) ................................... 66 Figure 3.5: Case study process ................................................................................... 85 Figure 4.1: Purpose of survey in overall research aim ............................................... 90 Figure 4.2: Categories of respondent in questionnaire survey ................................... 92 Figure 4.3: Respondents’ utilisation of LCCA in highway projects ........................ 110 Figure 4.4: Types of data utilised by respondents in highway treatments ............... 115 Figure 5.1: Integration of survey findings with model development ....................... 128 Figure 5.2: Development of model based on research objectives and questions ..... 129 Figure 5.3: Decision support model development process ...................................... 130 Figure 5.4: Proposed assessment methods for the decision support model ............. 133 Figure 5.5: Proposed application of the Fuzzy AHP ............................................... 134 Figure 5.6: Hierarchy map of sustainability-related cost component assessment ... 137 Figure 5.7: The linguistic scale of triangular numbers for relative importance ....... 138 Figure 5.8: The intersection between C 1 and C 2 ..................................................... 142 Figure 5.9: Timing of maintenance and rehabilitation ............................................. 144 Figure 5.10: Agency costs associated with construction activities .......................... 145 Figure 5.11: Social and environmental costs added to agency costs associated with construction activities............................................................................................... 146 Figure 6.1: Approach to model application and overall research aim ..................... 156 Figure 6.2: Wallaville Bridge in flood (BTRE 2007a) ............................................ 158 Figure 6.3: Tim Fischer Bridge (BTRE 2007a) ....................................................... 159 Figure 6.4: Northam Bypass (BTRE 2007b)............................................................ 161 Figure 6.5: Final decision making by WSM ............................................................ 175 Figure 6.6: Sensitivity analysis for Fuzzy AHP weight factor changes ................... 176 Figure 6.7: Sensitivity analysis for LCCA weight factor changes ........................... 178 Figure 6.8: Alternative alignment options of Northam Bypass (EPA 1993) ........... 179 Figure 6.9: Final decision making by WSM ............................................................ 191 Figure 6.10: Sensitivity analysis for Fuzzy AHP weight changes ........................... 193 Figure 6.11: Sensitivity analysis for LCCA weight factor changes ......................... 194 Figure 7.1: Critical sustainability-related cost components in Australian highway infrastructure projects............................................................................................... 204
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Figure 7.2: Platform for developing financial decision support model in highway infrastructure sustainability ...................................................................................... 213 Figure 7.3: The finalised financial decision support model for highway infrastructure sustainability............................................................................................................. 215
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LIST OF TABLES Table 2.1: Differences between BCA and LCCA ...................................................... 28 Table 2.2: Existing LCCA models and programs ...................................................... 33 Table 2.3: Agency impacts and costs in highway projects ........................................ 43 Table 2.4: Social impacts and costs in highway projects ........................................... 46 Table 2.5: Environmental impacts and costs in highway projects ............................. 48 Table 2.6: Sustainability-related cost components for highway infrastructure.......... 52 Table 3.1: Characteristics of questions ...................................................................... 65 Table 3.2: Stages and steps in model building (Richardson and Pugh, 1981) ........... 80 Table 3.3: Case projects’ fulfillment of selection criteria .......................................... 83 Table 4.1: Respondents’ roles in highway projects ................................................... 93 Table 4.2: Respondents’ construction industry experience ....................................... 93 Table 4.3: Consultants’ rating of sustainability-related cost components ................. 97 Table 4.4: Contractors’ rating of sustainability-related cost components.................. 99 Table 4.5: Government agencies and local authorities’ rating of sustainability-related cost components ....................................................................................................... 101 Table 4.6: Perceptions of ‘importance level’ of cost components related to sustainable measures by industry stakeholders ........................................................ 103 Table 4.7: Industry validated sustainability-related cost components in highway infrastructure ............................................................................................................ 108 Table 4.8: Questions to identify current industry practice of LCCA ....................... 110 Table 4.9: Relevant analysis period of LCCA ......................................................... 112 Table 4.10: Maintenance treatments of highway infrastructure............................... 113 Table 4.11: Ways to quantify cost related to sustainable measures ......................... 118 Table 4.12: Challenges to integrating costs related to sustainable measures into LCCA ....................................................................................................................... 120 Table 4.13: Stakeholders’ suggestions for enhancing sustainability in LCCA........ 122 Table 4.14: Comparison of the survey results with literature findings .................... 125 Table 5.1: Sustainability-related cost components for highway infrastructure........ 131 Table 5.2: Triangular fuzzy conversion scale .......................................................... 138 Table 5.3: Assessment approach of critical sustainability cost components ........... 143 Table 5.4: WSM calculation table for final decision making .................................. 150 Table 6.1: The fuzzy evaluation matrix with respect to the goal ............................. 165 Table 6.2: The relative importance of agency cost components .............................. 165 Table 6.3: The relative importance of social cost components ................................ 165 Table 6.4: The relative importance of environmental cost components .................. 165 Table 6.5: Composite priority weights for sustainability-related cost components evaluation criteria ..................................................................................................... 167 Table 6.6: Evaluation of the alternatives with respect to material costs .................. 167 Table 6.7: Evaluation of the alternatives with respect to plant and equipment costs .................................................................................................................................. 167 Table 6.8: Evaluation of the alternatives with respect to major maintenance costs 167 Table 6.9: Evaluation of the alternatives with respect to rehabilitation costs .......... 168 Table 6.10: Evaluation of the alternatives with respect to road accident- internal costs .................................................................................................................................. 168 Table 6.11: Evaluation of the alternatives with respect to road accident- economic value of damage ....................................................................................................... 168 Table 6.12: Evaluation of the alternatives with respect to hydrological impacts .... 168
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Table 6.13: Evaluation of the alternatives with respect to loss of wetland .............. 168 Table 6.14: Evaluation of the alternatives with respect to cost of barriers .............. 169 Table 6.15: Evaluation of the alternatives with respect to disposal of material costs .................................................................................................................................. 169 Table 6.16: Priority weights of the alternatives with respect to agency aspects ...... 169 Table 6.17: Priority weights of the alternatives with respect to social aspects ........ 170 Table 6.18: Priority weights of the alternatives with respect to environmental aspects .................................................................................................................................. 170 Table 6.19: Final scores of the alternatives .............................................................. 170 Table 6.20: Determination of activity timing ........................................................... 171 Table 6.21: Estimated expenditures to keep old bridge open .................................. 172 Table 6.22: Costs of agency and social category ..................................................... 173 Table 6.23: Computation of expenditure by years ................................................... 173 Table 6.24: Computation of life-cycle cost analysis ................................................ 173 Table 6.25: Summary of sustainability assessment results ...................................... 174 Table 6.26: Summary of normalised sustainability assessment result ..................... 174 Table 6.27: Weight factors for normalised sustainability assessment results and final prioritisation ............................................................................................................. 174 Table 6.28: Changes in prioritisation value by changing the Fuzzy AHP weight factors ....................................................................................................................... 176 Table 6.29: Changes in prioritisation value by changing the LCC weight factors .. 177 Table 6.30: The fuzzy evaluation matrix with respect to the goal ........................... 182 Table 6.31: The relative importance of agency cost components ............................ 182 Table 6.32: The relative importance of social cost components .............................. 182 Table 6.33: The relative importance of environmental cost components ................ 182 Table 6.34: Composite priority weights for sustainability-related cost components evaluation criteria ..................................................................................................... 183 Table 6.35: Evaluation of the alternatives with respect to material costs ................ 184 Table 6.36: Evaluation of the alternatives with respect to plant and equipment costs .................................................................................................................................. 184 Table 6.37: Evaluation of the alternatives with respect to major maintenance costs .................................................................................................................................. 184 Table 6.38: Evaluation of the alternatives with respect to rehabilitation costs ........ 184 Table 6.39: Evaluation of the alternatives with respect to road accident- internal costs .................................................................................................................................. 184 Table 6.40: Evaluation of the alternatives with respect to road accident- economic value of damage ....................................................................................................... 185 Table 6.41: Evaluation of the alternatives with respect to hydrological impacts .... 185 Table 6.42: Evaluation of the alternatives with respect to loss of wetland .............. 185 Table 6.43: Evaluation of the alternatives with respect to cost of barrier ................ 185 Table 6.44: Evaluation of the alternatives with respect to disposal of material costs .................................................................................................................................. 185 Table 6.45: Priority weights of the alternatives with respect to agency aspects ...... 186 Table 6.46: Priority weights of the alternatives with respect to social aspects ........ 186 Table 6.47: Priority weights of the alternatives with respect to environmental aspects .................................................................................................................................. 186 Table 6.48: Final scores of the alternatives .............................................................. 187 Table 6.49: Determination of activity timing ........................................................... 188 Table 6.50: Costs of agency and social category ..................................................... 189 Table 6.51: Computation of expenditure by years ................................................... 189
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Table 6.52: Computation of life-cycle costs ............................................................ 189 Table 6.53: Summary of weighted sum assessment results ..................................... 190 Table 6.54: Summary of normalised weighted sum assessment results .................. 191 Table 6.55: Weight factors for normalised weighted sum assessment results and final prioritisation ............................................................................................................. 191 Table 6.56: Changes in prioritisation value by changing the Fuzzy AHP weight factors ....................................................................................................................... 192 Table 6.57: Changes in prioritisation value by changing the Fuzzy AHP weight factors ....................................................................................................................... 194 Table 6.58: Comparison of the case study results with literature and survey findings .................................................................................................................................. 199
Chapter 1: Introduction
CHAPTER 1: INTRODUCTION
1.1
Research Background
Sustainable development has gained prominence over the last few decades across various sectors including the construction industry (WCED 1987). In the construction industry, the practice of sustainability has faced ongoing opportunities and challenges in this period due to the globalisation of the business environment and climate change, new materials and technologies, information and communication technologies, and governance and regulation (Hampson and Brandon 2004). For the business sector to embrace sustainable development, there is a need to create increasing economic values while using natural resources sustainably and making a broader contribution to the community’s social aims and objectives (Bourdeau 1999). This change extends beyond the traditional concern of business, which is about profitability and increasing shareholder value. Consequently, there is also a great of need for tools to enable business to monitor, manage and report performance. Sustainable development is about making societal investments that are sensitive to the natural environment and at the same time financially viable in the long term. In the construction industry, the development of a project from the client perspective needs to be consistent with the benefits produced. Over a facility lifetime, there are many opportunities to minimise the impacts of operations on natural environment. Therefore, it is important to examine the sustainable approaches in its design, construction, operation, maintenance and replacement or retirement. This study aims to investigate the financial implication of sustainability measures in infrastructure development, with a particular focus on highway construction. Infrastructure development plays an important role in supporting society, the economy and the environment. In Australia, the distribution of essential public
1
2
Chapter 1: Introduction
services for maintaining human life, especially in dense urban environments, is heavily dependent on infrastructure systems. According to the Northern Economic Triangle Infrastructure Plan 2007-2012, the Queensland State Government will invest over 82 billion Australian dollars in the next 20 years, to fund transportation, gas delivery and water recycling projects. Some of these projects are quite large, requiring over a billion dollars each, and will make up almost 20 billion dollars of the $82 billion as a whole (Queensland Government 2007). Such significant investment warrants an examination of how infrastructure can become more sustainable. For this purpose, numerous researchers and industry professionals have put great effort into the development of criteria, tools, concepts and assessment systems to improve infrastructure sustainability (Dasgupta and Tam 2005; Sahely, Kennedy and Adams 2005; Ugwu et al. 2006a, 2006b). Recently, a significant number of research projects were initiated to investigate sustainability issues and the built environment in general. At the broader international level, the issues discussed include environment and industrial ecology, group decision-making (Seager and Theis 2004; Seager 2004), sustainability assessment (Ugwu and Haupt 2007), multi-attribute decision analysis (Rogers, Seager and Gardner 2004; Linkov et al. 2005; Anex and Focht 2002) and environmental management systems (Gluch and Baumann 2004). Researchers have investigated social dimensions and partnership (Fisher 2003) and risk analysis in environmental decision-making (Rogers, Seager and Gardner 2004; Linkov et al. 2005). Although the application of sustainability in built assets is beneficial, it often involves major capital investment. Costs always become the impeding factor for stakeholders when they contemplate sustainability initiatives. Thus, it is crucial to balance the financial benefits with sustainability deliverables in highway infrastructure development. The determination of costs is an important aspect of decision-making and an essential part of the development process. Life-cycle cost analysis (LCCA) is an economic assessment approach that can predict the costs of a facility throughout its life span. It takes into account the time, the value of money and reduces the flow of running costs over a period to a single current value or present worth. Life-cycle costing is a management tool to be used periodically
Chapter 1: Introduction
throughout the economic life of the asset. It is based on the different options available to determine the alternative with the lowest costs. According to List (2007), life-cycle cost analysis helps to ensure that these objectives are achieved. Using LCCA, decision-makers can evaluate competing initiatives and identify the most sustainable growth path for common infrastructure. LCCA make it possible to deal with the challenges of competing needs in selecting relevant allocations to spend on health care, environmental impact mitigation, national defense, transportation, and a wealth of other programs. Most of research on life-cycle costing methods on buildings and infrastructure focus on the economics of a construction project (Aye et al. 2000; List 2007). Little attention has been paid to the application of the life-cycle costing methods in evaluating the economic aspects of sustainability in construction projects (List 2007; Madanu, Li and Abbas 2009; Swaffield and McDonald 2008). LCCA can become a useful approach to managing the financial aspects of the asset while emphasising sustainability in its service life. To achieve such a balance, the construction industry needs to predict financial, social and environmental costs and benefits in the longterm. Hence, ideally, the principles of sustainability should be integrated into the LCCA concept. This is, however, complicated by the difficulties of measuring cost components related to sustainability and the inconsistencies in measurement approaches. Previous studies have shown unclear boundaries and ambiguities in identifying sustainability costs and impacts of highway development (Wilde, Waalkes and Harrison 2001; List 2007; Kendall, Keoleian and Helfand 2008; Zhang, Keoleian and Lepech 2008). Understandably, existing LCCA approaches tend to omit social and environmental costs given that such costs are usually difficult to measure and the values are often disputed. Worse still, these approaches also show a large degree of variance in the estimation methods, which has resulted in a lack of sustainable measures in current LCCA. Figure 1.1 illustrates the variances in traditional LCCA estimation methods, pointing to the need for a sustainability-based LCCA model.
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Chapter 1: Introduction
Inconsistent estimation methods in environmental and social costs calculation Unclear boundaries in considering sustainability impacts
Traditional LCCA model
Sustainability -based LCCA model
Research Gap
Difficult to quantify sustainability related cost components Ambiguity in identifying relevant costs for LCCA in highway projects
Figure 1.1: Variances leading to a sustainability-based life-cycle cost analysis model
This phenomenon calls for a new decision support model capable of dealing with sustainability-related
cost
components
and
assessing
long-term
financial
implications. Highway stakeholders need to appreciate such a level of decision support and act upon sustainability challenges as well as opportunities.
1.2
Research Questions
Based on the background and impetus of the research, the following questions are posed: RQ 1. What are the sustainability measures that have cost implications for highway projects? It has been argued that the growing problems of monetary turnover among highway infrastructure investors have become the main hindrance to pursuing sustainability. To achieve long-term financial viability for highway projects, it is essential to understand the development of life-cycle cost analysis and how this relates to the principle of sustainability. Identification of sustainability-related cost components in a highway project can help to promote critical thinking to fill the gap as shown above in Figure 1.1.
Chapter 1: Introduction
RQ 2. What are the specific cost components relating to sustainability measures about which highway project stakeholders feel most concerned? It is recognised that the complex nature of sustainability and highway infrastructure development often causes challenges in the pursuit of long-term financial viability. To understand this complex nature, it is important to first understand current highway industry practice and the development of life-cycle cost analysis. Suitable actions are needed to cope with these challenges. Identification of cost components related to sustainable measures provides the basis to assess tangible cost components in long-term financial decisions at the project level. In this way also, the understanding of the sustainability foci and the realisation in long-term financial management for the highway project can be enhanced. RQ 3. How can long-term financial viability of sustainability measures in highway projects be assessed? To facilitate a smooth and practical implementation of sustainability objectives at the project level, the critical cost components need to be thoroughly dealt with concerning real-life projects. The solutions to measure these components provide project stakeholders with concrete actions they can apply in their efforts to pursue and enhance the sustainability deliverables and financial practicality in highway infrastructure projects.
1.3
Research Objectives
The aim of this research is to develop a decision support model for evaluating longterm financial decisions relating to sustainability for highway projects. To achieve the research aim, the three questions presented in Section 1.2 need to be answered by the following objectives: 1. To understand the cost implications of pursuing sustainability in highway projects. This involves: •
Understanding global initiatives on sustainable infrastructure development,
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Chapter 1: Introduction
•
Understanding the context of highway infrastructure development in Australia,
•
Reviewing the current LCCA model and programs on highway infrastructure, and
•
Identifying the sustainability-related cost components in highway infrastructure projects.
2. To identify the critical cost components related to sustainable measures in highway infrastructure investments. This involves: •
Exploring the different perceptions and expectations of various stakeholders regardless of the current practice of life-cycle cost analysis in Australian highway infrastructure,
•
Identifying the cost components that are significant in highway infrastructure investments, and
•
Integrating the expectations of the various stakeholders that are suitable for long-term financial management.
3. To develop a decision support model for the evaluation of long-term financial decisions regarding sustainability for highway projects. This involves: •
Compiling the industry verified cost components into existing LCCA models for further development,
•
Developing financial decision support model for highway infrastructure sustainability, and
•
Testing and evaluating the decision support model based on the real-life projects.
1.4
Significance of the Research
As highway infrastructure projects involve large resources and mechanisms, financial stress is a significant challenge for investors. The concept of sustainability is gaining popularity in the construction industry and this means achieving sustainability not only on environmental and social scales, but also through economic
Chapter 1: Introduction
responsibility. While the sustainability concept is being emphasised in highway infrastructure, effective financial management is crucial as highway funding at all levels of government continues to fall short of infrastructure needs. As a result, investors’ decisions based on experience are not performing as well, as promised while managers are under great obligation to optimise society investments as well as sustainability deliverables at the project level. This study seeks to add to the existing body of knowledge by filling the gap between sustainable development and long-term financial management in the context of highway infrastructure. The data collected is an asset to knowledge in this area. The research findings serve as the guidelines to encourage sustainability and long-term financial management strategies for stakeholders. This result may directly or indirectly contribute to measurable benefits in the form of cost efficiency, better product quality and utility. This study also seeks to develop a decision support model for evaluating long-term financial management in Australian highway infrastructure. The expected model aims to serve as a decision-making tool to aid in highway infrastructure investments. It is also anticipated that the model may assist the stakeholders through increased understanding of the importance of sustainability concepts and long-term financial management in highway infrastructure. This understanding can lead to improve competitiveness in construction markets.
1.5
Scope and Delimitation
This study was delimited to the development of a decision support model aimed at improving long-term financial decisions in highway investment. “Delimitations” are within the control of the researcher. The identified delimitations are discussed as follows: •
The attention of this study is directed at public-sector evaluation in general, and more especially with respect to highway infrastructure. The data are collected from industry stakeholders involved in highway infrastructure projects. The result could be generalised for the highway infrastructure
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Chapter 1: Introduction
industry, but some of the identified factors may vary and not be relevant for other infrastructures. Further improvements are necessary for application on specific types of infrastructure. •
Research data was collected from the Australian highway infrastructure industry, and the results are applicable to Australia only.
•
This study is focused on the highway investment decisions in a financial perspective. Due to the infrastructure investment involved several stages of reviewing, this study is concentrating on the business case and budget committee consideration (Point 3 and 4) as shown in Figure 1.2. The highway investment decisions need to appropriately meet the needs of the community, have been appropriately planned and are based on reliable cost estimates.
Financial Implication Point 3 Point 4
Point 1
Point 2
Investment Concept Outline
Strategic Assessment and Option Analysis
Reason for project proposal
Benefits/ outcomes to be achieved
Relationship to government’s policy priorities
Business Case
Project Management
Delivery Alternatives
Budget Committee Consideration
Risk
External conditions and critical success
Point 5
Point 6
Interim Project Review
Post Implementation review
Project proposal cost
Market research
Timeline
Stakeholder analysis
Figure 1.2: Structured infrastructure investment review process (DTF 2011)
•
The strategic assessment and options analysis as shown in Figure 1.2 includes several criteria such as risk and sustainability benefits are part of key issues in strategic assessment. Even though both issues are crucial in considering project investment decisions, this study focuses purely on the financial implication for highway infrastructure sustainability. This study aims to provide the decision makers with a systematic project proposal and identify the preferred selection for highway investment decisions.
Chapter 1: Introduction
1.6
Research Framework
A research framework is a systematic structure that helps to coordinate a research project and ensures the efficient use of resources and to guide the researcher in the use of suitable research methods through logical stages. It shows a broad picture to the researchers to help to refine a clear connection between all the stages (King, Keohane and Verba 1994). The probability of success in a research project is greatly enhanced when the “beginning” is correctly defined as an accurate statement of goals and justification. Having accomplished this, it is easier to identify and organise the sequential steps necessary for writing a research framework and then successfully executing a research project. This procedure creates a greater understanding of problems or hypotheses, and makes practical applications through theories, questioning and reasoning to achieve the research objectives, with the hope to produce some new knowledge. For the purpose of this study, the research framework was based on three stages to answer the research objectives. Each of the stages is described in the following subsections.
1.6.1 Stage 1 - Developing a preliminary model This stage involves a literature review to explore the scope and issues in sustainability-related cost components in highway construction. A preliminary model is developed according to the sustainability-related cost components identified through previous research and Australian project reports. Imperative aspects of the cost components are identified and tabulated according to their significance before incorporating these into the questionnaire for industry verification.
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Chapter 1: Introduction
A summary of the Stage 1 is shown in Figure 1.3.
STAGE 1 Preliminary Model Reviewing the Literature
OBJECTIVE 1
Defining the Topic
To understand the costs implication of pursuing sustainability in highway projects
Identify Source of Information Keeping Records Reading and Taking Notes
Figure 1.3: Stage 1 - Developing a preliminary model
1.6.2 Stage 2 - Developing the survey The focus of this research is on the stakeholders in highway infrastructure as the primary respondents in of the surveys. Questionnaire surveys and semi-structured interviews are conducted with the industry stakeholders. Questionnaire surveys are administered to identify the cost components related to sustainable measures that are significant in highway infrastructure investments. Semi-structured interviews are conducted to have a better understanding of current highway industry practice in long-term financial management. Both methods reveal the facts for the second objective, which is to identify the critical cost components related to sustainable measures in highway infrastructure investments. A summary of Stage 2 is shown in Figure 1.4.
Chapter 1: Introduction
STAGE 2 Surveys Development Questionnaires Define the objective of the survey Determine the Sampling Group Writing the Questionnaire Administering the Questionnaire Interpretation of the Result
OBJECTIVE 2 To identify the critical cost components related to sustainable measures in highway infrastructure investments.
Semi-structured Interviews Face-to-face Telephone
Figure 1.4: Stage 2 - Surveys development
1.6.3 Stage 3 - Developing a decision support model Finally, the decision support model is developed to evaluate the long-term financial decision for highway projects by matching methods namely the Fuzzy Analytical Hierarchy Process (Fuzzy AHP) and life-cycle cost analysis. The case study is undertaken to apply and test the developed model in real-life projects. Further analysis and synthesis are applied to validate and prove the model in evaluating and comparing the highway project alternatives based on the sustainability indicators. A summary of Stage 3 is shown in Figure 1.5.
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Chapter 1: Introduction
STAGE 3 Matching Methods
Decision Support Model Fuzzy Analytical Hierarchy Process (Fuzzy AHP)
Life-Cycle Cost Analysis (LCCA)
Case Study
OBJECTIVE 3
To develop a decision support model for the evaluation of long-term financial decision for highway projects. Figure 1.5: Stage 3 - Developing a decision support model
Generally, a research framework follows certain structural stages and processes. Each stage represents different methodologies to achieve the research objectives. In this research, all possible methods and strategies were carefully considered before choosing the most appropriate one. The quantitative and qualitative data is processed and analysed using computer-assisted tools to derive meaningful results. The implementation of the key research methodologies assists in defining appropriate processes to answer the research questions as well as the aim. The research framework shows the overall research design procedure, and is illustrated in Figure 1.6.
Literature Review
Chapter 1: Introduction
Literature Review
Consultation with academics
Research Problems
Research Objectives
Research Question
Hypotheses Statements
Methodological Approach
Quantitative Method
Quantitative Method
Literature Review & Preliminary Model Development •
Data Collection Analysis
•
Stage 1
Refine traditional life-cycle cost analysis model. Identify sustainability-related cost components
Survey
Stage 2
Industrial Feedback
• Questionnaire-based survey based on the literature review and preliminary model building • Identify the cost components in LCCA that emphasise sustainability • Semi-structured interviews undertaken to identify current industry practice of LCCA in highway infrastructure
Model Development • Develop decision support model that emphasise the sustainability context.
Stage 3
Case Study
• Apply and test the developed model in real-life projects • Evaluate and validate the model
Industrial Feedback
Result
Research Analysis and Findings
Conclusions, Recommendations and Further Studies
Figure 1.6: Research plan chart
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Chapter 1: Introduction
1.7
Thesis Organisation
This dissertation consists of nine chapters. A brief summary of each is outlined as follows. Chapter 1 comprises the introductory section that develops the direction of this investigation. It also states the research background, problems and objectives; and provides a brief discussion of the methodology and the thesis organisation. Chapter 2 summarises the current state of knowledge by addressing the relevant literature. Areas covered in this chapter include sustainable development principles and the evolution of highway infrastructure development in Australia. The literature review also covers the long-term financial management in highway development which includes the principles of long-term financial management, application of LCCA in highway projects, development of the LCCA models and programs, and the limitation of existing LCCA studies regarding sustainability. Literature on the responses to the sustainability challenge and cost implication in highway infrastructure is also surveyed. Overall, this chapter identifies the research gap, which justifies the need for this study. Chapter 3 describes the research methodology in detail including: the research methodology; data collection methods (namely questionnaire, interview, model development and case studies); research information; selection of participants and case projects; research instrumentation; data analysis and validation of results; and, finally, guideline formulation. Chapter 4 describes the data analysis and results of the questionnaire and semistructured interview. Questionnaire feedback is presented and the results tabulated in order to answer the research questions. Sustainability-related cost components are identified and conclusions are drawn. The data analysis and findings of the interview results illustrate the understanding on the current industry practise of long-term financial management in highway infrastructure. In addition, potential issues hindering the integration of sustainability into LCCA are identified. Their conceptual solutions are also recognised.
Chapter 1: Introduction
Chapter 5 discusses the development of a decision support model to aid stakeholders in highway investment. This section explains the development of the model by using one of the multi-criteria decision support approaches, Fuzzy analytical hierarchy process (Fuzzy AHP) and integration with the traditional LCCA concept. The model will then be tested and evaluated by industry stakeholders in real-life highway infrastructure projects. Chapter 6 introduces the case projects, their significance to the research, and the profile of interviewees, before case studies are undertaken to demonstrate the model application and justify the specific cost components in long-term financial management towards sustainable highway infrastructure. Chapter 7 discusses the results of the questionnaire and the interview. Subsequently, based on the case studies, the ultimate research findings are presented in the form of a model. Chapter 8 reviews the research objectives and development processes; and offers conclusions with regard to the research outcomes based on the respective research questions, the contributions to the body of knowledge and its implications for both the research community and the highway infrastructure industry. Finally, recommendations for future research are proposed.
1.8
Chapter Summary
This chapter lays the foundation for the thesis. It first introduces the research background and points to the current crux of the issue in sustainability and long-term financial management in highway infrastructure development before presenting the research problems and its objectives. Next, the research significance is identified before the research scope and delimitation are drawn. Finally, the research framework is briefly discussed, and the thesis organisation is also outlined. On this basis, the study proceeds with a detailed description of the research and development processes.
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Chapter 2: Literature Review
CHAPTER 2: LITERATURE REVIEW
2.1 Introduction This chapter presents the current state of knowledge by reviewing the literature relevant to the research objectives set out in Section 1.3. Apart from establishing the depth and breadth of the existing body of knowledge in the area of sustainability and highway infrastructure development, the literature review serves to understand the cost implications of pursuing sustainability in highway projects, thus paving the way for questionnaires and interviews in a subsequent stage. To begin with, the following sections present the sustainable development principles before discussing the dynamics and application of sustainability in highway infrastructure development generally. This is followed with an overview of the current Australian construction industry and highway infrastructure practice. Longterm financial management in highway infrastructure development is highlighted. Principle of long-term financial management in highway development and the application of life-cycle cost analysis (LCCA) in highway projects are specifically discussed. A thorough review of current life-cycle cost analysis models and programs in highway development, the limitation of existing LCCA studies in adopting sustainability and the types of cost components related to sustainability measures in the project was undertaken. Premised on these discussions, the research gap in this research is identified, which leads to the formation of the research questions.
2.2 Sustainability and Transport There is an increasing demand for transport and mobility in our society. At the same time, a desire for a clean environment, preservation of nature and concern for the welfare of future generations is also progressively salient. Policymakers must
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accommodate these conflicting desires in order to balance the positive and negative impacts of transport infrastructure. Several research projects have been carried out to investigate a variety of topics related to sustainability and transport. Jonsson (2008) implemented an appraisal framework in the transportation system where the main elements of sustainability are taken into account. In Jonsson’s study, an appraisal framework was developed to analyse and measure the achievement of sustainability in the transport sector. Gudmundsson (1999) found that sustainability indicators are “selected, targeted, and compressed variables that reflect public concerns and are of use to decision-makers”. These indicators are based on a selection of literature on social, environmental, health and sustainability factors. A scan of the literature by Basler and Partner (1998) shows that current research is focusing on the sustainability indicators for the transport sector based on the three aspects of sustainability: economy, ecology and society. These emphases in current research are illustrated in Figure 2.1.
Natural habitats & landscapes
Climate Ecology Ozone layer
Air pollution Resources
Social costs
Noise
Economy
Society
Settlements/ areas
Individuality Price Participation Safety/ security
Solidarity
Figure 2.1: Sustainability criteria for the transport sector (Basler and Partner 1998)
Chapter 2: Literature Review
Furthermore, a set of transport indicators developed by Bickel et al. (2003) provides an overview of key sustainable development issues at the UK level as shown in Figure 2.2.
A SUSTAINABLE ECONOMY - Social investment as a percentage of GDP - Consumer expenditure - Energy efficiency of road passenger travel - Average fuel consumption of new cars - Sustainable tourism - Leisure trips by mode of transport - Overseas travel - Freight transport by mode - Heavy goods vehicle mileage intensity BUILDING SUSTAINABLE COMMUNITIES - Road traffic (headline) - Passenger travel by mode - How children get to school - Average journey length by purpose - Traffic congestion - Distance travelled relative to income - People finding access difficult - Access to services in rural areas - Access for disabled people - New retail floor space in town centres and out of town - Noise levels
MANAGING THE ENVIRONMENT AND RESOURCES - Carbon dioxide emissions by end user • Transport • Non-transport - Concentrations of selected air pollutants • NO2, SO2, CC, Particulates • Ozone - Emissions of selected air pollutants • CO • NOx • Particulates - Sulphur dioxide and nitrogen oxides emissions SENDING THE RIGHT SIGNALS - Prices of key resources fuel • Petrol/diesel • Industrial/domestic - Real changes in the cost of transport - Public understanding and awareness Individual action for sustainable development
Figure 2.2: UK sustainable development indicators (Bickel et al. 2003)
The International Council for Local Environmental Initiatives - Australia/New Zealand has collaborated with the Australian Greenhouse Office and the Victorian Health Promotion Foundation to deliver a resource package of tools, case studies and financial assistance to local governments that are Cities for Climate Protection™ (CCP™) participants around Australia through the Sustainable Transport initiative. The aim of the initiative is to accelerate the implementation of sustainable transport systems and to demonstrate the strong and multiple benefits that arise from implementing these actions (CCP-PLUS 2005). These indicators show that sustainability plays an important role in the development of a transport project. In the following sub-sections, the evolution of sustainable development principles and the practice of highway infrastructure development in Australia are introduced, before
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integrating both to set the scene to show the importance of sustainability in highway infrastructure development.
2.2.1 Sustainable development principles and evolution In the construction context, a definition of sustainability is suggested in the following exposition: The built environment provides a synthesis of environmental, economic and social issues. It provides shelter for the individual, physical infrastructure for communities and is a significant part of the economy. Its design sets the pattern for resource consumption over its relatively long lifetime. (Prasad and Hall 2004) Such an approach relates to the concept of sustainability to the concept of sustainable development. These two terms are often used interchangeably, and it is worthwhile to clarify the relationship of these two terms. “Sustainable development is defined as “a development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED 1987). According to this definition from the World Commission on Environment and Development, the underlying philosophy of sustainable development is restraining the use of natural resources and materials to keep enough for future generations to fulfill their own ambitions of living standards. In fact, the main concerns of the contemporary construction industry are ecological impact, economic development, and societal equity when considering sustainable development. Even though this definition leaves much to argue about, it is the basis for most work on sustainable development. Koo et al. (2007) demonstrate the general concept of sustainable development in three major aspects, namely, economic, environmental, and social aspects. These aspects need to be considered, incorporated, and improved to achieve a desired level of sustainable development. These aspects are illustrated as the three pillars of sustainable development in Figure 2.3.
Chapter 2: Literature Review
FUTURE/ PRESENT GENERATION
ENHANCEMENT OF SUSTAINABILITY ENHANCEMENT OF SUSTAINABILITY BY CONSIDERING THREE PILARS BY CONSIDERING THREE PILARS
SOCIETY
ENVIRONMENT
ECONOMY • • •
DEMANDS ON PUBLIC SERVICE LIMITS OF RESOURCES QUALITY OF HUMAN ENVIRONMENT, ETC…
Figure 2.3: The three pillars of sustainable development (Koo 2007)
On the other hand, the built environment represents one of the main supports (infrastructure, buildings) of economic development, and its construction has significant impacts on resources (land, materials, energy, water, human and social capital) and on the living and working environment. Hence, the current established concept of sustainable development gives rise to many issues regarding the physical resources required for human existence and overall quality of life for both present and future generations. A comprehensive plan of action, including sustainable development in the construction area, is set out in Agenda 21, which was an outcome of the 1992 United Nations Conference on Environment and Development. The Johannesburg Plan of Implementation, agreed at the Earth Summit 2002, affirmed UN commitment to ‘full implementation’ of Agenda 21. It functions as a fundamental guideline to define sustainability in many areas, including the construction industry. To appropriately define sustainability in the construction industry, the term `sustainable construction’ was proposed to describe the responsibility of the construction industry in attaining sustainability. Kibert (1994) explained that a major
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objective of the First International Conference on Sustainable Construction (in the United States) was to assess progress in a new discipline that might be called “sustainable construction” or “green construction”. As the conference convener, Kibert proposed that sustainable construction means “creating a healthy built environment using resource-efficient, ecologically based principles”. This very broad definition is a starting point to build a more concrete definition of the concept of sustainable construction and begin to illustrate the stakes and issues of sustainable development that relate to the construction sector. For this purpose, an International Council for Innovation and Research in Building and Construction project was launched in 1995 (Bourdeau 1999). It is inevitable that the term “sustainable construction” will initiate a number of semantic problems. When one considers that the International Union for Conservation of Nature described a sustainable activity as one which can continue forever, it is clear that a construction project cannot satisfy this criterion of sustainable activities. To compound the problem, the term `sustainable construction’ is generally used to describe a process which starts well before construction per se (in the planning and design stages) and continues after the construction team has left the site. Wyatt (1994) has deemed sustainable construction to include `cradle to grave’ appraisal, which includes managing the serviceability of a building during its lifetime and eventual deconstruction and recycling of resources to reduce the waste stream usually associated with demolition. Miyatake (1996) suggests that everybody has to appreciate that to achieve sustainable construction, the industry must change the processes of creating the built environment. This means that the infrastructure industry has to change the way in which all the construction activities are undertaken. They can act to realise the sustainable construction by creating built environment, restoring damaged and polluted environments, and improving arid environments. With this idea, it increases the industry understanding of the sustainability concepts throughout the lifetime of a construction project.
Chapter 2: Literature Review
2.2.2 Highway infrastructure development in Australia Although the Australian federal government has been committed to boosting the economy through national infrastructure projects, sustainability challenges are being taken into account. Environmental and social sustainability is a matter of responsibility and operational practice for both industry stakeholders and governments. Australian state and federal governments have set up various plans to accelerate road infrastructure improvement such as the South East Queensland Infrastructure Plan and Program by the Queensland Government, and the 2005 Strategic Infrastructure Plan for South Australia (BTCE 2009). Australia’s continuing prosperity is contingent upon appropriate investment in essential community infrastructure (Laird and Bachels 2001). This includes not just the new infrastructure development to meet the nation’s growth needs, but significantly, the maintenance and renewal of existing infrastructure to ensure it continues to provide optimum service delivery at minimal life-cycle cost. Highway infrastructure is typically long lived but is expensive to build (Surahyo and El-Diraby 2009; Li and Madanu 2009; Gerbrandt and Berthelot 2007). Unless managed and maintained, appropriately renewed, replaced and enhanced, it fails to deliver expected levels of service and economic benefit. It is now widely recognised that appropriate strategic asset management is fundamental to meeting community expectations for the delivery of services at an optimal life-cycle cost (Gerbrandt and Berthelot 2007; Winston and Langer 2006; Ugwu et al. 2005; Alam, Timothy and Sissel 2005). Over recent years, there has been a growing problem of financial stress confronting highway infrastructure service providers and indeed the financial sustainability of industry stakeholders. A significant number of providers have been deemed to be “not financially sustainable” in the long term when the declining condition of highway infrastructure is brought to account. This is made worse due to increasing demand for services, rising costs, cost shifting and restricted revenue raising capability. Several infrastructure and financial sustainability studies published in Australia over the last few years support this fact. For example, a report prepared by the Australian Local Government Association concluded that around 35% of
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Australian councils are not financially sustainable (PriceWaterhouseCoopers 2006). Recent natural disasters, such as the floods in Queensland and Victoria between December 2010 and February 2011 have created significant demand for road repairs, maintenance and upgrading. Sustainability endeavours in highway infrastructure development often require major capital input, which may cause concerns for the investors. Stakeholders responsible for the management of highway infrastructure assets highlighted some significant considerations: 1. Adequately managing the balance between the maintenance of existing highway infrastructure and the building of new highway infrastructure is essential to ensure sustainable outcomes and continued growth of Australia’s economic prosperity. This should be through the development of long-term financial plans based on highway infrastructure management plans that cover a forward planning horizon of at least ten years (Ugwu et al. 2005; Singh and Tiong 2005; Gransberg and Molenaar 2004; Wilmot and Cheng 2003). 2. Highway infrastructures are financially sustainable in the long term, through appropriate annual reporting on key performance indicators (Ugwu et al. 2005). It is important that long-term asset and financial plans are not produced for mere compliance, but to form an essential part of management for an organisation. 3. Adequate funding levels must be assured for local government to sustainably manage essential community infrastructure on behalf of the nation (Winston and Langer 2006). This local community infrastructure underpins the nation’s economy and provides significant support for state and national infrastructure. Thus, early consideration of long-term financial viability for highway infrastructure has become an essential strategy for astute investors.
Chapter 2: Literature Review
2.3 Long-Term Financial Prospects in Highway Development Highway infrastructures are classified as long-lived assets. To effectively and equitably manage the service level, a good strategy plan should set out the capital expenditure requirements for the next 20 years. Service levels for highways need to be based on long-term affordability. Highway maintenance and rehabilitation decisions should be resolved through a long-term financial prospect. As a result, there is a need for tools to assist decision-makers in preparing better long-term financial decisions for highway investments.
2.3.1 Principle of engineering economics Engineering economics involves benefit-cost analysis (BCA) and life-cycle cost analysis (Lee 2002b). Both approaches are used to deal with public-sector investment evaluation. To ensure sufficient funds are spent on highway infrastructure development so that related services are delivered economically, these methods have become significant methods in an attempt to meet the needs of the community into the future. Meanwhile, these methods also help the stakeholders to achieve a balance between competing demands with consideration towards long-term requirements and objectives (Gluch and Baumann 2004; Lee 2002b). The demand for capital works in many instances outstrips the funding capacity available. It is, therefore, important to adopt robust and transparent methods to evaluate and rank projects to ensure that new projects are prioritised objectively.
2.3.1.1
Benefit cost analysis
Benefits and costs are often articulated in money terms, and are in sync with the time value of money, so that all flows of benefits and project costs over time are expressed on a common basis in terms of their “present value” (Lee 2002b). Benefit cost analysis has been widely recognised as a useful framework for assessing the positive and negative aspects of prospective actions and policies, and for making the economic implications' alternatives an explicit part of the decision-making process (Jang and Skibniewski 2009; Carter and Keeler 2008). According to Carter and Keeler (2008), benefit cost analysis compares alternatives over time as well as space,
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and uses discounting to summarise its findings into a measure of net present value (NPV). The test of NPV is a standard method for assessing the present value of competing projects over time (Rahman and Vanier 2004). Discounting is typically carried out using the applicable interest rate, or a target rate of return. Benefit cost analysis is often used by governments to evaluate the desirability of a given involvement (Lee 2002b). Cost effectiveness is frequently included, and consumer surplus is occasionally treated (Li and Madanu 2009). BCA emphasises consequences in the form of a financial tool, whereas government sector investment evaluation could be called a social tool (Loomis 2011; Yuan et al. 2010). The evaluation criterion for BCA is the maximisation of net benefits, whereas the criterion for LCCA is the minimisation of costs. All costs are assumed to be stated in constant base year dollars, and a real (net of inflation) discount rate is used.
2.3.1.2
Life-cycle costing analysis (LCCA)
It is increasingly recognised that the selection of the lowest initial cost option may not guarantee the economical advantage over other options. LCCA is a well established economic evaluation method. LCCA seeks to optimise the cost of acquiring, owning and operating physical assets over their useful lives by attempting to identify and quantify all the significant costs involved in that life, using the present value technique (Garcia Marquez et al. 2008). Several definitions of life-cycle costing exist, as useful as any and shorter than most, is the one by Lee (2002b) that the life-cycle cost of an item “is the sum of all funds expended in support of the item from its conception and fabrication through its operation to the end of its useful life”. In order to make the procedure of the lifecycle costing to be more structured and easy to understand, a typical structure and process flow of LCC was illustrated in Figure 2.4. Based on this systematic flow, LCCA is applicable as investment calculus to evaluate investment decisions (Sterner 2002).
Chapter 2: Literature Review
Figure 2.4: Life-cycle costing procedure
There are some literatures that focus on life-cycle costing in construction management research, yet few researchers and practitioners give a clear definition on it. For instance, Assaf et al. (2002) used life-cycle cost methodology to identify the total discounted dollar cost of owning, operating, maintaining and disposing of a building or a building system over a period of time. Furthermore, they found LCCA as an economic evaluation technique that determines the total cost of owning and operating a facility over its assumed life. According to Pasquire and Swaffield (2002) the Royal Institution of Chartered Surveyors defines the life-cycle cost of an asset as the present value of the total cost of that asset over its operating life (including initial capital cost, occupation costs, operating costs and the cost or benefit of the eventual disposal of the asset at the end of its life). Additionally, it defines LCCA as a set of techniques for evaluating all relevant costs of acquiring and operating a project, asset or product over time. The New South Wales Department of Public Works and Services defines the lifecycle cost of an asset as the total cost throughout its life including, planning, designing, acquisition and support costs and any other costs directly attributed to owning and using that asset (NSW 2001). Further, El-Diraby and Rasic (2004)
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believe that, life-cycle cost is an economic assessment of an item, area, system, or facility, considering all the significant costs of ownership over its economic life expressed in terms of equivalent dollars. Correspondingly, Rahman and Vanier (2004) define the life-cycle cost as the economic assessment of alternative designs, construction or other investments considering all major costs and running over the lifetime of each alternative expressed in equivalent economic units. In summary, LCCA is a cost-centric approach used to select the most cost-effective alternative that is equal to a specific level of benefits in a construction project.
2.3.1.3
Differences between BCA and LCCA
Even though both the benefit cost analysis and life-cycle cost analysis methods are suitable for long-term financial management, studies have found that there are still differences and limitations. Lee (2002b) explains that the idea behind LCCA is that capital investment decisions should be based on costs over the lifetime of the investment, while BCA is used to evaluate the desirability of transportation capital and maintenance investments. It is concluded that LCCA typically includes related expenditure in the overall stages in the highway infrastructure life span while BCA is used for the denominator of a benefit cost ratio. The differences between BCA and LCCA are summarised in Table 2.1. Table 2.1: Differences between BCA and LCCA
Benefit cost analysis (BCA)
Life-cycle cost analysis (LCCA)
Benefit over project cost with net present Investment decision based on investment value evaluation
lifetime
Compare benefit based on desire results Compare of a project
project
implementation
alternatives
Assessing present value of competing Evaluate budgets over project life span projects over time Benefits oriented approach
Cost Centric approach
Both methods have their advantages and disadvantages. However, industry has realised the important of long-term economic advantage in highway infrastructure.
Chapter 2: Literature Review
Some of these organisations have referred to LCCA as decision support tool for longterm economic evaluation of the project scenarios they have to face.
2.3.1.4
Decision support
Decision Support is used often in different contexts related to decision making. It is a part of decision making processes. The term Decision Support contains the word ‘support’, which refers to supporting people in making decisions.
Thus, DS is
concerned with human decision making. Turskis et al. (2007) proposed the decisionmaking process comprises of three main stages: •
Intelligence: Facts finding, problems analysis, and exploration.
•
Design: Formulation of solutions, generation of alternatives, modeling and simulation.
•
Choice:
Goal maximisation, alternative selection, decision making, and
implementation. Decision support has been widely used in different disciplines include construction industry (Gluch and Baumann 2004; Rahman and Vanier 2004; Šelih et al. 2008). The decision-making process in construction industry is increasing complex due to a high degree of inherent uncertainty. This increasing complexity illustrated the need of decision support model, tools and system to aid the process. This need also applied to the highway infrastructure investment. It is not possible to know exactly how accurate a particular investment decision is, so decision support tools can help in improving decision-making process. According to Rahman and Vanier (2004) life-cycle cost analysis can be used as a decision support tool to aid decision makers to propose, compare, and select the most cost effective, alternatives for maintenance, renewal, and capital investment programs for highway investments. Chung et al. (2006) note that life-cycle costing studies show that the cost of owning and operating a system (ownership cost) can be quite significant and may often exceed acquisition costs. Thus, decisions based solely on the acquisition cost may not turn out to be the best selection in the long term, and
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this method can be effectively utilised to realise the benefits of long-term cost implications of sustainable development in infrastructure projects.
2.3.2 Life-cycle costing analysis and its application in highway infrastructure Since the 1960s, several studies dealing with life-cycle cost evaluation in the road infrastructure area have been conducted. The concept of LCCA was, firstly, applied in highway development by AASHTO “Red Book” in 1960s (Wilde, Waalkes and Harrison 2001). Since this conception, it was not applied widely until the early 1990s when the Federal Highway Administration (FWHA) started promoting the use of life-cycle costs in the design and use of highway infrastructure. The FHWA has issued guidelines about how the life-cycle cost analysis should be conducted, especially with regard to feasibility studies on pavements. The FHWA also requires the application of the LCCA concept in its major highway projects. The FWHA believes that life-cycle cost analysis can help transport agency officials to answer and exhibit their administration of taxpayer investments in highway infrastructure. This approach was further supported by the US government’s imposition of a new requirement making LCCA compulsory in National Highway System projects that cost over $25 million (Chan, Keoleian and Gabler 2008). This signified that the applications of life-cycle cost in highway infrastructure in practice was taking shape as the stakeholders realised the importance of long-term investment for highway infrastructure. A few research studies have been carried out in the last decade addressing topics related to life-cycle cost analysis in highway projects (Hawk 2003; Hegazy, Elbeltagi and El-Behairy 2004; Persad and Bansal 2004). There are also studies that focus on comparisons between benefit cost analysis and life-cycle cost analysis (Lee 2002a), assessments of the current practice in the use of these tools (Ozbay et al. 2004a) and ideas about how uncertainty should be introduced (Tighe 2001). However, these efforts have not focused on sustainability in considering the economic benefits for the stakeholders in highway development.
Chapter 2: Literature Review
2.3.2.1
Current LCCA models and programs in highway infrastructure
A review of the literature is undertaken in this study to gain a broader understanding of prominent life-cycle cost models in highway infrastructure. This review analyses the elemental features of the existing models and the cost components concerned with current LCCA practice. This review is important because, although existing studies follow the life-cycle costing concept, they differ in their approaches and applications to different types of projects. Over the past few decades, various agencies and institutions have developed methodologies for life-cycle cost analysis, particularly on road pavement projects. Some of these organisations have taken a step further to develop computer programs for their LCCA methodologies to facilitate the analysis. Organisations that have supported the development of LCCA for pavement design and management include institutions, state governments, construction organisations and some universities. Table 2.2 discussed the current available LCCA models and programs in highway infrastructure. In early 90s, the Pavement Life-Cycle Cost Analysis Package (LCCOST) was developed by the Asphalt Institute. It calculates pavement life-cycle costs incurred over a selected analysis period of up to 50 years. Over two decades, The International Study of Highway Development and Management (ISOHDM) has extended the scope of the HDM-III model, to improve the system approach to road management with adaptable and user friendly software tools known as (HDM-4). This tool includes technical and economic appraisals of road projects, to prepare road investment programmes and to analyse road network strategies (Ihs and Sjögren 2003). Several state governments in the United States also considered the development of LCCA model and methodologies to minimise expenditure for road infrastructure development throughout the lifecycle. In California, the state government developed a California Life-Cycle Benefit/Cost (Cal-B/C) Analysis Model that offers a simple and practical method for preparing economic evaluations on prospective highway and transit improvement projects within the State of California. The model is capable
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of handling several general highway construction types, such as lane additions, and more specific projects, such as high occupancy vehicle lanes, passing/truck climbing lanes or intersections. In addition, the Pavement Rehabilitation Life-Cycle Economic Analysis (PRLEAM) was developed by the Ministry of Transportation of Ontario and the University of Waterloo in 1991. The immediate objective of this software was to meet the needs of the Ministry for evaluating life-cycle costs for pavement rehabilitation and maintenance. It can evaluate up to three rehabilitation alternatives, each having up to six treatment cycles. In academia, several research efforts should be noted. Since early 1990s, the University of Maryland developed a set of life-cycle cost analysis programs that analyse flexible and rigid pavements (Witczak and Mirza 1992b). These programs incorporate user operating costs associated with pavement roughness among others. These programs were also intended for project-level analysis but are considered better suited for use in pavement management on a network level. Besides, the University of Texas also developed a new life-cycle cost analysis methodology for Portland cement concrete pavements that considers all aspects of pavement design, construction, maintenance, and user impacts throughout the analysis period (Wilde, Waalkes and Harrison 2001). This research predicts pavement performance using state-of-the-art performance models and reliability concepts, from which it determines maintenance and rehabilitation needs. Besides, it presents a standardised method for considering the agency and user costs associated with pavement performance. Other life-cycle cost analysis models and programs from Australia (Ockwell 1990), Canada (Rahman and Vanier 2004) and Hong Kong (Ugwu et al. 2005). However, these methodologies and programs have not been kept up-to-date with the dynamic changes in the construction sectors. Although an extensive literature review was carried out regarding life-cycle cost application in highway infrastructure, no previous research exclusively covers the life-cycle costing from a sustainability perspective.
Chapter 2: Literature Review
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Table 2.2: Existing LCCA models and programs
Organisations
Years
Functions and Descriptions
Models and Programs
The Asphalt Institute developed the Pavement Life-Cycle Cost Analysis Package (LCCOST) in 1991. • • • 1990s
LCCOST– Asphalt Institute •
Institutions
It calculates pavement life-cycle costs incurred over a selected analysis period of up to 50 years. Five alternative pavement strategies can be considered at any one time. This program considers the initial cost of construction, multiple rehabilitation actions throughout the design life, and user delay at work zones during initial construction and subsequent rehabilitation activities. In addition to these considerations, the program considers routine maintenance (optional) that will be applied each year between rehabilitation activities. Traditionally, routine maintenance has been excluded from lifecycle cost methodologies because many departments of transport do not maintain easily accessible routine maintenance records for individual highway segments. The LCCOST model also considers salvage value of the pavement and of the individual materials that make up the layers. However, the program does not consider social and environmental issues in calculating the pavement life-cycle costs. Yet both cost elements should be considered important due to the increased emphasis on sustainability by society. Therefore, the LCCOST model does not meet the need for a model that emphasises sustainability in the life-cycle cost analysis.
The Highway Design and Maintenance Standards Model (HDM-4) computer program was developed by the World Bank for evaluating highway projects, standards and programs in developing countries (Ihs and Sjögren 2003). 2000s
HDM 4– World Bank
•
•
HDM-4 is designed to make comparative cost estimates and economic evaluations of alternative construction and maintenance scenarios (including alternative time-staged strategies) either for a given road section or for an entire road network. The HDM program assumes that construction costs, maintenance costs and vehicle operating costs are a
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Chapter 2: Literature Review
Organisations
Years
Models and Programs
Functions and Descriptions
•
function of the vertical alignment, horizontal alignment and road surface conditions. Different types of costs are calculated by estimating quantities and using unit costs to estimate total costs. A major disadvantage of this model with respect to the current project is that it focus on specific costs related to social and environmental issues. This model focuses on the evaluation of the alternative construction and maintenance scenarios in detail but little consideration has been done on sustainability-related costs that are of high priority for society and governments.
The California Life-Cycle Benefit/Cost (Cal-B/C) Analysis Model offers a simple and practical method for preparing economic evaluations on prospective highway and transit improvement projects within the State of California. • • State Government
1990s
Cal B/C – California Department of Transport •
Universities
1990s
LCCP/LCCPR Maryland
The model is capable of handling general highway projects, such as lane additions, and more specific projects, such as high occupancy vehicle lanes, passing/truck climbing lanes, or intersections. The model can also handle several transit modes, including passenger rail, light rail and bus. Cal-B/C was developed in a spreadsheet format (MS Excel) and is designed to measure, in real dollar terms, the four primary categories of benefits that result from highway and transit projects: travel time savings, vehicle operating cost savings, accident cost savings and emission reductions. Users have the option of including the valuation of vehicle emission impacts and induced demand in the analysis. In the model, the results of the analysis are summarised on a project-by-project basis using several measures: life-cycle costs, life-cycle benefits, net present value, the benefit-cost ratio (benefits/costs), rate of return on the investment, and project payback period (in years). These results are calculated over the life of the project, which is assumed to be twenty years. In addition, the model calculates and displays first year benefits.
The University of Maryland developed a set of life-cycle cost analysis programs that analyse flexible and rigid pavements (Witczak and Mirza 1992a).
Chapter 2: Literature Review
Organisations
Years
Models and Programs
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Functions and Descriptions • • •
This program incorporates user operating costs associated with pavement roughness, among others. These programs were also intended for project-level analysis, but are considered better suited for use in pavement management on a network level. There are some limitations with this program, since it is not used to compare alternative pavement designs. It would thus require much modification and updating to develop a new model for life-cycle cost analysis.
The University of Texas developed a new life-cycle cost analysis methodology for Portland cement concrete pavements that considers all aspects of pavement design, construction, maintenance and user impacts throughout the analysis period (Wilde, Waalkes and Harrison 2001). •
• 2000s
LCCA of Portland Cement Concrete Pavement - Texas
•
This research predicts pavement performance using state-of-the-art performance models and reliability concepts, from which it determines maintenance and rehabilitation needs. It also presents a standardised method for considering the agency and user costs associated with pavement performance. The proposed model for the Portland cement life-cycle cost analysis represents an attempt to capture all the costs incurred by the transportation agency, by users of the facility, or by others affected by its presence. According to Wilde, Waalkes and Harrison (2001), in capturing the full impact of a highway project, the total life-cycle cost can be estimated and compared with other alternate pavement designs and configurations. In this way, the best alternative, from both the agency and user point of view, can be evaluated and selected. However, there are some limitations in this model including that it does not place a value on each of the external costs. In addition, the actual incorporation of external consequences in the Portland cement LCCA model is not sufficiently clarified. Although this life-cycle cost framework can predict both agency and user costs over the expected life of a project and can provide the user with an informative way of comparing the results, the final decision regarding selection of a preferred alternative must be made using engineering judgment. The framework is simply a tool with which engineers and planners can view the relative differences and similarities between alternate designs.
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2.3.2.2
Limitations of existing LCCA studies in adopting sustainable measures
Research on sustainable development in the area of highway infrastructure development is becoming increasingly popular. A large number of research studies have been undertaken all over the world to investigate a variety of aspects in highway infrastructure. Specifically, a growing body of literature is found in the area of life-cycle cost analysis in the highway infrastructure industry (Chan, Keoleian and Gabler 2008; Garcia Marquez et al. 2008; Gerbrandt and Berthelot 2007; Hawk 2003; Hegazy, Elbeltagi and El-Behairy 2004; Hong and Hastak 2007; Lagaros 2007; Lee, Cho and Cha 2006; List 2007; Singh and Tiong 2005; Tysseland 2008; Ugwu et al. 2005; Wilde, Waalkes and Harrison 2001). Based on the literature review, it can be concluded that current studies of LCCA are focusing on different elements in highway infrastructure. These studies are divided into three main categories: •
Starting from 2001-2002, the study of LCCA is mainly focused on pavement (Wilde, Waalkes and Harrison 2001; Lee 2002b);
•
In the period 2003-2006, the studies focus mainly on highway bridges (Hawk 2003; Hegazy, Elbeltagi and El-Behairy 2004; Singh and Tiong 2005; Ugwu et al. 2005; Lee, Cho and Cha 2006);
•
From 2007 onwards, the studies shifted to the area of highway management (List 2007; Lagaros 2007; Hong and Hastak 2007; Gerbrandt and Berthelot 2007; Tysseland 2008; Garcia Marquez et al. 2008; Chan, Keoleian and Gabler 2008)
LCCA provides a basis for contrasting initial investments with future costs over a specific period. The future costs are discounted back in time to make economic comparisons between different alternative strategies possible (Woodward 1997). This method is popularly used in the mainstream construction industry and a substantial amount of research has been carried out in recent years. However, there are limited research projects covering the economics of the highway industry from the sustainability point of view.
Chapter 2: Literature Review
The concept of sustainability has added a new dimension to the evaluation of highway investments. Sustainability means analysing the entire life of a facility, from an environmental as well as economic perspective (List 2007). Keoleian et al. (2005) developed an integrated life-cycle assessment and cost model to evaluate infrastructure sustainability, and compared alternative materials and designs using environmental, economic and social indicators. Despite an increasing enthusiasm for the life-cycle cost approach in the sustainability context, the adoption and application of LCCA in the highway infrastructure sector still remain limited (Zhang, Keoleian and Lepech 2008; Wilde, Waalkes and Harrison 2001; List 2007; Chan, Keoleian and Gabler 2008). Cole and Sterner (2000) indicate that an ‘imperfect understanding’ of the merits of LCCA among practitioners is the main cause for its limited adoption. However, there is still a gap between theory and practice as neither of them sufficiently explains the underlying reasons for incorporating social and environmental costs into LCCA. Moreover, the actual incorporation of costs incurred in pursuing social and environmental matters in the life-cycle cost approach is not sufficiently clarified. The following briefly describe the limitations of current LCCA models are briefly described as follows: •
Focus on direct market costs: Most existing LCCA studies emphasise on the cost allocation and investment evaluation of highway projects. These studies are primarily concerned with direct market costs, such as road construction and maintenance costs and crash damages and how these vary depending on roadway conditions. They assume that the roadway conditions and requirements do not change in a highway lifetime and so are unconcerned with the upgrade and end-of-life costs (Quinet 2004).
•
Designation of environmental impacts as external costs: Existing studies incorporate costs incurred from environmental impacts, primarily air pollution, noise and water pollution and various categories of land use impacts. Some studies have only considered them as the external costs. Their results often differ significantly, but can usually be explained by differences in their methodology and scope (Quinet 2004).
•
Unclear Boundaries: Existing studies also show unclear boundaries in identifying costs incurred in pursuing sustainability matters in highway
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infrastructure. Some models consider the global impacts of sustainability while others only consider micro impacts (List 2007; Wilde, Waalkes and Harrison 2001; Zhang, Keoleian and Lepech 2008). •
Inconsistent estimation methods: Surahyo and El-Diraby (2009) highlighted that the inconsistent estimation methods in current models in estimating sustainability-related costs for highways. Some use socioeconomic approaches, while others use technical/ engineering approaches. Due to the subjectivity of sustainability and the soft factors of the related cost elements, it is a challenge for current models to create consistent estimation methods.
•
Different environments and problems: Highway infrastructure projects also take place in different physical, legal and political environments, and studies assessing and mitigating costs incurred in pursuing sustainability matters are still evolving. Therefore, it is difficult to develop a universal standard of estimation methods to address and forecast sustainability-related cost components (Surahyo and El-Diraby 2009).
These limitations show the significance and necessity of incorporating costs incurred in pursuing sustainability measures into life-cycle costing practice.
2.3.3 Significance
of
incorporating
sustainability-related
cost
components in LCCA Realising the advantages of pursuing sustainability, a number of research projects have attempted to investigate topics that bridge the gap between sustainability and highway infrastructure. For example, Huang and Yeh (2008) have implemented an assessment rating framework for green highway projects. In the study, the framework has been developed to analyse and measure the achievement of sustainability in the highway infrastructure by using several indicators. Ugwu et.al (2006b, 2006a) found that there is a need for methods and techniques that would facilitate sustainability assessment and decision-making at the various project level interfaces during the development phases of a project. Although the sustainability concept is essential for current Australian highway infrastructure development, stakeholders also realise the importance of long-term
Chapter 2: Literature Review
cost implications for the investments. As decisions based solely on an acquisition cost may not turn out to be the best selection in the long run, Surahyo and El-Diraby (2009) highlighted the need to assess both environmental and social costs in highway construction, rehabilitation and operations phases. There is a consensus among stakeholders that sustainability endeavours will have an impact on the developmental costs of highway infrastructure. While the sustainability concept is being emphasised in highway infrastructure, effective management of highway investment has became crucial issue as highway funding at all levels of government continues to fall short of infrastructure needs (PriceWaterhouseCoopers 2006). In this regards, life-cycle cost analysis is applied in highway development to explore the more efficient investments for the stakeholders. It evaluates not only the initial construction cost of the highway infrastructure, but also all the associated maintenance costs during its service life. The use of LCCA in highway infrastructure seems established, but limitations in the current LCCA models and programs still remain as these programs are not wellestablished and do not cover some critical issues in highway development. Wilde et al. (2001) reported that the consideration of social impacts of road construction, including health impacts of pollution emission and noise was conversely independent of other costs and the incorporation of these elements into LCCA has not been undertaken. The existing life-cycle costing methodologies tend to omit costs incurred for pursuing sustainability matters in the life-cycle cost analysis calculation in highway infrastructure projects. These sustainability-related cost components include agency, social and environmental costs caused by the activities in highway construction and maintenance. As stated by Singh and Tiong (2005), user costs are social costs incurred by the highway user, and include accident costs, delay costs and vehicle operating costs (such as fuel, tires, engine oil and vehicle maintenance). These costs are increasingly important given that they will indirectly influence the financial budget for a long-term investment.
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This study is motivated by the realisation of the need and potential to incorporate sustainability-related cost components into LCCA in order to capture the full costs of highway development, under the increased pressure to achieve sustainability. The identification of these cost components in the life-cycle financial decisions for highway infrastructure is crucial. The detail of the cost components are discussed in the next sections.
2.4 Cost Implications in Highway Infrastructure Studies on sustainability-related cost components in highway infrastructure development are evolving (Surahyo and El-Diraby 2009; List 2007). While studies on life-cycle costing perspectives still remain limited, they at least make the methodological issues more visible and practical rather than just a general discussion. In this study, the existing LCCA cost allocation is studied and integrated with the sustainability-related cost components in three main categories: •
Agency costs such as initial construction, maintenance, pavement upgrade and end-of-life costs;
•
Social costs such as vehicle operating, travel delay, social impact and road accident cost; and
•
Environmental costs such as noise, air quality, water quality, resource consumption and pollution damage from agency activities and solid waste generation.
2.4.1. Sustainability-related cost components in highway projects Traditionally, life-cycle costing is used to estimate the total cost of a built system throughout its entire life (Flanagan, Jewell and Norman 2005). In order for this type of cost analysis to project an accurate value, the various cost components related to planning, construction and operation should be taken into account. In simple terms, for the purposes of this study, life-cycle costing for sustainability is the total estimated expense of a highway through its life-cycle or until there is an
Chapter 2: Literature Review
anticipated major reconstruction using materials and methods reducing the overall environmental impact. Conducting a life-cycle cost analysis can point out economic and financial costs. These costs account for environmental and social costs and benefits as well as site operation, maintenance and indirect costs such as construction equipment (Flanagan, Jewell and Norman 2005). With sustainable design the financial cost is no longer the only factor in consideration during design and construction. Environmental factors are now heavily weighted and taken into consideration during the design of structures. Highway designers are beginning to make an effort to reduce the overall impact on the surrounding environment and communities. Unlike the ownership of a building, most highways are owned indefinitely by federal, state or county authorities. For buildings, life is defined as the length of time in which the building satisfies specific requirements. The design life for highways is viewed differently than buildings because of their basic function and nature. For the ease of calculations the overall design life of a roadway will be assumed to be twenty years. However, the elements that make up the roadway, such as resurfacing and property acquisitions, may have varying life spans. Flanagan points out that in order to conduct an accurate life cost assessment, several different options must be researched for each aspect (Flanagan, Jewell and Norman 2005). The main points for consideration relating to costing are: the decision to acquire land, short-term running costs, performance characteristics, reduction of operational costs and the reliability of the costing data collected. Furthermore, an evaluation should be done for all energy conservation investments to determine if the added cost will be outweighed by the environmental benefits. According to Flanagan and Jewell (2005), sustainable design includes innovative new products and technologies where it is difficult to predict their longevity. Based on the review of the literature on Australian road projects, a set of key LCCA cost components related to sustainable measures is identified. These cost components can be divided into three main cost categories of agency, social and environmental category.
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2.4.1.1 Agency category A number of general categories that should be considered when tabulating an estimate for initial construction, rehabilitation and annual maintenance costs. All the cost items are viable options for construction and rehabilitation activities and should, accordingly, be considered as agency costs in the analysis of life-cycle costs for a highway pavement project. The initial construction items can be assigned quantities by the engineer to represent a particular design alternative, while unit costs can be provided for the other aspects of maintenance and rehabilitation activities. The quantification of costs can be determined using the data available from previous construction and maintenance projects. The initial construction, major maintenance and rehabilitation costs are most frequently included in the life-cycle cost analysis (Bradbury et al. 2000). Maintenance costs can be categorised as routine maintenance and major maintenance. Routine maintenance includes relatively inexpensive activities such as filling potholes and performing drainage improvements. These treatments have a service life of 1 to 4 years (Haas and Kazmierowski 1997). Major maintenance is more substantial and is usually associated with a structure or surface improvement such as patching or micro-surfacing. These treatments have an expected service life of 5 to 10 years (Haas and Kazmierowski 1997). Rouse and Chiu (2008) identify that the life-cycle pattern of a highway has a limited correspondence from a pavement quality perspective, as shown in Figure 2.5, as the quality in terms of serviceability of the highway declines under continuous traffic, climate and geology stress. It is recommended that only major maintenance be included in the LCCA because routine activities tend to be consistent across pavement design types.
Chapter 2: Literature Review
Figure 2.5: Typical life cycle of a road asset (Rouse and Chiu 2008)
Rehabilitation cost can be determined from pavement performance predictions. The initial pavement design and the maintenance activities will have a large influence on the rehabilitation activities that are required in the future and when they will be required (Tighe 2001). Agency cost components that are considered essential in highway investment are categorised as initial construction costs, maintenance costs, pavement upgrade costs and pavement end-of-life costs, as summarised in Table 2.3 Table 2.3: Agency impacts and costs in highway projects
AGENCY COST CATEGORY
FACTORS THAT LEAD TO IMPACTS AND COSTS
Initial Construction Costs
•
Initial construction: As highlighted by Ugwu, Kumaraswamy, Wong, & Ng (2006a), initial construction as a sustainability indicator encapsulates sub-elements such as direct/indirect costs (which further subsumes construction/ operation costs), and other life-cycle cost elements. Direct costs during initial construction stage such as material, labour, and plant and equipment costs in the whole of life cost analysis have been derived directly from the respective unit rates data.
Maintenance Costs
•
Routine Maintenance: Some routine maintenance can be designed for a specific time period or number of traffic loadings. The best estimate of the life of the technique must come from field performance observations or empirical models developed from field performance data. According to Hall et al. (2003) the period of time for rehabilitation treatment is often called the performance period.
•
Major Maintenance: Major maintenance activities are needed a few times throughout the life-cycle of a pavement (Wilde, Waalkes and
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AGENCY COST CATEGORY
FACTORS THAT LEAD TO IMPACTS AND COSTS Harrison 2001). Assuming good design and quality construction, a concrete pavement may require a concrete overlay in the second half of its design life to maintain ride quality and another asphalt overlay may be needed towards the end of its life. The strategy aims to perform the suitable maintenance activities at the right time on the road so as to optimise the total benefit and cost of a road over its lifetime.
Pavement Upgrade Costs
•
•
•
Pavement End-of-Life Costs
•
•
•
•
Upgrade costs: Upgrade costs consist of cost such as rehabilitation cost, pavement strengthening cost and cost of road pavement widening. Rehabilitation: Rehabilitation is part of the pavement upgrading process that involves structural enhancements that extend the service life of an existing pavement and/or improve its load carrying capacity. For example, rehabilitation techniques include restoration treatments and structural overlays (Gransberg 2009). Pavement life-cycle: The life-cycle pattern of a road has a more limited correspondence from a pavement quality perspective, as the quality of serviceability of the road declines under continuous traffic, climate and geology stresses (Rouse and Chiu 2008).
End of life costs: At the end of the life of infrastructure such as pavement, there would be certain costs involved demolish and recycle of the pavement. Economical and Environmental Friendliness: Pavement recycling has become more important and popular due to its resource saving and economical operation (Widyatmoko 2008; Brown and Cross 1989). Asphalt pavement recycling may be highly desirable, because it can save materials and is environmentally acceptable (Shoenberger, Vollor and LAB 1990; Aravind and Das 2007). It is based on sustainable development, by reusing materials reclaimed from the pavements and reducing the disposal of asphalt materials. Pavement performance: Aravind and Das (2007) found that the performance of the recycled materials was as good as that of equivalent conventional materials. Benefits of Recycling Pavement: Oliveira et al. (2005) identified the benefits of including recycled materials in pavement design, showing that the costs of applying a recycled mixture (with up to 50% reclaimed material) as a base or binder course were reduced by more than half, when compared with the costs of applying a new bituminous mixture, for the same expected life.
Chapter 2: Literature Review
2.4.1.2 Social category There has been a great deal of interest in the issue of the social costs in highway infrastructure development (Levinson, Gillen and Kanafani 1998; Delucchi 1997; Winston and Langer 2006; Gorman 2008). The passions surrounding social costs have evoked far more shadow than light. At the centre of this debate is the question of whether various modes of transportation are implicitly subsidised because they generate unpriced externalities, and to what extent this biases investment and usage decisions. On the other hand, the real social costs are typically not recovered when financing projects and are rarely used in charging for their use.
For example, road space is a scarce resource. Apart from a few new toll roads and some on-road parking, users are not charged a price for its use. Demand for the use of roads is therefore rationed only by the generalised cost of travel: vehicle operating costs and travel time. In many metropolitan areas, traffic congestion is the inevitable result. Road users considering whether to join a congested traffic stream would normally take account of the generalised travel cost that they would expect to incur. These are the private costs against which they would weigh the benefits of travel. However, road users do not take account of the fact that their decisions to travel increase congestion and impose additional (public) costs on other road users. However, social cost can be reduced to economically efficient levels by making road users take into account the costs that they impose on other road users when undertaking a trip. Social cost components that are considered essential in highway investment can be categorised as vehicle operating costs, travel delay costs, social impact influence and accident cost. A brief outline of each category is given in Table 2.4.
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Table 2.4: Social impacts and costs in highway projects
SOCIAL CATEGORY
FACTORS THAT LEAD TO IMPACTS AND COSTS
Vehicle Operating Costs
•
Vehicle Operating Costs include direct user expenses to own and use vehicles (plus incremental equipment costs for mobility substitutes such as telework). These indicate the savings that result when vehicle ownership and use are reduced. These can be divided into fixed (also called ownership) and variable (also called operating, marginal or incremental) costs, as indicated below. Variable costs increase with vehicle mileage, while fixed costs do not. Some costs that are considered fixed are actually partly variable. Variable costs increase with vehicle use, and decline when vehicle travel is reduced.
Travel Delay Costs
•
The Value of Travel Time refers to the cost of time spent on transport, including waiting as well as actual travel. It includes costs to consumers of personal (unpaid) time spent on travel, and costs to businesses of paid employee time spent in travel. The Value of Travel Time Savings refers to the benefits from reduced travel time. Travel time is one of the largest categories of transport costs, and time savings are often the greatest benefit of transport projects such as new and expanded roadways, and public transit improvements. Factors such as traveller comfort and travel reliability can be quantified by adjusting travel time cost values.
Social Impact Influence
•
Community Cohesion: Automobile-oriented transport tends to result in development patterns that are suboptimal for many social goals. Wide roads and heavy traffic tend to degrade the public realm (public spaces where people naturally interact) and in other ways reduce community cohesion (Litman 2007).
•
Economic vulnerability: Dependence on imported petroleum makes a region vulnerable to economically harmful price shocks (sudden price increases) and supply disruptions. For example, the last three major oil price shocks were followed by an economic recession.
•
Higher world oil prices: High US demand increases international oil prices (the elasticity of world oil price with respect to US demand is estimated at 0.3 to 1.1), imposing a financial cost on all oil consumers (Smith 2009).
•
Crash Costs are the economic value of damages caused by vehicle crashes (also called accidents or incidents). Injuries and fatalities refer to the extent of damage caused by a crash. Typical road users include pedestrians, cyclists and motorcyclists.
•
Types of Crash Cost Costs: Internal costs are injuries and hazards to the individual who travel by vehicle mode. While for external cost, it refers to the uncountable damages and dangers caused by an
Accident Cost
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SOCIAL CATEGORY
FACTORS THAT LEAD TO IMPACTS AND COSTS individual on other people. •
Crash costs include internal costs (damages caused by an individual), external (risks caused by other road users) and insurance compensation (accident damages compensated by insurance companies).
•
External Costs: Elvik (1994) clarifies three types of costs implies to crash activities such as accident damage costs impose on society, cost of injuries contributed by larger vehicles to smaller vehicles and the changes in traffic density that contribute to the marginal changes in crash risk. Jansson (1994) emphasises external costs crashes imposed on “unprotected road users” (pedestrians, cyclists and motorcyclists), and damage costs borne by society. Some existing studies also emphasise the costs motor vehicle risk may also be contributed by pedestrians and cyclists (Davis 1992). The results also supported by James (1991) indicate that such accidents are undervalued because of those incidents are not recorded.
2.4.1.3 Environmental category Environmental issues in the current construction industry lead to an unforeseen capital investment for built assets. One problem is the complexity of these issues, which leads to unpredictable investment decisions among the investors. In identifying environmental costs in highway investment, two situations are of particular significance for LCCA: one is the estimation of the full life-cycle cost of a project or decision, and the other is the attempt to increase production efficiency and focus on cost components related to the environment. In the first case, only downstream costs are of interest. In the second case, all costs components related to environmental are of interest. When deciding upon which environment-related costs to include in the study, there are borders that need to be taken into account. Environment-related cost components that are considered essential in highway investment can be categorised into noise pollution, air pollution, resource consumption, pollution damage from agency activities, solid waste generation cost, and water pollution and hydrologic impacts, as shown in Table 2.5.
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Table 2.5: Environmental impacts and costs in highway projects
ENVIRONMENTAL CATEGORY Noise Pollution
Air Pollution
Resource Consumption
Pollution Damage from Agency Activities
FACTORS THAT LEAD TO IMPACTS AND COSTS
•
Type of vehicle: Motorcycles, heavy vehicles (trucks and buses), and vehicles with faulty exhaust systems tend to produce high noise levels.
•
Traffic speed, stops and inclines: Lower speeds tend to produce less engine, wind and road noise. Engine noise is greatest when a vehicle is accelerating or climbing an incline. Aggressive driving, with faster acceleration and harder stopping, increases noise.
•
Pavement condition and type: Rougher surfaces tend to produce more tire noise, and certain pavement types emit less noise (Ahammed and Tighe 2008).
•
Barriers and distance: Walls and other structures such as trees, hills, distance and sound-resistant buildings (e.g., double-paned windows) tend to reduce noise impacts.
•
Mobile Emission: It is difficult to control mobile emission given the reason that motors are numerous and dispersed, and have relatively high damage costs because motor vehicles operate close to people.
•
Transportation: Transportation is a major contributor of many air pollutants. These shares are even higher in many areas where people congregate, such as cities, along highways and in tunnels.
•
Energy Security: Energy security includes economic and military costs associated with protecting access to petroleum resources. For example, US national security costs associated with defending petroleum supplies in the Middle East region are estimated to range from $6 to $60 billion annually (Romm and Curtis 1996).
•
Economic vulnerability: Dependence on imported petroleum makes a region vulnerable to economically harmful price shocks (sudden price increases) and supply disruptions. For example, the last three major oil price shocks were followed by an economic recession.
•
Higher world oil prices: High US demand increases international oil prices (the elasticity of world oil price with respect to US demand is estimated at 0.3 to 1.1), imposing a financial cost on all oil consumers (Smith 2009).
•
Roadkills: Motor vehicles are a major cause of death for many large mammals, including several threatened species.
•
Road Aversion and other Behavioural Modifications: Animals behaviour and movement patterns are affected by roads; animals
Chapter 2: Literature Review
ENVIRONMENTAL CATEGORY
FACTORS THAT LEAD TO IMPACTS AND COSTS become accustomed to roads, and are therefore more vulnerable to harmful interactions with humans.
Solid Waste Generation Cost
•
Population Fragmentation and Isolation: By forming a barrier to species movement, roads prevent interaction and cross breeding between population groups of the same species. This reduces population health and genetic viability.
•
Exotic Species Introduction: Roads spread exotic species of plants and animals that compete with native species. Some introduced plants thrive in disturbed habitats along new roads, and spread into native habitat. Preventing this spreading is expensive.
•
Pollution: Road construction and use introduce noise, air and water pollutants.
•
Impacts on Terrestrial Habitats: Road construction can cause habitat disruption and loss.
•
Impacts on Hydrology and Aquatic Habitats: Road construction changes water quality and water quantity, stream channels, and groundwater.
•
Access to Humans: Roads increase the access of humans including hunters, poachers, and irresponsible visitors.
•
Sprawl: Increased road accessibility stimulates development, which stimulates demand for urban services, which in turn stimulates more development, leading to a cycle of urbanisation.
• Damage costs: Damagin solid waste is created by the inappropriate disposal of used tires, batteries, junked cars, oil and other harmful materials resulting from motor vehicle production and maintenance. • Construction and Demolition Wastes: Damaging solid waste is created by surplus materials arising from land excavation or formation, civil construction, roadwork, pavement maintenance or demolition activities. • Waste from Motor Vehicles: Motor vehicles produce various harmful waste products that can impose externalities. Motor vehicle wastes are the major source of moderate-risk wastes produced in typical jurisdictions (Giannouli et al. 2007). • Waste Management: Planning for waste management is process that involves many complex interactions such as transportation systems, land use, public health considerations and interdependencies in the system such as disposal and collection methods.
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ENVIRONMENTAL CATEGORY Water Pollution and Hydrologic Impacts
FACTORS THAT LEAD TO IMPACTS AND COSTS
• Impacts from motor vehicles, roads and parking facilities: These impacts impose various costs including polluted surface and groundwater, contaminated drinking water, increased flooding and flood control costs, wildlife habitat damage, reduced fish stocks, loss of unique natural features, and aesthetic losses. • Hydrologic Impacts: Roads concentrate stormwater, causing increased flooding, scouring and siltation, reduced surface and groundwater recharge which lowers dry season flows, and creates physical barriers to fish. • Improper vehicles leak hazardous fluids: Lubricating oils used in automobiles are burned in the engine or lost in drips and leaks onto the ground or into sewers, leading to the destruction of many aquatic species.
Chapter 2: Literature Review
2.5
Research Gap
The literature review reported in the previous sections suggests that industry stakeholders need to pay attention to two key issues in order to incorporate the sustainability concept into the life-cycle cost analysis. First, they need to understand the evolving needs and challenges to improve long-term financial decisions. Second, there is a need for clearer understanding of critical cost components related to sustainable measures in Australian highway investments. As such, the complexity of incorporating sustainability into LCCA must be addressed. These two issues are interrelated and are further discussed in the following sub-sections.
2.5.1 Challenges to improve long-term financial decisions Sustainability has become one of the prime issues that the current construction industry needs to respond to. Although the application of sustainability in built assets is beneficial, it often involves major capital investment. Costs always become the impeding factor for stakeholders when they contemplate sustainability initiatives in highway projects. While profit is still the main concern in highway investment, there is increasing social awareness of concerns relating to global warming and climate change. Thus, highway industry stakeholders are responsible for ensuring the balance between the financial benefits and sustainability deliverables in highway investments. This study has identified that LCCA is an effective economic assessment approach that is able to evaluate financial benefits in the long-term. However, the review of the literature has found that there are many limitations in current LCCA models concerning sustainability (as discussed in section 2.3.2.2). To overcome these limitations, it is important to understand the Australian industry practice of LCCA and the expectations of various stakeholders in improving long-term financial decisions while considering sustainability in highway projects. This is one of the gaps that the current research aims to bridge.
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2.5.2 Critical cost components in Australian highway investments There is an increasing number of studies on sustainability-related cost components in highway development (Surahyo and El-Diraby 2009; List 2007). A review of the literature has managed to identify 42 cost components related to sustainable measures (Table 2.6). However, the literature shows that highway projects often take place in different physical, legal and political environments; therefore, it is a challenge to apply these cost component suites for all highway projects. Table 2.6: Sustainability-related cost components for highway infrastructure Sustainability Criteria
Sustainable Cost Components (Main Factors) Initial Construction Costs
Agency Category
Maintenance Costs Pavement Upgrading Costs Pavement End of Life Costs
Vehicle Operating Costs Travel Delay Costs
Social Category
Social Impact Influence
Accident Costs
Solid Waste Generation Costs
Environmental Category
Pollution Damage by Agency Activities
Resource Consumption
Sustainable Cost Components (Sub Factors) Labour Cost Materials Cost Plants and Equipments Cost Major Maintenance Cost Routine Maintenance Cost Rehabilitation Cost Pavement Extension Cost Demolition Cost Disposal Cost Recycle and Reuse Cost Vehicle Elements Cost Road Tax and Insurance Cost Speed Changing Cost Traffic Congestion Cost Cost of Resettling People Property Devaluation Reduction of Culture Heritages and Healthy Landscapes Community Cohesion Negative Visual Impact Economy Value of Damages Internal Cost External Cost Cost of Dredge/Excavate Material Waste Management Cost Materials Disposal Cost Land Use Cost Distraction to Soil Extent of Tree Felling Habitat Disruption and Loss Ecology Damage Environmental Degradation Fuel Consumption Cost Energy Consumption Cost
Chapter 2: Literature Review
Sustainability Criteria
Sustainable Cost Components (Main Factors) Noise Pollution
Air Pollution Water Pollution
Sustainable Cost Components (Sub Factors) Cost of Barriers Tire Noise Engine Noise Drivers’ Attitude Effects to Human Health Dust Emission CO2 Emission Loss of Wetland Hydrological Impacts
In order to fit the Australian context, these cost components need to be examined and verified by industry stakeholders involved in highway development. This is another gap that the current study aims to bridge, by identifying the critical cost components related to sustainable measures with which highway project stakeholders are most concerned.
2.6
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Chapter Summary
This chapter highlighted findings from the literature review conducted as part of the first stage of the research framework (as discussed in section 1.6.1. Specifically, it answered the first research question, that is, What are the sustainability measures that can have the cost implications in highway projects? The findings supported the view of the global initiatives on sustainable infrastructure development and the context of highway infrastructure development in Australia. The push towards sustainability has added new dimensions to the complexity of financial evaluation in highway projects. Life-cycle costing analysis is generally recognised as a valuable tool in dealing with this evaluation. However, to date, existing LCCA models appear to be deficient in dealing with sustainability-related cost components due to their inherent focus on the economic issues alone. The two main barriers preventing the advancement of the sustainability concept in the life-cycle costing analysis in Australian highway investments are the need for stakeholders to understand the industry challenges and improve long-term financial decisions, and the need for clearer understanding of critical cost components related to sustainable measures, as discussed in section 2.5.
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To overcome these barriers, there is a need to identify the substantial cost components in long-term financial decision at the project level. This allows the industry stakeholders to appreciate the cost components are significant in highway infrastructure investments. In addition, this study examines the different perceptions and expectations of the industry stakeholders regarding the current practice of lifecycle cost analysis in Australian highway infrastructure. This will allow all parties involved to understand the industry needs in achieving the goal of maximising sustainability deliverables while ensuring financial viability over highway investment. The following chapter will further discuss the suitable methodology options to investigate the key research questions of this study.
Chapter 3: Research Methodology and Development
CHAPTER 3:
RESEARCH
METHODOLOGY
AND
DEVELOPMENT
3.1 Introduction According to Creswell (2003), methodology is necessary to ensure that a research project compressively addresses the research questions. To meet these objectives, a research study should have a detailed research design that can be used as a blueprint for collecting observations and data that are connected to the research questions. According to Simister (1995), the research design should: •
Make explicit the questions the researcher should answer
•
Provide hypotheses or propositions about these questions
•
Develop a data collection methodology, and
•
Discuss the data in relation to the initial research questions and hypotheses or propositions.
This chapter outlines the methodologies used to guide this research, which aims to develop a decision support model for evaluating long-term financial decisions for highway projects. With consideration of these objectives, the research is positioned as mixed methods research that uses complementary quantitative and qualitative paradigms. The inquiry is based on the assumption that collecting different types of data best provides an understanding of a research problem and the necessary ingredients of the final product. The research began with a quantitative phase (questionnaire survey) with both open and closed questions. A review of the literature was undertaken to help establish a rationale for the research questions and to establish the extent and depth of existing knowledge on cost components related to sustainable measures in highway projects and the development of existing life-cycle cost analysis models. The literature was
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used as a basis for advancing the research questions (Creswell and Clark 2007). The qualitative phase then followed, which involved the conduct of explanatory in-depth semi-structured interviews and case studies. This chapter is organised as follows. The specific mixed methods employed in this study are outlined in Section 3.2. This section describes the specific research methodologies for this study. Section 3.3 presents the overall stages and the involvement of the methodologies within the study. In Section 3.4, the ethical considerations for this study are explained. Finally, Section 3.5 summarises the important points discussed in the chapter.
3.2 Selection of Research Methods According to Fellow and Liu (2003), data collection is a communication process. It involves the transaction of data between the providers (respondents) to the collectors (researchers). In this research, several research methods were involved to aid the researcher to create this communication link with the respondent. This chain of communication helps the researcher to understand the current practice of the industry stakeholders as well as the needs of industry towards improvement of highway asset management. Methods of collecting data, generally, can be categorised as either one-way or twoway communications. In this research, one-way methods require either acceptance of the data provided or their rejection. Clarification or checking are possible only rarely. One-way communication methods include questionnaires. Two-way methods such as semi-structured interviews, permit feedback and the gathering of further data via probing. One-way communication methods may be regarded as linear data collection methods while two-way communication methods are non-linear. Based on Fellow and Liu (2008), the spectrum of interview types related to the nature of the questions are shown in Figure 3.1.
Chapter 3: Research Methodology and Development
Figure 3.1: Spectrum of interview types (Fellows and Liu 2008)
Given that there is a restricted amount of resources and time available for carrying out the field work, choosing the most suitable research method is necessary. The choice is affected by consideration of the scope and depth required. The choice is between a broad but shallow study at one extreme, and a narrow and deep study at the other, or an intermediate position – as shown in Figure 3.2.
Figure 3.2: Breadth vs. depth in ‘question-based’ studies (Fellows and Liu 2008)
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This study employs the research methods that provide breadth to depth to generate holistic and meaningful findings and results. Therefore, the data collected needs to be maximised to ensure its accuracy and the usability in the research. Fellow and Liu (2003) suggest that the methods employed in research need to be pre-determined in order to identify what data is critical, and to ensure the validity of respondents selection and the right sampling number to bring a good representation of the population to the study. This research selects several research methods that are suitable for the research purposes, such as survey and case study. Each method is further discussed and justified in the following sections.
3.2.1. Survey A survey is "gathering information about the characteristics, actions, or opinions of a large group of people, referred to as a population" (Dillman 2007). It consists of cross sectional and longitudinal methods to collect data. The data collection and measurement processes include surveys; questionnaire-based surveys, marketing surveys, opinion surveys and political polls are some of the most common. This method produces observations that are constructed in a specific manner. Surveys have advantages that they do not require as much effort from the questioner as verbal or telephone surveys, and often have standardised answers that make it simple to compile data. However, this method is quite difficult to develop fresh perspectives or to come up with new ways of interpreting the researched phenomena. Usually, standardisation answers may cause frustration to the users. Surveys are also limited in that respondents must be able to read the questions and respond to them. Thus, the researchers must have a reasonably clear idea of the hypotheses they want to test and the preset responses they will set out before the surveys are even started (Alasuutari 2004). Surveys are conducted to produce quantitative descriptions of some characteristics of the study population. Survey analysis is mainly concerned on the relationships between variables, or with projecting findings descriptively to a predefined population (Fowler 2009). Survey research can be conducted by quantitative and qualitative methods. This requires standardised information from the subjects being
Chapter 3: Research Methodology and Development
studied. The subjects studied might be individuals, groups, organisations or communities. There are several ways to conduct a survey such as collecting information by asking people with structured and semi-structured questions. Their answers are referring to themselves or some other unit of analysis, which constitute the data to be analysed. The sample of a survey needs to be large enough to allow extensive statistical analyses. To achieve the second objective of this research, information relevant to sustainability-related cost components in highway projects is collected through surveys (quantitative method). The literature findings have demonstrated the lack of effective ways to quantify cost components related to sustainable measures as well as the limitations of current LCCA models in handling these costs in highway investment. Thus, understanding the needs and overall situation of the current LCCA practice in the Australian highway industry would require a realistic survey (qualitative method). In light of the small body of literatures relating to the research context, a survey of industry practice is essential to identify and develop effective approaches. The survey can provide both information as facts about the practice and opinions from the professional experience. The information can be the initial source for the further knowledge base formulation along with the decision support model development to achieve the goals of this study. To gain an understanding of the status of the current Australian highway industry in handling highway investment, the industry stakeholders are the major subjects. The industry survey is carried out in the major capital cities of Australia.
3.2.2. Case study Case study is a research methodology that explores a single entity (the case) by using a variety of data collection methods during a sustained period of time. Case study method excels at bringing researchers to an understanding of a complex issue or object and can extend experience or add strength to what is already known through previous research. Case study emphasises detailed contextual analysis of a limited number of events or conditions and their relationships.
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Researcher Robert K. Yin defines the case study method as an empirical inquiry that investigates a contemporary phenomenon within its real-life context; when the boundaries between phenomenon and context are not clearly evident; and in which multiple sources of evidence are used (Yin 1989). Critics of the case study method believe that the study of a small number of cases can offer no grounds for establishing reliability or generality of findings. Some dismiss case study method as useful only as an exploratory tool. Yet researchers continue to use the case study research method with success in carefully planned and crafted studies of real-life situations, issues, and problems. Reports on case studies from many disciplines are widely available in literature. To fulfill the research objectives proposed by this study, a descriptive case study was employed. Case study uses a variety of data collection methods during a specific period an effort to study each single case. Case study is used widely in social science as well as the practice-oriented fields in construction engineering, science management and education. According to Yin (1989), case study is the preferred strategy when "how" and "why" questions being posed, when there is little control over events, and when the focus is on contemporary phenomenon within real-life context. The objective of applying the case study method was first, the developed model needs to be applied to cases so it picks up real-life problems solving and decisionmaking routines. This will help complete the model development by embedding realistic and practical procedures to test and evaluate the decision support model based on the real-life projects. More specifically, this study seeks to answer specific research question of how can long-term financial viability of sustainability measures in highway projects be assessed. Given the "how" nature of this study's research question, a case study approach provides a useful methodology for answering them. Yin cites several advantages to the case study approach. Case study is useful when an 'investigator' has an opportunity to observe and analyse a phenomenon previously in accessible to scientific investigation (Yin 1989). Given the limited real-life projects that are available, two case projects are selected for the researcher to develop insight into the application of an emerging of decision support model.
Chapter 3: Research Methodology and Development
However, Yin notes, "The case study has long been stereotyped as a weak sibling among social science methods. Investigators who do case study are regarded as having deviated from their academic disciplines; their investigations, as having insufficient precision (that is quantification), objectivity and rigor". Summarising the work of others, he concludes that the strength of a case study is dependent upon the development of an explicit research design, and the use of several methods for data collection (Yin 2003).
3.3 Research Process This section seeks to integrate the preceding discussion into a research methodological framework to illustrate how the different research elements are developed in this research. There are four distinct phases in conducting this research which includes (1) literature review (2) survey development (3) decision support model development (4) case study. The research process is illustrated in Figure 3.3.
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Phase 1
Understand concept of sustainability & LCCA
Research Problems Literature Review
Identify research gaps
Survey Semi-Structured Interview
Questionnaire Survey Phase 2
• • • • •
What is a questionnaire Survey? Why a questionnaire Survey? What is the sample? How to conduct a questionnaire Survey? How to analyse the data?
• • • • •
What is a semistructured interview? Why a semi-structured interview? What is the sample? How to conduct a semi-structured interview? How to analyse the data?
Model Development Phase 3
• • • •
What is model development? Why model development? How to conduct model development? How to analyse the data?
Case Study Phase 4
• • • • •
What is a case study? Why a case study? What is the sample? How to conduct a case study? How to analyse the data?
Figure 3.3: Research process
Chapter 3: Research Methodology and Development
3.3.1. Literature review The literature review was conducted to identify how the knowledge developed to date impacts on the problem. According to the research problem, the literature is crucial for this research. Literature reviews inform researchers of the background to their research projects and provide context and ideas for their studies. There are good reasons for spending time and effort on a review of the literature before embarking on a research project. These reasons include: •
To identify the gaps in the literature,
•
To avoid reinventing the wheel (at the very least this will save time and it can stop the research from making the same mistakes as others),
•
To carry on from the point others have already reached (reviewing the field allows the research to build on the platform of existing knowledge and ideas),
•
To identify other people working in the same fields,
•
To identify information and ideas that may be relevant to the research, and
•
To identify methods that could be relevant to the research.
3.3.1.1. Literature review purposes The literature review was to define the initial research questions and to develop a general understanding for this study. This study carried out several steps to conduct the review of the literature and highlighted three main topics based on the first research question (as discussed in Section 1.2): •
The sustainability development principles and evolution of highway infrastructure development in Australia.
•
The principle of engineering economics, LCCA application, current LCCA models and their limitations in adopting sustainable measures in highway infrastructure.
•
Cost components related to sustainable measures in highway infrastructure.
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The literature reviewed on these three topics provided a theoretical background for the study. Through the literature review, a clear picture was formed for the researcher to identify the cost components related to sustainability measures and the limitations of existing LCCA approaches to adopting sustainability.
3.3.1.2. Literature review development This study has obtained most of the books and journal articles through libraries and electronic databases. The published literature can be retrieved through the existence of computer databases, computerised catalogues and searches on the internet. The researcher has identified several ways to explore important sources of written information. One of the most effective ways to obtain the literature is to ask for key readings from an acknowledged expert. This expert is able to provide guidance to the ‘specialised’ material, the latest findings and journals, and perhaps to unpublished material and other useful contacts. This study is also identifying and locating the material for a review. It is necessary to keep full and accurate bibliographic details, including information on the location of materials so that they can found again quickly. The researcher in this study employed a computer-based record system “Endnote”, which is a user-friendly and powerful application to cross-reference, and to attach fields for notes to the bibliographic details. All the written materials have been read fully and reflectively. The review of literature is focusing on the patterns, arguments, new ideas, methodology, and areas of further enquiry. The information gathered was systematically transferred into notes by classifying it under headings. The clearly presented tables were used to record a large amount of quantitative information, whereas reviews of qualitative materials were noted in text. Based on these steps, the preliminary model is developed and cost components related to sustainability in highway infrastructure were identified. The next procedures are the re-evaluation and selection of the definitive cost components to be evaluated by industry stakeholders using survey methods.
Chapter 3: Research Methodology and Development
3.3.2. Questionnaire This study used questionnaire-based surveys as the method to identify the critical cost components in life-cycle cost analysis that emphasise sustainability in highway infrastructure. The questionnaire surveys was selected because questionnaire surveys are effective in gathering information about the characteristics, actions or opinions of a large group of people (Creswell 2009). The questions that were designed for this questionnaire occur in two forms- open and closed. As shown in Table 3.1, open and closed questions have some different characteristics. According to Fellow and Liu (2008), careful consideration of the type of questions used in a questionnaire is essential so that researchers can get good responses. A well-designed questionnaire that is used effectively can gather relevant information on the sustainability-related cost components and also the comments of related factors that influence the application of sustainability in LCCA practice. Table 3.1: Characteristics of questions
• • • •
Open Question Easy to ask Informative Difficult to answer Never full / complete
• • • •
Closed Questions A set of number of responses - Likert scale Less informative No bias. Easier and quicker to answer
It is important to remember that a questionnaire should be viewed as a multi-stage process beginning with a definition of the aspects to be examined and ending with an interpretation of the results. Every step needs to be designed carefully because the final results are only as good as the weakest link in the questionnaire process. Questionnaire research design proceeds in a systematic and precise manner, as illustrated in Figure 3.4. Each item in the figure needs to be well planned and organised to conduct a comprehensive questionnaire survey.
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Define Goals and Objectives
Conduct Pilot Test
Revise Instruments
Design Methodology
Select Sample
Conduct Research
Determine Feasibility
Develop Instruments
Analyse Data
Prepare Report
Figure 3.4: Questionnaire research flow chart (Statpac 1997)
3.3.2.1. Purposes of questionnaire From the literature findings, an online questionnaire was conducted for the following research purposes: •
To identify the importance of sustainability-related cost components,
•
To explore barriers associated with quantifying cost related to sustainability measures,
•
To identify different perspectives of industry stakeholders towards cost components related to sustainable measures, and
•
To explore the industry stakeholders’ opinions of the future prospects in integrating sustainability into long-term financial management for highway projects.
In the questionnaire survey, the stakeholders (namely, local and state government officers, project managers, engineers, quantity surveyors, planners, civil contractors and subcontractors) were asked to rate the cost components based on their experience in highway projects. These cost components are incorporated into the proposed
Chapter 3: Research Methodology and Development
conceptual model for further development. Semi-structured interviews were employed to explore the current practice of long-term financial management and the calculation methods to quantify the costs related to sustainable measures in highway development.
3.3.2.2. Selection of questionnaire respondents The questionnaire used in this research was based on the combination of the literature review on contemporary LCCA models, preliminary model development, and also the identification of sustainability-related cost components in highway infrastructure. Unless a study is quite narrowly construed, researchers cannot study all relevant circumstances, events or people intensively and in-depth; samples must be selected (Bernard 2006). For this research, three main construction industry players involved in highway projects, namely, consulting companies, contractors and government agencies from Australia were included. The respondents include senior practitioners and stakeholders who have substantial working experience in highway infrastructure projects. They play an important role in the construction industry because they are the
decision-makers in highway investments. Consequently, these stakeholders also have more concerns about the economic dimension of highway construction projects. To ensure that holistic views were collected, targeted stakeholders included government or client representatives, builders, designers, project managers, quantity surveyors, planners, contractors and subcontractors involved in highway projects. The questionnaire respondents were selected from the last updated databases available in:
1. The National Innovative Contractors Database by the Cooperative Research Centres for Construction Innovation. 2. Directories from the Australian Institute of Quantity Surveyors. 3. Directories from Association of Consulting Engineers Australia. Samples chosen from these databases are a good representative of the Australian construction industry stakeholders. Through the questionnaire, the opinions and comments by these senior stakeholders represent the current industry’s perceptions of
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the importance of sustainability-related cost components in highway projects in particular.
3.3.2.3. Questionnaire development The questions in the questionnaire focus on the level of importance of three groups of sustainability-related cost components: agency, social, and environmental cost components. The questions were designed to identify the importance of these three categories of cost components in long-time financial management as highlighted in the literature review. The three sections focus on different aspects of sustainability-related cost components when selecting a highway infrastructure project and making highway investment decisions. The agency, social, environmental cost components sections aim to explore the perspective of industry stakeholders’ regarding the level of importance of these costs in highway investment. Meanwhile, the open questions seek to explore the comments and opinions of the stakeholders towards implementation of sustainability-related cost components in highway long-term financial management. The supplement at the end of the questionnaire is designed to gather information about the participants’ background for statistical purposes. The questionnaire was developed using a multiple-choice format. Some of the multiple-choice questions include answers to be solicited on a 5-point Likert scale with 1 representing the “not important” and 5 the “very important”, while others are designed with several pre-described answers. The questionnaire also includes one open-ended question to allow the respondents with relevant experience in highway development to write down the comments and problems they have come across in the long-term financial management of highway projects. The specific content of the questionnaire is presented in Appendix A2. Before the questionnaire was distributed to the respondents, it was initially been piloted by a small sample of respondents. Fellow and Liu (2003) argue that piloting will evaluate the questions to ensure they are intelligible, easy to answer and unambiguous, and to test the structure of the questionnaire design. The feedback
Chapter 3: Research Methodology and Development
obtained from the pilot respondents will help the researcher to improve the questionnaire. This research undertook the pilot questionnaire with academic and industry experts. This resulted in improving the questionnaire, filling in gaps, and determining the time required for, and ease of, completing the exercise. In addition, the ability to achieve the research objectives was a significant consideration in the piloting process. This process can improve the understanding of the researcher so that they would be able to analyse the results and findings well. As mentioned above, the questionnaire aims to explore the issues raised in the literature review. The design of the questions was based on those issues. The appropriateness and adequacy of the proposed questions were justified through the pilot study, which was carried out from April 2009 to June 2009. In the pilot study, the preliminary version of the designed questionnaire was sent to three academic staff in this field at the Queensland University of Technology and two industry practitioners at the Queensland Department of Public Works to test whether the questions were intelligible, easy to answer and unambiguous, and to seek possible improvement. A series of discussions were held separately with each of the persons involved. The results of the discussions proved to be useful and led to minor refinements of the questionnaire in the following aspects: •
Present an extra choice of “others” in most questions in order to allow respondents to add any possible answers which are not given in the questionnaire;
•
Shorten the questionnaire length and make it more succinct and clear;
•
Revise the rating scales for the importance level of cost components related to sustainable measures.
Following these suggestions, the questionnaire development was finalised and tested again with two of the above five participants, making sure that all the issues had been clarified and resolved. By April 2009, the questionnaire was ready to be disseminated to the industry stakeholders. The questionnaire was administered by email with on-line link to the web-based questionnaire to respondents due to the geographical limitations. A commercial
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survey provider, Survey Monkey (http://www.surveymonkey.com/), administrated the web-based questionnaires used in this research. Subsequently, the author approached the participants through emails to seek their consent to participate in this research. Before participating in the questionnaire survey, participants were given the following information by email and ordinary mail: 1. Cover letter; 2. Consent form for research project ; 3. Participant information for QUT research projects; and 4. Questionnaire survey sheets. In order to improve the response rate, the questions were designed to be unambiguous and easy to answer by the respondents. Fellow and Liu (2003) suggest that the questions in a questionnaire should not request unnecessary data; questions need to be clear, concerning one issue only and the questions should be presented in an ‘unthreatening’ form appropriate to the research. Dillman (2007) also argues that questionnaires by email or web need to have a user-friendly design because any complexity will prevent some respondents from receiving and responding to the questionnaire.
3.3.2.4. Data analysis All the data collected from the questionnaires was recorded into the Survey Monkey web survey tool. From the tool, the role data, which is the inputs from the respondents were retrieved and analysed using a software program. Sekaran and Bougie (2003) suggested that data analysis should be done with the aid of software programs. In this research, Microsoft Excel and SPSS were employed to analyse the data. Microsoft Excel was suitable for conducting statistical analysis to display the analysis in chart and graph format, while SPSS was used to transform the data into information such as the t-test analysis as SPSS offers more comprehensive statistical analysis. Microsoft Excel is also used to store and organise information as well as reordering records according to a numeric field. Both software programs play an important role in analysing statistical data gathered from the questionnaire survey.
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This study commenced two methods data analysis to identify the related importance of cost components related to sustainable measures in highway projects in Australia. Mean indexing and t-test are widely used in presenting exploratory and descriptive data analysis and can provide support to the criticality index in this research. Among many others, Yang and Peng (2008) used the mean index to discuss the importance of the evaluation factors for customer satisfaction in project management. Ahuja et.al (2009) used the standard deviation and mean in evaluating the issues of
ICT
adoption for building project management in the Indian construction industry. Shehu and Akintoye (2010) used mean to ‘support criticality index to rate the major challenges’. This research also used the same approach to support criticality index to rate the cost components related to sustainable measures. The level of importance was based on their professional judgment on a given fivepoint Likert-scale from 1 to 5 (where 1 is not important at all and 5 is very important). Higher mean scores reflect responses that indicate the higher importance of the respective cost components. The critical rating was fixed at scale ‘3.75’ since ratings above ‘3’ represent ‘moderate important’, ‘4’ represent ‘important’, and ‘5’ represent ‘most important’ according to the scale. Likert scales facilitate the quantification of responses so that statistical analysis could be taken and observed the perceptions of differences between participants. This study also employed descriptive statistics to analyse the survey results on the critical cost components. The mean scores ratings of all proposed cost components were calculated using (Eq. 1):
a=
1(n1) + 2(n2) + 3(n3) + 4(n4) + 5(n5) (n1 + n2 + n3 + n4 + n5)
(1)
where “a” is the mean importance rating of an attribute and n1, n2, n3, n4, and n5, represent the number of subjects who rated the cost components as 1, 2, 3, 4 and 5, respectively. The data from the survey was analysed using mean and standard
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deviation to rate the cost components. The t-test analysis was employed to identify ‘importance’ cost components to be considered in long-term investment for highway infrastructure. Prior to proceeding with the analysis, a Cronbach α reliability analysis was conducted. The result of the test proves the reliability of the data is≥α0.7 as recommended (Chan, Chan et al. 2010; Yip Robin and Poon 2009). Yang and Peng (2008) suggests that in the early stages of research on predictor tests or hypothesised measures of a construct, reliability of α≥ 0.7 or higher will suffice. In this case, α = 0.948. The t-test analysis has been used by past studies in identifying the relative important indicators (Ekanayake and Ofori 2004; Wong and Li 2006; Shehu and Akintoye 2010). It can also provide support to the important cost factors in this research. The rule of t-test of this survey sets out that the cost factors which value larger than 3.75 were considered to be critical. The null hypothesis (H0: μ1μ0) were tested, where μ1 represents the mean of the survey sample population, and μ0 represents the critical rating above which the indicators considered as ‘important’. The value of μ0 was fixed at ‘3.75’because it represents ‘important’ and ‘most important’ factors. The decision rule was to reject H0 when the result of the observed t-values (tO) (Eq. (2)) was larger than the critical t-value (tC) (Eq. (3)) as shown in Eq. (4).
x� − μ0 SD� √n
(2)
tc = t (n−1,α)
(3)
to > 𝑡𝑡𝑡𝑡
(4)
to =
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where 𝑥𝑥̅ is the sample mean, SD/ √𝑛𝑛 is the estimated standard error different mean
score (𝑆𝑆𝑆𝑆 is the sampled standard deviation of difference score in the population, n is
the sample size which was 62 in this study), n-1 represents degree of freedom, and α represents the significant level which was set at 5% (0.05). The criticality of cost components in this study was examined using Eqs. (3) and (4). If the observed t-value is larger than the critical t-value to > tc, 𝑡𝑡(61,0.05)= 1.671 at
95% confidence interval, then H0 that the indicator was ‘moderate important’, ‘less important’ and ‘not important’ rejected, and only the H1 was accepted. If the observed t-value of the mean ratings weighted by the respondents was less than the critical t-values (tO< tC), the H0 that was ‘less important’ and ‘not suitable’ only was accepted.
3.3.3. Semi-structured interview In general, there are three types of interview, namely, unstructured, semi-structured and structured types. Unstructured and semi-structured interviews are often referred to as qualitative research interviews (King 2004). Unstructured interviews are informal and are conducted in order to explore some preliminary issues so that the researcher can determine what variables need further in-depth investigation. Semistructured interviews are designed to have a list of themes and questions prepared in advance; however, such prepared questions are relatively open and flexible in relation to the research topic. This means that subsequent interviewer questions can be modified and question wording can be changed, omitted or added based on the needs of the situation in advance (Robson 2002). However, interview questions must be improvised in a careful and theorised way (Wengraf 2001). Structured interviews are based on an identical set of questions. Those questions are designed usually with pre-coded answers and are also referred to as quantitative research interviews (Saunders, Lewis and Thornhill 2009). The researcher has a list of predetermined questions to be asked of the respondents either personally, on the telephone, or through the medium of a computer (Sekaran and Bougie 2003). Each interview method has advantages and disadvantages. Semi-structured interviews can be easily controlled based on what the interviewer expects to enquire
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about, as compared to unstructured interviews. In this case, the semi-structured interview allows the researcher to ask specific questions that are relevant to the interviewees’ understanding of and opinions on the current practice of long-term financial management and cost components related to sustainability measures in highway infrastructure project. Moreover, the flexibility in semi-structured interviews enables the researcher to keep the interviewees on track regarding the topic of discussion, and in the meantime to express their views freely. As for structured interviews, the questions are focused on a predetermined set. The interviewer is totally in control over the interviewees who are given a subordinate role in this context. This does not allow respondents to express their opinions freely (Saunders, Lewis and Thornhill 2009). Burgess (1988) argued that the structured interview is defined as a data collection device involving situations where the interviewer merely poses questions and records answers in a set pattern. The lack of flexibility in structured interviews is unlikely to bring forth opinions from the respondents for the purpose of this research. Based on the above argument, the semi-structured interview approach was adopted for this research. In order to have a better understanding of the current practice of long-term financial management and cost components related to sustainable measures in highway projects, the interview questions were prepared in three main sections along with a few other sub-questions. This strategy helped to ensure the questions would be well understood by the interviewees, and simultaneously, helped the researcher to extract meaningful data. Practically, the researcher was able to ask and guide the conversation and focus on the relevant questions in order to have a clearly understanding before the interviewee starts answering. This process guided the interviewees, and at the same time enabled them to develop their ideas and share their experiences and perceptions on the current practice of long-term financial management and the calculation of cost components related to sustainable measures in highway projects.
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3.3.3.1. Semi-structured interview purposes The semi-structured interview was aimed to achieve the following three purposes: •
To identify the current industry practice on LCCA applications for highway infrastructure projects;
•
To identify ways to integrate cost components related to sustainability measures into LCCA practice and the enhancement of the sustainability concept into LCCA practice in highway projects; and
•
To obtain the industry practitioners’ recognition of the challenges of integration sustainability-related cost components into LCCA practice in order to clarify the many uncertainties exposed by the earlier questionnaire survey.
The interview presented all the cost components identified from the questionnaire to the respondents and asked them to comment on these components. Interviewees were also encouraged to propose possible solutions and considerations to deal with these sustainability-related cost components. The data collected was analysed in the same sequence as the pre-described questions in the interview.
3.3.3.2. Selection of interview respondents Sekaran and Bougie (2003) suggest that while choosing the sample for interview, those interviewed should be representative of the group who are attempting to make inferences about. The specific target groups should also be the holders of the desired information and able to answer research questions. For this research, the eligible participants for the interviews were selected based on their substantial working experience in highway infrastructure projects. These stakeholders and practitioners usually have 15 to 20 years of experience and still practise in this industry. Targeted stakeholders in this interview included government representatives, environmentalists, engineers, project managers, financial representatives (specifically in infrastructure management) and academics. From the respondents of the questionnaire survey, 20 practitioners who fit this criteria were invited to participate
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in this research. As some of the practitioners were retired recently, changed job scope or unable to cope with their schedule, 15 practitioners agreed to be involved in this interview. The response rate shows a significant interest from the industry. The comments from these practitioners represent the perceptions of the current practice of long-term financial management and deal with the sustainability-related cost components in highway projects.
3.3.3.3. Interview development Semi-structured interviews can be conducted in many situations, such as face-toface, telephone, internet and intranet mediated interviews (Saunders, Lewis and Thornhill 2009). The face-to-face and telephone interview approach was employed in this study. Face-to-face interview was adopted for the interviewees who were contactable in Brisbane, Queensland. On the other hand, due to the geographical limitations, telephone interviews were employed for the interviewees outside the Brisbane, Queensland area. In this case, the interviewer managed to control the pace of both interview approaches and record any data that was forthcoming. The face-to-face and telephone interview approaches were employed in this research in the following contexts and stages: •
After the questionnaire survey stage, the interview was conducted, which aimed to identify the different perceptions and expectations of various stakeholders regarding the current practice of long-term financial management and.
•
The interview also served to understand the determination and calculation of sustainability-related cost components in highway projects in Australia; and
•
In relation to case studies at a later stage to elicit information from case study projects.
The questionnaire survey identified differences in the various stakeholders’ perceptions of cost components related to sustainability measures in highway projects. Accordingly, the semi-structured interviews that were conducted at the middle stage of data collection after the questionnaire survey uncovered the in-depth
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understanding and perceptions of the current practice of long-term financial management of the different interviewees, and enable the researcher to determine how the sustainability-related cost components are calculated and which unquantified variables needed further in-depth investigation. Furthermore, the interviews adopted in the case study phase helped the researcher to evaluate and improve the proposed model. As per the questionnaire findings, the industry stakeholders generally agreed that the consideration of sustainability-related cost components is essential and must be integrated into long-term financial management for highway investment decisions. Based on the questionnaire, many potential issues were identified for the exploration of the current practice of long-term financial management as well as potential ways to quantify these cost components in real money figures. Hence, the semi-structured interviews were employed to: (1) explore the current industry practice regarding LCCA application in highway projects; (2) identify the ways of integrating cost components related to sustainable measures into LCCA practice; and (3) explore the challenges of integrating cost components related to sustainable measures into LCCA practice. In response to the interview purposes, the pre-described interview questions consisted of three sections. Section 1 presented the current industries practice of Life-cycle costing analysis (LCCA) in determining pavement type for highway infrastructure. The interviewees were also encouraged to express their comments on the types of highway maintenance activities, period of maintenance throughout its lifetime. Before they move into next section, there is a question, which explores their comments about the importance of integrated sustainability-related costs in your analysis. Section 2 consisted of three parts namely agency, social and environmental cost components which further identify the ways of measuring these costs in highway development. This section was employed to identify various calculation approaches used by current industry to quantify these components into real costs and the limitation of quantifying certain components into real costs. Section 3 included the potential problems that can occur in quantifying sustainability-related cost components and explored their comments in improving the problems faced by the
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industry in dealing with the problems. Again, the interviewees were encouraged to propose other issues, which had not been listed in the predefined questions. Thirteen interviews were conducted between February and April 2010. With the assistance of the industry contacts, an appointment was made with each participant. Due to geographical reason, some of the interview sessions were conducted by telephone. Before the interview, each interviewee was given the following information, electronically:
1. Cover Letter 2. 'Participant Information for QUT Research Project' and 3. Interview Questions Sheet. Each interview began with the author explaining to the interviewees the specific objectives of the interview, and the overall research objective. To ensure that they understood the intended meanings, any queries were clarified. Each interviewee was then asked to confirm that they truly understood each of the interview questions and the interview objectives. Ample time was given to all interviewees to elaborate their answers to the questions. All of the verbal answers were recorded in a digital voice recorder. Considering the time limit and the numbers of questions, the researcher allowed the interviewees to give their comments in section 2 based on their understanding of each cost components. Interviewees were also encouraged to present their opinions on how to solve the cost issues appropriately in the real projects. Each interview was expected to last 45 minutes to 1.5 hours. The specific content of the semi-structured interview is presented in Appendix B3.
3.3.3.4. Data analysis During the interviews, the answers and opinions of the interviewees were recorded. Subsequently, the responses were transcribed into text documents, with the aid of software and Microsoft Word. In order to improve the accuracy of the transcriptions, the comments from the interviews were first transcribed by software called
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Macspeech Scribe Version 1.1. Once the transcription was finished, the researcher listened to the transcriptions again and filled in the gaps and checked for any mistakes made by the software. Once finished editing the transcription, the researcher listened to the recorded interview again, checking on the consistency between the transcription and the comments and opinions of the interviewees. Next, the responses were categorised and grouped under different headings. This allowed systematic and thorough analysis of the respondents’ comments on the current practice of long-term financial management in highway projects, their perceptions of integrating and quantifying costs related to sustainable measures into highway infrastructure investments, and their expectations and suggested improvements for long-term financial management in highway projects. The results are discussed accordingly in Chapter 4.
3.3.4. Model Development Model development is an approach that improves productivity as it is able to transfer previous modelling experience to the construction of new models. It is a processoriented approach to model reusability where the transfer of previous modelling experience is captured by concept for formation of a model domain as well as the modelling process (Binbasioglu 1994) Based on this approach, preliminary model development was carried out to identify the cost components in traditional life-cycle cost analysis models and in the sustainability context. In addition, the traditional LCCA models were refined and transformed into a new model. However, traditional LCCA concepts were used as the model domain for the new model with an emphasis on the sustainability context. In order to achieve the research objective, a new model was developed based on the five stages in model building: problem identification and definition, system conceptualisation, model formulation, analysis and evaluation of model behaviour, policy analysis, and model use or implementation (Richardson and Pugh 1997). Table 3.2 summarises the steps and stages in model building.
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Table 3.2: Stages and steps in model building (Richardson and Pugh, 1981)
Stage
Steps
Problem
Define time horizon Identify reference modes Define level of aggregation Define system boundaries
Conceptualisation
Establish relevant variables Determine important stocks and flows Map relationships between variables Identify feedback loops Generate dynamic hypotheses
Formulation
Develop mathematical equations Quantify model parameters
Analysis/ evaluation
Check model for logical values Conduct sensitivity analyses Validate model
Policy analysis
Conduct policy experiments Evaluate policy experiments
As can be seen from Table 3.2, the process of model building involves a wide variety of conceptual activities. These range from 'brainstorming' variables to be included or excluded from the model's boundary to determining specific parameter values to identifying the important feedback loops within the model. However, the stages commonly distinguish between three general types of tasks: eliciting information, exploring courses of action and evaluating situations (Hackman 1968; Sidowski 1966; Bourne and Battig 1966; Simon 1960). Different phases of the modelling process emphasise different combinations of these three types of tasks. The purpose of conducting model development in this research is to develop a decision support model for the evaluation of long-term financial decisions regarding sustainability for highway projects. The model presents a series of Fuzzy AHP and LCCA evaluation methods in dealing with the critical cost components related to sustainable measures that were identified from the questionnaire. Chapter 6 explains the overall model development process and highlights the detail of incorporating Fuzzy AHP and LCCA analysis into the model. The developed model can serve as a decision support tool for the industry stakeholders to assess the long-term financial
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viability of sustainability measures in the highway projects. This model is tested and evaluated by case projects, which are further be discussed in Chapter 7.
3.3.5. Case Study The case study approach is ideal when a holistic, in-depth investigation is needed (Feagin, Orum and Sjoberg 1991; Guba and Lincoln 1989; Patton 2002). Merriam (1988) cites qualitative case study research as the preferred choice for those researchers who are seeking insight, discovery and interpretation (rather than hypotheses testing) and where there is a desire for holistic description and explanation. A case study is a detailed examination of an event (or a series of events). Yin (2003) defines a case study as an objective, in-depth examination of a contemporary phenomenon where the investigator has little control over events. The case study also allows an investigation to retain the holistic and meaningful characteristics of real-life events – such as individual life-cycle, organisational and managerial processes, neighbourhood change, international relations, and the maturation of industries (Yin 2003). It is an examination of specific phenomenon such as a program, an event, a person, a process, an institution, or a social group (Merriam 1988). In order to test and validate the proposed decision support model, the case study approach was used. As highlighted by Stake (2005), the data derived from qualitative case studies is more concrete, contextual and further developed through the researcher’s own experiential understanding, combined with the findings. Previously unknown relationships and variables could be expected to emerge from case studies, leading to a rethinking of the phenomenon being studied (Stake 2005). This is what is expected to occur in this research where deep insights and understandings of the proposed decision support model can be applied in highway projects. In this research, the case study method is needed for a better understanding of the stakeholders’ requirements and comments on the model. Meanwhile, several case studies are used to test and validate the model to ensure that it is able to improve the decision-making process in highway projects along with the consideration of sustainability factors. Several approaches were employed in the case study stage. This included interview and documentary analysis. These different data collection
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techniques help the researcher to ensure validity and create discrete dimensions in the data collected.
3.3.5.1. Case study purposes The case study is conducted to achieve the following two purposes: •
To integrate the industry-verified cost components into existing LCCA models for further development.
•
To apply, adapt, then complete the proposed decision support model through testing and evaluating the model on the real-life projects.
The case study serves to compile all the critical cost components identified from the questionnaire and integrated these into a decision support model. This study employs two real-life highway projects to test and evaluate the model. Participants involved in the projects were encouraged to criticise the model and propose suggestions for its improvement.
3.3.5.2. Selection of case projects The selection of case projects is a process that needed attention by the researcher to maximise the data collected as well as lessons learned in the research period (Tellis 1997). The selection of methods and cases for the case study will significantly affect the overall result of the research. Yin (2003) suggests that the selection of case projects needs to relate to the research problem and questions and identify the attributes that are most likely to yield relevant data. For this reason, this research has identified certain criteria and considered the suitability of selected case studies. To have a meaningful result for this research, the case projects were selected based on the following criteria: 1. The case project must have been completed in a specific timeframe (around 815 years prior to 2010) during which life-cycle costing anaylsis (LCCA) have been undertaken,
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2. The case project must recently have gone through economic evaluation by the Australian government, and 3. The case project site should be in Australia and accessible to the researcher. The criterion that the case project must be gone through economic evaluation by Australian government is significant because the data of the project can be used by the researcher to develop and evaluate the proposed model for long-term financial decision in Australian highway infrastructure projects as the final outcome. The researcher also consulted with several industry practitioners based on the selection criteria to select the most suitable case projects. This process helped the researcher to select the two most relevant case projects namely, the Wallaville Bridge (Queensland) and the Northam Bypass (Western Australia). The two case projects fulfill the following criteria as shown in Table 3.3. Table 3.3: Case projects’ fulfillment of selection criteria
Case Project Criterion Located in Australia Completed in 8-15 years ago (from 2010) Post-Economic Evaluation by Government Highway Infrastructure
Wallaville Bridge
Northam Bypass
Queensland
Western Australia
15 years ago
8 years ago
Yes
Yes
Highway Bridge
Highway
The number of case projects was a main concern in this study. There is rarely a specific number of cases that needs to be used in a case study (Yin 2003). However, previous studies have recommended that two to four cases are the minimum, and 1015 are the maximum (Perry 1998). In this research, the selection of the number of cases was based on the relevant data in the industry as well as the justification of the time, funding and resources constraints. Based on the factors highlighted, two highway infrastructure projects were chosen as the case projects in this study. The two case projects are considered to be representative of Australian highway infrastructure projects given the fact that:
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1. They were based on the same Australian economic, social and political conditions, and way of life. Thus, they have very similar highway infrastructure development processes, requirements and expectations. 2. They are both funded and approved by the Australian Commonwealth Government and carried out according to the Commonwealth standards applicable to all states in Australia and, 3. These two case projects cover the main elements of highway infrastructure as they include bridges and highway pavements. As shown in Table 3.4, the case projects were both completed in the range of 8-15 years prior to 2010. The reason for selecting projects of this age is because they have gone through a certain life span. Both projects were also recently post-economic evaluated by the Australian government so relevant data and information is available for use in this study. For example, the cost data for both projects is used to conduct the life-cycle cost analysis (LCCA). These data is then tested and integrated into the proposed model for further validation.
3.3.5.3. Case study development This research used a combination of quantitative and qualitative methods in the case studies to derive information that is complex or probing. Gable (1994) suggests that the case studies should include a combination of qualitative and quantitative analyses to seek in-depth understanding of a certain problem. In this case, the case study process can be divided into two stages. The first stage involved the application of the developed decision support model. The Fuzzy AHP and LCCA methods were employed to test and evaluate highway alternatives based on the data from the reallife case projects. The second stage included semi-structured interviews with the participants involved in the highway projects to probe into the validity of the developed decision support model and any further improvements needed. Both stages of the case study are outlined in Figure 3.5.
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CASE STUDY Stage 1 • • •
Stage 2
Model application based on two real-life projects. Integration of Fuzzy AHP and LCCA evaluation methods. Involvement of data input from questionnaire and document analysis.
•
•
Semi-structured interview – validate and gain suggestions to improve the model. Respondents (projects participants) suggest the limitations and improvements for the model.
Figure 3.5: Case study process
In Stage 1, the combination of two evaluation methods, Fuzzy AHP and life-cycle cost analysis are used to test the model. Triangular fuzzy numbers are employed to represent the respondents’ comparisons by linguistic terms. The comparison of the importance of main criteria of cost components, sub-criteria of cost components and alternative t can be done with the help of the questionnaire (Appendix C2). The data collected from the questionnaires are the input to the Fuzzy AHP and LCCA Analysis. Fuzzy AHP is employed to analyse the weights of the criteria and alternatives based on the data from the questionnaire. The weight vectors are calculated based on this approach. Then, the normalised weight vectors are determined. As a result, the final set of scores of highway alternatives are obtained by the evaluation matrices. The detail calculation method of priority weights of the different highway alternatives by Fuzzy AHP is further explained in Chapter 7. Simultaneously, document analysis that covers project documents, industry publications and reports was also used to identify the related cost components that can be applied for LCCA calculation. These related costs, project activity timing, discount value and evaluation timeframes were identified and incorporated into the LCCA calculation. Based on this method, the final sets of costs of highway alternatives are calculated. Finally, weighted sum model was employed to combine both results and identify the most suitable alternative based on ion value.
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In Stage 2, semi-structured interviews were conducted to validate and gain suggestions to improve the model. Yin (2003) observes that the central tendency of all types of a case study is to illuminate a decisions by considering why they were taken, how they were implemented and with what results. Thus, this case study aims to identify how this developed model can aid stakeholders in dealing with real-life projects. Their decisions served to clarify the way in which each critical cost component could be addressed in the model. To validate the model, the interviewees were requested to answer the following questions based on their project experience in either the Wallaville Bridge (Case A) or Northam Bypass (Case B) projects: 1. What are the problems arising from the model? 2. How can these problems be addressed? 3. What actions are necessary to improve the model? Since both case projects were selected for economic evaluation, it is implied that both cases were rich in data and could provide meaningful data input to the study. The data collected from the case projects paved the way for the final step of the research: the development of a decision support model that aids the stakeholders to improve financial investment decisions for highway infrastructure development.
3.3.5.4. Data analysis Correspondingly, recorded interviews from the case studies were transcribed into text documents using the software package as discussed above. Each interviewee gave their comments and opinions based on the selected projects. They identified the related important cost components that needed to be considered in long-term financial management of highway investment. Each input was analysed using Fuzzy AHP and life-cycle costing calculations. To ensure the meaningful research outcomes, these results were discussed with a number of industry stakeholders involved in the case projects. From this process, as the outcome of the research, a model for achieving long-term financial decision support with consideration of sustainability could be developed.
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3.4
Ethical Considerations
The ethical considerations of this study involved protecting the rights and welfare of participants in the questionnaire, semi-structured interview and case study. This study serves to achieve outcomes that are beneficial to the Australian highway industry and stakeholders on highway projects in Australia. In doing this, the research aims to preserve the truthfulness of research, the integrity of the individual researcher, the reputation of the organisations responsible for research, and the responsibility of the researcher to both the general community and to specific groups that have an interest in this research.
This research project followed guidelines provided by the QUT Research Ethics Committee in line with requirements by the Faculty of Built Environment and Engineering. This involved the ascertaining of approval and clearance for the research topic, the data collection methods, the instruments, materials used, the site and location, the sample population, information required, treatment of data, the methods of analysis, confidentiality issues, dissemination of information and results, and intellectual property and copyright issues. Covering letters were attached to the questionnaires explaining the purpose of the research, giving assurance of confidentiality, outlining the benefits of the study and soliciting voluntary participation by the sample population. In addition, optional consent forms for voluntary participation were provided to the potential interviewees (see Appendix B2). Each individual and organisation was required to understand and agree with the terms and conditions before participating in the session. Fulfillment with other requirements was confirmed in consultation with the individual participants, and with the guidance and advice of the principal research supervisor.
3.5 Chapter Summary This chapter presented the relevant methodological issues and described the research methods employed in this study. Generally, the research procedure followed certain structural phases. These phases and processes are as shown in Figure 3.3. This study employs four distinctive data collection methods namely, questionnaires, interviews,
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model development and case studies. Each research method was justified to achieve the research objective before considering the selection of respondents as well as case projects. Research development and data analysis processes are also clearly defined in this chapter. All of these form a comprehensive of the results that derived from data collected in questionnaires, semi-structured interviews and case studies. These provided a strong platform for the development of a long-term financial decision support model incorporating sustainability measures in highway projects. Through comparison with experience in real-life case projects, industry stakeholders can evaluate and validate the model. This study collected relevant data through a range of appropriate research methods, and the extensive results and findings are presented in Chapters 4, 5, 6 and 7. The next chapter discusses the questionnaire data analysis and findings.
Chapter 4: Cost Implications for Highway Sustainability – Survey Studies
CHAPTER 4: COST IMPLICATIONS FOR HIGHWAY SUSTAINABILITY – SURVEY STUDIES
4.1 Introduction This chapter reports the findings from phase 2 of the research process discussed in the previous chapter (Section 3.3). It presents the results through the mixed method strategy that analysed predominantly quantitative data. Phase 2 involved the survey methods namely questionnaires and semi-structured interviews. The questionnaire survey was administered as a means of intervention to identify the critical cost components related to sustainable measures in highway infrastructure investments. Semi-structured interviews aim to explore the different perceptions and expectations of various stakeholders regarding the current practice of life-cycle cost analysis with a view to integrating their expectations into a model that suitable for the long-term financial management of Australian highway infrastructure. Figure 4.1 shows the results from both methods that answer the second research question: What are the specific cost components relating to sustainability measures about which highway project stakeholders feel most concerned? This chapter has four main sections. Section 4.2 provides a brief description of the respondents. Next, Section 4.3 discusses the results and findings obtained through both methods. This core process is necessary to convert the results into the development of a decision support model for the evaluation of highway investment. Section 4.4 provides a summary of the findings in this chapter.
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Chapter 1.
Chapter 2 Literature Review
Cost Implications for Highway Sustainability
Chapter 5 & 6 Decision Support Model Development and Model Application
Understanding cost implications pursuing sustainability
of
• Understanding global initiatives on sustainable infrastructure development • Understanding the context of highway infrastructure development in Australia • Reviewing current LCCA model and programs • Identifying sustainability-related cost components in highway infrastructure projects
2.
Chapter 4
Research Questions
Research Objectives
Identifying sustainability-related cost components that project stakeholders concerned with
• Exploring current practice of life cycle cost analysis in Australian highway infrastructure • Identifying critical sustainabilityrelated cost components in highway infrastructure investments • Integrating various stakeholders’ expectation of sustainability enhancement in LCCA
3. • •
Developing a decision support model Integrating the industry verified cost components with decision support model. Testing and evaluating the decision support model
What are the sustainability measures that have cost implications in highway projects?
What are the specific cost components relating to sustainability measures about which highway project stakeholders feel most concerned?
How to access the long-term financial viability of sustainability measures in highway project?
Figure 4.1: Purpose of survey in overall research aim
Chapter 4: Cost Implications for Highway Sustainability – Survey Studies
4.2 Profile of Respondents Research projects take place in contexts that impact on the research and results. This context includes the sample group characteristics (Fellows and Liu 2008). Having an understanding and an awareness of the characteristics of the sample population helps focus the analysis and put the results into perspective. The following sub-sections discuss the profile of the respondents who participated in the questionnaire survey and interviews in this study.
4.2.1 Respondents’ profiles - questionnaire survey The questionnaire survey was administered in June 2009 by an online questionnaire survey tool. A total of 150 questionnaires were delivered to survey participants with a cover letter explaining the purpose of the study and providing an assurance of anonymity. The selection criteria for the participants are based on the requirements as explained in Section 3.3.2.2. Participants include staff from local authorities and government officers from the public sectors. Participants from the private sectors include project managers, engineers, quantity surveyors, planners, contractors and subcontractors involved in highway projects in Australia. Their expertise in highway infrastructure development strengthens the validity of the data. They hold positions at middle and higher management levels. This helps to ensure the credibility of the data collected. The participants represent more than 70 organisations throughout Australia selected for their recent involvement in highway development. A good level of support from stakeholders in the industry led to a response rate of 41%. Out of the 150 questionnaires sent out, 71 questionnaires were returned including nine that had not been completed in full. As a result, the useable response rate was 41% (62 questionnaires). Ahuja et al. (2009) and Love and Smith (2003) state that a response rate of 30% to 40% for a questionnaire survey in the construction industry can be considered satisfactory. Participants were asked to rate the importance of each cost component in life-cycle cost considerations in their highway projects. Although 10 pilot studies had been completed prior to the final distribution of the questionnaires, they are not considered in the questionnaire analysis.
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Nearly half of the participants in the survey were working in government agencies, which reflects the public sector nature of highway development projects. Most participants have more than 20 years of experience in highway construction. Base on the type of their organisation, participants were divided into three groups: client representatives (government agencies); project management and design consultants (consultants); and construction contractors (contractors), as shown in Figure 4.2. The majority of participants were involved in highway design and construction activities. A small number of participants were also involved in maintenance and extension works for highway infrastructure; others were involved in construction, extension and maintenance works. Most of the participants were at the project management level and expressed their interest in sustainability concepts in LCCA practice. Figure 4.2 summarise the background details of the questionnaire participants. The representative distribution of the respondents by categories shows that the largest number was from government agencies and local authorities (53%), and the remainder were contractors (24%) and consultants (23%). This means the respondents participated in this study in the ratio of Consultants 1: Contractors 1: Government Agencies and Local Authorities 2.
Respondents Categories
Government Agencies and Local Authorities
23% 53%
Contractors
24% Consultants
Figure 4.2: Categories of respondent in questionnaire survey
Chapter 4: Cost Implications for Highway Sustainability – Survey Studies
The participants are all stakeholders in highway projects. Most of them hold professional positions at middle and higher management levels. They are the decision makers in highway development, so they have more experiences about the economic dimension of highway projects. As shown in Table 4.2, almost half of the participants work in government agencies and most have more than 20 years of experience in highway projects. This background ensures that they can clearly understand the questionnaire survey and are able to answer the questions without the need for further assistance from the researcher. Table 4.1: Respondents’ roles in highway projects Project role
CR
PMC
DC
CC
Total
Highway design and construction
6
11
10
4
31
Highway maintenance
3
3
1
5
12
Highway construction and extension
1
4
1
0
6
Highway construction and maintenance
2
2
0
1
5
Highway construction, extension and maintenance
2
5
0
1
8
Total
14
25
12
11
62
Notes: CR – client representative; PMC – project management consultants; DC – design consultants; CC/S – construction contractors/ specialist Table 4.2: Respondents’ construction industry experience Years of experience
Category of respondents Consulting
Contractor
Government Agency
No.
%
No.
%
No.
%
No.
%
1-5 years
2
14
1
7
2
6
5
7
6-10 years
0
0
5
33
4
12
9
15
11-15 years
4
29
1
7
4
12
9
15
16-20 years
5
36
3
20
1
3
9
15
Above 20 years
3
21
5
33
22
67
30
48
Total
14
100
15
100
33
100
62
100
Total
All the participants had experience working in highway projects. It can be seen from Table 4.1 that the majority of the participants were involved in highway design and construction activities. A small number of participants were also involved in
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maintenance works and extension works for highway infrastructure; others were involving in construction, extension and maintenance works. Other respondents were in roles such as client representatives, design consultants and construction contractors in an equal number of participation.
4.2.2 Respondent’s profiles - semi-structured interview Thirteen targeted senior practitioners from the highway infrastructure industry in Australia were interviewed. Specifically, there were eight interviewees from government departments, two from private companies and three from research or academic institutions. A majority of these (10, or 77%) held senior to top management positions and decision-making roles in their respective organisations, while others (3, or 23%) are senior researchers in this area. The professions of the respondents are classified into three categories: government officers (46%); researchers (23%); and consultants (15%) and contractors (15% and 15% respectively). The government officers include managers in selected disciplines such as asset strategies, asset and network performance and road transport policy and investment. The researcher category encompasses the professors and senior research fellows involved in highway infrastructure research. The consultants and contractors category covers senior civil engineers, builders and network managers involved in highway design and transportation management. Meanwhile, since the questionnaire covered several main states in Australia, the interviews were organised in the city of Sydney, Melbourne, Perth and Brisbane. In particular, five interviews were conducted in Brisbane and eight were conducted in regions outside Brisbane. It is noted that 13 rather than 14 interviews were conducted in total because one of the 14 interviews was conducted with two respondents at the same time. Prior to the interviews, the interview questions were sent to them by email for their early perusal and preparation.
Chapter 4: Cost Implications for Highway Sustainability – Survey Studies
4.3 Results and Findings Chapter 3 described in detail the development process and the data analysis methods utilised in this research, particularly the rationale for their use. The procedures involved in their application were presented in that chapter. Here, the results from their application to the analysis process are presented. The administered questionnaire survey consisted of four main parts, each with a specific purpose and utilising a particular ordinal scale. Hence, the approach to analysing the results is divided into those four parts. The semi-structured interview also consisted of four main areas. The findings from the analysis of the interview data are framed around the core and the key cost components that satisfy the aims and objectives of this study while synthesising the need to address the research questions. Significant findings from the analysis of the quantitative and qualitative data are highlighted. The overall interpretation and discussion of these results is carried out later in Chapter 7, where the data of this study is integrated. However, the results from the analysis of the questionnaire survey and semi-structured interview are briefly highlighted in this section to address the research questions, with special attention given to those that yielded significant values.
4.3.1 Questionnaire survey results and findings The survey focused on the identification of critical cost components related to sustainable measures that industry stakeholders believed to be necessary to incorporate into highway investment decisions. The respondents were asked to indicate the extent of the importance of statements on a five-point rating scale. The different stakeholders’ perspectives of the importance of these cost components are presented in Tables 4.3 to 4.5. The overall rates of the respondents are combined in Table 4.6 for ease of reference and to facilitate interpretation. The following sections contain only the salient information to avoid information ‘congestion’ and the use of many large tables in the main text.
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4.3.1.1 Sustainability-related cost components: perspective of consultants The results are set out in Table 4.3 indicate that the importance level of sustainability-related cost components according to the consultants are relatively different compared to other stakeholders. The highest rated costs for consultants are material costs (mean = 4.57), plant and equipment costs (mean = 4.36) and labour costs (mean = 4.07) in the agency category. The vehicle operation costs (mean = 3.79), traffic congestion (mean = 3.79) and road accident - economic value of damage (mean = 3.71) are the highest rated in the social category. The waste management (mean = 3.93), ground extraction (mean = 3.86), disposal of material costs (mean = 3.86) and hydrological impacts (mean = 3.86) are rated the highest in the environmental category. In the agency category, the results revealed that the consultants were more concerned with the initial construction costs in highway development. They rated the material, plant and equipment and labour costs as the highest in importance. Generally, the consultants focused on the initial costs rather than on the life-cycle benefits for highway operation and maintenance. Conversely, consultants were not very interested in the pavement extension and demolition costs in the LCCA for highway projects. They believed that by the pavements’ end of life, major rehabilitation works are usually employed to improve the pavement. In the social category of cost components, vehicle operation costs and traffic congestion were the top two highly important item among the consultants. They considered that those costs indirectly influenced the overall cost of a highway throughout its lifetime. They highlighted that these costs should be taken into account in LCCA in highway project. These costs are incurred by the road users but are directly caused and attributable to the presence of a work zone and the construction activities undertaken by the local governments. Widle et al. (2001) also highlighted the costs occurred in lost travel time may sometimes exceed the agency’s construction costs by a substantial amount, particularly in urban areas. The survey results imply that the consultants were taking into consideration the vehicle operation costs and traffic congestion in long-term financial decisions.
Chapter 4: Cost Implications for Highway Sustainability – Survey Studies
In the environmental category of cost components, waste management costs were rated as significant by the consultants. Waste management is an important cost component in project management. Based on the comments from the consultants, waste management costs were usually generated during the construction, maintenance and rehabilitation stages of highway infrastructure. This cost is significant because engineers take early decisions on design configurations, construction methods/processes and material specifications. Such decisions have very significant impacts on the overall highway project cost including the wastes generated throughout the project life-cycle including its whole life cost. Thus, it is important to ensure resource optimisation through reuse, recycling and innovation in terms of materials, construction methods and processes. Table 4.3: Consultants’ rating of sustainability-related cost components
Sustainability indicators
Sub-cost components
Mean
Consultants (N =14) Standard Deviation 0.65 0.63 0.83 0.96 1.00 1.10 1.02 1.34 0.95 1.41
Rate
Agency category
Material costs Plant and equipment costs Labour costs Major maintenance costs Rehabilitation costs Routine maintenance costs Dispose asphalt materials costs Recycle costs Pavement extension costs Demolition costs
4.57 4.36 4.07 4.00 3.93 3.86 3.50 3.43 2.86 2.86
Social category
Vehicle operation costs Traffic congestion Road accident- economic value of damage Reduce speed through work zone Road accident- internal costs Resettling cost Road accident- external costs Reduction of culture heritage Negative visual impact Community cohesion Road tax and insurance Property devaluation
3.79 3.79
0.89 1.42
1 1
3.71
0.99
3
3.64 3.64 3.43 3.43 3.29 3.29 3.14 2.86 2.79
1.34 1.22 0.94 1.28 1.07 0.99 1.35 1.10 0.70
4 5 6 6 8 8 10 11 12
Waste management costs Ground extraction costs Disposal of material costs Hydrological impacts
3.93 3.86 3.86 3.86
1.14 1.10 1.23 0.95
1 2 3 3
Environmental category
1 2 3 4 5 6 7 8 9 9
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Sustainability indicators
Sub-cost components
Mean
CO2 emission Land use Loss of wetland Dust emission Soil disturbance Extent of tree felling Cost of barriers Habitat disruption Ecological damage Air pollution effects on human health Environmental degradation Rough surface produce more tyre noise Fuel consumption Vehicle engine acceleration noise Energy consumption Driver attitudes
3.79 3.71 3.71 3.71 3.64 3.64 3.64 3.57 3.50 3.29 3.21 3.21 3.07 3.07 2.71 2.50
Consultants (N =14) Standard Deviation 1.25 0.99 0.91 1.07 0.93 0.74 0.93 0.94 0.94 1.14 0.89 1.19 1.27 1.21 1.20 1.40
Rate 5 6 6 8 9 9 9 12 13 14 15 15 17 18 19 20
4.3.1.2 Sustainability-related cost components: perspective of contractors For contractors, the most important cost components are those that threaten their profit level, with material (mean = 4.50), plant and equipment (mean = 4.19), rehabilitation (mean = 3.94) and recycling costs (mean = 3.94) rated in importance in the agency category. The road accident- internal costs (mean = 4.25), traffic congestion (mean = 4.00) and external costs (mean = 3.88) were rated the most significant in the social category. The disposal of materials (mean = 4.13), ground extraction (mean = 4.06) and waste management costs (mean = 4.00) were classified as critical in the environmental category. In regards to agency costs, contractors considered rehabilitation activities as the third main cost component in this category. Rehabilitation activities are important to ensure the optimisation of the performance of each highway pavement (Chung et al. 2006). Meanwhile, rehabilitation activities usually involve huge amount of costs throughout the highway life span, so contractors can apply relevant techniques to rehabilitate the highway infrastructures. Road accident costs are also highly rated by contractors as they placed these in the top and the third most important rating in the social category. They reported that highway safety is one of the major concerns in highway development. Wilde et al. (2001) found that the roadway factors and conditions directly influence the rates and types of accidents. Relevant rehabilitation
Chapter 4: Cost Implications for Highway Sustainability – Survey Studies
activities are needed to not only improve the pavement quality, but also the highway safety. Table 4.4: Contractors’ rating of sustainability-related cost components
Sustainability indicators
Sub-cost components
Mean
Contractors (N =15) Standard Deviation 0.65 0.91 1.17 1.23 1.29 0.91 1.12 1.09 1.00 1.12
Rate
Agency category
Material costs Plant and equipment costs Rehabilitation costs Recycle costs Labour costs Major maintenance costs Dispose asphalt materials costs Routine maintenance costs Pavement extension costs Demolition costs
4.50 4.19 3.94 3.94 3.88 3.81 3.63 3.44 3.00 3.00
Social category
Road accident- internal costs Traffic congestion Road accident- external costs Road accident- economic value of damage Vehicle operation costs Reduce speed through work zone Resettling cost Community cohesion Negative visual impact Property devaluation Reduction of culture heritage Road tax and insurance
4.25 4.00 3.88
0.97 1.18 1.00
1 2 3
3.81
1.00
4
3.75 3.56 3.44 3.38 3.25 3.06 3.06 3.00
1.2 1.33 1.09 0.94 0.51 0.92 0.83 1.24
5 6 7 8 9 10 10 12
Disposal of material costs Ground extraction costs Waste management costs Dust emission Energy consumption CO2 emission Loss of wetland Fuel consumption Soil disturbance Habitat disruption Cost of barriers Extent of tree felling Hydrological impacts Air pollution effects on human health Rough surface produce more tyre noise Ecological damage Land use Environmental degradation
4.13 4.06 4.00 3.94 3.88 3.88 3.88 3.81 3.75 3.69 3.69 3.63 3.63 3.56 3.5 3.44 3.38 3.38
0.97 0.86 0.97 0.86 0.39 1.04 0.92 0.66 0.88 0.7 0.95 0.97 0.8 1.08 0.94 0.85 0.94 0.94
1 2 3 4 5 5 5 8 9 10 10 12 12 14 15 16 17 17
Environmental category
1 2 3 3 5 6 7 8 9 9
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Sustainability indicators
Sub-cost components Vehicle engine acceleration noise Driver attitudes
Contractors (N =15) Standard Deviation 3.25 0.93 3.25 1.09
Mean
Rate 19 19
4.3.1.3 Sustainability-related cost components: perspective of government agencies and local authorities For government agencies and local authorities, the ten costs rated highest in importance were those in the category of agency costs, namely, material (mean = 4.30), major maintenance (mean = 4.24) and rehabilitation costs (mean = 4.21). In the social category, road accident costs, namely, internal (mean = 4.45), external costs (mean = 4.39) and the economic value of damage (mean = 4.00) were rated highest in the importance. In the environmental category, hydrological impacts (mean = 4.36), loss of wetland (mean = 4.24) and cost of barriers (mean = 4.21) were the most important. In the agency category, the respondents from government agencies and local authorities rated major maintenance and rehabilitation costs as the second and third important costs. Due to the limited funds in government allocations, the greatest task in managing highway infrastructure is the prioritisation of maintenance and repair expenditure. As highway infrastructures approach the end of their design lives, there is an increasing demand for new construction, rehabilitation, maintenance and repair projects to create and/or extend the design life so that the potential for loss of function or downtime can be minimised. To accomplish the difficult task of efficient allocation of funds, it is necessary to develop decision support tools to handle the priorities for these expenditures (Chouinard, Andersen and Torrey Iii 1996). In the social category of cost components, road accident costs were rated as the priorities for the respondents in the government agency and local authority group. Similar to the contractors’ perspective, the respondents in this group are also concerned about road safety. As mentioned by one of the respondents, the main reason for highway infrastructure development is to improve the mobility of the community and the road safety. This statement is supported by the result in
Chapter 4: Cost Implications for Highway Sustainability – Survey Studies
Gregersen et al. (1996) which found that consideration of factors such as wider pavements can significantly reduce the rate of road accidents. Table 4.5: Government agencies and local authorities’ rating of sustainability-related cost components
Sustainability indicators
Sub-cost components
Agency category
Material costs Major maintenance costs Rehabilitation costs Plant and equipment costs Routine maintenance costs Labour costs Demolition costs Recycle costs Pavement extension costs Dispose asphalt materials costs
Social category
Road accident- internal costs Road accident- economic value of damage Road accident- external costs Reduction of culture heritage Vehicle operation costs Resettling cost Traffic congestion Community cohesion Negative visual impact Reduce speed through work zone Property devaluation Road tax and insurance
Environmental category
Hydrological impacts Loss of wetland Cost of barriers Land use Rough surface produce more tyre noise Dust emission Disposal of material costs Habitat disruption Environmental degradation Ground extraction costs Extent of tree felling Ecological damage Soil disturbance Air pollution effects on human health CO2 emission
Government Agencies and Local Authorities (N =33) Mean Standard Rate Deviation 4.30 0.81 1 4.24 0.83 2 4.21 0.65 3 4.09 0.77 4 4.06 1.00 5 3.82 0.77 6 3.24 1.12 7 3.21 0.99 8 3.09 1.07 9 3.00 1.00 10 4.45
0.79
1
4.39
0.79
2
4.00 3.82 3.67 3.58 3.55 3.48 3.39 3.18 3.12 2.79
1.12 1.16 1.11 1.30 1.23 1.28 1.09 1.26 1.11 1.17
3 4 5 6 7 8 9 10 11 12
4.36 4.24 4.21 4.06 4.00 4.00 3.97 3.97 3.88 3.85 3.85 3.85 3.82 3.79 3.73
0.82 0.83 0.96 0.97 1.00 1.12 1.02 0.92 1.05 0.87 1.00 1.06 0.85 1.22 1.15
1 2 3 4 5 5 7 8 9 10 11 11 13 14 15
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Sustainability indicators
Sub-cost components Waste management costs Vehicle engine acceleration noise Fuel consumption Energy consumption Driver attitudes
Government Agencies and Local Authorities (N =33) Mean Standard Rate Deviation 3.70 1.10 16 3.52 1.28 17 3.33 1.16 18 3.30 0.95 19 3.15 1.30 20
The survey result shows that practitioners in government agencies and local authorities are most concerned about the highway investment. This is likely to be due to the reason that they usually are the key drivers in highway development. As shown in Tables 4.3 to 4.5, the survey results provide a means of identifying overall the cost components that are critical to highway investment decisions among the three groups of respondents.
4.3.1.4 Integration of sustainability-related cost components in LCCA studies Table 4.6 shows the overall rating for the most significant sustainability-related cost components in highway infrastructure projects. A general observation of the results in Table 4.6 is that the cost components rated most highly by the respondents tended to be those that are paramount to their particular business objectives. Based on the analysis of the results, the ratings of importance in Table 4.6 reveal that the most important cost components are centred on three major sustainability aspects of agency, social and environmental issues. The following sections elaborate on these findings in detail.
Chapter 4: Cost Implications for Highway Sustainability – Survey Studies
103
Table 4.6: Perceptions of ‘importance level’ of cost components related to sustainable measures by industry stakeholders
Sustainability indicators Agency category
Social category
Environmental Category
Sub-cost components Material costs Plant and equipment costs Major maintenance costs Rehabilitation costs Labour costs Routine maintenance costs Recycle costs Dispose asphalt Materials costs Demolition costs Pavement extension costs Road accidentinternal costs Road accidenteconomic value of damage Road accidentexternal costs Vehicle operation costs Traffic congestion Resettling cost Reduction of culture heritage Community cohesion Reduce speed through work zone Negative visual impact Property devaluation Road tax and insurance Hydrological impacts Loss of wetland Disposal of material costs Cost of barriers Dust emission Ground extraction
All
Consultants
Rating Contractors
1
1
1
Government Agencies 1
2
2
2
4
*4.1927
3
4
6
2
*2.7426
3 5
5 3
3 5
3 6
*2.8057 1.0383
6
6
8
5
0.6685
7
8
3
8
-2.1226
8
7
7
10
-3.3851
9 10
9 9
9 9
7 9
-4.1372 -5.6353
1
5
1
1
*3.7016
2
3
4
2
*3.2568
3
6
3
3
0.7091
4
1
5
5
-0.3318
4 6
1 6
2 7
7 6
-0.2826 -1.4152
7
8
10
4
-1.6068
8
10
8
8
-2.0669
9
4
6
10
-2.3109
10
8
9
9
-3.0861
11
12
10
11
-5.7471
12
11
12
12
-6.1330
1
3
12
1
*2.9528
2
6
5
2
*2.6843
3
3
1
7
*1.8748
4 5 6
9 8 2
10 4 2
3 5 10
*1.8670 1.4248 1.4550
t-value *6.9164
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Chapter 4: Cost Implications for Highway Sustainability – Survey Studies
Sustainability indicators
Sub-cost components
All
Consultants
Rating Contractors
Government Agencies
costs Waste management 7 1 3 16 costs Land use 7 6 17 4 Habitat disruption 7 12 10 8 Soil disturbance 10 9 9 13 CO2 emission 10 5 5 15 Extent of tree 12 9 12 11 felling Rough surface produce more tyre 13 15 15 5 noise Ecological damage 14 13 16 11 Environmental 15 15 17 9 degradation Air pollution effects 15 14 14 14 on human health Fuel consumption 17 17 8 18 Vehicle engine 18 18 19 17 acceleration noise Energy 19 19 5 19 consumption Driver attitudes 20 20 19 20 Note: * = t-value which is higher than the cut off t-value (1.6710) indicating the significance of the
t-value
0.6501 0.7231 0.8053 0.3620 0.2763 0.1693 -0.1472 -0.4772 -0.9264 -0.8076 -2.4828 -2.5144 -3.3523 -4.2399
indicators.
a.
Agency category
Agency costs consist of all costs generated by the highway agencies’ activities over the overlay system lifetime. These typically include construction and preservation costs such as material costs, plant and equipment costs and labour costs. As highlighted by the participants, material costs (mean = 4.40) and plant and equipment costs (mean = 4.16) are the most important cost categories rated by the stakeholders. This finding is consistent with the dominant view in the literature (Ugwu et al. 2005; Singh and Tiong 2005; Tighe 2001). These costs are selected because of the huge amount of capital needed to address the aspects of concern during the construction stage. The survey participants also reported that major maintenance costs and rehabilitation costs (mean = 4.06) are the third most important in highway investment. They
Chapter 4: Cost Implications for Highway Sustainability – Survey Studies
explained that rehabilitation activities are important to preserve the effectiveness of transportation, safety of road users and economic development. As stated by Rouse and Chiu (2008), the quality of roads deteriorates over time. Hence, proper maintenance of a highway system is necessary to maintain its serviceability and structural reliability. Since highways have a long-term life span, maintenance activities need to be considered from a life-cycle perspective. An optimal balance between benefits and costs is crucial to achieving long-term financial viability while ensuring the best service to road users. Some factors are more important than others according to different stakeholders. For example, pavement recycling costs were rated as the third most important cost according to contractors. According to Widyatmoko (2008), recycled materials are more cost effective compared to conventional materials. Recycled materials also provide similar performance to pavement. Thus, contractors are increasingly concerned with sustainable development, place an emphasis on material conservation and re-use such as the recycling of pavement during highway maintenance and rehabilitation activities.
b.
Social category
Road accident cost components have emerged as the most important theme in the category of social aspects. These costs refer to the economic value of damages (mean = 4.10) caused by vehicle crashes, which includes internal costs (those incurred due to damages and risks to the individual travelling in a particular vehicle), and external costs (such as uncompensated damages and risks imposed by an individual on other people) (Partheeban, Arunbabu and Hemamalini 2008). Road accident costs internal (mean = 4.23) were rated as the most important criteria because highway safety is becoming a main priority. Highway construction needs to improve general access for the community while highway upgrades, maintenance and rehabilitation also help in improving road safety for users. Often decisions regarding highway design selection are based not only on the development of the financial budget, but also on the design safety for road users. Thus, road accident costs are a primary concern in the social aspects of LCC analysis for highway projects.
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Traffic congestion (mean = 4.00, 3.79) receives a high importance rating among social category by the contractors and consultants. Heavy traffic tends to degrade the public realm (public spaces where people naturally interact) and in other ways reduces community cohesion (Litman 2007). Highway traffic certainly involves traffic delay costs to users who have been mathematically modeled and evaluated based on simplifying assumptions (Jiang and Adeli 2003). Respondents comment that the design and construction of highway infrastructure are critical because of the natural increase and interstate migration that influence the growth of traffic in are such as South East Queensland. This situation puts significant pressure on highway infrastructure development. Nevertheless, due to increasing usage of highway infrastructure, renewal works are needed for highway infrastructure at some points in time. Surplus funds may be needed to ensure that renewal or extension works take place during the highway life span. It is a challenge for the stakeholders to optimise the desired service levels while minimising life-cycle costs for highway infrastructure.
c.
Environmental category
Highway systems produce a mixture of impacts on the environment, and costs involved in environmental issues also vary depending on the situation and the nature of the project (Surahyo and El-Diraby 2009). Water pollution, such as hydrological impacts (mean = 4.36), and loss of wetland (mean = 4.24), are rated as the most important costs by the participants in government agencies and local authorities. They highlighted that these impacts impose various costs including those related to polluted surfaces and groundwater, contaminated drinking water, increased flooding and flood control costs, loss of unique natural features, and aesthetic losses. Quantifying these costs is challenging. It is difficult to determine how many motor vehicles contribute to water pollution problems since impacts are diffuse and cumulative. Ground extraction costs, disposal of material costs, and waste management costs are the top three environmental cost components rated as significant by the contractors and consultants in managing highway infrastructure. Solid waste is usually generated
Chapter 4: Cost Implications for Highway Sustainability – Survey Studies
during the construction, maintenance and rehabilitation stages of highway infrastructure. This waste imposes a variety of environmental, human health, aesthetic, and financial costs. Some legislation and policies are designed to ensure that the disposal of materials is properly managed (Hao, Hills and Huang 2007). Therefore, legislation makes it mandatory for the stakeholder to prepare a relevant budget for managing the disposal of solid waste. The survey respondents highlighted that construction and demolition waste management activities exist through the whole life-cycle of a construction project from the initial design until demolition, which is consistent with the viewpoint in the literature (Shen et al. 2005). Planning for waste management is a process that involves many complex interactions such as transportation systems, land use, public health considerations and interdependencies in the system such as disposal and collection methods.
4.3.2 Summary of the questionnaire survey results and suggestions The results of the questionnaire survey revealed three themes that can be outlined as following: 1. There are similarities and differences between industry stakeholders regarding the importance of sustainability-related cost components. •
The perception between the consultants and contractors are relatively similar. (e.g. material, plant and equipment costs are classified as the top main cost components in highway investment).
•
Some differences of the importance level of cost components were found between the groups of stakeholders (e.g. the government agencies and local authorities have slightly differing opinions compared to other groups as they are the main investors in public highway infrastructure).
•
Different
organisations
have
their
own
goals
and
needs.
Organisational differences affect the consideration of these cost components in highway investment decisions.
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2. The sustainability-related cost components in highway investment are important. •
Most of the survey participants agreed that sustainability-related cost components are vital in highway investment decisions.
•
The consideration of these costs is essential and must be integrated into LCCA for highway investment decisions.
3. The results on critical cost components are indicated by the t-value which is higher than the cut-off t-value (1.6710) offering supporting evidence for the importance of cost components related to sustainable measures in highway infrastructure investments. These top ten rated cost components were identified and validated by industry stakeholders as shown in Table 4.7. Table 4.7: Industry validated sustainability-related cost components in highway infrastructure
Sustainability Criteria Agency category
Social category
Environmental category
Main Cost Components Material costs Plant and equipment costs Major maintenance costs Rehabilitation costs Road accident- internal costs Road accident- economic value of damage Hydrological impacts Loss of wetland Disposal of material costs Cost of barriers
The revelation of cost components as shown in Table 4.7 have achieved one of the sub-objectives, which is to identify the cost components that are significant in highway infrastructure investment. The results from the questionnaire survey also raised a number of issues extending the quantitative data. These issues generated the following questions. •
What is the current industry practice in applying LCCA?
•
What are the ways to quantify cost components related to sustainable measures in highway investments?
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•
What are the challenges of integrating these cost components into LCCA practice?
•
What are the actions needed to enhance sustainability in LCCA practice?
These questions influence the identification of the critical cost components related to sustainable measures in highway infrastructure investments. They helped shape the semi-structured interview of this study covered in next section.
4.3.3 Semi-structured interview results and findings The current construction industry faces many challenges of integrating cost components related to sustainable measures in LCCA for highway infrastructure, as indicated by the comments from participants in the questionnaire survey and in the literature. These issues might be due to the current industry practices and the ways of quantifying these costs. Prior to the analyses of the feedback on these potential issues, the interviewees’ perspective and comments on current industry practice on LCCA and the ways to deal with these cost components are studied to determine the reality of industry experience. This section reports on the results and findings of the second part of the survey. It demonstrates the in-depth understanding of these cost components through the semistructured interviews with a number of construction industry practitioners and researchers. The following sections are organised as follows. Section 4.3.3.1 begins with the identification of current industry practice in applying LCCA. This is followed by an overview of the ways of quantifying sustainability-related cost components in section 4.3.3.2. Section 4.3.3.3 discusses the challenges of integrating cost components related to sustainable measures. Finally, Section 4.3.3.4 presents the interviewees’ suggestions for enhancing sustainability in LCCA practice.
4.3.3.1. Current industry practice of LCCA application In order to identify the current industry practice of applying LCCA for highway infrastructure projects, six main questions were presented to the interviewees as shown in Table 4.8.
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Table 4.8: Questions to identify current industry practice of LCCA
No.
Question
1
Does your organisation currently apply LCCA in determining pavement type for highway infrastructure?
2
Does you organisation plan to utilise LCCA in determining pavement type for highway projects in future?
3
How long do you think is relevant for the analysis period of LCCA?
4
What discount rate do you utilise?
5
Please list the highway maintenance treatments that you will consider in LCCA evaluation and at which year(s) during the analysis period do you assume they will occur: (i.e. fog sealing @ year 6, milling with overlay @ year 12, etc.).
6
Based on the current practice or your experience, what are the types of data (Historical and Theoretical Data) are used to determine the type and frequency of the highway maintenance treatments?
For Question 1, the current utilisation of LCCA in determining pavement type for highway infrastructure is summarised in Figure 4.2. Almost 62% of the interviewees reported that their organisations utilise LCCA practice in highway infrastructure project. They highlighted that new major highway projects usually applied LCCA in practice. In a typical example, one respondent stated that:“Yes, LCCA usually applied for major highway infrastructure projects.”
No; 38%
Yes; 62%
Figure 4.3: Respondents’ utilisation of LCCA in highway projects
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However, 38 % of the respondents reported that they did not apply LCCA in their highway projects due to the fact that they deal with maintenance and upgrading works in the regional areas. It is understandable that only recent large highway infrastructure projects would apply LCCA. These respondents did, however, mention about the utilisation of benefit cost analysis in their highway planning in regional level. Question 2 examined the future plans of the agency to apply LCCA in determining highway infrastructure projects. All the respondents highlighted that they planned to utilise LCCA in highway infrastructure development. They also stated that there is a need to do so because there are too many uncertainties occuring in highway infrastructure development. Government agencies face challenges to ensure sufficient funds are spent on renewing highway infrastructure so that related services are delivered economically and sustainably to meet the needs of the community into the future. This position is also supported by Chan et al. (2008) who highlighted that effective highway investment has become crucial as highway funding continues to fall short of infrastructure needs. Therefore, the interviewees agreed that LCCA is a useful tool to assist them to adopt robust and transparent methods to evaluate and rate projects to ensure that renewal and new highway projects are prioritised objectively. Highway infrastructure typically has a long-term life span, and is usually designed to a life-cycle period of 50 years (Gerbrandt and Berthelot 2007). In life-cycle cost assessment, the analysis period depends on the nature of the project. Some studies stated that 20 to 30 years analysis periods are necessary for pavement (Haas and Kazmierowski 1997) while others suggest an analysis period of more than 35 years to include at least one major rehabilitation event for each alternative being considered (Walls Iii and Smith 1998). In this study, interviewees were asked about the relevant analysis period of LCCA for highway infrastructure (Question 3). Based on their experience and knowledge, the relevant periods of LCCA analysis are in the range of 30-50 years depending on pavement types and conditions as shown in Table 4.9.
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Table 4.9: Relevant analysis period of LCCA
Question 3 How long do you think is relevant for the analysis period of LCCA? Interviewee
H1, H2, H4, H12, and H13 H3, H5, H6, H7 and H8 H9, H10
Annotation Usually for highway pavement, we take into account relevant analysis period of 30 years. Highway pavement maybe in the range of 30-40 years, however for bridges, it can last for 50 years or more. 40-50 years depend on types of highway infrastructure.
The discount rate is another concern in LCCA calculation as the discount rate may significantly influence the overall cost in the long term. In Question 4, interviewees were asked to explain the employment of discount rates in LCCA calculation in practice. The discount rate is one of the variables necessary to calculate net present value (NPV). It is used to reduce future expected expenditures to present day terms and is one of the most controversial variables in the NPV equation (Tighe 1999). The discount rate (true interest rate) is determined using the inflation rate (annual compound rate of increase in the cost of pavement construction) and the interest rate associated for the agency borrowing money (market interest rate). The discount rate should also reflect historical trends over long periods of time. Historically, nominal discount rates over an extended period of time have been 3 to 4 percent (Kerr and Ryan 1987). A typical response is that:“In Australia, values of up to 10 percent have been used, but a range of 4 to 8 percent is more common.” (H5) Meanwhile, interviewees H10 and H13 stated that: “We recommended that constant dollars and real discount rates be used.”( H10, H13)
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The use of real discount rates eliminates the need to estimate and include the premiums for both cost and discount rates. Real discount rates are recommended over nominal discount rates (inflation) because they reflect the true value of money over time with no inflation premiums and should be used in conjunction with noninflated dollar cost estimates. The analysis period is the length of time selected for the life-cycle cost, and it should not extend beyond the period of reliable forecasts. At the discount rate used by most agencies (generally ranging from 4% to 8%), any expenditures or benefits in the order of 30 years or more represent a small present worth value (Haas, Tighe and Falls 2006). Table 4.10: Maintenance treatments of highway infrastructure
Question 5 Please list the highway maintenance treatments that you will consider in LCCA evaluation and at which year(s) during the analysis period do you assume they will occur: (i.e. fog sealing @ year 6, milling with overlay @ year 12, etc.). Interviewee
Annotation
H1, H9, H11
“Every year we allocate $2000 every kilometer for day to day maintenance and routine maintenance. Maintain road sign…. Including day to day activities.” (H1) “Again, after 5 years, we have all seal roads here, aggregate sealing. Every 5 years sealing, 10mm aggregate sealing. We need to allocate money for that. After 20 years, we need to rehabilitate the highway pavement. We usually design the pavement for 20 years life span. When 20 years, we believe pavement crack, determinate, we need to plan for major rehabilitation, add more gravel and compact and double sealing but after 20 years.” (H9)
H2, H8
H3
H4, H7
“Usually, current available budget for maintenance from states government is not enough because of the more than expected vehicles which may reduce the quality of the pavement. For example more vehicles and other industrial vehicles may significantly reduce the pavement quality and significantly increase the maintenance cycle.” (H11) “… we would normally reseal the pavement 10-14 years but some are earlier than others depend on the conditions.” (H2) “...maintenance for asphalt pavements and intersection would be 15-20 years …” (H8) “Is done with BCR [Benefit Cost Ratio] for overlays and pavement at the same time, sealing was at 7 years and is pushed out pending funding.” (H3) “The principle seems to be that the number of treatment needed. In that life-cycle of highway infrastructure, for example for 40 years life, 8 years
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fog sealing.” (H4)
H5
“The resurfacing program which was automatically topping up for improving, for example 6 years or 8 years or 12 years. You simply see the number of treatment in that period, you are looking at both material and construction cost also the risk and the interruption of heavy load traffics in certain areas.”(H7) “It depends on the projects and the nature of the environment,” (H5)
Table 4.10 shows the maintenance treatments that are undertaken by highway industry stakeholders in practice. From their feedback, maintenance costs can be categorised as routine maintenance and major maintenance. Routine maintenance includes relatively inexpensive activities such as filling potholes and performing drainage improvements. These treatments have a service life of 1 to 4 years (Haas and Kazmierowski 1997). Major maintenance is more substantial and is usually associated with structure or surface improvement such as patching or microsurfacing. These treatments have an expected service life of 5 to 10 years (Haas, Tighe and Falls 2006; Haas and Kazmierowski 1997). It is recommended that only major maintenance be included in the LCCA because routine activities tend to be consistent across pavement design types. Question 6 investigates the types of data (Historical and Theoretical Data) are used in current industry to determine the type and frequency of the highway maintenance treatments. The results of this question are summarised in Figure 4.4.
Chapter 4: Cost Implications for Highway Sustainability – Survey Studies
31%
Theoretical and Historical Data
69%
Historical Data
Figure 4.4: Types of data utilised by respondents in highway treatments
Almost 69% of the interviewees reported that their organisations utilise both historical and theoretical data in evaluation of highway maintenance treatments. As some of the interviewees highlighted, in planning highway maintenance, general principles and theoretical principles are important in planning the type and frequency of the highway maintenance treatment. A typical example came from interviewee H12 who stated that:“We actually applied are based on local data and also experience whether those theoretical numbers should be adjusted in reality. Based on theoretical principles, we do need to undertake major maintenance for pavement around 8-12 years. Sometimes, the engineers who in charge in the region will consider other factors such as the traffic condition and weather conditions that may reduce the performance in a shorter period. As a result, the experiences turn out to be the great reference in managing highway maintenance treatment.”(H12) Another example is from interviewee, H5 who stated that: “It is a bit of both. In the sense of theoretical data, for example, when we built certain highway, we are expected certain maintenance and certain rehabilitation activities throughout the phase, we would use theoretical such as we use program or model. However, it depends on the situation and the condition of the pavement. If let
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say in theoretical, we need to reseal this road after 7 years but due to the pavement conditions, it needs to be reseal in 3 years, so certain adjustment is important. Overall, the use of theoretical is to have a broad understanding; however, historical data is more applicable in practice.”(H5) On the other hand, 31% of the interviewees highlighted that they only use historical data as the priority. They adopted the historical data as their guide to planning the maintenance treatment and reported that this is because the historical data are statewide averages and are well documented in their organisations. It can be concluded that in highway infrastructure management, both historical and theoretical data are important for stakeholders in managing the highway maintenance treatment. This is consistent with the result from Ugwu et al. (2005) stating that the recurrent highway maintenance treatments are often computed using historical cost data and unit rates that are determined by theoretical principles such as the highway features (e.g., running surface of vehicular structure, pedestrian structure, roadside slope and noise barrier). Based on the overall results for Questions 1 to 6, it can be concluded that long-term financial management is important in highway infrastructure management. Although some of the regions apply LCCA and some regions apply BCA, the stakeholders have some general understanding of the details of each application and details of lifecycle cost assessment. Their opinions have direct connection to their profession and organisation. However, they do agree that the incorporation of sustainability concepts into long-term financial management is important to deal with highway investment in the future. It is essential to improve current calculation methods in dealing with sustainability-related cost components. The following sections provide more details on how the industry currently deals with these cost components in highway infrastructure.
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4.3.3.2. Ways to quantify cost related to sustainable measures Question 7 examined that the future plans of the respondent’s agency to take sustainability-related cost components into consideration in highway infrastructure projects. All the respondents reported that they do not consider it at the moment but they are on the way to working on it. They stated that there is a need to do so because of uncertainties, environmental pressures, and limited funding from governments to preserve the infrastructure in the long run.
Typical examples are from interviewees, H7, H10, H13 who stated that: “Sustainability is also about sustaining the highway infrastructure networks and dollars is an important part of it.” (H7) “We don't do at the moment but in future we hope to. Right now not every project is considering social and environmental issues.” (H10) “We do need strategy level but not every project. Some can quantitative can be difficult to quantitative comparison for environmental assessment methods based on Austroad’s guideline. We don't do quantitative on environmental cost right now.” (H13) Based on these statements, we can see that the industry stakeholders plan to integrate sustainability costs and issues into highway infrastructure investment consideration. Due to the lack of quantitative methods to transfer social and environmental issues into real costs, industry stakeholders are hindered in their intentions to integrate these issues into current LCCA practice. Table 4.11 outlines current industry practice regarding their routines to integrate and quantify several costs related to sustainable measures in LCCA practice for highway projects.
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Table 4.11: Ways to quantify cost related to sustainable measures
Question 7.1 And if so, please briefly explain how agency cost is determined and calculated based on the list below. Agency cost categories Initial construction costs
Annotations Yes from all the interviewees “Initial Construction done on model estimation.” (H3)
Maintenance costs
Pavement upgrading costs Pavement end-of-life costs
“…We probably use unit rates to try to work on…” (H5) Yes from all the interviewees “Maintenance Costs off historical data.” (H4) Yes from all the interviewees “Pavement Upgrading costs off historical data.” (H4) 50%Yes and 50% No from interviewees “We don't take into account recycling. It all depending on the current situation.” (H11) “End-of-life, would be considered but it probably small cost as it discounted for 50-60 years, it turn out to be smaller costs based on future cost.” (H5) Question 7.2
And if so, please briefly explain how social cost is determined and calculated based on the list below.
Social cost categories Vehicle operating costs Travel delay costs
Social impact influence
Annotations “We use external factors if they have been published such as travel time delay, we have a standard way to calculate those cost but we have not a standard which published.” (H10) “We used guidelines from the Austroads to quantify the Vehicle Operating costs.” (H4) 23% Yes and 77% No from interviewees. “We do part of it. We don’t do for we do need to have some social factors. We do it on much larger and strategitic projects.” (H1)
Accident cost
“Some of establish priority but sometime it depend on convert into value level.” (H2) “We do have factors like safety and do consider road safety as a part of evaluation.”(H11 and H13)
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Question 7.3 And if so, please briefly explain how environmental cost is determined and calculated based on the list below. Solid waste generation cost Pollution
46 % Yes and 54% No from interviewees “We consider these costs in the construction stage which involve waste management.”H10
damage by agency activities
“Environmental Impact assessments is part of our environmental evaluation process that we need to consider before construction activities” H4 “Part of the construction cost, which link together. Pollution implication, that's we reference the Austroads requirement.” H3
Resource consumption Noise pollution Air pollution Water pollution
No from all the interviewees 15% Yes and 50% No from the interviewees. Noise pollution, could be referencing Austroad, we just based on guidelines from Austroads which they really take into account certain environmental factors. (H11) It is consider as an external costs which we usually make it as a wrap up cost. (H12)
The feedback from the interviewees indicates that in terms of agency cost categories, they are able to quantify these costs based on the existing models and programs. Meanwhile, they also use historical data as a guideline in dealing with these costs. The social and environmental costs are still not very clear in the estimation methods. Some of the interviewees mentioned that they use a wrap up cost, some mentioned using the environmental impact assessment as their guideline, and some mentioned that it is very hard to convert each of the components into real costs money. From all of these responses, it can be concluded that the current industry lacks knowledge and methods to deal with the social and environmental costs in highway infrastructure. In the following section, the limitations of integrating sustainability-related cost components into LCCA are further discussed.
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4.3.3.3. Challenges in integrating costs related to sustainable measures into LCCA practice Despite the existence of models and guidelines that are able to calculate agency costs in highway infrastructure, there are still challenges in integrating costs related to sustainable measures into real cost value. Table 4.12 outlines the major clarifications provided by the various stakeholders on the challenges to emphasising costs related to sustainable measures into LCCA practice for highway project. Table 4.12: Challenges to integrating costs related to sustainable measures into LCCA
Question 9 What are the difficulties to emphasise sustainability-related cost components in LCCA practice for highway infrastructure project? Interviewee H11 and H6
H1, H7, H9 and H12
Annotations “Obvious limitation is a way to quantify and compare the social and environmental cost options depend on different design options, we are working to plug the hole on this.” (H11) “Limitation comes to the quality of assumption and the quality of data. We need to use knowledge and experience.” (H6) “Economical value is still very limitation on determine and measurable and a lot we are not too sure.” (H1) “Yes, not everything can be quantified into real dollar.” (H7) “We can quantify to a cost, green house components for pavement options can be quantified into ton for CO2, sometime, like other sustainability cost such as water quality, and sometimes it is hard to value.” (H12)
H3
H5
“Sometimes, we are looking on the willingness to pay and clean up options, that doesn't really reflect environmental value, but it's comes out into economic and we don't know what they going to be able to know what is the long- term effect to the environment.”(H9) “Information can be used in a certain point in time and this could significantly change with vehicle usage/population growth in a later period.” (H3) “Sustainability is something that we are conscious of but it is very difficult to put a dollar figure around. We mostly consider the sustainability factors and impacts based on our experience.” (H5)
Chapter 4: Cost Implications for Highway Sustainability – Survey Studies
The feedback from the interviewees as summarised in the table reveals that there are two main domains identified which contribute to the different challenges to emphasise sustainability-related cost components into LCCA practice. They are: The omission of social and environmental costs in LCCA: This omission is caused by the difficulty of putting a dollar figure on each factors, the difficulty of quantifying social and environmental related costs and unclear impacts on the social and environmental issues. Uncertainty environment: Uncertainty is caused by the lack of data in these areas; especially in identifying real cost values for the sustainability-related cost components, the assumptions needed in calculating and identifying these cost components, uncertainties of the future social and environmental impacts caused by highway infrastructure development, dynamic changes in the environment, the lack of techniques or models in evaluation sustainability-related costs, and changes in the government policies and guidelines. Based on the overall results highlighted in this section, it can be concluded that there are challenges in applying sustainability concepts in long-term financial management. Although some efforts have been done to consider sustainability impacts on the highway infrastructure, the stakeholders report that more work needs to be done to deal with this uncertainty and also to improve the decision making process in highway investments. The following sections discuss in more detail the suggestions from industry stakeholders about how to enhance sustainability-related considerations in LCCA for highway infrastructure projects.
4.3.3.4. Suggestions for enhancing sustainability in LCCA practice Based on the results outlined in the previous section, it is concluded that there are many challenges in enhancing sustainability in LCCA practice. The industry stakeholders do believe that improvements can be made in current LCCA practice. Table 4.13 outlines the suggestions made by the various stakeholders about how to enhance sustainability in LCCA practice for highway projects.
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Table 4.13: Stakeholders’ suggestions for enhancing sustainability in LCCA
Question 10 What is your suggestion to improve the measurement methods of social and environmental costs and to enhance sustainability in LCCA for highway projects? Interviewee
Annotations
H3
“Full costs can’t be accurately determined, public survey may assist with attaining some information.” (H3)
H5
“Not everything can be quantified; the use of multi-criteria evaluation methods may help in considering social and environmental impacts in highway projects.” (H5)
H7
“Even though it is hard to put all these factors into real dollar, our experience and knowledge may also significantly contribute to the enhancement of sustainability.” (H7)
H8
“…Engineering input is still a valuable part of the process…” (H8)
H11
“It would be good if we got our initial estimate and it was our plan to develop a database that stores the initial estimated and the quality impact. We have a sort of data. Resources to check back the assumption.” (H11)
H12
“It is really hard and we just based on experience, we rely on people with experience and we are model driven, and we still need expert input to improve on it.” (H12)
The feedback from the interviewees indicates that there are still areas for improvement in current long-term financial management. In order to employ sustainability in long-term financial management, there is a need for tools that are not only able to evaluate real cost data but also able to evaluate the importance of sustainability-related issues and impacts on the highway infrastructure investment decisions.
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4.3.4 Summary of semi-structured interview results and suggestions The results and findings of the semi-structured interviews can be summarised as four themes as follows: 1. The overall scenario of current highway industry in LCCA application. •
Understanding of the LCCA concept is still evolving and the stakeholders have some general ideas of this concept but little assistance is done in current industry practice.
•
LCCA is usually only applied in large and new highway infrastructure projects.
•
The current industry is actively promoting the application of LCCA in enhancing long-term financial management in highway infrastructure.
2. The ways to quantify sustainability-related cost components in highway investment. •
The organisations employed existing models and software in quantifying the agency-related cost components (e.g. the application of Highway Design and Maintenance standard model Version 4 (HDM4) to quantify costs associated with construction and maintenance activities.)
•
There is a lack of standard calculation methods for social- and environmental-related cost components. The current industry faced some issues in quantifying these cost components. -
There are no published models and calculation methods in dealing with these cost components.
-
These costs are difficult to convert into real dollar value.
-
These costs are classified as external costs or wrap up costs. (e.g. Waste management costs are part of the construction costs).
3. The challenges to integrate sustainability-related cost components into LCCA practice.
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•
There are limitation in the methods and models in quantifying cost components related to sustainable measures.
•
There is a poor quality of assumptions and data in dealing with these costs.
•
It is difficult to examine the long-term effects and costs associated to with communities and environments.
4. The suggestions to enhance sustainability in LCCA practice. •
The application of multi-criteria evaluation methods may help in considering social and environmental effects in highway infrastructure projects.
•
Industry experience and knowledge may significantly contribute to the enhancement of sustainability in LCCA.
•
There is a need to improve the existing models to cope with industry highway projects.
•
There is a need of tools to improve the financial decision-making process in highway investments.
Thus, this section has achieved another two sub-objectives, which are to explore the different perceptions of various stakeholders regarding the LCCA practice and to explore the industry expectation about enhancing sustainability for life-cycle cost analysis in Australian highway infrastructure.
4.4 Chapter Summary This chapter reported the findings from phase 2 of the research process that involved two survey methods. The findings from both the questionnaire survey and semistructured interview answered the second research question: What are the specific cost components relating to sustainable measures about which highway project stakeholders feel most concerned? The conclusions drawn from the questionnaire survey and semi-structured interview results have verified the findings from the literature. Their comparison is illustrated in four relevant subjects as shown in Table 4.14.
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Table 4.14: Comparison of the survey results with literature findings
Research Objective
To identify the critical cost components related to sustainable measures in highway infrastructure investments.
Relevant Subjects
Literature Findings
Survey Findings
Industry status and LCCA application in highway infrastructure
• Existing studies has highlighted several LCCA models and programs for highway infrastructure • LCCA concepts are evolving in highway infrastructure industry • Different environments and problems associated with highway infrastructure projects
The scenario is based on the Australian highway industry:
Critical sustainability-related cost components in highway infrastructure
• Literature review has identified 42 cost components related to sustainable measures in highway projects
The questionnaire surveys indicate the following result:
Challenges of integrating sustainability-related cost components in LCCA
• Social and environmental costs are The interviews indicates the following results. considered as the external costs • Limitation in the methods and models in dealing • Unclear boundaries in considering with cost components related to sustainable sustainability-related costs (e.g. some measures. researchers focus on the global impacts • Lack of quality assumptions and data to deal with of sustainability in highway projects) these costs • Employ multi-criteria evaluation methods in • There are still limitations in the current analysis of sustainability-related cost components LCCA model that emphasises • Need to improve the existing models sustainability.
The needs for the decision support models to assist in highway investment decisions
• Applied in large and new highway infrastructure development • Promoting LCCA application in highway infrastructure • Understanding of the LCCA concept is still evolving
• Ten critical cost components related to sustainable measures in highway infrastructure investments
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From the comparison as set out in Table 4.14, the questionnaire survey has verified the critical cost components related to sustainable measures in highway infrastructure. The semi-structured interview has identified the challenges to improve long-term financial decisions in the current industry. All these results and findings guide the researcher to the next stage of the research work. This involves the development of a decision support model to assist the stakeholders in dealing with highway investment decisions. Chapters 5 and 6 will introduce and present the decision support model and present a case study for in-depth application and verification.
Chapter 5: A Decision Support Model for Evaluating Highway Investment
CHAPTER 5: A DECISION SUPPORT MODEL FOR EVALUATING HIGHWAY INVESTMENT
5.1
Introduction
This chapter reports the process of model development in detail. It presents a series of Fuzzy Analytical Hierarchy Process (Fuzzy AHP) and Life-cycle cost analysis (LCCA) evaluation methods in dealing with the sustainability-related cost components validated by industry stakeholders. The findings of the questionnaire survey in Chapter 4 identified the ten most critical cost components in highway investment. The semi-structured interview results also identified the industry challenges and suggestions to integrate of sustainability concepts in LCCA practice. As a baseline of this study, the analysis of the survey indicates the need to develop a decision support model in dealing with the long-term financial decisions in highway projects. Figure 5.1 illustrates that the findings from the survey serve as the platform for the development of decision support model. This chapter discussed work that has achieved one of the purposes in the third objective, which is to apply the industry verified cost components and identified the industry challenges and suggestions of integration of sustainability concepts to develop a decision support model. The links between the research objectives, research questions and the development of the model are set out in Figure 5.2. The model development considered three essential requirements. Firstly, the model should be applicable regardless of the project size and type. Secondly, the modelling result should be convincing in order to enable practitioners to adopt a final decision, which is selecting the most sustainable project alternative. Thirdly, the model should effectively assess the ten sustainability-related cost components in the early stage of the project development. The overall concept of the model is intended to be tested and evaluated in real case scenarios in which multiple alternatives are proposed.
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Industry Validated Sustainability Related Cost Components
Industry Challenges
• • • •
Agency Category Material costs Plant and equipment costs Major maintenance costs Rehabilitation costs
• •
Social Category Road accident - internal costs Road accident- economic value of damage
• • • •
Industry Suggestions
Environmental Category Hydrology impacts Loss of wetland Disposal of material costs Cost of barriers
Development of a decision support model for dealing with long-term financial decisions in highway projects Figure 5.1: Integration of survey findings with model development
This chapter has seven sections. Section 5.2 provides a brief description of the model structure and application. Next, Section 5.3 discusses the assessment procedure of the Fuzzy AHP method. This is followed by Section 5.4, which explores the application of LCCA in highway infrastructure and assessment procedures. Section 5.5 then discusses the final decision process that includes the combinations of the weighted values for both the Fuzzy AHP and LCCA assessment. Finally, Section 5.6 explains the sensitivity analysis for the proposed model. Finally, Section 5.7 discusses the model validation process, and Section 5.8 provides a summary of this chapter.
Chapter 5: A Decision Support Model for Evaluating Highway Investment
Chapter 2.
Chapter 2 Literature Review
Research Questions
Research Objectives Understanding cost implications pursuing sustainability
of
• Understanding the global initiatives on sustainable infrastructure development • Understanding the context of highway infrastructure development in Australia • Reviewing current LCCA models and programs • Identifying sustainability-related cost components in highway infrastructure projects
3. Identifying sustainability-related cost components that project stakeholders are concerned about: Chapter 4 Cost Implications for Highway Sustainability
Chapters 5 & 6 Decision Support Model Development and Model Application
• Exploring current practice of life cycle cost analysis in Australian highway infrastructure • Identifying critical sustainabilityrelated cost components in highway infrastructure investments • Integrating various stakeholders’ expectations of sustainability enhancement in LCCA
What are the sustainability measures that have cost implications in highway projects?
What are the specific cost components relating to sustainability measures about which highway project stakeholders feel most concerned?
3. Developing a decision support model •
Integrating the industry verified cost components with decision support model
•
Testing and evaluating the decision support model
How to assess the long-term financial viability of sustainability measures in highway projects?
Figure 5.2: Development of model based on research objectives and questions
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5.2
The Model Structure and Application
This section presents the overall structure and development of a conceptual model in order to effectively assist industry stakeholders in dealing with complex highway investment decisions. The model development consists of two stages, as shown in Figure 5.3. The first stage identifies the sustainability-related cost components in highway projects through a review of literature and industry reports. The second stage develops the decision support model by the adoption of Fuzzy AHP and LCCA, integrating industry verified cost components as well as industry problems and suggestions extracted from the survey of industry practitioners.
Literature
Stage 1
Industry Reports
Sustainability-Related Cost Components in Highway Infrastructure Agency
Social
Environmental
Ten Critical Cost Components in Highway Infrastructure Industry Problems
Stage 2
Fuzzy Analytical Hierarchy Process
Industry Suggestions
Decision Support Model
Life-Cycle Cost Analysis Concept
Figure 5.3: Decision support model development process
5.2.1. The model structure and development: stage 1 The literature review in Chapter 2 served to understand the extent of the sustainability-related cost components in highway infrastructure. An extensive literature review and evaluation of project reports from previous highway projects
Chapter 5: A Decision Support Model for Evaluating Highway Investment
131
was first conducted to reveal all potential cost components. Forty-two imperative aspects of these cost components were identified. .These cost components are grouped in three main categories as shown in Table 5.1. Table 5.1: Sustainability-related cost components for highway infrastructure
Sustainability Criteria
Sustainability-Related Cost Components Main Factors Sub Factors Initial Construction Costs Maintenance Costs
Agency Category Pavement Upgrading Costs Pavement End-of-Life Costs
Vehicle Operating Costs Travel Delay Costs
Social Category
Social Impact Influence
Accident Costs
Solid Waste Generation Costs
Pollution Damage by Agency Activities
Environmental Category
Resource Consumption
Noise Pollution
Air Pollution Water Pollution
Labour Cost Materials Cost Plants and Equipments Cost Major Maintenance Cost Routine Maintenance Cost Rehabilitation Cost Pavement Extension Cost Demolition Cost Disposal Cost Recycle and Reuse Cost Vehicle Elements Cost Road Tax and Insurance Cost Speed Changing Cost Traffic Congestion Cost Cost of Resettling People Property Devaluation Reduction of Culture Heritage and Healthy Landscapes Community Cohesion Negative Visual Impact Economy Value of Damages Internal Cost External Cost Cost of Dredging/Excavating Material Waste Management Cost Materials Disposal Cost Land Use Cost Distraction to Soil Extent of Tree Felling Habitat Disruption and Loss Ecology Damage Environmental Degradation Fuel Consumption Cost Energy Consumption Cost Cost of Barriers Tyre Noise Engine Noise Drivers’ Attitudes Effects to Human Health Dust Emission CO2 Emission Loss of Wetland Hydrological Impacts
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In addition, the contemporary LCCA models in the evaluation of road infrastructure were reviewed. None of these methods or programs highlights social and environmental aspects, nor do they provide the means to add future components. Followed by the questionnaire surveys and semi-structured interviews as discussed in chapter 4, this study managed to identify ten most critical cost components in highway investments with sustainability objectives. These top ten rated cost components were validated by industry stakeholders as shown in Table 4.7 in section 4.3.2. These critical cost components reveal the common opinions of Australian highway industry stakeholders in both theory and practice of highway infrastructure development in Australia. Although many of these cost components are neither fully understood nor easy to calculate, an attempt to quantify and evaluate each aspect should be made in developing a comprehensive financial decision support tool. Therefore, this research employed the Fuzzy AHP and the LCCA approaches to develop the decision support model. Both methods were selected to deal with quantitative and qualitative sustainability-related cost components.
5.2.2. The model structure and development: stage 2 This section presents the integration of the Fuzzy AHP approach and the life-cycle costing analysis (LCCA) concept to develop the decision support model. This study found that the issue with traditional LCCA model is focusing on quantifiable agency cost components. There is a lack of systemical evaluation of soft factors such as social and environmental costs, which are characterised as qualitative, intangible, and informal cost components. The Fuzzy AHP was selected in this study because of its ability to provide quantitative measures for soft factors by using the same scale. To effectively employ these two concepts in the model development, the researcher firstly needed to understand these concepts. It was also necessary to identify ways to effectively integrate these concepts into development of the model. To accomplish the design of the whole model, the industry problems in LCCA application and the challenges of integrating sustainability-related cost components in LCCA were
Chapter 5: A Decision Support Model for Evaluating Highway Investment
extracted from the semi-structured interviewed of practitioners as reported in Chapter 4. Two assessment methods were employed to evaluate the industry verified sustainability-related cost components as shown in Figure 5.4. These modules include Fuzzy AHP and LCCA. Single assessment method was not a realistic option for assessing these cost components as all them have multi-criteria characteristics. For this reason, the qualitative cost components were assessed by Fuzzy AHP method that is able to deal with soft factors. On the contrary, quantitative cost components were assessed by LCCA method. The application of each assessment method is explained in detail in the next section.
Sustainability Highway Infrastructure Assessment
Assessment Methods for Qualitative Cost Components
Assessment Methods for Quantitative Cost Components
Fuzzy Analytical Hierarchy Process
Life Cycle Costing Analysis
Figure 5.4: Proposed assessment methods for the decision support model
5.3
The Fuzzy Analytical Hierarchy Process
The Fuzzy Analytic Hierarchy Process is a method of multi-criteria decision-making (MCDM) and is considered to be a descriptive approach to decision-making (Lee and Chan 2008; Nobrega et al. 2009; Jaskowski, Biruk and Bucon 2010; Peihong and Jiaqiong 2009). According to Cho (2003), the MCDM method deals with decisions involving the choice of a best or appropriate alternative from several potential ‘candidates’, subject to several criteria or attributes. However, the current
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construction industry’s problems are becoming more complex and it is more difficult for the stakeholders to reach a precise decision in these complex situations. To deal with an MCDM problem, Fuzzy AHP methodology is used as a decision support tool in this study. The Fuzzy AHP methodology is intended for alternative selection by integrating the concept of fuzzy set theory and hierarchical structure analysis. The application of fuzzy methodology enables the decision makers evaluate the decisions based on both qualitative and quantitative data. For this reason, it improves the level of confident of decision makers in giving interval judgments rather than fixed value judgments. In this approach, triangular fuzzy numbers are employed for evaluating the preferences of one criterion over another. Then, by using the extent analysis method, the synthetic extent value of the pairwise comparison is calculated. The proposed fuzzy AHP approach does not merely constitute a technical solution for an isolated problem, but rather represents a comprehensive concept of the entire selection process.
Qualitative cost components in the evaluation of highway infrastructure projects using Fuzzy AHP Hierarchy Revision
Hierarchy construction with soft factors
Pairwise comparison for all sets of factors Scoring of alternatives Calculation of priority factors
Aggregate the relative weights Calculate the total score for each alternative Select the alternative that has the highest total score Figure 5.5: Proposed application of the Fuzzy AHP
The model involves the benefit evaluation of alternatives. It passes through the stages in fuzzy AHP principles as illustrated in Figure 5.5. It addresses a multi-criteria decision making problem, where there are a number of significant criteria that need
Chapter 5: A Decision Support Model for Evaluating Highway Investment
to be considered in the selection process. The related important factors and criteria require the prioritisation or weighting of some factors to be identified. Those factors or criteria with high ratings are said to be critical. To perform the operation successfully, the decision maker must first organise and prioritise the problem. It then requires an effective decision making technique to systematically evaluate the selection process, which, in this case, will help the individual practitioner to select the most appropriate choice for highway infrastructure projects based on sustainability indicators. The fuzzy AHP was chosen for this research to provide the decision maker with a logical framework to model a complex decision scenario, which can integrate perceptions, judgments and experiences into a hierarchy. It therefore allows a better understanding of the problem, its criteria and possible choices.
5.3.1. Fundamentals of Fuzzy AHP The Fuzzy AHP began with the basic concept of the Analytical Hierarchy Process (AHP). AHP was developed by Saaty (1980) in the early 1970s to help individuals and groups deal with decision making problems. Saaty (1980) first introduced AHP as a new approach to dealing with complex economic, technological, and sociopolitical problems, which often involve a great deal of uncertainty. However, due to the complexity of current problems, the fuzzy concept was employed to be integrated with AHP methods to handle more complex decisions. The earliest work in integrating between Fuzzy Logic and AHP concepts appeared in the early 1980s, with several researchers working on the concepts and starting to determine fuzzy priorities of comparison ratios by using the geometric mean (Boender, de Graan and Lootsma 1989; Buckley 1985; Van Laarhoven and Pedrycz 1983). In the 1990s, studies in Fuzzy AHP became more popular and several improvements on the methods were developed (Deng 1999; Chang 1996; Ruoning and Xiaoyan 1992). Chang (1996) introduced triangular fuzzy numbers for pairwise comparison scales of Fuzzy AHP and the use of the extent analysis method for the synthetic extent values of the pairwise comparisons. Zhu et al. (1999) investigated the extent analysis method and applied some practical examples of Fuzzy AHP.
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Recently, Fuzzy AHP has been extensively applied in the literature. In the construction industry, the application of Fuzzy AHP is becoming popular because it aids industry stakeholders in dealing with complex decisions. Several research studies have proved the efficacy of the method. For example, Pang (2008) proposes the Fuzzy AHP in selecting a suitable bridge construction method. Peihong and Jiaqiong (2009) apply Fuzzy AHP methods to risk assessment in an international construction project. Jaskowski et al. (2010) assess contractor selection with Fuzzy AHP in a group decision environment. Based on these studies, it can be concluded that Fuzzy AHP is a practical approach in dealing with complex decisions in the construction industry. This research proposes the use of the Fuzzy AHP model to evaluate highway infrastructure projects by comparing alternative choices based on the sustainabilityrelated cost components. The proposed Fuzzy AHP model does not merely provide a technical solution for an isolated problem, but rather represents a comprehensive concept of the entire selection process.
5.3.2. Fuzzy AHP assessment procedure The first step in the Fuzzy AHP assessment procedure is establishing a hierarchical structure. The Fuzzy AHP is a part of the model assessment process. The purpose of applying the Fuzzy AHP is to assess ten industry verified cost components in a systemic manner. The Fuzzy AHP results will be integrated with other estimation results in the final decision making process to determine the most sustainable alternative of highway infrastructure projects. Figure 5.6 illustrates the Fuzzy AHP hierarchy structure. The first sets of layers are the agency, environmental, and social aspects described as the first level. The second level consists of three (3) groups. The three groups represent the triple bottom-line approach of the Fuzzy AHP hierarchy. Four (4) qualitative indicators are grouped under the agency aspect. Another four (4) qualitative indicators are categorised under the environmental aspect. A remaining two (2) qualitative indicators are grouped under the social aspect. The third level is the number of proposed alternatives subject to assessment of each qualitative indicator in the second level.
Chapter 5: A Decision Support Model for Evaluating Highway Investment
LEVEL 1 Focus LEVEL 2 Sustainability Criteria LEVEL 3 Sub Criteria of Desired components
Qualitative Sustainability Benefits Assessment
Importance of Economic Aspect
Importance of Environmental Aspect
Importance of Social Aspect
Group of cost components from Economic Aspect
Group of cost components from Environmental Aspect
Group of cost components from Social Aspect
Alternative “n” per each cost component in economic aspect
Alternative “n” per each cost component in environmental aspect
Alternative “n” per each cost component in economic aspect
LEVEL 4 Alternatives Aggregate hierarchy value to make a final prioritisation Figure 5.6: Hierarchy map of sustainability-related cost component assessment
In order to perform a pairwise comparison among the parameters, the triangular numbers and fuzzy conversion scale are employed based on the Fuzzy scale used in existing studies (Aya and Özdemir 2006; Fu et al. 2008; Peihong and Jiaqiong 2009; Perçin 2008). Figure 5.7 shows the linguistic scale for the triangular numbers. The fuzzy conversion scale are shown in Table 5.2. Throughout this study, the importance of the benefits of information-sharing criteria and sub-criteria are evaluated by five main linguistic terms. The terms are: •
“EI: equally important”,
•
“WMI: weakly more important”,
•
“SMI: strongly more important”,
•
“VSMI: very strongly more important” and
•
“AMI: absolutely more important”.
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This study has also considered the respondents’ reciprocals: •
“ALI: absolutely less important”,
•
“VSLI: very strongly less important”,
•
“SLI: strongly less important” and
•
“WLI: weakly less important”.
By using the linguistic terms, decision makers will feel more comfortable using such terms in highway investment assessments. For example, someone may consider that cost components i is “absolutely important” compared with the component j under certain criteria; decision makers may set 𝑎𝑎𝑎𝑎𝑎𝑎 = (5/2,3, 7/2). If element j is thought to be “absolutely less important” than element i, the pair wise comparison between j
and i could be presented by using fuzzy number, 𝑎𝑎𝑎𝑎𝑎𝑎 = (1/𝑢𝑢_1 ,1/𝑚𝑚_1 ,1/𝑙𝑙_1 ) = 2/7,1/3,2/5. µRI
1.0
1/2
EI
WI
FI
VSI
AI
1
3/2
2
5/2
3
7/2
RI
Figure 5.7: The linguistic scale of triangular numbers for relative importance
Table 5.2: Triangular fuzzy conversion scale
Linguistic scale for importance Equal important (EI) Weakly more important (WI) Fairly more important (FI) Very strongly more important (VSI) Absolutely more important (AI)
Triangular fuzzy scale (1/2, 1, 3/2)
Triangular fuzzy reciprocal scale (2/3, 1, 2)
(1, 3/2, 2)
(1/2, 2/3, 1)
(3/2, 2, 5/2)
(2/5, 1/2, 2/3)
(2, 5/2, 3)
(1/3, 2/5, 1/2)
(5/2, 3, 7/2)
(2/7, 1/3, 2/5)
Chapter 5: A Decision Support Model for Evaluating Highway Investment
To generate pairwise comparison matrices, a group of 5 respondents from each case projects were interviewed. Then the fuzzy evaluation matrix relevant to the goal of each case projects was obtained with the consensus of the respondents. Their feedback was then be recorded in the form of linguistic expressions and analysed in a spreadsheet. The outlines of the extent analysis method on Fuzzy AHP (Zhu, Jing and Chang 1999; Chang 1996; Ruoning and Xiaoyan 1992) can be summarised as follows: Let x = {x1 , x2 , … , xn } be an object set, and u = {u1 , u2 , … , un } be a goal set.
According to Chang’s extent analysis method, each object is taken and extent analysis for each goal 𝑔𝑔𝑔𝑔 is performed, respectively. Therefore, the C extent analysis values for each object can be obtained and shown as follows:
𝑚𝑚 1 2 𝐶𝐶𝑔𝑔𝑔𝑔 , 𝐶𝐶𝑔𝑔𝑔𝑔 ,…, 𝐶𝐶𝑔𝑔𝑔𝑔 , 𝑖𝑖 = 1,2, … , 𝑛𝑛
(1)
j
where all the Cgi (j = 1, 2, … , m) are triangular fuzzy numbers (TFNs) whose
parameters are l, m and u. They are the least possible value, the most possible value, and the largest possible value, respectively. A TFN is represented as (l, m, u). The steps of the extent analysis method can be given as follows (Büyüközkan et al. 2004): Step 1: The value of fuzzy synthetic extent with respect to the 𝑖𝑖𝑡𝑡ℎ object is defined as:
Si =
m
j � Cgi j=1
⊗
n
m
j �� � Cgi � i=1 j=1
−1
(2)
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Chapter 5: A Decision Support Model for Evaluating Highway Investment j
To obtain ∑m j=1 Cgi , this study performs the fuzzy addition operation of m extent analysis values for a particular matrix such that:
m
j � Cgi j=1
j
m
m
m
j=1
j=1
j=1
(3)
= �� lij , � mij , � uij �
−1
and to obtain �∑ni=1 ∑m j=1 Cgi � , this study performs the fuzzy addition operation of j
Cgi (j = 1, 2, … , m) values such that: n
m
j � � Cgi i=1 i=1
where,
m
m
m
i=1
i=1
i=1
= �� lij , � mij , � uij �
m
m
m
j=1
j=1
j=1
(4)
li = � ly , mi = � mij , ui = � uij
Then, the inverse of the vector in equation (5) is computed as:
n
m
−1
j �� � Cgi � i=1 j=1
= �
1
1
1
, , � ∑ni=1 ui ∑ni=1 mi ∑ni=1 li
Where ∀ ui, mi, li > 0 Finally, to obtain the 𝑆𝑆𝑖𝑖 in equation (2), we perform the following multiplication:
(5)
Chapter 5: A Decision Support Model for Evaluating Highway Investment
Si =
m
j � Cgi j=1
⊗
n
m
j �� � Cgi � i=1 j=1
−1
m
= ��× j=1
1
∑ni=1 mi
m
, lij , � uij × j=1
1
∑ni=1 li
(6) �
Step 2: The degree of possibility of 𝐶𝐶2 = (𝑙𝑙2 , 𝑚𝑚2 , 𝑢𝑢2 ) ≥ 𝐶𝐶1 = (𝑙𝑙1 , 𝑚𝑚1 , 𝑢𝑢1 ) is defined as:
V(C2 ≥ C1 ) = sup �min �μM 2 (y)��
(7)
y≥x
This can be expressed equivalently as follows:
1 if M2 ≥ M1 0 V(C2 ≥ C1 ) = hgt(C1 ∩ C2 ) = μC 2 (d) = � , if M2 ≥ M1 (l1 − u2 ) (m2 = u2 ) − (m1 = u1 ) otherwise
(8)
where d is the ordinate of the highest intersection point D between μM 1 and μM 2 . To
compare 𝐶𝐶1 and 𝐶𝐶2 , both the values of V(C1 ≥ C2 ) and V(C2 ≥ C1 ) are needed. The intersection between 𝐶𝐶1 and 𝐶𝐶2 , is shown in Figure 5.8.
Step 3: The degree possibility for a convex fuzzy number to be greater than k convex fuzzy numbers mi (i = 1,2, … , k) can be defined by: V(C ≥ C1 , C2 , … , Ck ) = V[(C ≥ C1 and C ≥ C2 and … and C ≥ Ck )] = min V(C ≥ Ci ) , i = 1,2, … , k
(9)
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Assume that:
D′ (Si ) = min V ( Si ≥ Sk )
(10)
For = 1,2 … , n; k ≠ i . Then the weight vector is given by: W ′ = D′ ((S_1 ), D^′ (S_2 ), … , D′(S_n ))T
(11)
where 𝑆𝑆𝑖𝑖 (𝑖𝑖 = 1, 2, … , 𝑛𝑛) are n elements µC C1
1
C2
V(C1 ≥ C2)
0
D
l1
m1
l2
d
u1 m2
u2
C
Figure 5.8: The intersection between C1 and C2
Step 4: After normalisation (the elements of each column are divided by the sum of that column the elements in each resulting row are added and this sum is divided by the number of elements in the row), the normalised weight vectors are obtained as follows:
W = (D(S1 ), D(S2 ), … , D(S1 )T
(12)
Chapter 5: A Decision Support Model for Evaluating Highway Investment
The issue of consistency in Fuzzy AHP is another subject that needs to be examined. The consistency index (CI) and consistency ratio (CR) are calculated as follows:
CI =
(λmax − n) (n − 1)
(13)
where λmax is the largest eigenvalue of the comparison matrix, n is the number of
items being compared in the matrix, and RI is a random index. If the CR is less than 0.10, the comparisons are acceptable, otherwise not. The decision maker has to make the pairwise judgments again (Saaty 1990, 1980). By applying Fuzzy AHP assessment procedure, it allows all aspects of the cost components-related to sustainable measures in highway infrastructure to be evaluated in order to elicit meaningful data. Subsequently, this provides a platform for the model development based on ten industry verified sustainability-related cost components. Table 5.3 summarises how these critical cost components could be meaningfully investigated by the fuzzy AHP and LCCA methods. Table 5.3: Assessment approach of critical sustainability cost components
Main Criteria Agency category
Social category
Environmental category
Sub-Criteria Material costs
Investigation Methods LCCA + Fuzzy AHP
Plant and equipment costs
LCCA + Fuzzy AHP
Major maintenance costs
LCCA+ Fuzzy AHP
Rehabilitation costs
LCCA + Fuzzy AHP
Road accident- internal costs
LCCA + Fuzzy AHP
Road accident- economic value of damage Hydrological impacts
Fuzzy AHP
Loss of wetland
Fuzzy AHP
Disposal of material costs
Fuzzy AHP
Cost of barriers
Fuzzy AHP
Fuzzy AHP
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5.4
Life-Cycle Cost Analysis
Life-cycle cost analysis (LCCA) is one of the decision support tools employed in the model development. As shown in Table 5.3, LCCA approach is ideal to evaluate cost components that are able to convert into monetary value. Life-cycle cost calculation will handle existing cost components such as agency and some social cost components, while Fuzzy AHP will deal with the unquantified factors such as some social and environmental cost components. In this research, the life-cycle cost calculation is based on real case data; it involves components such as the agency costs for the maintenance activities.
5.4.1. Life-cycle cost analysis in highway infrastructure The LCCA will be calculated and entered for the appropriate year depending on the highway maintenance strategy selected and also the life span of the highway infrastructure. The timing of all construction activities are recorded, with the timing then used in calculating the agency costs associated with a project. This timing of events is illustrated in Figure 5.9, which shows a conceptual diagram of pavement performance, with corresponding marks on the horizontal axis indicating the year in which the work will be performed.
Condition
Time Figure 5.9: Timing of maintenance and rehabilitation
The combined agency costs for each event will be entered in the life-cycle cost analysis at the predicted age of the pavement. The total cost calculated for each year is then discounted to the present time to obtain its present value, for comparison.
Chapter 5: A Decision Support Model for Evaluating Highway Investment
Using the economic analysis strategies, the total life-cycle costs of each alternate design were analysed and rated. The conceptual graph in Figure 5.10 shows the agency costs associated with each construction activity over the life of the highway project.
Initial Cost
Rehabilitation 1 Maintenance 2
Cost Maintenance 1
Rehabilitation n Maintenance n
Maintenance n
Year (i) Figure 5.10: Agency costs associated with construction activities
In Figure 5.11, the dotted arrows represent the social and environmental costs, which are associated with construction activities every time a construction work zone is in place. These costs are in addition to all agency costs that are incurred because of the construction activities. Social and environmental costs vary greatly, depending on the number of vehicles passing through the work zone, but can easily be much greater than the total cost of the actual construction activities. The essence of life-cycle costing is to capture all predictable costs that may have an impact on the economy or society that could be affected by the highway pavement project under consideration.
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Initial Cost
Rehabilitation 1 Maintenance 2
Maintenance 1
Rehabilitation n Maintenance n
Maintenance n
Cost
Year (i) Figure 5.11: Social and environmental costs added to agency costs associated with construction activities
5.4.2. LCCA calculation procedure This research attempts to provide a means for identifying and estimating all costs that may have an effect on these entities involved in the construction and use of the highway section. Out of ten sustainability-related cost components, five are a part of the LCCA assessment because they are considered as quantitative factors that can be estimated in terms of monetary value. Most conventional LCCA methodologies, such as the Federal Highway Administration model, adopts the present value method that brings the future value back to the base year. Future value is defined as any capital investment requirement scheduled after the base year. Future costs need to be discounted to take into account the time value of the money. Ockwell (1990) introduced two approaches in LCCA calculations. The first approach considers simultaneously both the inflation rate and the nominal discount rate, as shown in Equations 14, and 15.
FV = $const . (1 + i)n
(14)
Chapter 5: A Decision Support Model for Evaluating Highway Investment
PV =
FV (1 + dn )n
(15)
The second approach uses the real discount rate. The real discount rate takes into account only the real earning potential of money over time. Equation 16 can calculate the real discount rate. The present value is calculated by multiplying the constant dollar value and the discount factor, using the real discount rate as shown in Equation 17.
dr =
1 + dn −1 1+i
PV = $const . × DF, DF =
1 (1 + dr )n
where FV = future current dollar value PV = present constant dollar value, DF = discount factor, $ const = constant dollar value, i = inflation rate, d n = nominal discount rate d r = real discount rate, and n = number of years in the future at which costs are incurred.
(16)
(17)
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Since the constant dollar value at the base year can be estimated, the selection of the discount rate and the application of the discount factor significantly control the overall performance of the LCCA and the effective long-term economical judgment between comparable alternatives. The present value is significantly decreased by a high discount factor, especially for an extremely long life-cycle. The discount factor is a function of two factors - time and the discount rate. From the broader point of view of road users and the wider community, economic analysis suggests the net present value at a 7% real discount rate will achieve a positive economic. A real discount rate of 7% is based on the guidance recommended by Austroads and the Road and Transport Authority (RTA), Australia. It is extremely difficult to predict the future discount rate because economic fluctuation is influenced by too many external factors. If present value is used for real cost estimation, discount factor simulation that takes multiple discount rates is recommended to minimise misinterpretation in the life-cycle cost analysis. In summary, decision makers should assess the benefit of future savings between proposed alternatives. Decision makers should not underestimate the future cost implications by using an unrealistic discount rate because a significant reduction of present value makes the future investment insignificant. When using a real cost estimation method, decision makers should consider this tendency in conventional LCCA models. The future economical benefit should be carefully assessed by not only including the present value of future cost, but also by considering the realistic monetary value of the future task. These cost components represent quantitative indicators in economical assessment. Discount factors can be applied to all cost components except initial cost components. Real cost estimation analysis should include not only the total sum of costs, but also effectiveness of each cost component between proposed alternatives. All other qualitative economical indicators are assessed as a part of Fuzzy AHP evaluations. The combination of the two separate results will be done during the final decision making process. The summation of all quantitative cost items is expressed in Equation 18.
Chapter 5: A Decision Support Model for Evaluating Highway Investment
Real costs ($) = �(Ci )
(18)
where Ci= quantitative sustainability indicators for cost estimation
5.5
Final Decision Making Process
The final decision is based on two modular results from the overall sustainability assessment processes, as shown in Table 5.4. The two modular results have different dimensional (criteria) values. Another MCDM is required to integrate both values into a single uniform process (the first MCDM used in this model is Fuzzy AHP for qualitative indicator assessment). The simplest and most effective MCDM method for a single level of decision making is the Weighted Sum Model (WSM) (Triantaphyllou et al. 1997). Normalisation requires consideration of different characteristics for each modular result. High values are preferred for these results. For example, Fuzzy AHP and LCCA provide high value preferred results. Equation 19 calculates the normalised values of modular results. Symbol (a high i ) is used for the normalisation of high value preferred results.
Ri ahigh i = � n � ∑i=1(R i )
(19)
where R i = a result corresponding to an alternative from each modular assessment, and
n = number of alternatives. The relative importance of each modular result is expressed as an interval value from 0 to 1. The sum of the relative importance must be equal to one. This relative
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importance is used as a weight factor 𝑊𝑊𝑗𝑗 in Equation 20, which is used to calculate
the overall sustainability 𝑆𝑆 of each alternative. The sum of the weighted normalised values of all alternatives in Table 5.3 must be equal to one. Subsequently, the sum of
𝑆𝑆𝑗𝑗 values must also equal one. The highest 𝑆𝑆 value represents the most sustainable
alternative method.
𝑚𝑚
(20)
𝑆𝑆𝑖𝑖 = � 𝑎𝑎𝑖𝑖𝑖𝑖 𝑊𝑊𝑗𝑗 𝑗𝑗 =1
where, S i = relative sustainability of alternative A (e.g. Alt 1, Alt 2, Alt i), and m = number of module results (1-2).
Table 5.4: WSM calculation table for final decision making Modular Results
Fuzzy AHP
LCCA Weighted Sum Value
Weight Factor
Alternative 1
Alternative 2
Alternative i
W1
Fuzzy AHP -
Fuzzy AHP -
Fuzzy AHP -
Alt 1
Alt 2
Alt i
W2
$ - Alt 1
$ - Alt 2
$ - Alt i
W i =1
S1
S2
Si
The relative importance of each modular result can be decided by the subjective and intuitive assessment of decision makers and other stakeholders. Therefore, sensitivity tests are required to determine if the final decision requires changing the relative importance of each modular result. Sensitivity analysis for this study adopts proportional changes of weight factors by the given magnitude of the weight factor. For example, when a weight factor for Fuzzy AHP is changed, all other weight factors are changed proportionally from their original values. Therefore, a higher weight factor value is changed proportionally higher than for a lower weight factor. An equation detailing this sensitivity analysis is presented in Chapter 6 along with a case study.
Chapter 5: A Decision Support Model for Evaluating Highway Investment
The last step of the decision support model application is to approve the final result from the WSM. If the final prioritisation result is not approved by the decision maker, then the modelling process should be repeated. This looping function should include cancellation of the project development and modification of alternatives of the projects.
5.6
Sensitivity Analysis
Sensitivity analysis was conducted to verify the vulnerability of final result reversion by changing the weight factors of Weighted Sum Model (WSM). The analysis was conducted as part of the final decision-making process. All two weight factors are applied to the sensitivity analysis. The sensitivity analysis results provide a range of weight factors that can make a difference in the outcome of the final decision making. Therefore, when a specific weight factor is an issue and it is significant to the overall sustainability, sensitivity analysis can demonstrate ‘what-if’ scenarios by applying different weight factors. There are various approaches to sensitivity analysis. Changing the weight factors used for WSM is considered as the most appropriate method for two reasons: 1) weight factors can be decided by the subjective judgments of decision makers, which may cause conflict between stakeholders; and 2) all previous assessment outcomes (two modular results) can be treated as non-negotiable results in order to improve the consistency of the model application. Two sensitivity analyses and the output data are presented in the following sections. The selected calculation process for the sensitivity analysis is based on changing a weight factor, which is subject to the analysis. When a value of a weight factor is changed by the sensitivity analysis, other weight factors are decreased or increased by proportional changes of the weight factor. Then, these adjusted weight factors and changed weight factor are multiplied by the normalised assessment results. The total sum of the two weight factors is always equal to one (1). Proportional adjustments for other weight factors are calculated by Equation 21.
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𝑊𝑊𝑊𝑊𝑎𝑎𝑎𝑎𝑎𝑎 .𝑖𝑖 =
�𝑊𝑊𝑊𝑊𝑐𝑐ℎ𝑛𝑛𝑛𝑛 .𝑗𝑗 − 𝑊𝑊𝑊𝑊𝑗𝑗 � �1 − 𝑊𝑊𝑊𝑊𝑗𝑗 �
× 𝑊𝑊𝑊𝑊𝑖𝑖
(21)
where, 𝑊𝑊𝑊𝑊𝑎𝑎𝑎𝑎𝑎𝑎 .𝑖𝑖 = adjusted other weight factors except sensitivity analysis weight factor,
𝑊𝑊𝑊𝑊𝑐𝑐ℎ𝑛𝑛𝑛𝑛 .𝑗𝑗 = changed weight factor of sensitivity analysis,
𝑊𝑊𝑊𝑊𝑗𝑗 = originally given weight factor of sensitivity analysis, and
𝑊𝑊𝑊𝑊𝑖𝑖 = original weight factors except sensitivity analysis weight factor.
5.7
Chapter Summary
This chapter provided a detailed methodology and illustration of the proposed decision support model for long-term financial investments in highway infrastructure. The preliminary model effectively assesses various aspects of cost components related to sustainability measures. This also helps to enhance the sustainability of the highway project. The model focuses on project level application and assessing the relative sustainability of proposed alternatives in the feasibility stage of the project development. Finally, it helps decision makers facing an investment decision to select the most sustainable and the most financially viable alternative for the project. For development of the model, temporal and spatial boundaries of the model specify the area and range of the assessment process. Ten (10) industry validated cost components related to sustainable measures constituted the model. The model provides two modules for the assessment process: (1) the Fuzzy Analytic Hierarchy Process, and (2) life-cycle cost analysis. Each assessment module produces a different attribute (criterion) of the result. Each criterion was considered as an independent attribute. The weighted sum model, one of the methods of multi-criteria decision making, is proposed for the final decision making process.
Chapter 5: A Decision Support Model for Evaluating Highway Investment
A preliminary model is designed to be applied regardless of the project size and type in the area of highway infrastructure development. The model requires real world scenario application and validation from senior decision makers in the industry. The implementation, verification and validation of the model are reported through case studies in the next chapter.
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CHAPTER 6: MODEL CASE STUDIES
6.1
APPLICATION
THROUGH
Introduction
Conclusions from the data explored in the previous chapters have highlighted the need to improve current life-cycle cost analysis (LCCA) models so that practitioners are able to deal with sustainability issues in highway infrastructure projects. The improvements include: •
incorporating the industry verified sustainability-related cost components into current LCCA models for highway infrastructure projects; and
•
developing a benchmarking model to improve the long-term financial investment decisions for highway infrastructure development.
To address these necessary improvements, Chapter 5 discussed the overall development of the proposed model to deal with long-term financial decisions as well as sustainability-related cost components. This chapter aims to answer the third research question: How to assess the long-term financial viability of sustainability measures in highway project? This can be achieved through application of the preliminary model. The process included applying and validating the model in real case projects. The links between the research objectives and research questions and the process for testing and evaluating the model are set out in Figure 6.1. The development of this model includes the combination of two methodologies, namely the Fuzzy Analytical Hierarchy Process (Fuzzy AHP) method and life-cycle costing analysis. Sustainability-related cost components that cannot be quantified into real cost data were evaluated by the Fuzzy AHP method while LCCA was used to analyse the real cost data that can be quantified in highway infrastructure projects. To have a better understanding of this model application, two highway infrastructure projects were employed. The industry stakeholders involved in the projects were interviewed based on the case projects characteristics and needs.
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Chapter
Research Objectives 4.
Chapter 2 Literature Review
Understanding cost implications pursuing sustainability
Research Questions of
• Understanding the global initiatives on sustainable infrastructure development • Understanding the context of highway infrastructure development in Australia • Reviewing current LCCA model and programs • Identifying sustainability related cost components in highway infrastructure projects
5. Identifying sustainability-related cost components that project stakeholders are concerned with: Chapter 4 Cost Implications for Highway Sustainability
Chapters 5 & 6 Decision Support Model Development and Model Application
• Exploring current practice of life-cycle cost analysis in Australian highway infrastructure • Identifying critical sustainabilityrelated cost components in highway infrastructure investments • Integrating various stakeholders’ expectations of sustainability enhancement in LCCA
What are the sustainability measures that have cost implications in highway projects?
What are the specific cost components relating to sustainability measures about which highway project stakeholders feel most concerned?
4. Developing a decision support model •
Integrating the industry verified cost components with decision support model.
•
Testing and evaluating the decision support model
How to assess the long-term financial viability of sustainability measures in highway project?
Figure 6.1: Approach to model application and overall research aim
This chapter discusses application and validation of the model in handling long-term financial decision support and sustainability benefits based on two highway infrastructure projects.
The chapter is divided into seven sections. Section 6.2
discusses the characteristics of Case Projects A (Wallaville Bridge) and B (Northam
Chapter 6: Model Application Through Case Studies
Bypass) in detail. It outlines the background, key milestones and major events of the projects. The significance of these cases to the research project is further justified in Section 6.3. Based on the real case projects, this research tests the proposed model as well as evaluates these two projects in Sections 6.4 and 6.5. The application of the Fuzzy AHP and LCCA is demonstrated. Section 6.6 validates the application of the model. Industry stakeholders were interviewed to gather their comments and opinions on improving the model. A summary of the findings is provided in Section 6.7.
6.2
Selection of the Case Study Projects
Both case study projects fulfilled the selection criteria, as set out earlier in the thesis (Section 3.4.5.2). The background information about the projects has been sourced from interviewee accounts, project documentations and government reports.
6.2.1
Case study A: Wallaville bridge
The Wallaville Bridge formed part of the Bruce Highway until it was replaced by the Tim Fischer Bridge in July 1999 at a cost of $28.3m.
The project involved
construction of a new 8.3 km section of the Bruce Highway at Wallaville, 40 km southwest of Bundaberg, including a 307 metre bridge across the Burnett River and two smaller bridges—240 metres and 95 metres long respectively—over the floodway channels on the approach road network. The construction of the new bridge started in December 1997, and replaced a narrow and poorly aligned bridge (located 5 km downstream from the new one) built during World War II and constructed at a cost of $50,000 (Figure 6.2). The new 307 metre bridge was opened to the public for use on 5 July 1999 under the name, Tim Fischer Bridge (Figure 6.3).
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Figure 6.2: Wallaville Bridge in flood (BTRE 2007a)
The replacement of the old bridge did not become a priority for the Federal Government until a weir was proposed in the mid-1990s across the Burnett River, 11 km downstream of the old bridge. The traffic on the Wallaville Bridge section of the Bruce Highway was less than 1800 vehicles per day in 1992. Although the old bridge was a structure of between Q2 and Q3.51 with an average closure time of 52.3 hours during floods, the availability of alternative route through Bundaberg meant that the bridge upgrade was not regarded as a high priority project by the Department of Transport at that time. The Walla Weir (now called Ned Churchward Weir) was planned to be constructed in two stages, the first of which would increase the time of closure due to flooding and the second of which would result in the inundation of the old bridge. However, due to unexpectedly prolonged drought conditions, the planned stage two construction of the weir did not occur. This meant that the old Wallaville Bridge would not be inundated by higher water levels and would not be lost as a road asset as originally expected.
Chapter 6: Model Application Through Case Studies
Figure 6.3: Tim Fischer Bridge (BTRE 2007a)
There would also be a cost penalty attributable to constructing across ponded water after the weir was built. The new bridge has provided improved flood immunity, safety and road alignment compared with the level crossing. In November 1997, the Federal Government approved $24.4m for the construction.
6.2.2
Case study B: Northam bypass
Northam is a town on the Great Eastern Highway (GEH), approximately 97 km east of Perth. Northam has a population of around 7000 and is a major service and
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administration centre for the Western Australia Central Wheat Belt Region. Prior to the Northam Bypass being built, the GEH passed through the centre of the town with heavy vehicles having to negotiate the main shopping area, including two railway crossings, four right angle turns and many busy intersections. These vehicles included B-Doubles and truck/trailer combinations up to 67.5 tonnes. The primary aim of the bypass was to divert through-traffic away from the townsite, thus overcoming the difficulties and dangers of heavy vehicles using the pre-existing route through built-up areas as well as improving the safety and amenity of the major streets of Northam. The Northam Bypass involved construction of a new road approximately 14.9 km long including eight bridges - 2 over rivers, 2 over railways and 4 over existing roads (Figure 6.4). The bypass starts from the old GEH to the west of Northam near the entrance to the Army camp. Passing north-east, it crosses the Northam-Toodyay Road via an overpass north-west of the Colebatch Road intersection and follows an alignment between the town wastewater treatment ponds and the cemetery. It is then carried on a 230-metre bridge over the standard gauge railway line, Avon River and Katrine Road. From Katrine Road, the bypass continues in a north-easterly direction, passing over the Irishtown Road before heading east to cross over the NorthamPithara Road to the north of the airstrip. From the Northam-Pithara Road back to the existing GEH, the bypass follows a south-easterly alignment, passing north of the racecourse and a road train assembly area. The bypass route connects with the preexisting highway east of the Katrine Highway.
Chapter 6: Model Application Through Case Studies
Figure 6.4: Northam Bypass (BTRE 2007b)
The total budgeted cost for the project was estimated to be $47m (in 1998 prices) in the Stage 3 Project Proposal Report. Australian Federal Government funding was capped at $40m. The State Government was committed to bear any additional cost in excess of $40m. The actual project cost was $49.4m (nominal). The project commenced in January 2001 and was completed in May 2002.
6.3
Significance of the Case Projects
The case projects were selected based on the criteria as stated in Section 3.3.5.2. They are significant because both cases have completed in around 8-15 years prior to 2010, so they have relevent data to carry out life-cycle costing anaylsis. The Bureau of Transport and Regional Economics, Australia has evaluated both case projects under the economic evaluation of the National Highway Project. This shows the reliability of the information from both projects. Both projects were used to apply, test and evaluate the proposed decision support model. Although the evaluation provides some useful cost data, the complex nature and difficulties in both case projects were thoroughly examined.
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6.4
Model Application in Case Study A - Wallaville Bridge
This case study illustrates the importance of three base case specifications when there is interdependency between two projects: in this case, the Ned Churchward Weir and the Tim Fischer Bridge. It also provides an example of how to undertake a complex road closure/flooding plus diverting evaluation.
6.4.1
Project alternatives
According to the industry report, the case project considered three alternatives as follows:
Alternative 1 (A1): This alternative assumed that the weir will be constructed stage 2 with a height of 21m. During construction of the new bridge, the removal of the existing bridge would also commence. Without access to the old Wallaville Bridge all Bruce Highway traffic would divert to a longer route via Bundaberg, Queensland. This base case can be defined as the ‘no bridge’ option. Alternative 2 (A2): This alternative base case assumes stage 1 construction of the weir as a certainty, with stage 2 construction of the weir uncertain. Therefore, the old Wallaville Bridge would be open for light vehicle traffic only until the stage 2 construction of the weir or the end of the physical life of the old bridge (say 2010). From this time all light vehicles would have to diver through Bundaberg. All heavy vehicles would have to divert through Bundaberg from the start of the evaluation period for safety reasons. This base case can be defined as the 'bridge partially open’ option. Alternative 3, (A3): The old Wallaville Bridge remains open for the entire evaluation period for all vehicles. A minimum capital expenditure of $5 million is required to ensure the serviceability of the old bridge for highway traffic. This base case can be labelled as the 'bridge open’ option.
Chapter 6: Model Application Through Case Studies
6.4.2
Fuzzy AHP for qualitative indicators
To create pairwise comparison matrices, a group of five stakeholders involved in this project was interviewed. Then, the fuzzy evaluation matrix relevant to the goal was obtained with the consensus of the stakeholders.
6.4.2.1 Evaluation of criteria weight Some examples of decision makers’ answers in the form of linguistic expressions about the importance of the sustainability-related cost components were given in Appendix C2. The consistency of the pairwise comparison matrices were examined and it was determined that all the matrices were consistent. By applying formula (2) given in Step 1:
SACI = (3.0, 4.0, 5.0) ⊗ �
1 1 1 , , � 12.5 9.33 7.17
= (0.24, 0.44, 0.70 ) 1 1 1 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 = (2.0, 2.67, 3.5) ⊗ � , , � 12.5 9.33 7.17 = (0.16, 0.29, 0.49 ) 1 1 1 𝑆𝑆𝐸𝐸𝐸𝐸𝐸𝐸 = (2.17, 2.67, 4.0) ⊗ � , , � 12.5 9.33 7.17 = (0.17, 0.29, 0.56 ) are obtained.
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Using these vectors and formula (8), the following values are calculated:
𝑉𝑉 (𝑆𝑆𝐴𝐴𝐴𝐴𝐴𝐴 = 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 ) = 1.00, 𝑉𝑉 (𝑆𝑆𝐴𝐴𝐴𝐴𝐴𝐴 = 𝑆𝑆𝐸𝐸𝐸𝐸𝐸𝐸 ) = 1.00, 𝑉𝑉 (𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 = 𝑆𝑆𝐸𝐸𝐸𝐸𝐸𝐸 ) = 1.00 𝑉𝑉 (𝑆𝑆𝐸𝐸𝐸𝐸𝐸𝐸 = 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 ) = 1.00, 𝑉𝑉 (𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 = 𝑆𝑆𝐴𝐴𝐴𝐴𝐴𝐴 ) = 0.64, 𝑉𝑉 (𝑆𝑆𝐸𝐸𝐸𝐸𝐸𝐸 = 𝑆𝑆𝐴𝐴𝐴𝐴𝐴𝐴 ) = 0.69
Finally, by using formula (10), the following results are obtained:
𝐷𝐷′𝐴𝐴𝐴𝐴𝐴𝐴 = 𝑉𝑉(𝑆𝑆𝐴𝐴𝐴𝐴𝐴𝐴 ≥ 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 , 𝑆𝑆𝐸𝐸𝐸𝐸𝐸𝐸 ) = min(1.00, 1.00) = (1.00 ) 𝐷𝐷′𝑆𝑆𝑆𝑆𝑆𝑆 = 𝑉𝑉(𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 ≥ 𝑆𝑆𝐴𝐴𝐴𝐴𝐴𝐴 , 𝑆𝑆𝐸𝐸𝐸𝐸𝐸𝐸 ) = min(0.64, 1.00) = (0.64) 𝐷𝐷′𝐸𝐸𝐸𝐸𝐸𝐸 = 𝑉𝑉(𝑆𝑆𝐸𝐸𝐸𝐸𝐸𝐸 ≥ 𝑆𝑆𝐴𝐴𝐴𝐴𝐴𝐴 , 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 ) = min(0.69, 1.00) = (0.69 )
Therefore, the weight vector is calculated as W ′ = (1.00, 0.63, 0.69)T . After normalisation, the normalised weight vectors of objective with respect to the cost components criteria ACI, SCI and ECI from Table 6.1 are obtained as WObjective =
(0.43, 0.27, 0.30)T . According to the answers by the decision makers, it is concluded
Chapter 6: Model Application Through Case Studies
that the agency and environmental category are more important than the social category in this project. Table 6.1: The fuzzy evaluation matrix with respect to the goal
ACI
SCI
ECI
Agency category
(1,1,1)
(1, 3/2, 2)
(1, 3/2, 2)
Social category
(1/2, 2/3, 1)
(1,1,1)
(1/2,1,3/2)
Environmental category
(1/2, 2/3, 1)
(2/3,1,2)
(1,1,1)
Table 6.2: The relative importance of agency cost components
MC
PEC
MMC
RC
(1,1,1)
(1, 3/2, 2)
(3/2, 2, 5/2)
(1, 3/2, 2)
Plant and equipment costs
(1/2, 2/3,1)
(1,1,1)
(1, 3/2, 2)
(1/2, 1, 3/2)
Major maintenance costs
(2/5, 1/2, 2/3)
(1/2, 2/3, 1)
(1,1,1)
(1/2, 1, 3/2)
(1/2, 2/3, 1)
(2/3, 1, 2)
(2/3, 1, 2)
(1,1,1)
Material costs
Rehabilitation costs
Table 6.3: The relative importance of social cost components
Road accident- internal costs Road accident- economic value of damage
RA-IC
RA-EVD
(1,1,1)
(1, 3/2, 2)
(1/2, 2/3, 1)
(1,1,1)
Table 6.4: The relative importance of environmental cost components
HI
LW
DMC
CB
(1,1,1)
(1, 3/2, 2)
(1/2, 1, 3/2)
(3/2, 2, 5/2)
Loss of wetland
(1/2, 2/3, 1)
(1,1,1)
(1/2, 1, 3/2)
(1, 3/2, 2)
Cost of barriers
(2/3, 1, 2)
(2/3, 1, 2)
(1,1,1)
(1, 3/2, 2)
(2/5, 1/2, 2/3)
(1/2, 2/3, 1)
(1/2, 2/3, 1)
(1,1,1)
Hydrological impacts
Disposal of material costs
From Table 6.2, the weight vectors were calculated as SMC = (0.19, 0.35, 0.59) ,
SPEC = (0.13, 0.25, 0.43) , SMMC = (0.10, 0.19, 0.33) , SRC = (0.12, 0.22, 0.47) , V (SMC ≥ SPEC ) = 1.00,
V (SMC ≥ SMMC ) = 1.00
,
V (SMC ≥ SRC ) = 1.00
,
V (SPEC ≥ SMC ) = 0.69 , V (SPEC ≥ SMMC ) = 1.00 , V (SPEC ≥ SRC ) = 1.00 ,
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V (SMMC ≥ SMC ) = 0.44 , V (SMMC ≥ SPEC ) = 0.77 , V (SMMC ≥ SRC ) = 0.87,
V (SRC ≥ SMC ) = 0.67 , V (SRC ≥ SPEC ) = 0.92 , V (SRC ≥ SMMC ) = 1.00. Then the normalised
weight
vector
from
Table
6.2
is
calculated
as
WACI = (0.36, 0.25, 0.16, 0.24). Based on these results, it is concluded that in the
agency cost components, the material, plant and equipment and rehabilitation costs appear to be more important than the rehabilitation costs in highway investment
decisions. The other two matrices relevant to pairwise comparisons of the subcriteria of social and environmental cost components and the relative importance of each matrix are given in Table 6.3 and Table 6.4, respectively. The normalised weight vector from Table 6.3 is calculated as WSCI = (0.68, 0.32)T . It is observed that for the social cost components in highway infrastructure, road accident- internal costs play a much more important role than other criteria. The
normalised
weight
vector
from
Table
6.4
is
calculated
as
WECI = (0.33, 0.25, 0.14, 0.28)T . From this result it is deduced that the most
important criteria for the environmental cost components in highway investment
decisions in this project are hydrological impacts, disposal of material costs and loss of wetland. Table 6.5 presents the composite priority weights obtained by the evaluation of the significance of sustainability-related cost components in highway infrastructure investments with respect to the main criteria and sub-criteria.
6.4.2.2 Evaluation of alternatives In the following step of the evaluation procedure, the alternatives in the case project were compared based on three main highway bridge design alternatives with respect to each of the sub-criteria separately. These results in the matrices are shown in Tables 6.6 to 6.15. Alternative 1 except for three sub-criteria with respect to major maintenance costs, rehabilitation costs and hydrological impacts, shows a good performance in terms of all criteria. Alternative 3 is the weakest except for the three sub-criteria in which it shows the highest performance level. This means that industry stakeholders in this project consider the Alternatives 1 and 2 as being more satisfactory than Alternative 3 in considering long-term highway infrastructure sustainability.
Chapter 6: Model Application Through Case Studies
Table 6.5: Composite priority weights for sustainability-related cost components evaluation criteria
Main Criteria Agency category
Social category
Environmental category
Local weights 0.43
0.27
0.30
Sub-criteria
Local weights 0.36
Material costs Plant and equipment costs
0.25
Major maintenance costs
0.16
Rehabilitation costs
0.24
Road accident- internal costs
0.68
Road accident- economic value of damage
0.32
Hydrological impacts
0.33
Loss of wetland
0.25
Cost of barriers
0.14
Disposal of material costs
0.28
Table 6.6: Evaluation of the alternatives with respect to material costs
A1
A2
A3
W MC
Alternative 1
(1,1,1)
(1,3/2,2)
(2,5/2,3)
0.60
Alternative 2
(1/2,2/3,1)
(1,1,1)
(3/2,2,5/2)
0.37
Alternative 3
(1/3,2/5,1/2)
(2/5,1/2,2/3)
(1,1,1)
0.04
Table 6.7: Evaluation of the alternatives with respect to plant and equipment costs
A1
A2
A3
W PEC
Alternative 1
(1,1,1)
(1,3/2,2)
(3/2,2,5/2)
0.52
Alternative 2
(1/2,2/3,1)
(1,1,1)
(3/2,2,5/2)
0.39
Alternative 3
(2/5,1/2,2/3)
(2/5,1/2,2/3)
(1,1,1)
0.08
Table 6.8: Evaluation of the alternatives with respect to major maintenance costs
A1
A2
A3
W MMC
Alternative 1
(1,1,1)
(2/5,1/2,2/3)
(2/5,1/2,2/3)
0.12
Alternative 2
(3/2,2,5/2)
(1,1,1)
(2/5,1/2,2/3)
0.30
Alternative 3
(3/2,2,5/2)
(3/2,2,5/2)
(1,1,1)
0.58
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Table 6.9: Evaluation of the alternatives with respect to rehabilitation costs
A1
A2
A3
W RC
Alternative 1
(1,1,1)
(2/5,1/2,2/3)
(1/3,2/5,1/2)
0.04
Alternative 2
(3/2,2,5/2)
(1,1,1)
(1/2,2/3,1)
0.37
Alternative 3
(2,5/2,3)
(1,3/2,2)
(1,1,1)
0.60
Table 6.10: Evaluation of the alternatives with respect to road accident- internal costs
A1
A2
A3
W RA-IC
Alternative 1
(1,1,1)
(1,3/2,2)
(1,3/2,2)
0.46
Alternative 2
(1/2,2/3,1)
(1,1,1)
(3/2,2,5/2)
0.42
Alternative 3
(1/2,2/3,1)
(2/5,1/2,2/3)
(1,1,1)
0.12
Table 6.11: Evaluation of the alternatives with respect to road accident- economic value of damage
A1
A2
A3
W RA-EVD
Alternative 1
(1,1,1)
(1/2,2/3,1)
(1,3/2,2)
0.35
Alternative 2
(1,3/2,2)
(1,1,1)
(1,3/2,2)
0.47
Alternative 3
(1/2,2/3,1)
(1/2,2/3,1)
(1,1,1)
0.18
Table 6.12: Evaluation of the alternatives with respect to hydrological impacts
A1
A2
A3
W HI
Alternative 1
(1,1,1)
(1/2,2/3,1)
(1/3,2/5,1/2)
0.30
Alternative 2
(1,3/2,2)
(1,1,1)
(2/5,1/2,2/3)
0.14
Alternative 3
(2,5/2,3)
(3/2,2,5/2)
(1,1,1)
0.55
Table 6.13: Evaluation of the alternatives with respect to loss of wetland
A1
A2
A3
W LW
Alternative 1
(1,1,1)
(1,3/2,2)
(3/2,2,5/2)
0.56
Alternative 2
(1/2,2/3,1)
(1,1,1)
(1,3/2,2)
0.34
Alternative 3
(2/5,1/2,2/3)
(1/2,2/3,1)
(1,1,1)
0.09
Chapter 6: Model Application Through Case Studies
Table 6.14: Evaluation of the alternatives with respect to cost of barriers
A1
A2
A3
W CB
Alternative 1
(1,1,1)
(1,3/2,2)
(1/2,1,3/2)
0.38
Alternative 2
(1/2,2/3,1)
(1,1,1)
(1/2,1,3/2)
0.28
Alternative 3
(2/3,1,2)
(2/3,1,2)
(1,1,1)
0.34
Table 6.15: Evaluation of the alternatives with respect to disposal of material costs
A1
A2
A3
W DMC
Alternative 1
(1,1,1)
(3/2,2,5/2)
(1,3/2,2)
0.55
Alternative 2
(2/5,1/2,2/3)
(1,1,1)
(1,3/2,2)
0.29
Alternative 3
(1/2,2/3,1)
(1/2,2/3,1)
(1,1,1)
0.16
6.4.2.3 Final scores of alternatives In Tables 6.16 to 6.19, this research presents the last computations in order to obtain the alternative priority weights of alternatives. This is done by gathering the weights over the hierarchy for each alternative. To achieve this, the weights of each criterion are multiplied to a decision alternative, and then those results are summed up over all the different pathways to that decision alternative. By combining the weights for the sub-criteria and alternatives, the priority weight of each alternative is calculated in (Büyüközkan et al. 2004). The final score results can be ascertained from the final priority weights presented in Table 6.19. Table 6.16: Priority weights of the alternatives with respect to agency aspects
MC
PEC
MMC
RC
Alternative Priority Weights
Weights
0.36
0.25
0.16
0.24
Alternative 1
0.60
0.52
0.12
0.04
0.37
Alternative 2
0.37
0.39
0.30
0.37
0.36
Alternative 3
0.04
0.08
0.58
0.60
0.27
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Table 6.17: Priority weights of the alternatives with respect to social aspects
RA-IC
RA-EVD
Alternative Priority Weights
Weights
0.68
0.32
Alternative 1
0.46
0.35
0.43
Alternative 2
0.42
0.47
0.43
Alternative 3
0.12
0.18
0.14
Table 6.18: Priority weights of the alternatives with respect to environmental aspects
HI
LW
CB
DMC
Alternative Priority Weights
Weights
0.33
0.28
0.14
0.28
Alternative 1
0.30
0.56
0.38
0.55
0.45
Alternative 2
0.14
0.34
0.28
0.29
0.25
Alternative 3
0.55
0.09
0.34
0.16
0.30
Table 6.19: Final scores of the alternatives
ACI
SCI
ECI
Alternative Priority Weights
Weights
0.43
0.27
0.30
Alternative 1
0.37
0.43
0.36
0.41
Alternative 2
0.36
0.43
0.22
0.35
Alternative 3
0.27
0.14
0.14
0.24
The main result is that Alternatives 1 and 2 are the preferred key decisions. It appears all stakeholders would agree that these cost components are important in this highway infrastructure investment. Moreover, based on the final scores in Table 6.19, it can also be concluded that Alternative 3 has a relatively low score in overall design alternatives based on the sub-criteria. In order to have more holistic results in terms of financial benefit, the next section discusses the life-cycle cost calculation and selects the most economical alternative.
Chapter 6: Model Application Through Case Studies
6.4.3
LCCA calculation for quantitative indicators
Five
available cost
components, including construction, materials, major
maintenance, rehabilitation and road accident costs, are estimated using the LCCA process. This process treats these costs as resources of a highway infrastructure structure. The magnitude of the required amount of the costs represents the economic efficiency of a project development. Assuming that all future costs and temporal intervals for maintenance, operation, and rehabilitation are equivalent, the future costs are significant enough to enable relative comparisons to be made in this case study. There are three alternatives to be compared. The future opportunity costs were evaluated and acquired from various sources such as industry published reports and project reports. However, the costs of the construction method and material are significantly variable depending on specific project requirements, complexity of the project, capability of the contractor, market conditions, and all other unexpected risks. Therefore, the reasonable judgment of the decision maker is required to make a sensible comparison of these cost items. As shown in Table 6.20, the deterministic LCCA computes three alternatives project strategies. The discount rate used in this analysis is 4 percent, and a 28-year analysis period is used. Table 6.20: Determination of activity timing
Year 0 12
Alt. 1 Initial Construction
20
Major rehabilitation
Alt. 2 Initial Construction Maintenance costs for 12 years (per annum) 8 years annual maintenance, Stage 2 Construction
28
35
Alt. 3 Major Maintenance Maintenance costs for 12 years (per annum) 5 years annual maintenance, Major rehabilitation End-of-life of existing bridge and new construction needed
End of Analysis Period
Alternative 1 is characterised by few construction and rehabilitation activities compared to Alternatives 2 and 3, but the activities require more extensive and costs compared to the others. Alternative 2 requires two stages of construction and requires
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more frequent use of rehabilitation activities to maintain the service level of the highway infrastructure compared to Alternative 1. Meanwhile, in Alternative 3, there is no initial construction but several huge maintenance and rehabilitation activities are needed to maintain the services of the existing highway infrastructure compared to Alternatives 1 and 2. The expenditure on maintenance activities is necessary to keep old Wallaville Bridge open. Maintenance costs are estimated in short-, medium- and long-term options, as shown in Table 6.21. The estimated costs for providing services to local traffic ranged from $36,000 to $231,000 depending on how long the bridge would remain in service. Table 6.21: Estimated expenditures to keep old bridge open
Items
Guardrail repair/ replacement Alkali- aggregate reaction monitoring Ongoing maintenance Fixed joint repairs Expansion joint repairs Replacement of superstructure elements Total
Maintenance Costs ($) Short term
Medium term
Mediumlong term
Long term
(2 years)
(7 years)
(15 years)
(20 years)
20,000 56,000
20,000 70,000
20,000 79,000
4,000 6,000
26,000 4,000 6,000
42,000 4,000 6,000 80,000
86,000
126,000
231,000
20,000 16,000
36,000
Agency and social costs for each activity are in constant, base year dollars. Social costs are based upon average accident costs. Costs to year 28 reflect the value of the remaining service life for each alternative in that year. Based on the data reported in Table 6.22 and Table 6.23, due to the uncertain life span of the existing bridge for Alternative 3, the bridge was assumed to reach the end of life at year 28. During that stage, construction costs were three times higher based on the existing capital costs of Alternative 1. This value was calculated based on the future value with the consideration of 4% interest. As a result, the value for construction costs was turned out to be $73,168,361.
Chapter 6: Model Application Through Case Studies
Table 6.22: Costs of agency and social category
Cost Items Capital costs ($’000) Maintenance cost ($’000 per annum) Additional expenditure for old bridge open Salvage value ($’000) Average accident cost ($)
Alt. 1 24,400 52 N/A N/A 64,000
Alt. 2 18,090 52 126,000 500 64,000
Alt. 3 5000 52 231,000 500 64,000
Table 6.23: Computation of expenditure by years Year 0 12 20 28
Alt. 1 24,400,000 231,000
Alt. 2 18,090,000 624,000 18,321,000
Alt. 3 5,000,000 624,000 5,231,000 73,168,361
End of Analysis Period
Using the discount factor, with the interest rate of 4%, the present value is calculated using Equation 15, for each of the agency and social costs. Based on the results shown in Table 6.24, Alternative 1 has the lowest combined agency and social costs, where as Alternative 2 has the lower initial construction. However, Alternative 3 has no initial construction costs but more construction costs are needed in year 28. Table 6.24: Computation of life-cycle cost analysis Year
Discount Factor
Alt. 1 ($)
Alt. 2 ($)
Alt. 3 ($)
0
1.0000
24,400,000
18,090,000
5,000,000
12
0.6246
0
389,749
389,749
20
0.4564
57,505
8,361,465
2,387,360
28
0.3335
0
0
24,400,000
24,457,505
26,841,214
32,177,109
End of Analysis Period Total Cost (PV)
Based on the information alone, the decision makers could lean toward either Alternative 1 (based on overall costs) or Alternative 2 (due to its lower initial construction costs). Alternative 3 turns out to be the worse choice as more overall cost is needed at year 28. However, more analysis might improve the accuracy of the decision. The following section explains in detail the weighted sum model (WSM) to combine both results generated from Fuzzy AHP and LCCA.
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6.4.4
Final decision making
The weight sum model is used to obtain final the decision. The summary of the two modular results are presented in Table 6.25. The WSM process is based on higher value preferred normalised results. The weight factors were calculated based on Equation 19. Table 6.25: Summary of sustainability assessment results
Items Fuzzy AHP LCCA Calculation ($)
Alt 1 0.41 24,457,505
Alt.2 0.35 26,841,214
Alt.3 0.24 32,177,109
Table 6.26 presents the summary of the normalised two modular results. The sum of each row is equal to one and the total sum of all values is equal to the number of modular results. The relative importance of each result is expressed in weight factors for WSM as shown in Table 6.27 and Figure 6.5. The summation of each column yields prioritisation of sustainability and long-term financial assessment by selecting a particular alternative. In this case, Alternative 1 was selected as the main priority compared to the other two alternatives in this project. Table 6.26: Summary of normalised sustainability assessment result
Assessment Items Fuzzy AHP LCCA Total
Alt. I 0.409 0.591 1.000
Alt. II 0.350 0.409 0.758
Alt. III 0.241 0.000 0.241
Total 1.000 1.000 2.000
Table 6.27: Weight factors for normalised sustainability assessment results and final prioritisation
Assessment Items Fuzzy AHP LCCA Total Prioritisation
Weight Factor 0.5 0.5 1
Alt. I 0.204 0.296 0.500 1
Alt. II 0.175 0.204 0.379 2
Alt. III 0.121 0.000 0.121 3
Chapter 6: Model Application Through Case Studies
1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 AHP
Cost WF
Alt. I
Total Alt. II
Alt. III
Figure 6.5: Final decision making by WSM
6.4.5
Sensitivity analysis
Sensitivity analysis serves to verify the weakness of final result reversion by changing the weight factors of WSM. The selected calculation process for the sensitivity analysis is based on changing a weight factor, which is subject to the analysis. When a value of a weight factor is changed by the sensitivity analysis, other weight factors are decreased or increased by proportional changes of the weight factor. Then, these adjusted weight factors and changed weight factor are multiplied by the normalised assessment results. The total sum of the two weight factors is always equal to one. Proportional adjustments for other weight factors are calculated by Equation 21.
6.4.5.1 Sensitivity analysis for Fuzzy AHP Weight factors for AHP raging from 0.1 to 0.9 are applied to perform sensitivity analysis, as shown in Table 6.28. The sensitivity analysis result shows that there is a reversion of the decision making by changing the weight factor of Fuzzy AHP which is originally 0.5. As indicated in Figure 6.6, the gap between the three alternatives reduces as the Fuzzy AHP weight factor increases. In conclusion, there is a possibility to change the final decision making by increasing or decreasing the significance of the Fuzzy AHP. However, for this analysis, it is shown that any
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Chapter 6: Model Application Through Case Studies
changes in the Fuzzy AHP weight factors cannot possibly reverse the most sustainable alternative selection, which is Alternative 1. Table 6.28: Changes in prioritisation value by changing the Fuzzy AHP weight factors
Fuzzy AHP Weight Changes 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
Alt. I 0.57 0.56 0.54 0.52 0.50 0.48 0.46 0.45
Alt. II 0.40 0.40 0.39 0.39 0.38 0.37 0.37 0.36
Alt. III 0.02 0.05 0.07 0.10 0.12 0.15 0.17 0.19
0.43
0.36
0.22
0.61
0.51
Final Result Changes
176
0.41
0.31
0.21
0.11
0.01 0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Fuzzy AHP Weight Factor Changes Alt. I
Alt. II
Alt. III
Figure 6.6: Sensitivity analysis for Fuzzy AHP weight factor changes
6.4.5.2 Sensitivity analysis for LCCA Weight factors for life-cycle cost analysis, ranging from 0.1 to 0.9, are applied to perform sensitivity analysis as shown in Table 6.29. The sensitivity analysis result
Chapter 6: Model Application Through Case Studies
shows that there is no reversion of the decision-making by changing the weight factor of the life-cycle cost component, which is originally 0.5. As indicated in Figure 6.7, the gap between the three alternatives is getting wider as the LCC weight factor increases. As a result, there is no possibility to change the final decision by increasing or decreasing the significance of LCC impacts in this case study. Therefore, any potential disagreement between industry stakeholders regarding to the LCC is unlikely. The model application in Case A has drawn several achievements and recommendations that should be considered by the researcher. The summary of the model application is further explained in Section 6.6. Table 6.29: Changes in prioritisation value by changing the LCC weight factors
LCC Weight Changes 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
Alt. I 0.43 0.45 0.46 0.48 0.50 0.52 0.54 0.56 0.57
Alt. II 0.36 0.36 0.37 0.37 0.38 0.39 0.39 0.40 0.40
Alt. III 0.22 0.19 0.17 0.15 0.12 0.10 0.07 0.05 0.02
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Chapter 6: Model Application Through Case Studies
0.61
0.51
Final Result Changes
178
0.41
0.31
0.21
0.11
0.01 0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
LCCA Weight Factor Changes Alt. I
Alt. II
Alt. III
Figure 6.7: Sensitivity analysis for LCCA weight factor changes
6.5
Model Application in Case Study B - Northam Bypass
The Great Eastern Highway presently runs through the town of Northam (Figure 6.8). This current alignment has inherent problems for local traffic in terms of congestion and the frequency of accidents. Further problems include noise and visual pollution caused by traffic, particularly heavy vehicles. To alleviate these problems, three different alignments and alternatives around the town have been proposed.
Chapter 6: Model Application Through Case Studies
Figure 6.8: Alternative alignment options of Northam Bypass (EPA 1993)
6.5.1
Project alternatives
According to the project report, three alternatives were considered in the case project: •
Route 9 (R9): after the common staring point, Route 9 traverses an area through rural farming land requiring bridges over the railway, Avon River, Katrine Road and Irishtown Road. Route 9 then passes over the NorthamPithara Road, behind the Doctors Hill locality and to the north of the Northam racecourse to finally link up with the existing Great Eastern Highway. In 1993 terms, the Route 9 alignment would cost approximately $32 million to construct. Main Roads propose to construct the bypass in two stages. Stage 1 will involve the construction of a single carriageway with land acquisitions and road reserves capable of eventually accommodating the second (stage 2) carriageway. Overall, the final dual carriageway bypass including median strip and road reserve will be approximately 33 metres wide, with its length dependent upon the chosen alternative route.
•
Route 6 (R6): from the common starting point (88.9 km from Perth) this route then traverses the railway line and Avon River requiring bridges for both
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crossings. The alignment then continues along the northern bank of the Avon for approximately 2 kilometres, passing the Northam Cemetery and then through the Doctors Hill locality. The Doctors Hill portion of this route requires extensive cut and fill to achieve required gradients and some noise minimisation. Finally, Route 6 crosses the Mortlock River and another railway line before running behind the Northam Racecourse and linking up with the existing Great Eastern Highway. In 1993 terms, the Route 6 alignment would cost approximately $38 million to construct. •
Route 6A (R6A): after the common staring point Route 6A crosses the railway line and Avon River then continues in a wide arc around the Northam Cemetery requiring some degree of cut and fill. The route then continues in an easterly direction and travels along the northern bank of the A von until it links up with the same alignment as Route 6 to eventually re-join the existing Great Eastern Highway. In 1993 terms, the Route 6A alignment would cost just over $40 million to construct.
6.5.2
Fuzzy AHP for qualitative indicators
To create pairwise comparison matrices, a group of five stakeholders involved in this project was interviewed. Then, the fuzzy evaluation matrix relevant to the goal was obtained with the consensus of the stakeholders.
6.5.2.1 Evaluation of criteria weight As set out earlier in Section 6.4.2.1, the decision makers in this project commented in the form of linguistic expressions about the importance of the sustainability-related cost components in highway infrastructure (Appendix C2). The consistency of the pairwise comparison matrices were examined and it was determined that all the matrices were consistent. By applying formula (2), (8) and (10), the weight vector is calculated as W ′ = (1.00, 0.63, 0.69)T . After normalisation, the normalised weight
vectors of the objective with respect to the cost component criteria ACI, SCI and ECI from Table 6.30 are obtained as WObjective = (0.43, 0.27, 0.30)T .
Chapter 6: Model Application Through Case Studies
The answers from the decision makers indicate that the agency and environmental categories are more important than the social category in long-term financial management for highway infrastructure investment. As a consequence, the consideration of agency and environmental categories can result in much greater efficiency for highway infrastructure investment decisions. In a similar pattern, the sub-criteria with respect to the main criteria are compared, beginning with, the subcriteria of agency cost components. Table 6.31 presents the results for the relative importance of agency cost components in sub-criteria. The normalised weight vectors for Table 6.31 are calculated based on formula (2), (8) and (10) as shown in Section 5.3.2 and the results are shown as WACI =
(0.29, 0.25, 0.25, 0.21). From these results, it is concluded that agency cost
components such as the material, plant and equipment, and major maintenance costs appear to be more important than the rehabilitation costs in highway investment decisions. The other two matrices relevant to pairwise comparisons of the subcriteria of social and environmental cost components and, the relative importance of each matrix are given in Table 6.32 and Table 6.33, respectively.
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Table 6.30: The fuzzy evaluation matrix with respect to the goal
ACI
SCI
ECI
Agency category
(1,1,1)
(1, 3/2, 2)
(1, 3/2, 2)
Social category
(1/2, 2/3, 1)
(1,1,1)
(1/2,1,3/2)
Environmental category
(1/2, 2/3, 1)
(2/3,1,2)
(1,1,1)
Table 6.31: The relative importance of agency cost components
MC
PEC
MMC
RC
(1,1,1)
(1/2, 1, 3/2)
(1, 3/2, 2)
(1, 3/2, 2)
Plant and equipment costs
(2/3, 1, 2)
(1,1,1)
(1/2, 1, 3/2)
(1/2, 1, 3/2)
Major maintenance costs
(1/2, 2/3, 1)
(2/3, 1, 2)
(1,1,1)
(1, 3/2, 2)
Rehabilitation costs
(1/2, 2/3, 1)
(2/3, 1, 2)
(1/2, 2/3, 1)
(1,1,1)
Material costs
Table 6.32: The relative importance of social cost components
RA-IC
RA-EVD
(1,1,1)
(1, 3/2, 2)
(1/2, 2/3, 1)
(1,1,1)
Road accident- internal costs Road accident- economic value of damage
Table 6.33: The relative importance of environmental cost components
HI
LW
CB
DMC
(1,1,1)
(1/2, 1, 3/2)
(3/2, 2, 5/2)
(1, 3/2, 2)
Loss of wetland
(2/3, 1, 2)
(1,1,1)
(3/2, 2, 5/2)
(1, 3/2, 2)
Cost of barriers
(2/5, 1/2, 2/3)
(2/5, 1/2, 2/3)
(1,1,1)
(2/5, 1/2, 2/3)
(1/2, 2/3, 1)
(1/2, 2/3, 1)
(3/2, 2, 5/2)
(1,1,1)
Hydrological impacts
Disposal of material costs
The normalised weight vector from Table 6.32 is calculated as 𝑊𝑊𝑆𝑆𝑆𝑆𝑆𝑆 = (0.68, 0.32)𝑇𝑇 .
It is observed that the social cost components, namely road accident - internal costs, play a much more important role than road accident - economic value of damage.
Chapter 6: Model Application Through Case Studies
The normalised weight vectors from Table 6.33 are calculated as WECI =
(0.34, 0.34, 0.26, 0.06)T . From this result, it is deduced that the most important criteria for this project base on the environmental cost components in highway investment decisions are hydrological impacts and loss of wetland. Table 6.34 presents the composite priority weights obtained by the evaluation of the significance of sustainability-related cost components in highway infrastructure investments with respect to the main criteria and sub-criteria.
6.5.2.2 Evaluation of alternatives In the following step of the evaluation procedure, the alternatives in the case projects were compared based on three main highway bridge design alternatives with respect to each of the sub-criteria separately. The results in the matrices are shown in Tables 6.35 to 6.44. Route 9 shows a good performance in terms of all criteria. Route 6 is the weakest among the three alternatives except for rehabilitation costs and cost of barriers in which it shows a higher performance level compared to Route 6A. This means that industry stakeholders in this project consider the Route 9 option to be satisfactory than Route 6A and Route 6 in long-term financial management for highway infrastructure taking into account the sustainability objectives. Table 6.34: Composite priority weights for sustainability-related cost components evaluation criteria
Main Criteria Agency category
Social category
Environmental category
Local Weights 0.43
0.27
0.30
Sub-Criteria Material costs
Local Weights 0.29
Plant and equipment costs
0.25
Major maintenance costs
0.25
Rehabilitation costs
0.21
Road accident- internal costs
0.68
Road accident- economic value of damage
0.32
Hydrological impacts
0.34
Loss of wetland
0.34
Cost of barriers
0.26
Disposal of material costs
0.06
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Table 6.35: Evaluation of the alternatives with respect to material costs
R9
R6A
R6
W MC
(1,1,1)
(3/2,2,5/2)
(3/2,2,5/2)
0.51
Route 6A
(2/5,1/2,2/3)
(1,1,1)
(1/2,2/3,1)
0.31
Route 6
(2/5,1/2,2/3)
(1,3/2,2)
(1,1,1)
0.19
Route 9
Table 6.36: Evaluation of the alternatives with respect to plant and equipment costs
Route 9 Route 6A Route 6
R9
R6A
R6
WPEC
(1,1,1)
(1,3/2,2)
(3/2,2,5/2)
0.58
(1/2,2/3,1)
(1,1,1)
(1,3/2,2)
0.35
(2/5,1/2,2/3)
(1/2,2/3,1)
(1,1,1)
0.08
Table 6.37: Evaluation of the alternatives with respect to major maintenance costs
Route 9 Route 6A Route 6
R9
R6A
R6
W MMC
(1,1,1)
(1,3/2,2)
(1/2,1,3/2)
0.38
(1/2,2/3,1)
(1,1,1)
(1,3/2,2)
0.34
(2/3,1,2)
(1/2,2/3,1)
(1,1,1)
0.29
Table 6.38: Evaluation of the alternatives with respect to rehabilitation costs
R9
R6A
R6
W RC
(1,1,1)
(1,3/2,2)
(1,3/2,2)
0.45
Route 6A
(1/2,2/3,1)
(1,1,1)
(1/2,1,3/2)
0.26
Route 6
(1/2,2/3,1)
(2/3,1,2)
(1,1,1)
0.29
Route 9
Table 6.39: Evaluation of the alternatives with respect to road accident- internal costs
Route 9 Route 6A Route 6
R9
R6A
R6
W RA-IC
(1,1,1)
(1,3/2,2)
(3/2,2,5/2)
0.60
(1/2,2/3,1)
(1,1,1)
(1,3/2,2)
0.35
(2/5,1/2,2/3)
(1/2,2/3,1)
(1,1,1)
0.05
Chapter 6: Model Application Through Case Studies
Table 6.40: Evaluation of the alternatives with respect to road accident- economic value of damage
R9
R6A
R6
W RA-EVD
(1,1,1)
(1,3/2,2)
(1,3/2,2)
0.47
Route 6A
(1/2,2/3,1)
(1,1,1)
(1/2,2/3,1)
0.18
Route 6
(1/2,2/3,1)
(1,3/2,2)
(1,1,1)
0.35
Route 9
Table 6.41: Evaluation of the alternatives with respect to hydrological impacts
R9
R6A
R6
W HI
(1,1,1)
(3/2,2,5/2)
(3/2,2,5/2)
0.71
Route 6A
(2/5,1/2,2/3)
(1,1,1)
(1,3/2,2)
0.28
Route 6
(2/5,1/2,2/3)
(1/2,2/3,1)
(1,1,1)
0.02
Route 9
Table 6.42: Evaluation of the alternatives with respect to loss of wetland
R9
R6A
R6
W LW
(1,1,1)
(1,3/2,2)
(3/2,2,5/2)
0.71
Route 6A
(2/5,1/2,2/3)
(1,1,1)
(1,3/2,2)
0.28
Route 6
(2/5,1/2,2/3)
(1/2,2/3,1)
(1,1,1)
0.02
Route 9
Table 6.43: Evaluation of the alternatives with respect to cost of barrier
R9
R6A
R6
W CB
(1,1,1)
(2,5/2,3)
(3/2,2,5/2)
0.80
Route 6A
(1/3,2/5,1/2)
(1,1,1)
(1/2,1,3/2)
0.02
Route 6
(2/5,1/2,2/3)
(2/3,1,2)
(1,1,1)
0.18
Route 9
Table 6.44: Evaluation of the alternatives with respect to disposal of material costs
R9
R6A
R6
W DMC
(1,1,1)
(1,3/2,2)
(1,3/2,2)
0.55
Route 6A
(1/2,2/3,1)
(1,1,1)
(1/2,1,3/2)
0.29
Route 6
(1/2,2/3,1)
(2/3,1,2)
(1,1,1)
0.16
Route 9
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6.5.2.3 Final scores of alternatives Tables 6.45 to 6.48 present the last computations to obtain the priority weights of these project alternatives. This is accomplished by aggregating the weights over the hierarchy for each decision alternative. The evaluation process are similar as discussed in Section 6.4.2.3. These weight values represent the overall score result, as shown in Table 6.48. Table 6.45: Priority weights of the alternatives with respect to agency aspects
MC
PEC
MMC
RC
Alternative Priority Weights
Weights
0.29
0.25
0.25
0.21
Route 9
0.51
0.58
0.38
0.45
0.48
Route 6A
0.31
0.34
0.34
0.26
0.31
Route 6
0.19
0.08
0.29
0.29
0.21
Table 6.46: Priority weights of the alternatives with respect to social aspects
RA-IC
RA-EVD
Alternative Priority Weights
Weights
0.68
0.32
Route 9
0.60
0.47
0.56
Route 6A
0.35
0.18
0.30
Route 6
0.05
0.35
0.14
Table 6.47: Priority weights of the alternatives with respect to environmental aspects
HI
LW
CB
DMC
Alternative Priority Weights
Weights
0.34
0.34
0. 26
0.06
Route 9
0.71
0.71
0.80
0.45
0.72
Route 6A
0.28
0.28
0.02
0.26
0.21
Route 6
0.01
0.01
0.18
0.29
0.07
Chapter 6: Model Application Through Case Studies
Table 6.48: Final scores of the alternatives
ACI
SCI
ECI
Weights
0.43
0.27
0.30
Route 9
0.48
0.56
0.63
0.57
Route 6A
0.31
0.30
0.17
0.28
Route 6
0.21
0.14
0.14
0.15
Alternative Priority Weights
Route 9 is the preferred option in this project, and all stakeholders agreed that the cost components in this option are important in this highway infrastructure investment. It also concluded that the Route 6 option has a relatively low score in overall design alternatives based on the sub-criteria. The next section discusses the real cost calculation and select the most economical option to generate a more holistic result in terms of financial benefit.
6.5.3
LCCA calculation for quantitative indicators
Three available cost items, including construction, maintenance and rehabilitation costs, are estimated for the LCCA cost estimation process. Construction costs are acquired from current industry reports such as the survey from bid schedules and published reports. Maintenance and rehabilitation costs are based on the construction cost references and expert interviews. The LCCA cost estimation process treats costs as resources of a highway infrastructure. Assuming that all future costs and temporal intervals for maintenance, operation and rehabilitation are equivalent, the future costs are significant enough to enable relative comparisons in this case study. There are three alternatives (Route 9, Route 6 and Route 6A) to be compared in this case. The future opportunity costs were evaluated and acquired from various sources such as industry published reports and project reports. However, the cost of the construction method and material costs is changeable depending on specific project requirements, density of the project, capability of the contractor, market conditions, social and environmental effects, and all other unexpected risks. Therefore, the reasonable judgment of the decision maker is required to make a sensible comparison of these cost items.
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The LCCA computes three alternatives project strategies. The discount rate used in this analysis is 4 percent, and a 28-year analysis period is used. Table 6.49 presents the LCCA comparison of three alternative project strategies. Each alternative supplied the same level of performance or benefit, so the application of LCCA is appropriate. In this case, Route 9 is characterised by an initial construction and one rehabilitation activity in 20 years compared to Route 6 and 6A which have similar construction costs, but are more focused on major maintenance activities every eight years. R6 and R6A require three stages of major maintenance and require a more frequent use because the R6 and 6A pass through the town centre of Northam, so there is a significant volume of vehicles and more intersections in between. More maintenance activities are needed to maintain the level of service of the highway infrastructure compared to R9. Table 6.49: Determination of activity timing
Year 0 12 20 28
Route 9 (R9) Initial Construction
Route 6 (R6) Route 6A (R6A) Initial Construction Initial Construction Maintenance one (8- Maintenance one (8-year year service life) service life) Rehabilitation one (20- Maintenance two (8- Maintenance two (8-year year service life) year service life) service life) Maintenance three (8- Maintenance three (8year service life) year service life) End of Analysis Period
The LCCA costs for each activity are constant. Table 6.50 shows all the activities associated with the alternative routes. The total sum of R9 turns out to be the highest compared to other routes, which is $47 million considering several activities throughout its life span. Meanwhile, R6 has a lower overall cost which is $39.872 million compared to R6A at $41.872 million. Table 6.51 computes all the expenditures for the three routes based on the costs to year 28. This reflects the value of the remaining service life for each alternative in year 28. This value was calculated based on the future value with the consideration of 4% interest.
Chapter 6: Model Application Through Case Studies
Table 6.50: Costs of agency and social category
Cost items Construction Costs ($’000) Maintenance Cost One ($’000 per annum) Maintenance Cost Two ($’000 per annum) Maintenance Cost Three ($’000 per annum) Rehabilitation Cost ($’000 per annum) Total
R9
R6
32,000
38,000 624 624 624
40,000 624 624 624
39,872
41, 872
15,000 47,000
R6A
Table 6.51: Computation of expenditure by years Year 0 12 20 28
R9
R6
R6A
32,000,000
38,000,000 624,000 15,000,000 624,000 624,000 End of Analysis period
40,000,000 624,000 624,000 624,000
Using the discount factor, with the interest rate of 4%, the present value is calculated using Equation 15, for each of the agency and social costs. Table 6.52: Computation of life-cycle costs Year
Discount Factor
R9 ($)
R6 ($)
R6A ($)
0
1.0000
32,000,000
38,000,000
40,000,000
12
0.6246
0
389,749
389,749
20
0.4564
6,845,804
284,785
284,785
28
0.3335
0
208,090
208,090
38,882,624
40,882,624
End of Analysis Period Total Cost (PV)
38,845,804
Based on the results shown in Table 6.52, R9 has the slightly lowest present value on the overall cost after computing the present value calculation. R6 has the lower initial costs but in terms of the present value, it is slightly higher than R9. R6A has lower initial construction costs but ends up being the highest after calculating the present value for 28 years. Based on the information alone, the decision maker could lean toward either R9 (based on overall costs throughout its life span) or R6 (due to its lower initial costs). However, more analysis might improve the accuracy of the
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decision. The following section explains in details the Weighted Sum Model (WSM) to combine the results generated from the Fuzzy AHP and LCCA.
6.5.4
Final decision making
As discussed in Section 6.4.4, WSM serves to obtain a final decision which changes the two modular results into weighted factors that are standardised to be calculated. The summary of the two modular results are presented in Table 6.53. The WSM process is based on higher value preferred normalised results. The weight factors were calculated based on Equation 19. Table 6.53: Summary of weighted sum assessment results
Items Fuzzy AHP LCCA Calculation ($)
R9 0.57 38,845,804
R6 0.28 38,882,624
R6A 0.15 40,882,624
Table 6.54 presents the summary of the normalised two modular results. The sum of each row is equal to one and the total sum of all values is equal to the number of modular results. The relative importance of each result is expressed in weight factors for WSM as shown in Table 6.55 and Figure 6.9. The summation of each column yields prioritisation of sustainability and long-term financial assessment by selecting a particular alternative. In this case, R9 was selected as the main priority compared to the other two alternatives in this project.
Chapter 6: Model Application Through Case Studies
Table 6.54: Summary of normalised weighted sum assessment results
Assessment Items Fuzzy AHP LCCA Total
R9 0.572 0.505 1.076
R6 0.278 0.495 0.773
R6A 0.151 0.000 0.151
Total 1.000 1.000 2.000
Table 6.55: Weight factors for normalised weighted sum assessment results and final prioritisation
Assessment Items Fuzzy AHP LCCA Total Prioritisation
Weight Factor 0.5 0.5 1
R9 0.286 0.252 0.538 1
R6 0.139 0.248 0.386 2
R6A 0.075 0.000 0.075 3
1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 AHP
Cost WF
R9
Total R6
R6A
Figure 6.9: Final decision making by WSM
6.5.5
Sensitivity analysis
As discussed in Section 6.4.5, sensitivity analysis are conducted through the process as stated in Section 5.6. Equation 21 calculates proportional adjustments for other weight factors. The total sum of the two weight factors in this case is always equal to one. The following sections demonstrate the sensitivity analysis for the model.
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6.5.5.1 Sensitivity analysis for Fuzzy AHP Weight factors for Fuzzy AHP ranging from 0.1 to 0.9 are applied to perform sensitivity analysis as shown in Table 6.56. The sensitivity analysis result shows that there is a reversion of the decision making by changing the weight factor of Fuzzy AHP, which is originally 0.5. As indicated in Figure 6.10, the gap between R9 and R6 widens while the gap between R6 and R6A reduces as the Fuzzy AHP weight factor increases. In conclusion, there is a possibility to change the final decision by increasing or decreasing the significance of the Fuzzy AHP. However, for this analysis, it is shown that any changes in Fuzzy AHP weight factors cannot possibly reverse the most sustainable and cost viability selection, which is Route 9. Table 6.56: Changes in prioritisation value by changing the Fuzzy AHP weight factors
Fuzzy AHP Changes 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
R9 0.511 0.518 0.525 0.531 0.538 0.545 0.551 0.558 0.565
R6 0.474 0.452 0.43 0.408 0.386 0.365 0.343 0.321 0.299
R6A 0.015 0.03 0.045 0.06 0.075 0.091 0.106 0.121 0.136
Chapter 6: Model Application Through Case Studies
0.61
Final Result Changes
0.51
0.41
0.31
0.21
0.11
0.01 0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
AHP Weight Factor Changes R9
R6
R6A
Figure 6.10: Sensitivity analysis for Fuzzy AHP weight changes
6.5.5.2 Sensitivity analysis for LCCA Weight factors for, life-cycle cost analysis ranging from 0.1 to 0.9, are applied to perform sensitivity analysis as shown in Table 6.57. The sensitivity analysis result shows that there is no reversion of the decision-making by changing the weight factor of LCC, which is originally 0.5. As indicated in Figure 6.11, the gap between R9 and R6 reduces while the gap between R6 and R6A widens as the LCC weight factors increases. As a result, there is no possibility to change the final decision by increasing or decreasing the significance of LCC impacts in this case study. Therefore, a potential disagreement between industry stakeholders regarding the lifecycle cost analysis is unlikely. The model application in Case B has drawn several achievements and recommendations that should be considered by the researcher. The summary of the model application is further explained in Section 6.6.
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Table 6.57: Changes in prioritisation value by changing the Fuzzy AHP weight factors
LCC Weight Changes 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
R9 0.565 0.558 0.551 0.545 0.538 0.531 0.525 0.518 0.511
R6 0.299 0.321 0.343 0.365 0.386 0.408 0.43 0.452 0.474
R6A 0.136 0.121 0.106 0.091 0.075 0.06 0.045 0.03 0.015
0.61
0.51
Final Result Changes
194
0.41
0.31
0.21
0.11
0.01 0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
LCC Weight Factor Changes R9
R6
R6A
Figure 6.11: Sensitivity analysis for LCCA weight factor changes
0.9
Chapter 6: Model Application Through Case Studies
6.6
Summary of Model Application
Based on the model application in Case A and B, it concluded that the integration of Fuzzy AHP and LCCA into the proposed model has generated systematic and informative assessment approaches to deal with highway investment decisions. This model proved its capability to evaluate sustainability-related cost components, which is one that cannot be done by existing tools. This study has gone a step further by incorporating Weighted Sum Model (WSM) and sensitivity analysis into the model. WSM generates normalised value for the assessments and sensitivity analysis deals with uncertainty decisions before decision makers obtain final decision. Implementation of the decision in both case studies resulted in several lessons that could enhance the outcomes of future applications. The model process needs to be facilitated to be truly effective. In Case A, an introduction to the model and several examples of Fuzzy AHP and LCCA assessment were provided (similar to the process used on Case B) however, there was still some confusion, specifically pertaining to identifying an appropriate base case and how to interpret the definitions. There are several lessons learned specific to the application of the model in the case projects. The researcher has evaluated the alternatives based on the projects and then introduced the model. In Case A and B, the process was facilitated and many of the unclear items or interpretations were clarified as several iterations were undertaken. It appears several iterations and feedback loops to facilitate a common understanding of the definitions and evaluation indicates that there is a learning curve associated with the model application. This is to be expected as it is a new decision support tool. Since all the performance categories are not used in typical day-to-day industry practice, additional time is required to work with the definitions in order to fully understand them. Some components will be more valuable to certain projects depending on the scenario and requirement of the projects. This provided a clear understanding about the model application so participants can evaluate alternatives in a systematic and effective manner in the future. This is an important element to consider when applying it in future projects.
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6.7
Validation of the Model
The model was applied in real highway infrastructure projects through case studies. To enrich the findings of a finalised model, a discussion was conducted with the industry stakeholders involved in the case studies. Their respective professional backgrounds, experiences and also their involvement in the case projects makes them best fit to test and validate the proposed model. The discussions revealed some of the industry feedback and comments that could enhance the model and make it more applicable and user friendly for industry practice. The process of model validation starts with first, once the preliminary model was developed, the researcher made a separate appointment with each participant. The objective of the session was explained. These application and enhancement processes were conducted through the discussion sessions which focused on the following areas of investigation: 1. The application of the proposed preliminary model in real case projects. 2. The problems associated with the proposed preliminary decision support models in handling highway investment. 3. The extent to which the proposed model are consistent with good practice in the highway industry in dealing with highway investment decisions. 4. The success of the developed model and the practitioners’ comments and opinions about the improvement of the model. The comments and opinions of the participants were recorded for later editing. The participants were asked about their satisfaction with the research findings. The results indicated the two case projects’ members were satisfied with the model in general. The results from the case studies demonstrate three supportive feedback from the decision makers to the model: •
The proposed model is capable of actually assess qualitative factors (environmental and partial social cost components) and quantify quantitative factors (agency and partial social cost components) of a highway infrastructure project. Five out of ten quantitative and qualitative cost
Chapter 6: Model Application Through Case Studies
components related to sustainable measures were actually evaluated through Fuzzy AHP and LCCA assessment approaches that were actually implemented on the two case study projects. •
The decision makers agreed that the evaluation decisions can enhance sustainability performance on highway infrastructure projects. By using Fuzzy AHP to evaluate the qualitative factors, stakeholders may able to rate the importance of the related cost components based on the scenario of the projects as well as the requirement of the projects. This shows that unquantify factors can also be assess with suitable assessment tools while quantify factors can convert into real cost data.
•
The model shows that sensitivity analysis can be adapted to aid stakeholders in dealing with uncertainty future decision.
The senior decision makers of both projects proposed that the platform for developing decision support model should be added into the model for better understanding on its function in dealing with highway investment decisions. Reviewing the model development and testing has proven the validation of the model. Overall, the model has achieved the objective that it can assist industry stakeholders to evaluate highway infrastructure projects and compare alternative choices based on the sustainability indicators. The positive and supportive feedback from the industry stakeholder representatives encourages the consideration of further improvement to the preliminary proposed model. These comments are considered to revise the model and finalise it in the following chapter.
6.8
Chapter Summary
This chapter reported the findings from phase 4 of the research process that involved the case study method. The findings from the case study answered the third research question: How to assess the long-term financial viability of sustainability measures in highway projects? The conclusions drawn from the case study results have verified the findings from the literature (Chapter 2) and survey (Chapter 4). This chapter has outlined findings regarding the application of the model and the data analysis from the case study.
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Specifically, it demonstrates the model application and also how it supports decision making for stakeholders. Two highway infrastructure case projects were selected to test and evaluate the model. Based on both case projects, three alternatives from each project were used to test and evaluate the model. The alternatives were evaluated by using Fuzzy AHP and LCCA approaches to identify the most suitable alternative in terms of long-term highway infrastructure investment. As summarised in the comparison as in Table 6.58, the industry stakeholders agreed that the proposed model is useful in supporting the decision-making process. Accordingly, the results on this model pave the way for further discussions on findings and model finalisation of the overall research to be reported in more detail in the following chapter.
Chapter 6: Model Application Through Case Studies
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Table 6.58: Comparison of the case study results with literature and survey findings
Research Objective
Relevant Subjects
Literature Findings
Industry status and LCCA application in highway infrastructure
To develop a decision support model for the evaluation of longterm financial decisions regarding sustainability for highway projects
Critical sustainabilityrelated cost components in highway infrastructure
Challenges of integrating sustainability-related cost components in LCCA The needs for a decision support model to assist in highway investment decisions
Survey Findings
Case Study Findings
The scenario is based on the Australian highway industry:
Both highway infrastructure projects were used to demonstrate the application of the decision support model. The case studies indicate the following results:
• Applied in huge and new highway infrastructure development • Promoting LCCA application in highway infrastructure • Understanding of the LCCA concept is still evolving The questionnaire survey indicates the following result: Refer to Table 4.14 for details
• Ten critical cost components related to sustainability measures in highway infrastructure investments. The interviews indicate the following results: • Limitations methods and models in dealing with cost components related to sustainability measures. • Lack of quality assumptions and data to deal with these costs • Employ multi-criteria evaluation methods in analysis of sustainability-related cost components • Need to improve the existing models
• The model employs multicriteria evaluation method (Fuzzy AHP) to analyse sustainability-related cost components. • The model can employ industry stakeholders’ experiences and knowledge as an input for the model evaluation process. • This model improves the existing models by integrating Fuzzy AHP with the LCCA method to develop a new decision support model.
Chapter 7: Findings and Model Finalisation
CHAPTER 7: FINDINGS AND MODEL FINALISATION
7.1
Introduction
This chapter integrates the quantitative (questionnaire survey) and qualitative (semistructured interview and case Studies) data of the mixed methods. Integration of the quantitative and qualitative data provides a mechanism to further explain the results and findings of the main issues arising out of this study and in the context of the literature review as reviewed in Chapter 2. The analysis and discussion of the results and findings are centred on the interpretation of the quantitative and qualitative data contained in Chapter 4 (questionnaire survey and semi-structured interviews), Chapter 5 (model development) and Chapter 6 (case studies), and the insights with the concepts identified in the literature review. This chapter is designed as an opportunity to address the aim, objectives and questions of the research. The main conclusion drawn from this integration process is presented in the next chapter. The analysis, interpretation and literature review support the findings which crystallised into the formation of the decision support model. The development of the model has enabled the author to accomplish the overall aim of this research, that is, to develop and recommend a decision support model for handling long-term financial decisions in Australian highway projects. This chapter is divided into seven sections. The first section concentrates on synthesising phases 1 to 4 for interpretation and discussion. The next section discusses
the
critical
sustainability-related
cost
components
in
highway
infrastructure. This section discusses the three dimensions of sustainability and the framework of the industry verified cost components. Next, the sustainability enhancement for LCCA is outlined. This section is followed by a discussion on industry practice of LCCA and the challenges of incorporating sustainability into LCCA. Subsequently, the long-term financial management in highway infrastructure and model finalisation is then presented, followed by a summary of this chapter.
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7.2
Synthesising Phases 1 to 4 for Interpretation and Discussion
Four phases of this study were implemented to address the research questions. The literature review in Phase 1 was aimed at gaining a broad spectrum of the cost implications of pursuing sustainability in highway projects. Based on the review of literature, this study managed to identify 14 main and 42 sub-cost components related to sustainable measures (as shown in Table 5.1 in Chapter 5) for the in-depth investigation into the subject of the research. The questionnaires and interviews in Phase 2 focused specifically on the highway infrastructure industry in Australia to identify the critical cost components related to sustainable measures. In this phase, the quantitative and qualitative findings were used to assist in explaining, interpreting and extending the results. Phase 3 of this study involved model development, which identified the industry verified cost components in existing LCCA models for further development. The case studies in Phase 4 concentrated on the application and verification of the decision support model for evaluating the long-term financial decisions regarding sustainability in highway projects. Four main areas are discussed as follows: •
Critical sustainability-related cost components - the discussion and interpretation in this section integrates quantitative data (questionnaire survey). These data emanated from the current industry practice of LCCA, industry verified cost components related to sustainable measures and challenges of enhancing sustainability in LCCA practice in the context of highway infrastructure (addresses Research Question 2).
•
Sustainability enhancement for LCCA practice - the discussion and interpretation in this section integrates critical factors from the interview findings (addresses Research Questions 2).
•
Long-term financial management in highway investment - the discussion and interpretation in this section involve the integration of quantitative data and results as well as critical factors from the interview data and model development (addresses Research Questions 2 and 3).
Chapter 7: Findings and Model Finalisation
•
Model Finalisation - the discussion and interpretation in this section involve the integration of quantitative and qualitative data and results as well as critical factors from the model development and case study data (addresses Research Question 3).
The questionnaire, interview and case study data suggest that a fuller understanding and a holistic view of developing a decision support model for long-term financial investments in Australian highway projects are possible. The overwhelming amount of evidence collected from the literature review, questionnaires, interviews and case studies across the range of highway industry practice gave a strong indication of the validity. One obvious factor from the evidence is that the development of a decision support model for highway investment with sustainability objective is not as straightforward as giving a ‘how?’ answer but it is necessity to provide the ‘what?’, ‘where?’, ‘who?’, ‘when?’ and ‘why?’ components of that answer. Answering the question ‘How to assess the long-term financial viability of sustainability measures in the highway project?’ is considered within all the categories and sub-categories that encapsulate this study’s aim and objectives and therefore, need to be considered as a whole.
7.3
Critical Sustainability-Related Cost Components
Premised on the sustainability-related cost components from the review of literature, the study employed questionnaire survey advanced into its subsequent stage – identifying the most critical cost components in highway investments with sustainability objectives. Figure 7.1 shows an expanded view of the industry verified sustainability-related cost components in highway infrastructure. These critical cost components reflect the consensus opinions of a group of experienced highway industry stakeholders in both theory and practice of highway infrastructure development. The discussions are further interpreted in the following sections.
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Material
Road accident economic value of damage
Plant and Equipment
Social Cost Components
Agency Cost Components
Major Maintenance
Rehabilitation
Road Accidentinternal cost
Hydrological impacts
Loss of wetlands
Environmental Cost Components
Disposal cost of materials
Cost of barriers
Figure 7.1: Critical sustainability-related cost components in Australian highway infrastructure projects
7.3.1. Agency dimension of sustainability Highway infrastructure development usually involves huge capital. Agency cost is an important consideration over the highway’s lifetime. The findings from the questionnaire indicated that the material, plant and equipment costs are the main cost criteria that considered in highway investment. These costs significantly influence the overall profit margin of the highway investment. This is consistent with Wilde, Waalkes and Harrison (2001) who found that agency cost is still a major cost that needs to be included into the highway investment and design decision process. Major maintenance and rehabilitation costs were also highly rated by industry stakeholders in the questionnaire. These costs usually contribute to the annual cost as the maintenance and rehabilitation activities are applied in a given year to improve the highway pavement. However, the strategies of maintenance and rehabilitation depend on the predicted pavement condition as well as the real condition of the highway infrastructure. This finding is also supported by the observation by Widle, Waalkes and Harrison (2001) that the pavement is evaluated at the end of each year by the performance models, and the distress levels are evaluated by the strategies’ modules. These models and modules are able to assist the stakeholders in identifying an appropriate maintenance and rehabilitation strategy for a highway infrastructure project.
Chapter 7: Findings and Model Finalisation
7.3.2. Social dimension of sustainability One of the interesting points of the social dimension of sustainability in the highway infrastructure investment is related to health and safety impacts. Stakeholders considered internal, external or economic value of damage as the most important components compared to other cost components in highway investment. Highway accident costs comprise a huge portion of costs over overall highway investment. The general high rating indicates very high levels of awareness about health and safety-related matters in highway infrastructure development and the wider society. Meanwhile, the results from the questionnaire and interviews also highlighted that improving highway performance and quality is one of the factors to improve highway health and safety. Tighe et al. (2000) who found that the incidence of road accidents has a strong relationship with the pavement condition. Another study also found that traffic accident frequencies are based on different pavement conditions (Chan, Huang et al. 2010). It is of interest that all stakeholders’ were aware of the need to consider accident costs as part of overall highway investment costs.
7.3.3. Environmental dimension of sustainability Differences of the importance level of cost components were found between groups of stakeholders. Government agencies and local authorities rated hydrological impacts as the most important factors in highway investment decisions, where as consultants rated it as the third most important and contactors rated it as the twelfth most important factor in environmental category. These differences suggest a general understanding among government agencies and consultants that government statutory instruments are effective in controlling water quality and minimising pollution that often emanates from highway infrastructure development. On the other hand, the questionnaire results also indicate that contractors are not really concerned about the hydrological impacts as long-term impacts. The reason for this may be that contractors have no liability after projects are finished, as highlighted by Tighe (2001).
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Based on the questionnaire findings, the cost of the disposal of materials is another environmental cost that stakeholders are concerned about. Contractors rated it as the most important component in highway investments, consultants rated it as the third most important, while government agencies rated it at seventh among all the environmental cost components. This result indicates that contractors are more concerned about the direct waste generation costs occur in highway infrastructure construction. In contrast, government agencies are less concerned about the cost of material disposal because contractors are the key players in waste management in highway construction. This result is supported by Lingard, Graham and Smithers (2000) who found that contractors are responsible for the waste management, the fees for which represent a significant cost to them. Waste management involves many complex interactions such as transportation systems, land use, public health considerations and interdependencies in the system such as disposal and collection methods. A well managed plan is needed to prevent over-expenditures in these activities.
7.4
Enhancement of LCCA for Sustainability Measures
Making highway investment decisions is complex. Several tools currently available aim to structure, simplify this complexity, and support the decision maker in a highway infrastructure investment situation. However, as indicated by the findings from the semi-structured interviews, several of these tools are insufficient for the problems faced in highway investment decision-making. To solve some of these problems, the results from the interview suggested future efforts in the development of decision support tools in the following areas: (1) Further development of tools that integrate social, environmental and microeconomic dimensions. This approach follows the ‘a little is better than nothing’ advice and is foremost supported by the decision makers’ familiarity with economic units. It is advocated by the work of Epstein (2008). (2) Improve the understanding of socially and environmentally-related decisionmaking and use of tools such as the multi-criteria decision support approach. This approach acknowledges that individuals in making decisions use cognitive skills, which are influenced by both personal values and perceived
Chapter 7: Findings and Model Finalisation
benefits. Recognising the decision maker’s behaviour, an extended approach and a way forward is to develop and use decision strategies that also consider cognitive aspects. (3) Extend the system boundaries by complementing LCC-oriented tools with tools that focus on physical measures, for example LCCA and Fuzzy AHP methods in this study. This combination of analysis methods is also supported by Koo, Ariaratnam and Kavazanjian (2009) and recognises the social and environmental aspects more extensively. The interview findings also revealed that the recognition of the decision maker’s cognitive skills is essential to deal with highway investment decisions.
The development of a decision support model for this study builds upon the findings from the literature, questionnaires and interviews revealing a range of issues related to adopting sustainability-related cost components into LCCA, including the following obstacles: •
Lack of data,
•
Lack of contractual agreements, and
•
Lack of standardisations.
A life-cycle perspective is important since it extends the system boundaries and incorporates some costs that are incurred in the future. Using a multi-criteria decision support approach, such as Fuzzy AHP, in making investment decisions both longterm economic values as well as social and environmental cost components are considered. In contrary, Gluch and Baumann (2004) argue that life-cycle cost analysis is an imperfect theoretical base as its limitation in quantifying social and environmental-related cost components must be recognised. This issue was also acknowledged in this study. The interview findings reveal that decision makers use decision support tools to rationally evaluate options (alternatives) to make an optimal decision. Another interesting finding is a change towards more socially and environmentally responsible behaviour in the highway infrastructure industry which requires a wider understanding of the decision maker’s situation and behavior. This recognises the
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importance of other decision processing aspects in addition to making a rational choice among alternatives in highway investment decisions. As a result, the extended perspective of the decision-making context gives rise to a focus in this research on stakeholders from different backgrounds who should cooperate. The outcome of this research is the development of a model that involves people in the decision process, such as brainstorming about the sustainability issues and about decision options based on financial consideration.
7.4.1. Industry practice of LCCA This study provided evidence that LCCA is acknowledged as a robust evaluation technique for choosing between different types of pavements for highway infrastructure. The potential benefits of the LCCA and the applicability of this technique to evaluate highway investment is recognised by the industry stakeholders. This is supported by the work of Ozbay et al. (2004b) and Gluch and Baumann (2004). The interview results confirmed that highway infrastructure projects are of considerable importance to politicians and individual interest groups. This study showed that the governmental guidelines and reports on LCCA (or any evaluation technique) could significantly influence its actual implementation. Any guidance must be even-handed and based on proven scientific research. For example, the Association of Australian and New Zealand Road Transport and Traffic Authorities (Austroads) has developed a guideline for the discount rate value, the analysis period, the inclusion of the user delay cost during rehabilitation activities, and the intention of adopting the probabilistic approach. Government agencies are usually required to prepare a highway construction and planning program that highlights the activity in the long-term. Therefore, a construction program needs to be closely monitored. Any government departments involved are likely to be queried and must be prepared to defend the situation publicly as well as in the legislature. Typically, when projects are priced, their costs are estimated in term of the current cost of the projects, and this estimate is not
Chapter 7: Findings and Model Finalisation
adjusted to fit the future situation. These cost increases can be amplified at a higher rate in the near future. This significantly affects the overall cost of an investment. Stakeholders are able to estimate future funding and project costs by life-cycle cost analysis. This was also evident in the study conducted by Wilmot and Cheng (2003) who found that future funding is obviously never known and involves a great deal of uncertainty. In contrast to the work of Gerbrandt and Berthelot (2007), LCCA is able to guide the decision makers in forecasting future funding and reducing the risk of project investments. This study found that the industry stakeholders rely on their expert opinion and past practices to establish the life-cycle strategies for the alternatives, which specify the timing of rehabilitation, upgrading and reconstruction. An asset forecast life is a major influence on life-cycle analysis (Woodward 1997). An error in forecast may cause a huge difference when predicting the costs for an asset such as highway infrastructure with a 50 to 60 year life span. To minimise the errors, the utilisation of theoretical and historical data in life-cycle cost analysis becomes crucial in long-term highway investment. This finding is also supported by Hastak, Mirmiran and Richard (2003) and Arja, Sauce and Souyri (2009), but is contrary to Carroll and Johnson (1990) who observed that descriptive decision-making studies have shown that individuals are not making rational decisions, especially when uncertainty is involved because of complex and long-term consequences, which is typical for highway investment decisions. An appropriate discount rate is a crucial decision in a life-cycle cost analysis. The industry stakeholders in dealing with LCCA evaluation use specific discount rates. Usually the discounted rates are based on the Austroads standard; however, an appropriate adjustment is needed to suit the project’s environment. Therefore, this study shows that theoretical and historical data are significantly important for decision makers to evaluate competing initiatives and find the most sustainable growth path for the highway infrastructure.
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7.4.2. Challenges of incorporating sustainability into LCCA The interview results brought to light the general tendency of Australian highway industry to exclude some cost components encountered by communities and environments (especially during normal operations) from the LCCA of transportation projects based on the assumption that such costs are common to all alternatives. The inclusion/ exclusion of social and environmental costs: Research on how to quantify and monetise such costs –
vehicle operating costs, comfort, risk and
reliability, noise and health effects – continues to grow as these cost components are proven to be significant based on years of empirical and theoretical research results. More importantly, in considering social and environmental costs, industry practitioners tend to exclude these costs in their analysis based on the unfounded argument that these components are not real costs, let alone the difficulty in monetising these externalities (Surahyo and El-Diraby 2009). A monetary value: ‘Sustainability’ LCCA aims at translating social and environmental problems into a one-dimensional monetary unit. However, this study found that the attempts of life-cycle cost analysis to translate these problems into a monetary unit may oversimplify reality. Neoclassical economic theory presupposes that all relevant aspects have a market value, that is, a price. The interview findings showed that there are items that are not possible to price. This leads to monetary calculations being incomplete with regard to socially and environmentally-related cost components. Many economic theorists suggest different ways to put a price on social environmental items, for example through taxes (Pearce and Turner 1990; Hanley, Shogren and White 1997; Turner, Pearce and Bateman 1994), but this study argues that it is impossible to catch all relevant aspects of these complex problems into one monetary figure. A similar finding was drawn from the research conducted by Surahyo and El-Diraby (2009). The monetarism of LCC consequently results in loss of important details which in turn limits the decision maker’s possibility to obtain a comprehensive view of these problems. Decision-making under uncertainty situation: This research observed that industry stakeholders usually have overlooked the uncertainty factor when applying LCCA.
Chapter 7: Findings and Model Finalisation
The social and environmental consequences of a highway investment decision often occur long after the decision was made, and not necessarily in the same location. Furthermore, these decisions have cumulative effects on social and ecological systems, which are difficult to detect (Arja, Sauce and Souyri 2009; Gilchrist and Allouche 2005; Yu and Lo 2005). A similar finding was drawn from the semistructured interviews, in which interviewees agreed that issues that are not considered as problems today may well be in the future. In the same way, today’s social and environmental problems were not anticipated yesterday. Long-term investment decisions with large social and environmental impacts therefore are characterised by considerable uncertainty at all stages of the decision-making process, such as the problem definition, possible outcomes and probabilities of the outcomes (Arja, Sauce and Souyri 2009). Business and Political influences: The questionnaire and interview results show that investment decisions for a highway infrastructure are affected by business, physical and institutional uncertainties, this findings also highlighted by Alam, Timothy and Sissel (2005); Chou et al. (2006); Gerbrandt and Berthelot (2007) and Gransberg and Molenaar (2004). Physical risks are often due to uncertainty about a highway infrastructure’s design or a material’s functional characteristics and performance change during its lifetime. Such uncertainty may involve the material being found unsuitable through new scientific evidence has become unsuitable. Business uncertainty is connected to unpredictable fluctuations in the market and institutional uncertainties reflected in the effect of changing regulations on infrastructure development. Many political decisions can instantly change the “rules of the game”. It is also easy to predict that materials and components that are difficult to recycle will be expensive to dispose of in the future both for technical reasons and due to increasing disposal taxes. This study revealed that the political decisions, external market factors, institutional regulations and environmental changes may also lead to changing conditions. Irreversible decisions: Another interesting finding from the interviews is that analysis that relies on estimation and valuation of uncertain future incidents and outcomes (social and environmental cost components) is problematic. There are numerous techniques available that attempt to decrease the uncertainty of future
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consequences, for example scenario forecasting, sensitivity analysis, probability analysis, decision trees and Monte Carlo simulation (Hastak, Mirmiran and Richard 2003; Hong, Han and Lee 2007; Tighe 2001). However, these techniques presuppose that decision makers are aware of the nature of the uncertainties that can be expected during the highway’s lifetime. A study of risk management (Li and Madanu 2009) revealed that stakeholders when conducting a sensitivity analysis of life-cycle cost analysis only considered tangible aspects such as interest rate. Furthermore, when estimating social and environmental cost components, the stakeholders relied more often on their intuition and rules of thumb than on techniques, such as sensitivity analysis.
7.5
Model Finalisation
Based on all the findings discussed above relating to the critical sustainability-related cost components and sustainability enhancement for LCCA practice, a platform of overall scenario of long-term financial management with sustainability objective in highway infrastructure development has been established. The platform, illustrated in Figure 7.2 summarises and provides an overall picture of the current industry’s practice, challenges and perspectives on sustainability enhancement for current LCCA in the context of highway infrastructure development. The framework clearly outlines the links between current industry practices on LCCA, challenges of integrating sustainability-related cost components into LCCA and the various stakeholders’ perceptions of sustainability enhancement as identified in the interviews. In addition, the questionnaire findings also encapsulated the ten critical sustainability-related cost components pertinent to the highway infrastructure project. The platform serves as a clear picture for understanding the current industry practice and general perceptions held by the various stakeholders in long-term highway infrastructure investment with the sustainability objective.
Chapter 7: Findings and Model Finalisation
Questionnaire Results and Findings Sustainability-related cost components in highway infrastructure development Agency Category • Material • Plant and Equipment • Major Maintenance • Rehabilitation
Social Category • Road Accident Internal Cost • Road Accident Economic Value of Damage
Environmental Category • Hydrological impacts • Loss of wetlands • Disposal of material • Cost of barriers
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Interview Results and Findings Sustainability enhancement for LCCA practice • Further development of tools that integrate social, environmental and micro-economic dimensions • Extend the system boundaries by complementing LCC-oriented tools • Improve the understanding of socially and environmentally related decision-making through multi-criteria decision support approach.
Industry practice of LCCA application • Industry recognition of LCCA • The theoretical and historical data of LCCA • Government guidelines and reports
Challenges of integrating cost related to sustainability measures • The inclusion/ exclusion of social and environmental costs • A monetary value • Decision-making under uncertainty situation • Business and political influences • Uncertainties evaluation techniques • Irreversible decisions
Development of Decision Support Model for Highway Investment Decisions Figure 7.2: Platform for developing financial decision support model in highway infrastructure sustainability
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By knowing the overall status and challenges that the industry is currently facing, strategies to improve and encourage the industry stakeholders to enhance life-cycle cost analysis with sustainability objective can be better organised and articulated. By closely monitoring of the implementation of sustainability measures against LCCA, this study ensures that assessing highway investment can be more informative and systematic, therefore resulting in better decisions for overall sustainability infrastructure development.
Premised on this platform, the research advanced into its subsequent stage – the development of the decision support model, the application in real case projects and the evaluation through the case studies. Based on the findings of these last development steps, the proposed decision support model was finalised with minor improvements. The finalised decision support model is shown in Figure 7.3 and revealed the suggestion from the participants to incorporate the platform into the model to generate a clear picture on the functions of the model in dealing with highway investment decisions.
Chapter 7: Findings and Model Finalisation
PLATFORM FOR DEVELOPING DECISION SUPPORT MODEL
Sustainability enhancement for LCCA practice
Sustainability- Related Cost Components Agency Category
Industry practice of LCCA application
Social Category
Challenges of integrating sustainability-related costs
Environmental Category FINANCIAL DECISION SUPPORT MODEL FOR HIGHWAY INFRASTRUCTURE SUSTAINABILITY
Applying in real case projects
Enhancing the model
Assessment Methods for Cost Components Qualitative
Quantitative
Fuzzy Analytical Hierarchy Process (Fuzzy AHP) • Evaluation of criteria weight • Evaluation of alternatives • Final score of alternatives
Life-Cycle Cost Analysis (LCCA) • Determination of activity timing • Computation of expenditure by year • Compute of life-cycle cost analysis
•
Final Decision Making Process Applying weight sum model to total up final scores Sensitivity Analysis Fuzzy AHP
LCCA
• Changes in prioritisations value by changing the Fuzzy AHP weight factors
• Changes in prioritisations value by changing the LCCA weight factors
Feedback from project stakeholders
Model Validation • Application of the proposed preliminary model in real case projects • Problems associated with the proposed model • Comments and opinions to improve the model Figure 7.3: The finalised financial decision support model for highway infrastructure sustainability
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Results of the propositions analysed in the validation phase demonstrate that the decision support model successfully performed the intended functions: •
The ability of the model to emulate a systematic evaluation process was satisfied.
•
The rating system provides a comprehensive fuzzy value to be evaluated and analysed in the model.
•
The results show that it identifies significant project decisions and the appropriate timing on a project.
•
The ability of the model to generate new and innovative solutions was also demonstrated.
In total, the above four aspects in the validation phase were satisfied, which provide sufficient evidence to validate the functionality of the model to perform as intended. Results from the numerical phase demonstrate the alternatives selected in the study are consistent with an independent review of historical data and therefore are accurate and reliable. Since the result in the numerical phase was satisfied, this provides strong evidence to support the numerical validation of the model. The interviewed project stakeholders acknowledged that the model could improve investment decisions in the highway infrastructure projects. The case studies demonstrate that the model is capable to evaluate quantitative as well as qualitative cost components. However, based on the study conducted by (Surahyo and El-Diraby 2009), there is a clear inconsistency in the evaluation methods used by researchers and practitioners to estimate these costs. This study proved that with the application of Fuzzy AHP and LCC approach, these cost components can be consistently evaluated based on the weighted factors. One other noteworthy observation is the influence of decision-making process of the stakeholders in evaluating highway investment decisions. The systematic nature of evaluation process shows the ability of Fuzzy AHP to define the linguistic scale of decision into fuzzy value. The results from the Fuzzy AHP demonstrated the systematic evaluation process, illustrating its ability to efficiently convert human
Chapter 7: Findings and Model Finalisation
linguistic idea into value that follow the scientific method when evaluating highway infrastructure alternative solution. Additionally, the cost data that can be retrieved from the case projects also provides a mechanism to define value on a project team decisions. The value generated from Fuzzy AHP and LCCA assessment is explicitly tailored to the projects with the model weighting factors. The resulting weighted factors objectively define the value on the project and are used to determine how well aligned each alternative is with the specified project priorities and scenario. This function was applied during the model application on two real case studies to assist the decision makers in determining which alternatives to implement in the projects.
7.6
Chapter Summary
This chapter discusses the results from the questionnaires, interviews, model development and case study findings, concerning chapters 4, 5 and 6. Firstly, the critical cost components related to sustainable measures in highway infrastructure development were discussed. These components included the various stakeholders’ perceptions of the cost components that are crucial in highway investment decisions. Following the industry verification, the cost components were consolidated into ten main sustainability-related cost components, which constitute the critical cost components for Australian highway infrastructure investments. It is crucial to further investigate the current industry practice, how these cost components are quantified and the challenges to incorporating these cost components. Therefore, the major contributions from the interviews include the identification of current industry practice in life-cycle cost assessment, the challenges of integrating sustainable measures into LCCA practice and the stakeholders’ perspectives on sustainability enhancement for LCCA. These findings were used to formulate the overall scenario of long-term financial management in highway infrastructure which served as a preliminary model for subsequent investigation. The conclusion of the questionnaires and interviews paved the way and lead to the development of the model. This model was tested and evaluated through the case studies. The model
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were tested and evaluated by industry stakeholders based on two real highway infrastructure projects. The derived findings from the three unique research approaches were included in the establishment of the decision support model to assist industry stakeholders in investment decisions for Australian highway infrastructure projects as the outcome of this research.
Chapter 8: Conclusion
CHAPTER 8: CONCLUSION
8.1
Introduction
Australia is putting a great emphasis on the development and rejuvenation of highway infrastructure because of the recent resource boom and regional economic growth. Stakeholders of these highway projects need to respond to the sustainability challenge while ensuring the associated financial implications and risks are dealt with and in control. This calls for a better decision support tool to help with reaching investment decisions among the complex sets of issues and agenda. This study developed a decision support model in dealing with highway investment decisions with sustainability objectives. This chapter presents the achievement of the research through the review of research objectives and development processes in Section 8.2, prior to the presentation of the conclusions to the research objectives in Section 8.3. Research contributions are discussed in Section 8.4, the study limitations in Section 8.5, and the recommendations for future research in Section 8.6.
8.2
Review of Research Objectives and Development Processes
The research objectives were established when the research gap was identified through a review of literature (Chapter 2). This review was undertaken in consultation with the industry practitioners and academics. Specifically, this research sought to achieve the following objectives:
•
To understand the cost implications of pursuing sustainability in highway projects.
•
To identify the critical cost components related to sustainable measures in highway infrastructure investments.
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•
To develop a decision support model for the evaluation of long-term financial decisions regarding sustainability for highway projects.
The objectives provided a clear direction upon which the research advanced with confidence. Three interrelated but distinctive approaches to data acquisition were selected and adopted in this research, namely:
1) Questionnaires distributed to industry stakeholders to confirm the cost
components related to sustainable measures that are significant in highway infrastructure investments. 2) Semi-structured interviews among experienced practitioners and academics to
explore the current practice of life-cycle cost analysis, challenges to enhance sustainability in the life-cycle cost analysis and the suggestions of the various stakeholders towards financially sustainability in Australian highway infrastructure. 3) Case studies conducted to apply proposed decision support model based on real case scenarios and collect expert opinions as well as real-life project information to enhance and validate the model.
8.3
Research Objectives and Conclusions
Three objectives were posed to address the aim of this research. The following subsections revisit the research objectives and present the conclusions and key findings from the interpretation and discussion of the results reported in the previous chapters.
8.3.1.
Research objective 1
RO 1. To understand the cost implications of pursuing sustainability in highway projects.
The literature review (Chapter 2) found that public awareness and the nature of highway construction works demand that sustainability measures are put on top of the development agenda. There are some stakeholders who consider sustainability as extra work that costs extra money. However, stakeholders in general have realised
Chapter 8: Conclusion
the importance of pursuing sustainability in infrastructure development. They are keen to identify the available alternatives and financial implications on a life-cycle basis. Due to the complex nature of decision making in highway infrastructure development, expertise and tools to aid the evaluation of investment options, such as provision of environmentally sustainable features in roads and highways, are highly desirable. Benefit-cost analysis (BCA) and life-cycle cost analysis (LCCA) are generally recognised as valuable approaches for long-term financial investment decision making for construction works. However, LCCA applications in highway development are still limited. This is because the current models focus on economic issues alone and are not able to deal with sustainability factors, which are more difficult to quantify and encapsulate in estimation modules. Based on the literature review, the limitation of current LCCA models and programs can be summarised as follows: 1. inconsistent estimation method in environmental and social costs calculation, 2. unclear boundaries in considering sustainability impacts, 3. difficult to quantify sustainability-related cost components, and 4. ambiguity in identifying relevant costs for LCCA in highway projects. While sustainability and long-term financial management are the logically linked to highway infrastructure projects, past research for this industry sector mainly focused on traditional LCCA methods. Little has been done to incorporate sustainabilityrelated cost components into LCCA practice, especially in highway infrastructure. There is a need to find effective ways to enhance sustainability foci in LCCA, along with the development of long-term financial decision support methods. The gap must be closed between the traditional LCCA practice and the need for a new decision support model capable of taking account into financial sustainability assessment. Thus, the identification of sustainability-related cost components for assessing highway investments is becoming imperative. This research addressed these problems by identifying the relative importance of the various costs components in highway infrastructure projects. A set of key cost
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components related to sustainable measures in highway infrastructure projects was produced as listed in Table 2.6 in Chapter 2. There are three main cost categories based on the study of previous Australian highway infrastructure projects: •
Agency category,
•
Social category, and
•
Environmental category.
These cost categories are expanded into 14 main factors with 42 sub factors for indepth investigation (see Table 2.6). This achieved the first objective of the research and paved the way for the pursuit of the second objective.
8.3.2.
Research objective 2
RO 2. To identify the critical cost components related to sustainable measures in highway infrastructure investments. The industry practitioners, based on their perceptions and experience, evaluated these identified cost components through questionnaire surveys (in Chapter 4). The most critical industry verified cost components in highway investments in the Australian context were therefore revealed. These ten critical cost components were ascertained against the proposed decision support model. The interviews with senior industry stakeholders found that LCCA practice has increasing recognition in the contemporary industry. Government agencies are putting a significant emphasis on early identification of the financial outlook when contemplating highway infrastructure investment. With improving social awareness, they will also need to overcome the traditional imbalance between sustainable measures and project budgets. Meanwhile, government reports provided by agencies and associations also significantly impact on the LCCA implementation. The Australian industry stakeholders rely on these reports, their expert opinion and past practices to establish the life-cycle strategies for the highway infrastructure alternatives. This inclusion of theoretical and historical data is significant for
Chapter 8: Conclusion
decision makers to evaluate competing initiatives and find the most sustainable growth path for highway infrastructure. The above findings provide a platform for the formulation of a preliminary decision support model capable of embedding sustainability objectives and considerations for highway investment decisions. Thus, it provides a holistic industry perception of enhancing sustainability in LCCA and critical cost components related to sustainable measures in the context of highway infrastructure development. This view allows the formulation of a decision support model. This helped to achieve the second objective and provide an imperative next step towards developing of a decision support model to aid decision makers in highway investment.
8.3.3.
Research objective 3
RO 3. To develop a decision support model for the evaluation of long-term financial decisions regarding sustainability for highway projects. Ten most important cost components related to sustainable measures were determined against the proposed model. There is a need of multi-criteria decision support approaches to evaluate the model. Fuzzy AHP, LCCA, Weighted Sum Model (WSM) and sensitivity analysis were employed to develop the model. At this point, the researcher evaluated the proposed decision support model with integrated procedures of application and evaluation (as mentioned in Chapter 5) through case studies (as documented in Chapter 6). Two highway infrastructure projects were selected to apply, test and evaluate the model based on the project alternatives. The model provides project stakeholders with guided decision-making assistance when contemplating alternatives. This process also demonstrates that, a systematic model in dealing with highway investment decisions. This confirms the findings from previous empirical case studies in Chapter 6 that the validation of the model should focus on the comments and suggestions from project stakeholders. Therefore, a finalised financial decision support for highway infrastructure sustainability has been developed (refer to Chapter 7). The formulation of the decision support model achieved the third objective of this study.
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8.4
Research Contributions
This research has contributed the knowledge and understandings of life-cycle cost analysis in highway infrastructure in the context of maximising sustainability initiatives and potentials. The specific contribution is according to two different perspectives: the contributions to academic knowledge and to the infrastructure industry.
8.4.1.
Contribution to academic knowledge
Contributions of this research to academic knowledge about the link between infrastructure and sustainability are: 1.
Integrated approaches to evaluating financial decisions for highway infrastructure investment with sustainability objectives and action plans
This research promotes multi-criteria decision support and life-cycle cost analysis approaches in proposed decision support model when performing highway investment evaluation. Cost components related to sustainable measures and industry suggestion of enhancing sustainability for life-cycle cost analysis practice established the platform for the researcher to develop this model. This model not only provides a decision support tool for agency costs; it also allows industry stakeholders to consider the impacts of specific design alternatives on the community. 2.
Filling a knowledge gap in the evaluation of highway alternatives through a systematic decision-making process.
The proposed model provides a structured and systematic approach to evaluate alternatives for highway infrastructure projects through the economical and sustainability consideration. Following the scientific method, a solid yet flexible model is developed to continuously identify ways to evaluate alternative solutions before implementing the projects. This model is significant as it provides a process to continuously generate new and innovative solutions that improve highway investment decision and increase levels of sustainability.
Chapter 8: Conclusion
8.4.2.
Contribution to the industry
Contributions are made to industry practice in the following ways: 1.
A practical tool for highway investment decisions with sustainable goals.
The proposed decision support model provides industry stakeholders with a practical tool that helps facilitate highway investment decisions with sustainable goals. This model is much needed by practitioners to optimise highway investments and to maximise the value of the assets over their life cycles. It will ensure the highway investment can be more informative and systematic in dealing with better decision in overall highway infrastructure development. 2.
Decision support model improves the awareness of industry stakeholders in sustainability.
The decision support model raised the awareness of industry stakeholders in considering sustainability while making investment decisions. This was done by integrating industry verified sustainability-related cost components into the model and ’guide’ stakeholders to think. The gauging of the practical issues encouraged their sustainability-related endeavours and exploration of thoughts for future research and development.
8.5
Study Limitations
The research has developed a model with the ability to improve investment decisions and promote higher levels of sustainability achievement in highway infrastructure. This research is limited in two aspects: •
The findings and views presented in the model are more reflective of highway infrastructure projects such as highway bridges and bypass rather than other types of road infrastructures. Undoubtedly, a wider coverage of other types of road infrastructures namely rural and urban arterial roads, and rural and urban local roads would add and enrich the findings. However, this
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was not the focus or ambit of this research. To this end, this research is more about developing methodology and application prototype. Nevertheless, some enhancements are needed to the proposed model to deal with investment decisions with sustainability objectives for other types of road infrastructure. •
Given the fact that the participating respondents and the case projects are from Australia, the models developed are specifically applicable to the Australian highway infrastructure context rather than to that of other regions in the world. This is because different regions or countries have different legal, cultural and political environments, which might be unique or specific. Nevertheless, the learning from this study can provide a good source of reference to the industries in other regions with slightly modification needed to fit to the needs of the particular region.
8.6
Recommendations for Future Research
This study presented a model for performing financial decision support for highway infrastructure sustainability. As sustainable highway infrastructure developments continue to mature, new ways to achieve sustainability objectives while improving the financial decision-making process must be discovered. Further studies could consider the following approaches and issues: •
This study focuses only on the Australian highway infrastructure context. It will be valuable for future researchers to cover other regions of the world by considering different legal, cultural and political environments that are specific to local conditions.
•
The enrichment of data is also important to improve the accuracy of the prediction model. A major improvement would be the ability to automatically calibrate the performance models using local condition survey data. This could be accomplished by allowing the industry stakeholders to enter relevant information along with historical environmental and as-built construction data. In addition to this information, variability in construction aspects, such as pavement strength and thickness and the surface roughness, should be used to calibrate the models.
Chapter 8: Conclusion
•
Due to time constraints and different focus, it was not possible for this research to generate a computer package to further aid stakeholders in dealing with highway investment. From the ease of operation point of view, a computerised procedure and package could have been more user friendly. Future research may develop a computerised version of the derived model.
•
This study focuses purely in financial implication for highway infrastructure sustainability. This could also be extended to include risk assessment method to evaluate the variability of critical input variables in cost estimation (litigation, cost overruns, contingencies, etc.). The types of analysis that can be considered are: 1. Establish probability risk assessment that include quantitative analysis of risk. 2. Conduct the empirical study by using statistical analysis to obtain critical factor of risks as the output of life-cycle cost estimation.
In these ways, future researcher should look into these aspects in order to further improve and refine the research findings.
8.7
Summary
The push for sustainability has added new dimensions to the evaluation of highway infrastructure projects, particularly on the cost front. The incorporation of sustainability-related cost components in highway investment decisions is a crucial step to ensure that the projects are economically feasible, socially viable and environmentally responsible in the societal investment. Understanding the current industry practice in life-cycle cost analysis, recognising the challenges faced by the current industry in incorporating sustainability-related cost components into consideration, and gathering suggestions to formulate a tool to enhance sustainability in life-cycle cost analysis for highway infrastructure, are major endeavours to generate a clear picture of highway infrastructure practice and needs. Accordingly, this research has moved a step further in developing a decision support model with sustainability objectives in evaluating highway infrastructure investment. The proposed model will help promote a more systematic, comprehensive and
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promising approach among key stakeholders in the process of highway investment decision-making. It will enhance the viability of the financial considerations and respond positively to sustainability concerns in highway infrastructure projects in Australia.
Appendices
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E. and A. G. Partner. 1998. "«Nachhaltigkeit–Kriterien im Verkehr»(«Sustainability–Criteria for Traffic»), report C5 of the National Research Programme 41: Traffic and Environment": Bern.
Bernard, H. R. 2006. Research methods in anthropology: Qualitative and quantitative approaches: Altamira press. Bickel, P., S. Ahvenharju, T. Konnola, M. Hielt, R. Tomassi, M. Arend, R. Burg and W. Rohling. 2003. "Setting the Context for Defining Sustainable Transport
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Walls Iii, J. and M. R. Smith. 1998. "Life-Cycle Cost Analysis in Pavement DesignInterim Technical Bulletin." Federal Highway Administration. WCED. 1987. "Our common future." Members of the Comission. Wengraf, T. 2001. Qualitative research interviewing: Biographic narrative and semi-structured methods: Sage Publications Ltd. Widyatmoko, Iswandaru. 2008. "Mechanistic-empirical mixture design for hot mix asphalt pavement recycling." Construction and Building Materials 22 (2): 7787. http://www.sciencedirect.com/science/article/B6V2G-4KYY3PS5/2/a0c983d15ddcb8e67f93e9d821dae0ee Wilde, W. J., S. Waalkes and R. Harrison. 2001. "Life Cycle Cost Analysis of Portland Cement Concrete Pavements." Research Report: 167205-1. Wilmot, C. G. and G. Cheng. 2003. "Estimating Future Highway Construction Costs." Journal of Construction Engineering and Management 129 (3): 272279. http://link.aip.org/link/?QCO/129/272/1 Winston, C. and A. Langer. 2006. "The effect of government highway spending on road users' congestion costs." Journal of Urban Economics 60 (3): 463-483. Witczak, M. W. and M. W. Mirza. 1992a. An Assessment of Asphalt Cement Property Changes Between Original and Mix/Laydown Conditions: Final Report. Witczak, M. W. and M. W. Mirza. 1992b. Microcomputer analysis for project level PMS life cycle cost studies for rigid pavements, Final Report. Vol. 1&2. College Park, Maryland.: Maryland University,. Wong, J and H Li. 2006. "Development of a conceptual model for the selection of intelligent building systems." Building and Environment 41 (8): 1106-1123. Woodward, D. G. 1997. "Life cycle costing—theory, information acquisition and application." International Journal of Project Management 15 (6): 335-344. Wyatt, D. P. 1994. "Recycling and serviceability: the twin approach to securing sustainable construction, edited, 69–78. Yang, J. B. and S. C. Peng. 2008. "Development of a customer satisfaction evaluation model for construction project management." Building and Environment 43 (4): 458-468. Yin, R. K. 1989. Case study research, Design and Methods. Applied Social Research Method Series. Newburry Park.: Sage Publications. Yin, R. K. 2003. Applications of case study research: Sage Publications, Inc.
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Yip Robin, C. P. and C. S. Poon. 2009. "Cultural shift towards sustainability in the construction industry of Hong Kong." Journal of Environmental Management 90 (11): 3616-3628. Yuan, H. P., L. Y. Shen, J. J. L. Hao and W. S. Lu. 2010. "A model for cost-benefit analysis of construction and demolition waste management throughout the waste chain." Resources, Conservation and Recycling. Zhang, H., G. A. Keoleian and M. D. Lepech. 2008. "An integrated life cycle assessment and life cycle analysis model for pavement overlay systems." Life-Cycle Civil Engineering: 907-915. Zhu, K. J., Y. Jing and D. Y. Chang. 1999. "A discussion on extent analysis method and applications of fuzzy AHP." European Journal of Operational Research 116 (2): 450-456.
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LIST OF APPENDICES APPENDIX A: Questionnaire A1: Invitation Letter - Questionnaire A2: Sample of Questionnaire APPENDIX B: Semi-structured Interview B1: Invitation Letter - Semi-structured Interview B2: Sample of Consent Form B3: Sample of Semi-structured Interview APPENDIX C: Case Study C1: Invitation Letter – Fuzzy AHP Questionnaire C2: Sample of Fuzzy AHP Questionnaire APPENDIX D: List of Publications
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APPENDIX A1: INVITATION LETTER-QUESTIONNAIRE Invitation to Questionnaire Survey Sustainability Based Life-Cycle Costing Analysis (LCCA) for Highways TO WHOM IT MAY CONCERN Dear Sir/Madam I am a doctoral candidate in the School of Urban Development, at Queensland University of Technology (QUT). Currently, I am doing a research that aims to develop the life-cycle cost analysis (LCCA) model to measure the benefit of sustainability versus financial viability in highway infrastructure project management. I am looking for the expertise of construction stakeholders in highway and road infrastructure development such as local authorities and government agencies, contractors, specialist contractors in highway development, project managers, quantity surveyors, engineers, planners and developers. Your relevant experience and expertise in highway infrastructure is valuable and you are invited to participate in a questionnaire. If you agree, you will be sent the questionnaire. We will highly appreciate, if you could forward this request to your colleagues and staffs involved in this project and highway infrastructure development, where applicable. Details of the questionnaire and how to participate can be found by clicking on the following link: http://www.surveymonkey.com/s.aspx?sm=Sw5Qal3Cvibf_2bHDvz_2bx3qg_3d_3d Password: 82105 This questionnaire is divided into 6 sections and will take about 10-15 minutes to complete. This questionnaire serves to identify the cost elements in life-cycle costing analysis, particularly those construction stakeholders use when making decisions and selecting highway infrastructure projects. Please note there is no expected right or wrong answer for each question. I am seeking your expert comments. All the answers will remain confidential, and all the information will be analysed in general, without reference to specific individuals (See the back of this letter for more details). If you have any queries about this project, please contact me or my Principal Supervisor, Prof. Dr Jay Yang on (07)31381028 or QUT Research Ethic office on (07)31382340 for further information about the ethical conduct of the project. Your contribution towards this study is greatly appreciated! Yours sincerely Kai Chen Goh Postgraduate Candidature School of Urban Development Faculty of Built Environment & Engineering Queensland University of Technology Australia Tel : +61 (07)3138 2105 +61 (07)3138 7647 Mobile : +61 (0)433902219 Email :
[email protected] [email protected]
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Additional Information Participation Thank you for your time to consider this survey. Your participation in this project is voluntary. If you do agree to participate, you can withdraw from participation at any time during the project without comment or penalty. Your decision to participate will in no way impact upon your current or future relationship with QUT. Please note that it will not be possible to withdraw, once you have submitted the questionnaire. Risks There are no risks beyond normal day-to-day living associated with your participation in this project. Confidentiality All comments and responses are anonymous and will be treated confidentially. The names of individual persons are not required in any of the responses. Consent to Participate The return of the completed questionnaire is accepted as an indication of your consent to participate in this project. Questions / further information about the project Please contact the researcher team members named above to have any questions answered or if you require further information about the project. Concerns / complaints regarding the conduct of the project QUT is committed to researcher integrity and the ethical conduct of research projects. However, if you do have any concerns or complaints about the ethical conduct of the project you may contact the QUT Research Ethics Officer on 3138 2340 or
[email protected]. The Research Ethics Officer is not connected with the research project and can facilitate a resolution to your concern in an impartial manner.
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APPENDIX A2: SAMPLE OF QUESTIONNAIRE
SUSTAINABILITY BASED LIFE-CYCLE COSTING (LCC) ANALYSIS IN HIGHWAY PROJECT Background: With increasing pressure to provide environmentally responsible infrastructure products and services, stakeholders are focusing on the early identification of financial viability and outcome of infrastructure projects. Traditionally, there has been an imbalance between sustainable measures and project budget. However, industry is under pressure to continue to return profit, while better adapting to current and emerging global issues of sustainability. For the highway infrastructure sector to contribute to sustainable development in Australia, it needs to address relevant sustainability criteria while ensuring financial viability and efficiency. This research aims to further develop the lifecycle cost analysis (LCCA) model to measure the benefit of sustainability versus financial viability in highway infrastructure project management. Objective: This questionnaire aims to identify the various categories of cost elements that are related to life-cycle costing analysis (LCCA) and at the same time complement the concept of sustainability. Once these cost elements are identified, they will be used to further develop the LCCA model to facilitate decision making in highway project management. Private and Confidential: All responses will be kept strictly confidential and will only be used for research purposes. Survey Time frame: Please take approximately 10-15 minutes to complete the questionnaire. SECTION 1: COMPANY’S TECHNICAL EXPERTISE Private and Confidential: No information provided here will be used to identify any individual respondent in either the analysis of results or dissemination of findings.
1. How do you classify your company? Consulting Contractor Developer Government Agency Other (Please Specify) 2. Your experience in the construction industry is (years)? 1-5 6-10 11-15 16-20 Above 20
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3. Please indicate the type of road infrastructure project do you mostly undertaken by ticking the appropriate boxes. Road and highway construction Road and highway extension works Road and highway maintenance works Other (Please Specify) 4. Please indicate your role in highway projects? Local Authority and Government Agency Project Manager Designer/ Engineer Quantity Surveyor Planner Contractor Specialist/ Subcontractor Developer Other (Please Specify)
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SECTION 2: SUSTAINABILITY RATING COST ELEMENTS INSTRUCTION FOR SECTION 2 Based on your experience, please rate the significance of the cost elements listed in order to make the life-cycle cost analysis (LCCA) more sustainable in highway projects. How important are each of the following sustainability-related cost elements and issues when selecting a highway infrastructure projects? (Please tick level of importance) i.
Agency Cost and Issues
Categories
Description
Initial Construction Costs
Labour costs including cost allocation of workers in highway projects. Material costs including materials needed for highway construction. Plant and equipment costs including plant and machinery used in highway construction. Other cost elements and issues considered important in highway projects based on this category (please specify)
Maintenance
Major maintenance activities are necessary only a few times throughout the design life of a highway to distress and maintain its quality Routine maintenance normally undertaken either annually for minor level distresses and maintenance of the pavement quality. Other cost elements and issues considered important in highway projects based on this category (please specify)
Pavement Upgrading Costs
Rehabilitation costs including structural enhancements that extends the service life of an existing pavement and/or improve its load carrying capacity.
Level of Importance Low ---------High 1 2 3 4 5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
Pavement extension costs including extension for driveways in highway projects. Other cost elements and issues considered important in highway projects based on this category (please specify)
Pavement End-of-Life Costs
Cost allocation for demolition activities on the pavement layer together with the road elements. Cost to recycle and reuse materials reclaimed from pavements and to reduce disposal of asphalt materials. Disposal costs including managing cost of disposing asphalt and other excavated materials. Other cost elements and issues considered important in highway projects based on this category (please specify)
Appendices
ii.
251
Social Cost and Issues
Categories
Vehicle Operating Costs
Description
Level of Importance Low -------High 1 2 3 4 5
Elements of vehicle operation including cost for fuel and oil consumption, tyre wear, vehicle maintenance, vehicle depreciation and spare parts. Road tax and insurances including costs for users due to policies and regulations. Other cost elements and issues considered important in highway projects based on this category (please specify) 1
Travel Delay Costs
2
3
4
5
Reduced speed through work zone increases the value of time spent on the journey to the destination. Traffic congestion increases the value of time spent on the road and results in vehicle idling and produces high levels of emissions. Other cost elements and issues considered important in highway projects based on this category (please specify)
Categories
Social Impact Influence
Description
Level of Importance Low -------High 1 2 3 4 5
Cost of resettling people when land is resumed for highway infrastructure project. Property devaluation caused by increased traffic creating additional pollution. Reduction of cultural heritage and healthy landscapes due to highway construction impacting on tourism industry. Community cohesion decreases when highway construction directly influences housing diversity, social alienation, social interaction and exacerbated urban problems. Negative visual impact due to highway construction reducing recreational land and landscape beauty. Other cost elements and issues considered important in highway projects based on this category (please specify) 1
Accident Cost
Economic value of damage to vehicles and road infrastructures; crash prevention and protection expenditures. Internal costs when victims suffer injuries or lose quality of life and medical treatment costs.
External costs of unemployment and uncompensated grief and lost companionship to crash victim’s family and friends. Other cost elements and issues considered important in highway projects based on this category (please specify)
2
3
4
5
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iii.
Environmental Cost and Issues Categories
Solid Waste Generation
Description
Level of Importance Low ---------High 1 2 3 4 5
Dredged or excavated material including cost of extracting ground material such as excavation or rock blasting. Waste management including cost of planning and monitoring of waste materials. Disposal of material costs including cost of handling, transporting, disposal platform and special treatment of waste. Other cost elements and issues considered important in highway projects based on this category (please specify)
Pollution Damage cause by Agency Activities
1
2
3
4
5
1
2
3
4
5
Land use including cost of using native land and land development. Disturbance and importing of soil material including the cost allocation for the use of plant and machinery. Extent of tree felling especially on hillsides due to disturbance of soil structure reducing its strength. Habitat disruption and loss due to use of land for highway construction. Ecological damage with animals killed directly by motor vehicles; animal behaviour and movement patterns are affected by roads. Environmental degradation due to increase road accessibility stimulating development, demand for urban services, which stimulates more development and cycle of urbanization. Other cost elements and issues considered important in highway projects based on this category (please specify)
Resource Consumption
Fuel consumption including cost of natural resources in the production and operation of motor vehicles. Cost of energy consumption for equipment during construction and maintenance of road; followed by usage of roadway services. Other cost elements and issues considered important in highway projects based on this category (please specify)
Appendices
Categories
Noise Pollution
Description
253
Level of Importance Low ---------High 1 2 3 4 5
Cost of barriers including walls and other structures, trees, hills, distance and sound- resistant buildings (e.g., double-paned windows) to reduce noise impacts. Rougher surfaces tend to produce more tyre noise, and certain pavement types emit less noise. Vehicles with faster acceleration, harder stopping and faulty exhaust systems tend to produce high engine noise levels. Driver attitude and vehicle congestion produce disturbance noises such as horns. Other cost elements and issues considered important in highway projects based on this category (please specify)
Air Pollution
1
2
3
4
5
1
2
3
4
5
Effects on human health due to highway construction including long term diseases and health problems. Dust emission created during road construction process and road maintenance. CO2 emission causes green house problem and global warming Other cost elements and issues considered important in highway projects based on this category (please specify)
Water Pollution
Loss of wetland due to pavement construction which reduces flows, plant canopy and surface and groundwater recharge. Hydrological impacts including stormwater problems that increase impervious surfaces, concentrated runoff and flooding. Other cost elements and issues considered important in highway projects based on this category (please specify)
5.
Do you think the sustainability-related cost elements discussed above will influence the decision of selecting a highway project? Yes No (please specify)
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6.
Do you have any other comments about this project either relating to the previous questions, or otherwise?
Thank you for completing this questionnaire. Your time and cooperation is greatly appreciated as your effort will contribute to the development of a new and practical model for stakeholders to evaluate investment decisions and reach an optimum balance between financial viability and sustainability deliverables in highway infrastructure project management. Please complete the following personal details for contact purposes only (confidential): Your Name Company Name Email Address Phone Number
: : : :
Would you like a copy of our research findings? Yes No
Please save it and send it back to
[email protected] Thank you
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APPENDIX B1: INVITATION LETTER- SEMI-STRUCTURED INTERVIEW Invitation for Interview Participation Sustainability Based Life-Cycle Costing Analysis (LCCA) for Highways TO WHOM IT MAY CONCERN Dear Sir/Madam I am a doctoral candidate in the School of Urban Development, at Queensland University of Technology (QUT). My research aims to develop the life-cycle cost analysis (LCCA) model to measure the benefit of sustainability versus financial viability in highway infrastructure project management. I am looking for the expertise of construction stakeholders in highway and road infrastructure development such as local authorities and government agencies, contractors, specialist contractors in highway development, project managers, quantity surveyors, engineers and planners. Your relevant experience and expertise in highway infrastructure is valuable and you are invited to participate in this interview. If you agree, please email me at:
[email protected] or
[email protected]. We can arrange the time that suits to your schedule to conduct this interview. This interview will take about 30-45 minutes to complete. The interview serves to seek for comments and perspectives on how the sustainable related cost elements and issues can be measured in life-cycle costing analysis, particularly those construction stakeholders concern when making decisions and selecting highway infrastructure projects. Please note there is no expected right or wrong answer for each question. I am seeking your expert comments. All the answers will remain confidential, and all the information will be analysed in general, without reference to specific individuals (See the below of this letter for more details). If you have any queries about this project, please contact me or my Principal Supervisor, Prof. Dr Jay Yang on (07)31381028 or QUT Research Ethic office on (07)31382340 for further information about the ethical conduct of the project. Your contribution towards this study is greatly appreciated! Yours sincerely Kai Chen Goh Postgraduate Candidature School of Urban Development Faculty of Built Environment & Engineering Queensland University of Technology Australia Tel : +61 (07)3138 2105 +61 (07)3138 7647 Mobile : +61 (0)433902219 Email :
[email protected] [email protected]
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Additional Information Participation Thank you for your time to consider this interview. Your participation in this project is voluntary. If you do agree to participate, you can withdraw from participation at any time during the project without comment or penalty. Your decision to participate will in no way impact upon your current or future relationship with QUT. Please note that it will not be possible to withdraw, once you have submitted the questionnaire. Risks There are no risks beyond normal day-to-day living associated with your participation in this project. Confidentiality All comments and responses are anonymous and will be treated confidentially. The names of individual persons are not required in any of the responses. Consent to Participate The return of the completed questionnaire is accepted as an indication of your consent to participate in this project. Questions / further information about the project Please contact the researcher team members named above to have any questions answered or if you require further information about the project. Concerns / complaints regarding the conduct of the project QUT is committed to researcher integrity and the ethical conduct of research projects. However, if you do have any concerns or complaints about the ethical conduct of the project you may contact the QUT Research Ethics Officer on 3138 2340 or
[email protected]. The Research Ethics Officer is not connected with the research project and can facilitate a resolution to your concern in an impartial manner.
Appendices
APPENDIX B2: SAMPLE OF CONSENT FORM
CONSENT FORM for QUT RESEARCH PROJECT “Sustainability Life-Cycle Costing Analysis (LCCA) in Road Infrastructure Project”
Statement of consent
By signing below, you are indicating that you: •
have read and understood the information document regarding this project
•
have had any questions answered to your satisfaction
•
understand that if you have any additional questions you can contact the research team
•
understand that you are free to withdraw at any time, without comment or penalty
•
understand that you can contact the Research Ethics Officer on 3138 2340 or
[email protected] if you have concerns about the ethical conduct of the project
•
agree to participate in the project
Name Signature Date
/
/
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APPENDIX B3: SAMPLE OF INTERVIEW Interview Questions 1. Does your organisation currently apply LCCA in determining pavement type for highway infrastructure? 2. Does you organisation plan to utilise LCCA in determining pavement type for highway projects in future? 3. How long do you think is relevant for the analysis period of LCCA? 4. What discount rate do you utilise? 5. Please list the highway maintenance treatments that you will consider in LCCA evaluation and at which year(s) during the analysis period do you assume they will occur: (i.e. fog sealing @ year 6, milling with overlay @ year 12, etc.). 6. Based on the current practice or your experience, what are the types of data (Historical and Theoretical Data) are used to determine the type and frequency of the highway maintenance treatments? 7. In life-cycle cost analysis (LCCA), will you include sustainability-related costs in your analysis? 7.1.
And if so, please briefly explain how agency cost is determined and calculated based on the list below. Initial Construction Costs Maintenance Costs Pavement Upgrading Costs Pavement End-of-Life Costs
7.2.
And if so, please briefly explain how social cost is determined and calculated based on the list below. Vehicle Operating Costs Travel Delay Costs
Social Impact Influence
Accident Cost
7.3.
Labours Cost Materials Cost Plants and Equipments Cost Major Maintenance Cost Routine Maintenance Cost Rehabilitation Cost Pavement Extension Cost Demolition Cost Disposal Cost Recycle and Reuse Cost
Vehicle Elements Cost Road Tax and Insurance Cost Speed Changing Cost Traffic Congestion Cost Cost of Resettling People Property Devaluation Reduction of Culture Heritages and Healthy Landscapes Community Cohesion Negative Visual Impact Economy Value of Damages Internal Cost External Cost
And if so, please briefly explain how environmental cost is determined and calculated based on the list below.
Appendices
Solid Waste Generation Cost
Pollution Damage by Agency Activities
Resource Consumption
Noise Pollution
Air Pollution
Water Pollution
Cost of Dredge/Excavate Material Waste Management Cost Materials Disposal Cost Land Use Cost Distraction to Soil Extent of Tree Felling Habitat Disruption and Loss Ecology Damage Environmental Degradation Fuel Consumption Cost Energy Consumption Cost Cost of Barriers Tire Noise Engine Noise Drivers’ Attitude Effects to Human Health Dust Emission CO2 Emission Loss of Wetland Hydrological Impacts
8. What are the limitations in the estimation and calculation methods for the social and environmental cost and issues in current LCCA practice? 9. What are the difficulties to emphasise sustainability-related cost elements in LCCA practice for highway infrastructure project? 10. What is your suggestion to improve the measurement methods of social and environmental costs and to enhance sustainability in LCCA for highway projects?
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APPENDIX C1: INVITATION LETTER- FUZZY AHP QUESTIONNAIRE
Invitation for Fuzzy AHP Questionnaire Participation Sustainability Based Life-Cycle Costing Analysis (LCCA) for Highways TO WHOM IT MAY CONCERN Dear Sir/Madam This research study intends to investigate and evaluate the highway infrastructure projects by comparing alternatives based on the sustainability- related cost components. Previous survey (Questionnaire Survey) was designed to extract a group of sustainability-related cost components to assess the critical cost factors in highway investment decision. In this survey (Fuzzy AHP Questionnaire), this study aims to prioritise these critical components by pair-wise comparison, and to investigate the interdependent relationship between the alternatives and the sustainability indicators of the highway infrastructure in this project. Your inputs are greatly valuable and we do hope that you can participate in this final survey. Your relevant experience and expertise in highway infrastructure is valuable and you are invited to participate in this survey. If you agree, please email me:
[email protected]. We can arrange the time that suits to your schedule to conduct this survey. This survey will take about 30 minutes to complete. All the answers will remain confidential, and all the information will be analysed in general, without reference to specific individuals (See below of this letter for more details). If you have any queries about this project, please contact me or my Principal Supervisor, Prof. Dr Jay Yang on (07)31381028 or QUT Research Ethic office on (07)31382340 for further information about the ethical conduct of the project. Your contribution towards this study is greatly appreciated! Yours sincerely Kai Chen Goh Postgraduate Candidature School of Urban Development Faculty of Built Environment & Engineering Queensland University of Technology Australia Tel : +61 (07)3138 2105 +61 (07)3138 7647 Mobile : +61 (0)433902219 Email :
[email protected] [email protected]
Appendices
Additional Information Participation Thank you for your time to consider this survey. Your participation in this project is voluntary. If you do agree to participate, you can withdraw from participation at any time during the project without comment or penalty. Your decision to participate will in no way impact upon your current or future relationship with QUT. Please note that it will not be possible to withdraw, once you have submitted the questionnaire. Risks There are no risks beyond normal day-to-day living associated with your participation in this project. Confidentiality All comments and responses are anonymous and will be treated confidentially. The names of individual persons are not required in any of the responses. Consent to Participate The return of the completed questionnaire is accepted as an indication of your consent to participate in this project. Questions / further information about the project Please contact the researcher team members named above to have any questions answered or if you require further information about the project. Concerns / complaints regarding the conduct of the project QUT is committed to researcher integrity and the ethical conduct of research projects. However, if you do have any concerns or complaints about the ethical conduct of the project you may contact the QUT Research Ethics Officer on 3138 2340 or
[email protected]. The Research Ethics Officer is not connected with the research project and can facilitate a resolution to your concern in an impartial manner.
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APPENDIX C2: SAMPLE OF FUZZY AHP QUESTIONNAIRE Instruction Each section in this survey consists of a number of question sets. Each question within a question set asks you to compare two factors/criteria at a time (i.e. pair-wise comparisons) with respect to a third factor/criterion. Please read each question carefully before giving your opinions/answers, and answer according to the following rating scale: Linguistic Scale for importance Absolutely More Important Very Strong More Important Strong More Important Weakly More Important Equal Important Weakly Low Important Strong Low Important Very Strong Low Important Absolutely Low Important
Abbreviation AMI VSMI SMI WMI EI WLI SLI VSLI ALI
Example If a sustainability indicator on the left is more important than the one on the right, put cross mark ‘‘X’’ to the left of the ‘‘Equal Importance’’ column, under the importance level (column) you prefer. On the other hand, if a on the left is less important than the one on the right, put cross mark “X” to the right of the equal important “EI” column under the importance level (column) you prefer based on the project preference. Q1. How important is the agency costs and issues when it is compared to social costs and issues? Q2. How important is the agency costs and issues when it is compared to environmental costs and issues? Q3. How important is the environmental costs and issues when it is compared to social costs and issues? Answers to some of the sample questions from the questionnaire Answer Q1 Q2 Q3
AMI
VSMI
SMI
WMI X X
EI
X
WLI
SLI
VSLI
ALI
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Section 1: Relative importance of the following sustainability-related cost components with the respect to the projects Q1. How important is the agency cost components when it is compared to social cost components? Q2. How important is the agency cost components when it is compared to environmental cost components? Q3. How important is the environmental cost components when it is compared to social cost components? Answer Q1 Q2 Q3
AMI
VSMI
SMI
WMI
EI
WLI
SLI
VSLI
ALI
The relative importance of agency cost components sub criteria Q4. How important is the material cost components when it is compared to plant and equipment cost components? Q5. How important is the material cost components when it is compared to major maintenance cost components? Q6. How important is the material cost components when it is compared to rehabilitation cost components? Q7. How important is the plant and equipment cost components when it is compared to major maintenance cost components? Q8. How important is the plant and equipment cost components when it is compared to rehabilitation cost components? Q9. How important is the major maintenance cost components when it is compared to rehabilitation cost components? Answer Q4 Q5 Q6 Q7 Q8 Q9
AMI
VSMI
SMI
WMI
EI
WLI
SLI
VSLI
ALI
The relative importance of social cost components sub criteria Q10. How important is the road accident- internal cost components when it is compared to road accident- economic value of damage cost components? Answer Q10
AMI
VSMI
SMI
WMI
EI
WLI
SLI
VSLI
The relative importance of environmental cost components sub criteria Q11. How important is the hydrological impacts when it is compared to loss of wetlands?
ALI
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Q12. How important is the hydrological impacts when it is compared to cost of barriers? Q13. How important is the hydrological impacts when it is compared to disposal of material costs? Q14. How important is the loss of wetlands when it is compared to cost of barriers? Q15. How important is the loss of wetlands when it is compared to disposal of material costs? Q16. How important is the cost of barriers when it is compared to disposal of material costs? Answer Q11 Q12 Q13 Q14 Q15 Q16
AMI
VSMI
SMI
WMI
EI
WLI
SLI
VSLI
ALI
Section 2: Relative importance of the following sustainability-related cost components with the respect alternative to the projects The relative importance of agency category Agency category Material Costs Plant and Equipment Costs Major Maintenance Costs Rehabilitation Costs
Answer
AMI
VSMI
SMI
WMI
EI
WLI
SLI
VSLI
ALI
WMI
EI
WLI
SLI
VSLI
ALI
ALT 1 ALT 2 ALT 3 ALT 1 ALT 2 ALT 3 ALT 1 ALT 2 ALT 3 ALT 1 ALT 2 ALT 3
The relative importance of social category Social category Road Accident – Internal Costs Road Accident – Economic Value of Damage
Answer ALT 1 ALT 2 ALT 3 ALT 1 ALT 2 ALT 3
AMI
VSMI
SMI
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The relative importance of environmental category Environmental category Hydrological Impacts Loss of Wetland Cost of Barriers Disposal of Material Costs
Answer
AMI
VSMI
SMI
WMI
EI
WLI
SLI
VSLI
ALI
ALT 1 ALT 2 ALT 3 ALT 1 ALT 2 ALT 3 ALT 1 ALT 2 ALT 3 ALT 1 ALT 2 ALT 3
All collected data will be kept strictly confidential and anonymous, and they will be used for academic research purposes ONLY. Thank you for completing the questionnaire. We appreciate your time. ~End~
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List of Publications
APPENDIX D: LIST OF PUBLICATIONS Goh, K. C. and Yang. J. 2009a. "Extending life-cycle costing (LCC) analysis for sustainability considerations in road infrastructure projects." In Proceedings of 3rd CIB International Conference on Smart and Sustainable Built Environment, SASBE2009, Aula Congress Centre, Delft, Amsterdam, edited. Goh, K. C. and Yang. J. 2010a. "Measuring costs of sustainability issues in highway infrastructure: perception of stakeholders in Australia, edited, 428-434: Faculty of Construction and Land Use, The Hong Kong Polytechnic University. Goh, K. C. and Yang. J. 2010b. "Responding to Sustainability Challenge and Cost Implications in Highway Construction Projects." In CIB 2010 World Congress, Conseil International du Bâtiment (International Council for Building), The Lowry, Salford Quays. , edited, 102. Goh, Kai Chen and Yang. Jay 2010c. "The importance of environmental issues and costs in Life Cycle Cost Analysis (LCCA) for highway projects." In The 11th International Conference on Asphalt Pavement, , Nagoya Congress Center, Aichi, edited, 228-235: International Society for Asphalt Pavements (ISAP). Goh, Kai Chen and Yang. Jay 2010d. "Incorporating sustainability measures in lifecycle financial decision making for highway construction." In New Zealand Sustainable Building Conference - SB10, Te Papa, Wellington, edited. Goh, Kai Chen and Yang. Jay 2009b. "Developing a life-cycle costing analysis model for sustainability enhancement in road infrastructure project." In Rethinking Sustainable Development : Planning, Infrastructure Engineering, Design and Managing Urban Infrastructure, Queensland University of Technology, Brisbane, edited, 324-331. Yang, Jay and Goh. Kai Chen 2009. "Developing a Life-cycle Costing Analysis Model for Sustainable Highway Infrastructure Projects " In Proceedings of the 14th International Symposium on Construction Management and Estate (CRIOCM2009), Nanjing, edited, 2460-2465.