Making sound choices and satisfying competing interests in today's complex and uncertain world are some of the biggest challenges facing decision-makers in both business and public sector organizations. How do you know you've made not just the "right" decision, but the "best" decision that will provide the greatest return on investment or the greatest public benefit? By applying economic reasoning to a broad array of issues, HDR Decision Economics offers unique analytical consulting services to industry and government entities in the United States, Canada and throughout the world to help them arrive at the best possible decisions.
StratBENCOST | TransDec | RailDec | GradeDec
RAP© | AirLib | IVA | SBC
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Strategic Decision Support Tool for Highway Planning and Budgeting The StratBENCOST model was developed by HDR economists as an investment analysis tool to be employed in the early stages of strategic planning for the National Cooperative Highway Research Program (NCHRP). StratBENCOST facilitates decision support for state and local transportation agencies engaged in multi-year strategic planning and budgeting for highways by incorporating an analysis of the network of highways and surrounding roads. Its objective is to integrate highway user costs and cost-benefit analysis into a broad-based highway investment evaluation tool. StratBENCOST has a risk analysis capability to further promote informed decision-making.
Key Features of StratBENCOST
Demand estimation traffic models (network and single roadway)
Value of time models based on economic data
Vehicle operating cost models
Safety and accident cost estimation
Environmental effects
Construction and disruption costs
Risk analysis element to account for uncertainty
Economic evaluation criteria
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Transit and Highway Investment Decision Support Tool
TransDec is a user-friendly computer analysis tool that permits cost-benefit analysis using either default values or locally generated data. It is scaled to apply to large and small urban areas and projects. TransDec provides a comprehensive framework to apply cost-benefit analysis to a wide range of prospective transit investments (greenfield and expansion projects, for example), as well as rehabilitation and maintenance work. The framework is applicable to various transit modes, including stage bus systems (local and express bus service in regular street operation), bus rapid transit (buses in various types of dedicated rights-of-way), light rail, heavy rail, commuter rail, and highway investments.
Key Features of TransDec
Value of time estimates for time spent in vehicle, walking, waiting, in crowded conditions, and in unsecured conditions
Optional use of the Mogridge-Lewis Convergence theory to estimate travel time savings from investments in high-capacity grade-separated transit
Extensive set of emission factors for both transit and highway vehicles; estimation of environmental cost savings for all major criteria air contaminants and greenhouse gasses
Safety and accident cost estimation for transit and highway modes
Estimation of construction and disruption costs
Risk analysis to account for uncertainty
Economic evaluation criteria, including net present value, cost-benefit ratio, rate of return on investment, pay-back period, and first-year rate of return
Large collection of default values for most model parameters
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Rail Investment Decision Support Tool
RailDec was developed for the Federal Railroad Administration by HDR economists to provide decision support for state and local transportation agencies engaged in strategic planning and budgeting for rail and rail-related intermodal projects. RailDec adopts standard cost-benefit and financial analysis techniques to evaluate investment alternatives. RailDec gives users:
Forecast values of financial and economic benefits of intermodal rail and rail related investments. By calculating both public and private rates of return on rail and rail related investment simultaneously, RailDec provides data to promote public/private partnering and innovative financing arrangements.
Project-level analysis to develop evidence allowing decision-makers to screen investment alternatives in a cost-effective and timely manner.
Risk analysis framework to account for model input uncertainty and provide decision makers with a probability range of cost-benefit and financial analysis results.
RailDec calculates the financial rate of return and can demonstrate how a project will generate net income from investment as well as the economic rate of return, to capture a wider range of benefits. RailDec incorporates a risk analysis framework to give decision-makers cost-benefit and financial analysis results to account for uncertainty in model input. Model outputs are also reported in probabilistic terms.
Key Features of RailDec
Facilitates strategic planning
Net present value analysis of investments
Uses risk analysis techniques to account for uncertainty in market and operating conditions
Provides probability ranges to quantify uncertainty for each model output
Provides users with extensive default data sets
Provides user with pre-defined project types
Allows users to quickly add new projects for analysis
User-friendly windows interface
Online help
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Highway-Rail Grade Crossing Investment Decision Support Tool
Under contract to the Federal Railroad Administration, HDR economists developed the GradeDec highway-rail grade crossing investment analysis tool as a stand-alone software package to provide grade crossing investment decision support. GradeDec provides a full set of standard cost-benefit metrics for a rail corridor, a region or an individual grade crossing. Model output allows a comparative analysis of grade crossing alternatives designed to mitigate highway-rail grade crossing accident risk and other components of user costs, including highway delays, air quality, and vehicle operating costs. GradeDec assists state and local transportation planners in identifying the most efficient grade crossing investment strategies. The modeling process can encourage public support for grade crossing strategies where project success often depends on getting the community involved in the early planning stages.
The model consists of components to quantitatively measure the effects of upgrades in grade crossing protection technology, grade closures, and grade separations along a rail corridor, taking into consideration six possible grade crossing improvements: passive signage, flashing lights, flashing lights with gate, grade closure, grade separation, and new technology.
Key Benefits of GradeDec
Safety benefits through reduction in vehicle-train accidents
Travel time savings through reduced delay experienced by highway vehicles at crossings
Improved highway system reliability
Environmental benefits through reduction in both highway vehicle and locomotive emissions at grade crossings
Vehicle operating cost savings
Network benefits through benefits to neighboring highway networks
RAP is HDR's internationally recognized, proprietary suite of tools to promote sound decisions for business and government using the most advanced risk analysis tools available. Most decisions require forecasts that are subject to uncertainty. RAP forecasts use probabilistic methods to facilitate consensus among stakeholders. The result of a realistic risk analysis based on solid data is a believable forecast of future events and the probability, or odds, of their occurrence. Risk analysis can provide planners, decision makers, and stakeholders with a sense of perspective on the likelihood of future events, helping in the selection of options that meet an acceptable level of risk.
The key to HDR’s approach lies in the integration of economic and financial analysis into the heart of the decision process. The application of RAP at the front end can lead to changes and refinements in project design or procurement standards at an early stage, avoiding costly changes once a project is underway. When employed in this manner, RAP ensures optimal configuration of projects for early budget forecasts and economic return on investment with minimum and manageable technical and financial risk.
Applications of RAP
HDR customizes the RAP software to each application and clients can independently update and analyze forecasts by inputting new information and decision factors into the system. The software is user-friendly and based on a Windows platform. RAP software provides a well-documented, manageable and easy-to-use tool for continuing analysis and decision support. RAP also provides outside expert evaluation of the forecasting assumptions and the estimated probabilities associated with their accuracy.
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Evaluation of Benefits from the Liberalization of Air Service Agreements
The AirLib model grew from a study commissioned by Transport Canada to investigate the benefits and costs associated with liberalizing international air travel agreements. The model combines analytic and simulation techniques to develop measures of change in economic welfare under alternative forms of bilateral agreements. Outcomes are developed from equilibrium models of air travel markets. The modeling approach is based on microeconomic analysis augmented by conventions from trade theory to account for issues that arise when analyzing international trade in services. Standard impacts of welfare economics, such as changes in consumer and producer surplus, are the model outputs. The model examines the distribution of impacts, both positive and negative, among countries, consumers, producers and production factors.
The AirLib model can be adapted to examine impacts of air transport liberalization in many different scenarios. For example, HDR economists have customized the model to account for factors typical in a developing country environment with a focus on strategies and policies to promote economic growth and development. The AirLib model developed by HDR and a team of leading aviation and trade economists has been applied to policy directions and negotiating strategies for the governments of Canada and Ghana.
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The IVA process is designed to conduct business case evaluations in "real-time," i.e., within a day, using a disciplined approach and risk analytic framework to help make decisions under uncertainty and risk. The process requires an interactive group dialog among experts closely associated with the business opportunity.
Getting the right experts together to participate in the analysis earlier has many benefits. This interaction brings out the best insights and fosters an environment of shared ownership and commitment to the result. During the interactive session a logical framework of the business opportunity is developed, data is assessed, uncertainty evaluated and results are produced "live" right in the session. This process enables the client(s) to:
Ensure a clear problem definition and the development of creative alternatives for consideration
Identify all sources of benefits and costs
Interview impartial experts to assess uncertainties and obtain their assessments
Develop a visual and spreadsheet dynamic simulation model to measure value and evaluate alternatives
Recognize key uncertainties and their interrelationships to each other and to the expected outcome
Benefit from expert analysis of the value and risk associated with key decisions
Use insights gained to search for better solutions
Optimize shareholder’s value and reduce time to market
Communicate analysis results to decision-makers and facilitate their involvement at key points
This process is very effective and applies equally well, whether it is a make vs. buy decision, selection of a new manufacturing process or a decision about a business strategy. It can also be used effectively to measure value of any organization in public or private sector.
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The Sustainability Business Case Tool takes into account the entire suite of potential costs and benefits related to sustainable design. These include not only traditional inputs such as the savings from increased energy efficiency, but also more esoteric inputs such as quantifying the environmental savings from reduced emissions, or the value of enhanced productivity of employees working in a green building and taking fewer sick days.
The key to HDR's approach lies in integrating economic and financial analysis into the heart of the decision process. Applying our proprietary Risk Analysis Process (RAP) at the front end typically leads to refinements in project design or procurement standards. When employed in this manner, RAP ensures an optimal configuration of sustainable design projects resulting in improved returns on investment with minimized technical and financial risk.
Our sustainable design models not only take into account traditional financial analysis but will also incorporate a risk analysis component over the project’s life cycle. These inputs will then be used to calculate the relevant output metrics, such as Net Present Value, appropriate for determining the feasibility of the project.
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