BEYOND CONVENTIONAL LCCA: LONG TERM RETURN ON PAVEMENT INVESTMENTS

It is becoming increasingly necessary in life cycle analysis (LCA) of infrastructure assets, including pavements, to take a longer term approach than in past, conventional practice. This is largely for reasons of ensuring sustainability and assessing the future impacts of today’s decisions. Life cycle analysis can be primarily in terms of life cycle cost analysis (LCCA) but can also include considerations of resource conservation, environmental impacts, energy balance, etc. In any case, a key question is what constitutes a reasonable time horizon for life cycle analysis. The suggestion is that it should involve short, medium and long term periods, in the order of 25, 50 and 100 years, respectively. Further, using this approach, it is possible to develop a context for LCA of likely and uncertain societal activities, including transportation, over the short, medium and long terms. Conventional LCCA is directed to comparing competing alternative investment strategies and can involve a range of stakeholders, from the elected level to the public at large to suppliers and consultants. Of the methods available, present worth of costs is almost exclusively the method used in the pavement field. However, when medium to longer term life cycle periods are involved, rate-of-return and cost-effectiveness formulations can be applicable and should be considered. A numerical example is provided which shows how an agency can determine the internal rate of return (IRR) for two investment alternatives involving different pavement designs and a life cycle period of 50 years. As well, a cost-effectiveness example is provided for a sidewalk network and again a life cycle period of 50 years which shows how the best investment alternative has been identified. Conventional LCCA for calculating present worth of costs will undoubtedly continue to be used in the pavement field as a primary tool. However, going beyond conventional LCCA and using a rate-of-return or cost-effectiveness formulation, especially for medium to longer term life cycle periods, should be given more consideration.