Reference no: EM131688428

Assignment

For this assignment, I would use an ex-ante Cost-Benefit Analysis (CBA), as described by McDavid, Huse, and Hawthorn (2013), approach to evaluate the project. (McDavid, Huse, & Hawthorn, 2013). The project, implementing a major high-speed overpass with multiple outcomes goals would benefit from a CBA. We should first consider the goals of the project and then follow the nine steps provided by McDavid, Huse, and Hawthorn (2013) for conducting this type of evaluation. McDavid, Huse and Hawthorne (2013) recommend nine steps to planning and conducting a CBA.

Specify the Set of Alternatives

Because this assignment is to conduct an assessment ate the program has been in operation for three years already, I believe that the only alternatives are to either continue with the status quo and extend the program, or return to the traditional method of collecting tolls. This determination should only be made after the CBA results are interpreted and presented.

Decide Whose Benefits and Costs Counts (Standing)

For this project, I believe that those who have standing are the travelers, the business owners in the cities being linked by the project, and the societies that are merged from this linkage. The state or city in which the tolls are collected would also have standing because if the intended goal of overcoming corruption in the previous toll collection system, government earnings should show an increase.

Categorize and Catalog the Costs and Benefits

Costs for this program are generally associated with the implementation of the program. New equipment, maintain the new equipment, training higher skilled employees, and additional administrative costs would all be costs to consider when conducting this evaluation.

Benefits derived from this program could include lower traffic congestion, lowered cost of vehicle operation, improved quality of transport services, an increase in toll collection, reduced opportunities for employee corruption, travel time saved by travelers, an increase in skilled labor positions, and an increase in commerce between the three cities involved in the project.

Predict Costs and Benefits Quantitatively Over the Life of the Project

In order to complete this step, the evaluator must know the life-expectancy of the project. A few short years ago, all of the tolls roads in my home state of Kentucky were suspended. If the project is intended to continue "until further notice", then the evaluation would need to have a way to project the costs and benefits over an unstated amount of time. However, if, like in Kentucky, tolls will be suspended when the project is paid for, the evaluator needs only to predict the costs and benefits up until the point that the project is expected to be suspended.

Monetize all Costs and Benefits

Monetizing the costs for this project would be much easier than monetizing the benefits. Considering that the evaluation is to be conducted in the third year of operation. The implementation costs should already be recorded and with simple manipulations to account for aging equipment, should remain somewhat stable.

Monetizing the benefits, however, poses a more difficult process. Because data is collected on a daily basis, this greatly simplified the process. However, some benefits might prove difficult to monetize. For instance, lowered cost of vehicle operation and improved quality of transport services could be difficult benefits on which to attach a monetary value. Furthermore, an increase in commerce between the cities would be a plausible study, but an evaluator could easily get bogged down with determining the monetary value of this benefit alone.

Select a Discount Rate for Costs and Benefits Occurring in the Future

I regretfully admit that I did not understand this step. I hope that my instructor and/or peers can clear this up for me. Thank you in advance for your assistance. Because I could not understand this step in the process, I also lack understanding of the following steps, Compute the net present value of the program and perform sensitivity and distributional analysis.

Make a Recommendation

This step seems relatively straightforward. Based on the findings and analysis the evaluator might suggest a continuance of the program as-is, recommend some changes, or recommend tossing out the project altogether.

Reference

McDavid, J. C., Huse, I., & Hawthorn, L. R. L. (2013). Program evaluation and performance measurement: An introduction to practice (2nd ed.). Thousand Oaks, CA: Sage.