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
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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 : _____________________
III
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.
IV
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
1.1 Research Background .................................................................................... 11.2 Research Questions ....................................................................................... 41.3 Research Objectives ...................................................................................... 51.4 Significance of the Research ......................................................................... 61.5 Scope and Delimitation ................................................................................. 71.6 Research Framework ..................................................................................... 9
1.6.1 Stage 1 - Developing a preliminary model ............................................ 91.6.2 Stage 2 - Developing the survey .......................................................... 101.6.3 Stage 3 - Developing a decision support model ................................... 11
CHAPTER 2: LITERATURE REVIEW ............................................................. 17
2.1 Introduction ................................................................................................. 172.2 Sustainability and Transport ........................................................................ 17
2.2.1 Sustainable development principles and evolution .............................. 202.2.2 Highway infrastructure development in Australia ............................... 23
2.3 Long-Term Financial Prospects in Highway Development ........................ 252.3.1 Principle of engineering economics ..................................................... 25
2.3.1.2 Life-cycle costing analysis (LCCA) ............................................. 262.3.1.3 Differences between BCA and LCCA .......................................... 282.3.1.4 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 .. 312.3.2.2 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 .............................................. 402.4.1. Sustainability-related cost components in highway projects ............... 40
2.5 Research Gap ............................................................................................... 512.5.1 Challenges to improve long-term financial decisions .......................... 512.5.2 Critical cost components in Australian highway investments ............. 52
CHAPTER 3: RESEARCH METHODOLOGY AND DEVELOPMENT ......... 55
3.1 Introduction ................................................................................................. 553.2 Selection of Research Methods ................................................................... 56
3.2.1. Survey ................................................................................................... 583.2.2. Case study ............................................................................................ 59
3.3 Research Process ......................................................................................... 613.3.1. Literature review .................................................................................. 63
3.3.1.1. Literature review purposes ............................................................ 633.3.1.2. Literature review development ..................................................... 64
3.3.2. Questionnaire ....................................................................................... 653.3.2.1. Purposes of questionnaire ............................................................. 663.3.2.2. Selection of questionnaire respondents ......................................... 673.3.2.3. Questionnaire development .......................................................... 683.3.2.4. Data analysis ................................................................................. 70
3.3.3.3. Interview development ................................................................. 763.3.3.4. Data analysis ................................................................................. 78
3.3.4. Model Development ............................................................................. 793.3.5. Case Study ............................................................................................ 81
3.3.5.1. Case study purposes ...................................................................... 823.3.5.2. Selection of case projects .............................................................. 823.3.5.3. Case study development ............................................................... 843.3.5.4. Data analysis ................................................................................. 86
4.3 Results and Findings ................................................................................... 954.3.1 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 ...................................................................... 1004.3.1.4 Integration of sustainability-related cost components in LCCA studies ………………………………………………………………….102
a. Agency category .......................................................................................... 104
b. Social category ............................................................................................. 105
c. Environmental category ............................................................................... 106
4.3.2 Summary of the questionnaire survey results and suggestions .......... 1074.3.3 Semi-structured interview results and findings .................................. 109
4.3.3.1. Current industry practice of LCCA application .......................... 1094.3.3.2. Ways to quantify cost related to sustainable measures ............... 1174.3.3.3. Challenges in integrating costs related to sustainable measures into LCCA practice ............................................................................................. 1204.3.3.4. Suggestions for enhancing sustainability in LCCA practice ...... 121
VIII
4.3.4 Summary of semi-structured interview results and suggestions ........ 1234.4 Chapter Summary ...................................................................................... 124
CHAPTER 5: A DECISION SUPPORT MODEL FOR EVALUATING
5.1 Introduction ............................................................................................... 1275.2 The Model Structure and Application ....................................................... 130
5.2.1. The model structure and development: stage 1 .................................. 1305.2.2. The model structure and development: stage 2 .................................. 132
5.3 The Fuzzy Analytical Hierarchy Process .................................................. 1335.3.1. Fundamentals of Fuzzy AHP ............................................................. 1355.3.2. Fuzzy AHP assessment procedure ..................................................... 136
5.5 Final Decision Making Process ................................................................. 1495.6 Sensitivity Analysis ................................................................................... 1515.7 Chapter Summary ...................................................................................... 152
CHAPTER 6: MODEL APPLICATION THROUGH CASE STUDIES .......... 155
6.1 Introduction ............................................................................................... 1556.2 Selection of the Case Study Projects ......................................................... 157
6.2.1 Case study A: Wallaville bridge ..................................................... 1576.2.2 Case study B: Northam bypass ....................................................... 159
6.3 Significance of the Case Projects .............................................................. 1616.4 Model Application in Case Study A - Wallaville Bridge .......................... 162
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 ................................. 1716.4.4 Final decision making ..................................................................... 1746.4.5 Sensitivity analysis ......................................................................... 175
6.4.5.1 Sensitivity analysis for Fuzzy AHP ...................................................... 175
IX
6.4.5.2 Sensitivity analysis for LCCA ............................................................. 176
6.5 Model Application in Case Study B - Northam Bypass ............................ 1786.5.1 Project alternatives ......................................................................... 1796.5.2 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 ................................. 1876.5.4 Final decision making .................................................................... 1906.5.5 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 ................................................................ 1956.7 Validation of the Model ............................................................................ 1966.8 Chapter Summary ...................................................................................... 197
CHAPTER 7: FINDINGS AND MODEL FINALISATION ............................ 201
7.1 Introduction ............................................................................................... 2017.2 Synthesising Phases 1 to 4 for Interpretation and Discussion ................... 2027.3 Critical Sustainability-Related Cost Components ..................................... 203
7.3.1. Agency dimension of sustainability ................................................... 2047.3.2. Social dimension of sustainability ..................................................... 2057.3.3. Environmental dimension of sustainability ........................................ 205
7.4 Enhancement of LCCA for Sustainability Measures ................................ 2067.4.1. Industry practice of LCCA ................................................................. 2087.4.2. Challenges of incorporating sustainability into LCCA ...................... 210
7.5 Model Finalisation ..................................................................................... 2127.6 Chapter Summary ...................................................................................... 217
8.1 Introduction ............................................................................................... 2198.2 Review of Research Objectives and Development Processes ................... 2198.3 Research Objectives and Conclusions ....................................................... 220
8.3.1. Research objective 1 .......................................................................... 2208.3.2. Research objective 2 .......................................................................... 222
X
8.3.3. Research objective 3 ........................................................................... 2238.4 Research Contributions .............................................................................. 224
8.4.1. Contribution to academic knowledge ................................................. 2248.4.2. Contribution to the industry ............................................................... 225
8.5 Study Limitations ...................................................................................... 2258.6 Recommendations for Future Research ..................................................... 2268.7 Summary .................................................................................................... 227
Bureau of Transport and Communications Economics = Bureau of Infrastructure, Transport and Regional Economics
Cal B/C = California Life-Cycle Benefit/ Cost CCP-PLUS = Cities for Climate Protection, Australia CCPTM = Cities for Climate ProtectionDEA
TM = Data envelopment analysis
FHWA
= Fuzzy AHP
Federal Highway Administration = Fuzzy Analytic Hierarchy Process
GEH = Great Eastern Highway HDM-4 = Highway Design and Maintenance Standards Model Version 4 HDM-III = Highway Design and Maintenance Standards Model Version III ISOHDM = International Study of Highway Development and Management IUCN = International Union for Conservation of Nature LCCA = Life-cycle cost analysis LCCOST = Pavement Life Cycle Cost Analysis Package LCCP = Life-cycle cost analysis program-Flexible Pavement LCCPR = Life-cycle cost analysis program-Rigid Pavement MCDM = Multi-Criteria Decision-Making PRLEAM = Pavement Rehabilitation Life-Cycle Economic Analysis QUT = Queensland University of Technology, Australia RTA = Road and Transport Authority, Australia UN = United Nations US = United States WCED = World Commission on Environment and Development WSM = Weighted Sum Model
XII
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.
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) ............ 8Figure 1.3: Stage 1 - Developing a preliminary model .............................................. 10Figure 1.4: Stage 2 - Surveys development ............................................................... 11Figure 1.5: Stage 3 - Developing a decision support model ...................................... 12Figure 1.6: Research plan chart .................................................................................. 13Figure 2.1: Sustainability criteria for the transport sector (Basler and Partner 1998) 18Figure 2.2: UK sustainable development indicators (Bickel et al. 2003) .................. 19Figure 2.3: The three pillars of sustainable development (Koo 2007) ....................... 21Figure 2.4: Life-cycle costing procedure ................................................................... 27Figure 2.5: Typical life cycle of a road asset (Rouse and Chiu 2008) ....................... 43Figure 3.1: Spectrum of interview types (Fellows and Liu 2008) ............................. 57Figure 3.2: Breadth vs. depth in ‘question-based’ studies (Fellows and Liu 2008) ... 57Figure 3.3: Research process ..................................................................................... 62Figure 3.4: Questionnaire research flow chart (Statpac 1997) ................................... 66Figure 3.5: Case study process ................................................................................... 85Figure 4.1: Purpose of survey in overall research aim ............................................... 90Figure 4.2: Categories of respondent in questionnaire survey ................................... 92Figure 4.3: Respondents’ utilisation of LCCA in highway projects ........................ 110Figure 4.4: Types of data utilised by respondents in highway treatments ............... 115Figure 5.1: Integration of survey findings with model development ....................... 128Figure 5.2: Development of model based on research objectives and questions ..... 129Figure 5.3: Decision support model development process ...................................... 130Figure 5.4: Proposed assessment methods for the decision support model ............. 133Figure 5.5: Proposed application of the Fuzzy AHP ............................................... 134Figure 5.6: Hierarchy map of sustainability-related cost component assessment ... 137Figure 5.7: The linguistic scale of triangular numbers for relative importance ....... 138Figure 5.8: The intersection between C1 and C2 ..................................................... 142Figure 5.9: Timing of maintenance and rehabilitation ............................................. 144Figure 5.10: Agency costs associated with construction activities .......................... 145Figure 5.11: Social and environmental costs added to agency costs associated with construction activities ............................................................................................... 146Figure 6.1: Approach to model application and overall research aim ..................... 156Figure 6.2: Wallaville Bridge in flood (BTRE 2007a) ............................................ 158Figure 6.3: Tim Fischer Bridge (BTRE 2007a) ....................................................... 159Figure 6.4: Northam Bypass (BTRE 2007b) ............................................................ 161Figure 6.5: Final decision making by WSM ............................................................ 175Figure 6.6: Sensitivity analysis for Fuzzy AHP weight factor changes ................... 176Figure 6.7: Sensitivity analysis for LCCA weight factor changes ........................... 178Figure 6.8: Alternative alignment options of Northam Bypass (EPA 1993) ........... 179Figure 6.9: Final decision making by WSM ............................................................ 191Figure 6.10: Sensitivity analysis for Fuzzy AHP weight changes ........................... 193Figure 6.11: Sensitivity analysis for LCCA weight factor changes ......................... 194Figure 7.1: Critical sustainability-related cost components in Australian highway infrastructure projects ............................................................................................... 204
XIV
Figure 7.2: Platform for developing financial decision support model in highway infrastructure sustainability ...................................................................................... 213Figure 7.3: The finalised financial decision support model for highway infrastructure sustainability ............................................................................................................. 215
XV
LIST OF TABLES
Table 2.1: Differences between BCA and LCCA ...................................................... 28Table 2.2: Existing LCCA models and programs ...................................................... 33Table 2.3: Agency impacts and costs in highway projects ........................................ 43Table 2.4: Social impacts and costs in highway projects ........................................... 46Table 2.5: Environmental impacts and costs in highway projects ............................. 48Table 2.6: Sustainability-related cost components for highway infrastructure .......... 52Table 3.1: Characteristics of questions ...................................................................... 65Table 3.2: Stages and steps in model building (Richardson and Pugh, 1981) ........... 80Table 3.3: Case projects’ fulfillment of selection criteria .......................................... 83Table 4.1: Respondents’ roles in highway projects ................................................... 93Table 4.2: Respondents’ construction industry experience ....................................... 93Table 4.3: Consultants’ rating of sustainability-related cost components ................. 97Table 4.4: Contractors’ rating of sustainability-related cost components .................. 99Table 4.5: Government agencies and local authorities’ rating of sustainability-related cost components ....................................................................................................... 101Table 4.6: Perceptions of ‘importance level’ of cost components related to sustainable measures by industry stakeholders ........................................................ 103Table 4.7: Industry validated sustainability-related cost components in highway infrastructure ............................................................................................................ 108Table 4.8: Questions to identify current industry practice of LCCA ....................... 110Table 4.9: Relevant analysis period of LCCA ......................................................... 112Table 4.10: Maintenance treatments of highway infrastructure ............................... 113Table 4.11: Ways to quantify cost related to sustainable measures ......................... 118Table 4.12: Challenges to integrating costs related to sustainable measures into LCCA ....................................................................................................................... 120Table 4.13: Stakeholders’ suggestions for enhancing sustainability in LCCA ........ 122Table 4.14: Comparison of the survey results with literature findings .................... 125Table 5.1: Sustainability-related cost components for highway infrastructure ........ 131Table 5.2: Triangular fuzzy conversion scale .......................................................... 138Table 5.3: Assessment approach of critical sustainability cost components ........... 143Table 5.4: WSM calculation table for final decision making .................................. 150Table 6.1: The fuzzy evaluation matrix with respect to the goal ............................. 165Table 6.2: The relative importance of agency cost components .............................. 165Table 6.3: The relative importance of social cost components ................................ 165Table 6.4: The relative importance of environmental cost components .................. 165Table 6.5: Composite priority weights for sustainability-related cost components evaluation criteria ..................................................................................................... 167Table 6.6: Evaluation of the alternatives with respect to material costs .................. 167Table 6.7: Evaluation of the alternatives with respect to plant and equipment costs
.................................................................................................................................. 167Table 6.8: Evaluation of the alternatives with respect to major maintenance costs 167Table 6.9: Evaluation of the alternatives with respect to rehabilitation costs .......... 168Table 6.10: Evaluation of the alternatives with respect to road accident- internal costs
.................................................................................................................................. 168Table 6.11: Evaluation of the alternatives with respect to road accident- economic value of damage ....................................................................................................... 168Table 6.12: Evaluation of the alternatives with respect to hydrological impacts .... 168
XVI
Table 6.13: Evaluation of the alternatives with respect to loss of wetland .............. 168Table 6.14: Evaluation of the alternatives with respect to cost of barriers .............. 169Table 6.15: Evaluation of the alternatives with respect to disposal of material costs
.................................................................................................................................. 169Table 6.16: Priority weights of the alternatives with respect to agency aspects ...... 169Table 6.17: Priority weights of the alternatives with respect to social aspects ........ 170Table 6.18: Priority weights of the alternatives with respect to environmental aspects
.................................................................................................................................. 170Table 6.19: Final scores of the alternatives .............................................................. 170Table 6.20: Determination of activity timing ........................................................... 171Table 6.21: Estimated expenditures to keep old bridge open .................................. 172Table 6.22: Costs of agency and social category ..................................................... 173Table 6.23: Computation of expenditure by years ................................................... 173Table 6.24: Computation of life-cycle cost analysis ................................................ 173Table 6.25: Summary of sustainability assessment results ...................................... 174Table 6.26: Summary of normalised sustainability assessment result ..................... 174Table 6.27: Weight factors for normalised sustainability assessment results and final prioritisation ............................................................................................................. 174Table 6.28: Changes in prioritisation value by changing the Fuzzy AHP weight factors ....................................................................................................................... 176Table 6.29: Changes in prioritisation value by changing the LCC weight factors .. 177Table 6.30: The fuzzy evaluation matrix with respect to the goal ........................... 182Table 6.31: The relative importance of agency cost components ............................ 182Table 6.32: The relative importance of social cost components .............................. 182Table 6.33: The relative importance of environmental cost components ................ 182Table 6.34: Composite priority weights for sustainability-related cost components evaluation criteria ..................................................................................................... 183Table 6.35: Evaluation of the alternatives with respect to material costs ................ 184Table 6.36: Evaluation of the alternatives with respect to plant and equipment costs
.................................................................................................................................. 184Table 6.37: Evaluation of the alternatives with respect to major maintenance costs
.................................................................................................................................. 184Table 6.38: Evaluation of the alternatives with respect to rehabilitation costs ........ 184Table 6.39: Evaluation of the alternatives with respect to road accident- internal costs
.................................................................................................................................. 184Table 6.40: Evaluation of the alternatives with respect to road accident- economic value of damage ....................................................................................................... 185Table 6.41: Evaluation of the alternatives with respect to hydrological impacts .... 185Table 6.42: Evaluation of the alternatives with respect to loss of wetland .............. 185Table 6.43: Evaluation of the alternatives with respect to cost of barrier ................ 185Table 6.44: Evaluation of the alternatives with respect to disposal of material costs
.................................................................................................................................. 185Table 6.45: Priority weights of the alternatives with respect to agency aspects ...... 186Table 6.46: Priority weights of the alternatives with respect to social aspects ........ 186Table 6.47: Priority weights of the alternatives with respect to environmental aspects
.................................................................................................................................. 186Table 6.48: Final scores of the alternatives .............................................................. 187Table 6.49: Determination of activity timing ........................................................... 188Table 6.50: Costs of agency and social category ..................................................... 189Table 6.51: Computation of expenditure by years ................................................... 189
XVII
Table 6.52: Computation of life-cycle costs ............................................................ 189Table 6.53: Summary of weighted sum assessment results ..................................... 190Table 6.54: Summary of normalised weighted sum assessment results .................. 191Table 6.55: Weight factors for normalised weighted sum assessment results and final prioritisation ............................................................................................................. 191Table 6.56: Changes in prioritisation value by changing the Fuzzy AHP weight factors ....................................................................................................................... 192Table 6.57: Changes in prioritisation value by changing the Fuzzy AHP weight factors ....................................................................................................................... 194Table 6.58: Comparison of the case study results with literature and survey findings
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
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 3
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 long-
term.
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.
4 Chapter 1: Introduction
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.
Traditional LCCA model
Sustainability-based LCCA
model Research Gap
Inconsistent estimation methods in environmental and social costs calculation
Unclear boundaries in considering sustainability impacts
Difficult to quantify sustainability related cost components
Ambiguity in identifying relevant costs for LCCA in highway projects
Chapter 1: Introduction 5
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 long-
term 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,
6 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 7
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
8 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.
• 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.
Investment Concept Outline
Strategic Assessment and Option Analysis
Business Case
Budget Committee
Consideration
Interim Project Review
Post Implementation
review
Point 1 Point 2 Point 3 Point 4 Point 5 Point 6
Reason for
project proposal
Relationship to government’s
policy priorities
Benefits/ outcomes
to be achieved
Delivery Alternatives
Project Management
External conditions and critical success
Risk
Stakeholder analysis
Project proposal
cost
Market research
Timeline
Financial Implication
Figure 1.2: Structured infrastructure investment review process (DTF 2011)
Chapter 1: Introduction 9
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 sub-
sections.
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.
10 Chapter 1: Introduction
A summary of the Stage 1 is shown in Figure 1.3.
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.
STAGE 1
Preliminary Model
Reviewing the Literature
Defining the Topic
Identify Source of Information
Keeping Records
Reading and Taking Notes
OBJECTIVE 1
To understand the costs implication of pursuing
sustainability in highway projects
Figure 1.3: Stage 1 - Developing a preliminary model
Chapter 1: Introduction 11
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.
STAGE 2
Surveys Development
Define the objective of the survey
Writing the Questionnaire
Interpretation of the Result
Determine the Sampling Group
Administering the Questionnaire
Questionnaires
Face-to-face
Telephone
Semi-structured Interviews
OBJECTIVE 2
To identify the critical cost components related to
sustainable measures in highway infrastructure
investments.
Figure 1.4: Stage 2 - Surveys development
12 Chapter 1: Introduction
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.
STAGE 3
Matching Methods
OBJECTIVE 3
To develop a decision support model for the evaluation of long-term financial decision for highway projects.
Case Study
Decision Support Model
Fuzzy Analytical Hierarchy Process (Fuzzy AHP)
Life-Cycle Cost Analysis (LCCA)
Figure 1.5: Stage 3 - Developing a decision support model
Chapter 1: Introduction 13
Figure 1.6: Research plan chart
Dat
a C
olle
ctio
n A
naly
sis
Res
ult
Lite
ratu
re R
evie
w
Industrial Feedback
Literature Review
Research Problems
Methodological Approach
Consultation with academics
Research Objectives
Industrial Feedback
Conclusions, Recommendations and Further Studies
Survey • 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
Case Study • Apply and test the developed model in real-life
projects • Evaluate and validate the model
Research Analysis and Findings
Literature Review & Preliminary Model Development
• Refine traditional life-cycle cost analysis model.
• Identify sustainability-related cost components
Research Question Hypotheses Statements
Quantitative Method Quantitative Method
Model Development • Develop decision support model that
emphasise the sustainability context.
Stage 1
Stage 2
Stage 3
14 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 semi-
structured 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 15
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.
Chapter 2: Literature Review 17
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. Long-
term 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
18 Chapter 2: Literature Review
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.
Figure 2.1: Sustainability criteria for the transport sector (Basler and Partner 1998)
Natural habitats & landscapes
Air pollution
Noise
Settlements/ areas Society
Individuality
Participation
Ecology
Economy
Solidarity Safety/ security
Price
Social costs
Ozone layer
Climate
Resources
Chapter 2: Literature Review 19
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.
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
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
20 Chapter 2: Literature Review
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 21
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
FUTURE/ PRESENT GENERATION
ENHANCEMENT OF SUSTAINABILITY BY CONSIDERING THREE PILARS
ECO
NO
MY
ENV
IRO
NM
ENT
SOC
IETY
ENHANCEMENT OF SUSTAINABILITY BY CONSIDERING THREE PILARS
ECO
NO
MY
ENV
IRO
NM
ENT
SOC
IETY
• DEMANDS ON PUBLIC SERVICE • LIMITS OF RESOURCES • QUALITY OF HUMAN ENVIRONMENT, ETC…
Figure 2.3: The three pillars of sustainable development (Koo 2007)
22 Chapter 2: Literature Review
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
1994
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 ( ) 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 23
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
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
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).
24 Chapter 2: Literature Review
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 25
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,
26 Chapter 2: Literature Review
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).
2.3.1.2 Life-cycle costing analysis (LCCA)
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.
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 life-
cycle 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 27
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 life-
cycle 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)
28 Chapter 2: Literature Review
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
Table 2.1: 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
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 29
Some of these organisations have referred to LCCA as decision support tool for long-
term 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 decision-
making 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
30 Chapter 2: Literature Review
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 31
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.
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
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).
32 Chapter 2: Literature Review
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 33
Table 2.2: Existing LCCA models and programs
Organisations Years Models and Programs Functions and Descriptions
Institutions
LCCOST– Asphalt Institute
1990s
•
The Asphalt Institute developed the Pavement Life-Cycle Cost Analysis Package (LCCOST) in 1991.
• 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 life-cycle 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.
HDM 4– World Bank
2000s •
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).
•
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
34 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.
State Government
Cal B/C – California Department of
Transport
1990s
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.
• 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.
Universities LCCP/LCCPR Maryland
1990s 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 35
Organisations Years Models and Programs 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.
LCCA of Portland Cement Concrete Pavement - Texas
2000s
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).
• 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.
36 Chapter 2: Literature Review
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).
• Starting from 2001-2002, the study of LCCA is mainly focused on pavement
(Wilde, Waalkes and Harrison 2001; Lee 2002b);
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:
• 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 37
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
38 Chapter 2: Literature Review
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 39
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 well-
established 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.
40 Chapter 2: Literature Review
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 41
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.
42 Chapter 2: Literature Review
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 43
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
Figure 2.5: Typical life cycle of a road asset (Rouse and Chiu 2008)
44 Chapter 2: Literature Review
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
• 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).
Pavement End-of-Life Costs
• 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 45
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.
46 Chapter 2: Literature Review
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).
Accident Cost • 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
Chapter 2: Literature Review 47
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.
48 Chapter 2: Literature Review
Table 2.5: Environmental impacts and costs in highway projects
ENVIRONMENTAL CATEGORY
FACTORS THAT LEAD TO IMPACTS AND COSTS
Noise Pollution • 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.
Air Pollution
• 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.
Resource Consumption
• 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).
Pollution Damage from Agency Activities
• 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 49
ENVIRONMENTAL CATEGORY
FACTORS THAT LEAD TO IMPACTS AND COSTS
become accustomed to roads, and are therefore more vulnerable to harmful interactions with humans.
• 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.
Solid Waste Generation Cost
• 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.
50 Chapter 2: Literature Review
ENVIRONMENTAL CATEGORY
FACTORS THAT LEAD TO IMPACTS AND COSTS
Water Pollution and Hydrologic Impacts
• 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 51
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.
52 Chapter 2: Literature Review
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)
Sustainable Cost Components (Sub Factors)
Agency Category
Initial Construction Costs Labour Cost Materials Cost Plants and Equipments Cost
Maintenance Costs Major Maintenance Cost Routine Maintenance Cost
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.”
Figure 4.3: Respondents’ utilisation of LCCA in highway projects
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 non-
inflated 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)
“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)
H2, H8 “… 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)
H3 “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)
H4, H7 “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
“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)
H5 “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.
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 Annotations
Initial construction costs Yes from all the interviewees
“Initial Construction done on model estimation.” (H3)
“…We probably use unit rates to try to work on…” (H5) Maintenance costs Yes from all the interviewees
“Maintenance Costs off historical data.” (H4) Pavement upgrading
costs
Yes from all the interviewees
“Pavement Upgrading costs off historical data.” (H4) Pavement end-of-life
costs
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 Annotations
Vehicle operating costs “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)
Travel delay costs
Social impact influence 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)
“Some of establish priority but sometime it depend on convert into value level.” (H2)
Accident cost “We do have factors like safety and do consider road safety as a part of evaluation.”(H11 and H13)
And if so, please briefly explain how environmental cost is determined and calculated based
on the list below.
Solid waste
generation cost
46 % Yes and 54% No from interviewees
“We consider these costs in the construction stage which involve waste management.”H10
“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
Pollution
damage by
agency
activities
Resource
consumption No from all the interviewees
Noise pollution 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)
Air pollution
Water pollution
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
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 Annotations
H11 and H6 “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)
H1, H7, H9 and
H12
“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)
“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)
H3 “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)
H5 “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)
Table 4.14: Comparison of the survey results with literature findings
Research Objective Relevant Subjects Literature Findings Survey Findings
To identify the critical cost components
related to sustainable measures in highway
infrastructure investments.
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:
• Applied in large and new highway infrastructure development
• Promoting LCCA application in highway infrastructure
• Understanding of the LCCA concept is still evolving
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:
• Ten critical cost components related to sustainable measures in highway infrastructure investments
Challenges of integrating sustainability-related cost components in LCCA
• Social and environmental costs are considered as the external costs
• Unclear boundaries in considering sustainability-related costs (e.g. some researchers focus on the global impacts of sustainability in highway projects)
The interviews indicates the following results.
• Limitation in the methods and models in dealing with cost components related to sustainable 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 needs for the decision support models to assist in highway investment decisions
• There are still limitations in the current LCCA model that emphasises sustainability.
126 Chapter 5: A Decision Support Model for Evaluating Highway Infrastructure Projects Investment
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 127
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.
128 Chapter 5: A Decision Support Model for Evaluating Highway Investment
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.
Industry Challenges
Industry Suggestions
Agency Category • Material costs • Plant and equipment costs • Major maintenance costs • Rehabilitation costs
Figure 6.11: Sensitivity analysis for LCCA weight factor changes
0.01
0.11
0.21
0.31
0.41
0.51
0.61
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
Fina
l Res
ult C
hang
es
LCC Weight Factor Changes
R9 R6 R6A
Chapter 6: Model Application Through Case Studies 195
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.
196 Chapter 6: Model Application Through Case Studies
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 197
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.
198 Chapter 6: Model Application Through Case Studies
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 199
Table 6.58: Comparison of the case study results with literature and survey findings
Research Objective
Relevant Subjects Literature Findings
Survey Findings Case Study Findings
To develop a decision support
model for the evaluation of long-
term financial decisions regarding
sustainability for highway projects
Industry status and LCCA application in highway infrastructure
Refer to Table 4.14 for details
The scenario is based on the Australian highway industry:
• Applied in huge and new highway infrastructure development
• Promoting LCCA application in highway infrastructure
• Understanding of the LCCA concept is still evolving
Both highway infrastructure projects were used to demonstrate the application of the decision support model. The case studies indicate the following results:
• The model employs multi-criteria 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.
Critical sustainability-related cost components in highway infrastructure
The questionnaire survey indicates the following result:
• Ten critical cost components related to sustainability measures in highway infrastructure investments.
Challenges of integrating sustainability-related cost components in LCCA
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 needs for a decision support model to assist in highway investment decisions
Chapter 7: Findings and Model Finalisation 201
CHAPTER 7: FINDINGS AND MODEL FINALISATION
7.1 Introduction
This chapter integrates the quantitative (questionnaire survey) and qualitative (semi-
structured 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.
202 Chapter 7: Findings and Model Finalisation
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 203
• 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 straight-
forward 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
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.
204 Chapter 7: Findings and Model Finalisation
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.
Agency Cost Components
Social Cost Components
Environmental Cost
Components
Material Plant and Equipment
Major Maintenance
Rehabilitation
Hydrological impacts
Loss of wetlands
Disposal cost of materials
Cost of barriers
Road Accident- internal cost
Road accident - economic value
of damage
Figure 7.1: Critical sustainability-related cost components in Australian highway
infrastructure projects
Chapter 7: Findings and Model Finalisation 205
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).
206 Chapter 7: Findings and Model Finalisation
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 micro-
economic 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 decision-
making 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 207
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 long-
term 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
208 Chapter 7: Findings and Model Finalisation
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
(
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
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.
Chapter 7: Findings and Model Finalisation 209
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.
210 Chapter 7: Findings and Model Finalisation
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 211
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 semi-
structured 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
212 Chapter 7: Findings and Model Finalisation
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 213
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
Industry practice of LCCA application
• Industry recognition of LCCA
• The theoretical and historical data of LCCA
• Government guidelines and reports
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.
Sustainability-related cost components in highway infrastructure development
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
Agency Category • Material • Plant and Equipment • Major Maintenance • Rehabilitation
Questionnaire Results and Findings Interview Results and Findings
Development of Decision Support Model for Highway Investment Decisions
Figure 7.2: Platform for developing financial decision support model in highway infrastructure sustainability
214 Chapter 7: Findings and Model Finalisation
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 215
PLATFORM FOR DEVELOPING DECISION SUPPORT MODEL
Agency Category
Social Category
Environmental Category
Sustainability- Related Cost Components
Sustainability enhancement for LCCA practice
Industry practice of LCCA application
Challenges of integrating sustainability-related costs
Qualitative Quantitative
Assessment Methods for Cost Components
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
Fuzzy AHP LCCA
Sensitivity Analysis
• Changes in prioritisations value by changing the Fuzzy AHP weight factors
• Changes in prioritisations value by changing the LCCA weight factors
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
FINANCIAL DECISION SUPPORT MODEL FOR HIGHWAY INFRASTRUCTURE
SUSTAINABILITY Applying in real
case projects
Enh
anci
ng th
e m
odel
Feedback from project stakeholders
Figure 7.3: The finalised financial decision support model for highway infrastructure
sustainability
216 Chapter 7: Findings and Model Finalisation
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 217
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
218 Chapter 7: Findings and Model Finalisation
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 219
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.
220 Chapter 8: Conclusion
• 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 sub-
sections 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 221
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 sustainability-
related 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
222 Chapter 8: Conclusion
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 in-
depth 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 223
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.
224 Chapter 8: Conclusion
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 225
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
226 Chapter 8: Conclusion
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 227
• 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
228 Chapter 8: Conclusion
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 229
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Appendices 245
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
246 Appendices
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
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
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
[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.
Survey Time frame: Please take approximately 10-15 minutes to complete the 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 life- cycle 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.
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?
2. Your experience in the construction industry is (years)?
Consulting Contractor Developer Government Agency Other (Please Specify)
1-5 6-10 11-15 16-20 Above 20
SECTION 1: COMPANY’S TECHNICAL EXPERTISE
Appendices 249
3. Please indicate the type of road infrastructure project do you mostly undertaken by ticking the appropriate boxes.
4. Please indicate your role in highway projects?
Road and highway construction Road and highway extension works Road and highway maintenance works Other (Please Specify)
Local Authority and Government Agency Project Manager Designer/ Engineer Quantity Surveyor Planner Contractor Specialist/ Subcontractor Developer Other (Please Specify)
250 Appendices
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 Level of Importance Low ---------High 1 2 3 4 5 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)
1 2 3 4 5 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)
1 2 3 4 5 Pavement Upgrading Costs
Rehabilitation costs including structural enhancements that extends the service life of an existing pavement and/or improve its load carrying capacity.
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)
1 2 3 4 5 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)
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 2 3 4 5 Travel Delay Costs
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 Description Level of Importance Low -------High 1 2 3 4 5 Social Impact Influence
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 2 3 4 5 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)
252 Appendices
iii. Environmental Cost and Issues
Categories Description Level of Importance Low ---------High
1 2 3 4 5 Solid Waste Generation
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)
1 2 3 4 5 Pollution Damage cause by Agency Activities
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)
1 2 3 4 5 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 253
5. Do you think the sustainability-related cost elements discussed above will influence the decision of selecting a highway project?
Categories Description Level of Importance Low ---------High
1 2 3 4 5 Noise Pollution
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)
1 2 3 4 5 Air Pollution 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)
1 2 3 4 5 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)
Yes No (please specify)
254 Appendices
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
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.
Sustainability Based Life-Cycle Costing Analysis (LCCA) for Highways
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
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.
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
Concerns / complaints regarding the conduct of the project
[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.
“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
1. Does your organisation currently apply LCCA in determining pavement type for highway infrastructure?
Interview Questions
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 Labours Cost Materials Cost Plants and Equipments Cost
Maintenance Costs Major Maintenance Cost Routine Maintenance Cost
Cost of Resettling People Property Devaluation Reduction of Culture Heritages and Healthy Landscapes Community Cohesion Negative Visual Impact
Accident Cost Economy Value of Damages Internal Cost External Cost
7.3. And if so, please briefly explain how environmental cost is determined and calculated based on the list below.
Appendices 259
Solid Waste Generation Cost
Cost of Dredge/Excavate Material Waste Management Cost Materials Disposal Cost
Pollution Damage by Agency Activities
Land Use Cost Distraction to Soil Extent of Tree Felling Habitat Disruption and Loss Ecology Damage Environmental Degradation
Resource Consumption Fuel Consumption Cost Energy Consumption Cost
Noise Pollution
Cost of Barriers Tire Noise Engine Noise Drivers’ Attitude
Air Pollution
Effects to Human Health Dust Emission CO2 Emission
Water Pollution 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?
Invitation for Fuzzy AHP Questionnaire Participation
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.
Sustainability Based Life-Cycle Costing Analysis (LCCA) for Highways
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
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
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
[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.
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:
APPENDIX C2: SAMPLE OF FUZZY AHP QUESTIONNAIRE
Linguistic Scale for importance Abbreviation Absolutely More Important AMI
Very Strong More Important VSMI Strong More Important SMI Weakly More Important WMI
Equal Important EI Weakly Low Important WLI Strong Low Important SLI
Very Strong Low Important VSLI Absolutely Low Important 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 AMI VSMI SMI WMI EI WLI SLI VSLI ALI
Q1 X Q2 X Q3 X
Appendices 263
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 AMI VSMI SMI WMI EI WLI SLI VSLI ALI
Q1 Q2 Q3
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 AMI VSMI SMI WMI EI WLI SLI VSLI ALI
Q4 Q5 Q6 Q7 Q8 Q9
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 AMI VSMI SMI WMI EI WLI SLI VSLI ALI
Q10 The relative importance of environmental cost components sub criteria Q11. How important is the hydrological impacts when it is compared to loss of wetlands?
264 Appendices
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 AMI VSMI SMI WMI EI WLI SLI VSLI ALI
Q11 Q12 Q13 Q14 Q15 Q16
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
Answer AMI VSMI SMI WMI EI WLI SLI VSLI ALI
Material Costs ALT 1 ALT 2 ALT 3
Plant and Equipment
Costs
ALT 1 ALT 2 ALT 3
Major Maintenance
Costs
ALT 1 ALT 2 ALT 3
Rehabilitation Costs
ALT 1 ALT 2 ALT 3
The relative importance of social category
Social category
Answer AMI VSMI SMI WMI EI WLI SLI VSLI ALI
Road Accident –
Internal Costs
ALT 1 ALT 2 ALT 3
Road Accident – Economic Value of Damage
ALT 1 ALT 2 ALT 3
Appendices 265
The relative importance of environmental category Environmental
category Answer AMI VSMI SMI WMI EI WLI SLI VSLI ALI
Hydrological Impacts
ALT 1 ALT 2 ALT 3
Loss of Wetland
ALT 1 ALT 2 ALT 3
Cost of Barriers
ALT 1 ALT 2 ALT 3
Disposal of Material Costs
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~
266 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 life-cycle 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.