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Life Cycle Cost Analysis and Cost Savings for Road Projects

FEATURED PAPER

By Abid Tabassum

Ontario, Canada

 


Abstract

According to Project Management Institute (PMI); for a successful construction project there are four salient ingredients; Cost, Time, Quality and Environment [6]. This paper will cover a proposal to show that, use of a comparatively new road construction material (Reclaimed Asphalt Pavement (RAP)) has all the four benefits as mentioned by PMI. It will compare the Life Cycle Cost Analysis (LCCA) for two options of; Option A – conventional Hot Mix Asphalt (or HMA) and Option B – HMA with 20% RAP. LCCA is carried out for 40 years with comparison provided between two options provided at the end of LCCA section. The LCCA is then followed by a case study for a mid-sized municipality based on actual data collected from a municipality in Ontario, Canada. The environmental benefits of use of RAP are also presented in later section of this paper. Results are summed up in terms of cost effectiveness, environmental benefits, time and quality.

Introduction

Roads are constructed using two major expensive components; aggregates and asphalt. According to a study over 90 million tonnes of asphalt is recycled every year in North America [5]. For being more cost effective; asphalt recycling/reclaiming is increasing every year [5]. Reclaimed Asphalt Pavement (RAP) is a cost effective reclaimed product. RAP is an asphalt pavement that is recycled, it is the product of milling and removal of asphalt from roadways and or plant wastes [1].

This paper will look into comparison between road construction with conventional HMA and HMA with 20% RAP. The cost effectiveness of enhanced usage of RAP will be determined through the following methods:

  1. Life Cycle Cost Analysis (LCCA) for both a conventional Hot Mix Asphalt (HMA) and HMA with 20% RAP.
  2. Determining cost effectiveness of RAP option through a case study for a mid sized municipality

Life Cycle Cost Analysis (LCCA)

LCCA is the process by which the economic viability of two or more competing projects is determined and compared utilizing its initial cost estimate and all other costs that will be borne by the organization and user through-out its life time. For road projects there are two types of cost, agency cost and user cost. For this paper we will use only agency costs. User cost such as increased delay costs and changes in accident costs as a result of future maintenance actions are extremely difficult to predict and beyond scope of this paper. There are several steps in LCCA methodology, as given below:

  1. Determine alternative designs
  2. Determine timing of activity
  3. Agency cost estimate
  4. Determine life cycle cost and analyze

There are many methods of comparing life cycle costs. The mostly used is Net Present Worth Method (NPW), the internal rate of return (IRR), the Benefit Cost Ratio (B/C), and Equivalent Uniform Annual Cost Method (EUAC). The most often used methods among these are NPW and IRR methods. The NPW method is the sum of the initial costs and future costs. Present or initial costs are considered in year zero and taken as it is while the future costs are discounted through an appropriate rate of return. The lower value of NPW for a project; more desirable it is. Since it shows that over the life cycle; lower costs will be incurred. Since NPW is the most widely used method for pavement LCCA, this paper will take into consideration the NPW method.

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About the Author

pmwj47-Jun2016-Tabassum-PHOTO
Abid Tabassum, M.Eng., PMP, CCP

Ontario, Canada

 

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Abid Tabassum
holds a Bachelor’s degree and two master’s degrees in Civil Engineering (specializing in construction and project management). He has worked in the project/ construction management as well in the project controls field for over 20 years in Oil & Gas, Infrastructure, Power and Energy. Abid holds Project Management Professional designation through PMI (USA) and is a Certified Cost Professional (CCP) through AACE International.

Mr. Tabassum can be contacted at [email protected]