Profitability evaluation of intelligent transport system investments

Pekka Leviäkangas, Jukka Lähesmaa

Research output: Contribution to journalArticleScientificpeer-review

49 Citations (Scopus)

Abstract

The objective of this study was to consider evaluation methods for intelligent transport system (ITS) investments, to point out some shortcomings of traditional methods (mainly benefit-cost analysis), to develop alternative methods and to make recommendations how the profitability of ITS investment should be evaluated. The results can be used when ITS investments are compared with each other and also when ITS investments are compared with road building investments. This paper identifies the fundamental differences between ITS and road infrastructure investments and how they impact on the profitability evaluation. The conclusion is that traditional cost-benefit analysis (BCA), which was developed for investments in physical infrastructure, does not capture all the benefits or costs related to ITS. Economic evaluation methods for ITS investments need improving. This paper illustrates how BCA could be used to take into consideration the option value of ITS investment and risks due, for example, to different time horizons of investments. The paper also discusses and demonstrates the use of multi-criteria analysis (MCA) in profitability evaluation. It illustrates how a method called analytical hierarchy process (AHP) could be utilised to evaluate other risks that do not have specific monetary values and to compare the results of different profitability analyses. These evaluation methods can be used within the project assessment framework in the transport sector to highlight different aspects of the profitability and efficiency of transport investments. None of the methods themselves can reflect all the aspects in decision making, but by using a suitable set of different methods depending on the decision situation, and by comparing the results, a wider and more realistic picture of investments can be obtained.
Original languageEnglish
Pages (from-to)276-286
JournalJournal of Transportation Engineering
Volume128
Issue number3
DOIs
Publication statusPublished - 2002
MoE publication typeA1 Journal article-refereed

Fingerprint

transport system
profitability
Profitability
evaluation
Cost benefit analysis
cost-benefit analysis
road
infrastructure
Decision making
decision making
efficiency

Keywords

  • transport telematics
  • intelligent transport systems
  • investment
  • profitability
  • cost-benefit analysis
  • multi-criteria analysis

Cite this

@article{0c4697d3dfc84277b29013fc64d84660,
title = "Profitability evaluation of intelligent transport system investments",
abstract = "The objective of this study was to consider evaluation methods for intelligent transport system (ITS) investments, to point out some shortcomings of traditional methods (mainly benefit-cost analysis), to develop alternative methods and to make recommendations how the profitability of ITS investment should be evaluated. The results can be used when ITS investments are compared with each other and also when ITS investments are compared with road building investments. This paper identifies the fundamental differences between ITS and road infrastructure investments and how they impact on the profitability evaluation. The conclusion is that traditional cost-benefit analysis (BCA), which was developed for investments in physical infrastructure, does not capture all the benefits or costs related to ITS. Economic evaluation methods for ITS investments need improving. This paper illustrates how BCA could be used to take into consideration the option value of ITS investment and risks due, for example, to different time horizons of investments. The paper also discusses and demonstrates the use of multi-criteria analysis (MCA) in profitability evaluation. It illustrates how a method called analytical hierarchy process (AHP) could be utilised to evaluate other risks that do not have specific monetary values and to compare the results of different profitability analyses. These evaluation methods can be used within the project assessment framework in the transport sector to highlight different aspects of the profitability and efficiency of transport investments. None of the methods themselves can reflect all the aspects in decision making, but by using a suitable set of different methods depending on the decision situation, and by comparing the results, a wider and more realistic picture of investments can be obtained.",
keywords = "transport telematics, intelligent transport systems, investment, profitability, cost-benefit analysis, multi-criteria analysis",
author = "Pekka Levi{\"a}kangas and Jukka L{\"a}hesmaa",
year = "2002",
doi = "10.1061/(ASCE)0733-947X(2002)128:3(276)",
language = "English",
volume = "128",
pages = "276--286",
journal = "Journal of Transportation Engineering",
issn = "0733-947X",
publisher = "American Society of Civil Engineers ASCE",
number = "3",

}

Profitability evaluation of intelligent transport system investments. / Leviäkangas, Pekka; Lähesmaa, Jukka.

In: Journal of Transportation Engineering, Vol. 128, No. 3, 2002, p. 276-286.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - Profitability evaluation of intelligent transport system investments

AU - Leviäkangas, Pekka

AU - Lähesmaa, Jukka

PY - 2002

Y1 - 2002

N2 - The objective of this study was to consider evaluation methods for intelligent transport system (ITS) investments, to point out some shortcomings of traditional methods (mainly benefit-cost analysis), to develop alternative methods and to make recommendations how the profitability of ITS investment should be evaluated. The results can be used when ITS investments are compared with each other and also when ITS investments are compared with road building investments. This paper identifies the fundamental differences between ITS and road infrastructure investments and how they impact on the profitability evaluation. The conclusion is that traditional cost-benefit analysis (BCA), which was developed for investments in physical infrastructure, does not capture all the benefits or costs related to ITS. Economic evaluation methods for ITS investments need improving. This paper illustrates how BCA could be used to take into consideration the option value of ITS investment and risks due, for example, to different time horizons of investments. The paper also discusses and demonstrates the use of multi-criteria analysis (MCA) in profitability evaluation. It illustrates how a method called analytical hierarchy process (AHP) could be utilised to evaluate other risks that do not have specific monetary values and to compare the results of different profitability analyses. These evaluation methods can be used within the project assessment framework in the transport sector to highlight different aspects of the profitability and efficiency of transport investments. None of the methods themselves can reflect all the aspects in decision making, but by using a suitable set of different methods depending on the decision situation, and by comparing the results, a wider and more realistic picture of investments can be obtained.

AB - The objective of this study was to consider evaluation methods for intelligent transport system (ITS) investments, to point out some shortcomings of traditional methods (mainly benefit-cost analysis), to develop alternative methods and to make recommendations how the profitability of ITS investment should be evaluated. The results can be used when ITS investments are compared with each other and also when ITS investments are compared with road building investments. This paper identifies the fundamental differences between ITS and road infrastructure investments and how they impact on the profitability evaluation. The conclusion is that traditional cost-benefit analysis (BCA), which was developed for investments in physical infrastructure, does not capture all the benefits or costs related to ITS. Economic evaluation methods for ITS investments need improving. This paper illustrates how BCA could be used to take into consideration the option value of ITS investment and risks due, for example, to different time horizons of investments. The paper also discusses and demonstrates the use of multi-criteria analysis (MCA) in profitability evaluation. It illustrates how a method called analytical hierarchy process (AHP) could be utilised to evaluate other risks that do not have specific monetary values and to compare the results of different profitability analyses. These evaluation methods can be used within the project assessment framework in the transport sector to highlight different aspects of the profitability and efficiency of transport investments. None of the methods themselves can reflect all the aspects in decision making, but by using a suitable set of different methods depending on the decision situation, and by comparing the results, a wider and more realistic picture of investments can be obtained.

KW - transport telematics

KW - intelligent transport systems

KW - investment

KW - profitability

KW - cost-benefit analysis

KW - multi-criteria analysis

U2 - 10.1061/(ASCE)0733-947X(2002)128:3(276)

DO - 10.1061/(ASCE)0733-947X(2002)128:3(276)

M3 - Article

VL - 128

SP - 276

EP - 286

JO - Journal of Transportation Engineering

JF - Journal of Transportation Engineering

SN - 0733-947X

IS - 3

ER -