cosima-road - modelling decision support and uncertainty using @risk

© Copyright DTU-CTT 2006

Technical University of DenmarkCentre for Traffic and Transport - CTT

COSIMA-ROAD

- Modelling Decision Support and Uncertainty using @RISK



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About me

Ph.d. Student, M.Sc. from the Technical University of Denmark – finishes in 2008

Half way through my Ph.d. study entitled: Optimization of Decision Support concerning Large Scale

Infrastructure Projects

2nd phase concerns risk analysis and sensitivity analysis upon uncertain variables and parameters

Implemeting @RISK as part of an overall software package for appraisal in the Danish Road Sector

Partly financed by a Danish Centre for Logistics and Freight Transport – CLG

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Outline of Presentation

Why do we need a model for appraising road infrastructure projects? – A Danish Manual for Appraisal Studies

Brief overview of the modelling structure of COSIMA-ROAD

Presentation of Case Example

The Deterministic Calculation Cost-Benefit Analysis

Single value point of return

The Stochastic Calculation Risk Analysis

Interval point of return in terms of probability distributions

Conclusion & Perspective

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The Socio-Economic Analysis

Prioritising between the different project proposals is necessary

Decision-makers has to choose the optimal combination of investments in a long-term planning perspective

Decision between several project alternatives

Decision of the actual design of the given/chosen projects

Assessment of each projects socio-economic rentability

….it is of course easier to achive political accept of a project if the socio-economic rate of return is high – but it may not lead to implementation. (The Danish Ministry of Transport, 2003)

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The Danish Manual

The Danish Ministry of Transport and Energy has conduc-ted CBA for a long time, however, it has been unsystematic

A tool for socio-economic analysis

Acceptance of methodology by transparency

Systematic method of determining various impact

Narrowing possible solution to a few alternatives

A practical toolbox for the analysts performing the socio-economic analysis

Identical measures and procedures for evaluating transport projects

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Danish Manual (1) [1] Definition of Problem/description of idea

[2] Relevant alternatives/aktivities is chosen for further evaluation

[3] Relevant impacts are assessed and implemented

[4] The construction/investment cost, period and start is determined

[5] The basis alternative is stated/calculated on basis of [3] & [4]

[6] The in [2] chosen alternatives is arranged/set up for further use

[7] The unit price settings is found and discounted to the correct year of

evaluation

[8] ”What if” Scenarios is defined:- Operation proposals towards rail

projects are stated- Various Traffic and Impact models is

performed- First year impacts are quantified

Socio economic impacts is evaluated

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Danish Manual (2)

[9] Evaluation parameters are determined such as forecast factors (f), BNP/Growth in economy (g), discount rate (d), Scenario factors (S & s) etc.

[10] Evaluation criteria: NPV, B/C-rate, IRR etc. is calculated

[11] Sensitivity Analysis or Risk Analysis is performed on chosen First

Year Impacts

[12] Non quantifiable (MCA) impacts are determined on basis of stakeholder

preferences

[13] Final results are illustrated schematically

[14] Presentation of the final results

[15] Follow-up and after calculation

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Evaluation Criteria

B/C-rate

Net Present Value

k

tt

tk

tt

tk

ttt

r

C

r

B

r

CBNPV

000 111

Development of costs and benefits over the years

Time

k

tt

t

k

tt

t

r

Cr

B

CB

0

0

1

1/

The ratio indicates the present value of the benefits that will result per present value invested.

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Case example – The Alleroed Case

Alleroed23.000 Inhabitants

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The Case

The main goal is to find a Ring Road that can connect the New Residential Area to the main Road Network

The second goal is to relieve the town centre of Alleroed for through traffic and congestion

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Basic & Alternative Scenarios

To perform any sort of appraisal study you need a basic scenarioDo-Nothing Scenario BUTBUT with the new generated traffic etc.

In the Alleroed Case - 4 different Alternative Scenarios are suggestedComparison of these scenarios are the main objective for

implementing COSIMA-ROADCOSIMA-ROAD

It is, however, important to remember that a good socio-economic performance does not necessarily lead to implementationDecision Support System - DSSDSS

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Basic Scenario

The Do-Nothing Scenario Traffic is supposed to arrive at the

new residential area as always Problems in the future with

congestions Capacity Pollution Noise …. COST = 0 Billion DKK

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Alternative 1

An upgrade of the existing road network and a 1 km extension

The cheapest sollution Problems in the future with

congestion Noise, emission etc. is still

influencing the residential areas around the existing road

COST = 19.2 Billion DKK

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Alternative 2 & 3

Both alternatives are bypass- and new constructed roads

Externalities are moved away from residential areas

COST Alternative 2 = 54.9 Bill. DKK

COST Alternative 3 = 48.6 Bill. DKK

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Alternative 4

A large scale upgrade of the entire road network in the Alleroed Region

The most expensive Creates a substantial time benefit

for travellers in the region Removes externalities from all of

the residential areas Adapted for future requirements COST = 194.5 Billion DKK

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Implementation in COSIMA-ROAD

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COSIMA-ROAD

COSIMA - COmpoSIte Model for AssessmentDeterministic calculation(point estimate)CBA-Module

Input data(Data entry)

Taxation(Calculation of the various time

and km. dependent taxation rules)

Impact Calculation(Entry of unit price settings & calculation of trip purposes)

Prognosis/Forecast(Forecast situation applied for the

First Year Impacts)

Prognosis/Forecast 2(Forecast situation applied for the

Unit Prices)

Base Calculation(Overview of all impact calculations with the implied evaluation criteria)

Results – expanded(Resultsheet containing all first

year impacts)

Results – overview(Containing the most important

results with criteria)

Front Sheet / ”Quick and Dirty”(Entry of data) Stochastic calculation (interval estimate)

Risk Analysis Module

Probability Distributions(Definition of the various uncertain

impacts)

Results – Uncertainty(Resulting Probability Distribution

of the B/C-rate)

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Entry Data Sheet – COSIMA-ROAD

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Main Data Input

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Forecast sheet - Impacts

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Key Figures

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Trip Purposes

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Results - Overview

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Results of all 4 alternatives

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B/C-ratio

0

0,5

1

1,5

2

2,5

Alternativ 1 Alternativ 2 Alternativ 3 Alternativ 4

B/C

-rat

ios

B/C-ratio



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Results of all 4 alternatives

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Net Values in mio kr.

-200

-100

0

100

200

300

400

Alternativ 1 Alternativ 2 Alternativ 3 Alternativ 4Net

Val

ue

in m

io D

KK

Total Benefits

Total Costs

NPV



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Risk Analysis

COSIMA-ROAD is designed to give a deterministic single value result, in this case as a benefit/cost ratio

However, several uncertainties are involved when interpreting models

The basis of Risk Analysis is then to give the decision-makers the ability to consider a ”complete set of possible future outcomes”

Assigning probability distributions on the uncertain first year effects – NOT Unit prices

Outcome is Interval results in terms of probability distributions

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Stochastic calculation – Risk Analysis module

Applying @RISK as add-on to Excel The different levels of knowledge is divided into 3 groups

where the actual distribution parameters are assessed:The relative level of knowledge

High level of knowledge:Normal distribution

High level of knowledge:Erlang distribution

Medium level of knowledge:Triangular distribution

Low level of knowledge:Uniform distribution

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Risk Analysis Sheet in COSIMA-ROAD

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Distribution of the Construction Cost

It has been found suitable to use an Erlang Distribution with a Scale parameter k = 5.

The Shape parameter is found by the following relationship:

The mean is calculated by the so-called Lichtenberg’s Principle:

This type of distributions is reasonable as the Construction Cost most often is exceed

k

9.4

.max9.2.min

ML

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Distribution of the Travel Time Savings

Recent Master Thesis from DTU has shown that a std. deviation between 10% - 20% is a reasonable error corresponding to the Traffic Models

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Distribution of Maintenance Cost

It has been found that a 10% lower bound and 50% higher bound is reasonable

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Distribution of The Safety Effect (number of Accidents)

This impact is found by impact models. These models, like the traffic models have embedded errors – a study has shown that these vary quiet extensively (+/- 10% in our case)Start End



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Risk Analysis Sheet with applied distributions

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Results of the Risk Analysis

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Results of the Risk Analysis

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Results all four alternatives

The Alleroed Case: All four Scenarios

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1

0,1 0,3 0,5 0,7 1,0 1,3 1,6 2,0 2,4 2,9

Total rate based on discounted benefits and costs

Pro

ba

bili

ty t

ha

t to

tal r

ate

will

be

eq

ua

lled

or

exc

ee

de

d Alt. 4

Alt. 2

Alt. 3

Alt. 1

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Conclusion & Perspective

The COSIMA-ROAD Evaluation System has been used in real case studies in the Danish Road Directorate

The model has proven highly applicable within transport infrastructure planning – at the moment it is used in a large-scale study in Greenland

To address some of the uncertainties embedded in the model result a Monte-Carlo simulation is conducted making use of various probability distributions

The various probability distributions applied within the COSIMA-ROAD model is to be revised and further investigated

Especially, the two main impacts; Construction Costs and Travel Time Savings are to be further investigated

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PhD Student, M.Sc. in Engineering

Kim Bang Salling

Technical University of Denmark

Centre for Traffic and Transport

Decision Modelling Group

Phone: +45 4525 1548

Email: [email protected]

www.ctt.dtu.dk



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”The Monster Sheet” – Basic calculations

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cosima-road - modelling decision support and uncertainty using @risk

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