Business Models to Facilitate Deployment of Connected Vehicle Infrastructure to Support Automated Vehicle Operations (2020)

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63 CHAPTER 4: METHODS AND DATA TO DEVELOP, EVALUATE, AND PRESENT THE BUSINESS CASE A business case is an evidence-based justification for a proposed project or policy investment. It is presented in a structured manner that enables decision-makers to quickly assess the expected benefits from the investment against the organization’s objectives and make informed investment decisions. Business cases are “living documents” that are updated throughout the investment’s life cycle, including during the planning, design, delivery and operation stages. All major capital investment decisions need a business case—whether it is qualitative or quantitative. Quantitative business cases are a part of a normal business model structure of several operating agencies when considering larger capital investments. Developing a quantitative business case analysis takes some effort, and it may be warranted only under certain circumstances. For example, an agency may stipulate that a quantitative business case is needed for a CV investment because a funding agency (e.g., for a grant program) needs it or because the required capital investments of the option or options under consideration exceed a pre- determined threshold value set by the DOT. An agency can determine the threshold value depending on the program and policy norms that govern its capital expenditure programs for related activities such as ITS and TSMO. Project managers responsible for the V2I application deployment (i.e., implementation planning once an investment decision is made) should prepare the business case. According to a recent survey by the NOCoE (2019), in most agencies, the CV program is embedded in TSMO, ITS, or Traffic Operations units or their like. The personnel in these units designated for CV- and AV- related activities can act as the primary sponsors of the business case analysis. They should convene a working group composed of a diverse group of staff from the central office and regions or districts with expertise in relevant areas of the DOT, including CV and AV programs, operations, safety, ITS, and incident and emergency response management. DOT units covering TMCs, traffic operations centers, weather management centers, maintenance, or other areas that will be directly affected by the investment or with direct experience with the problem should also participate in the working group. Although the level of involvement of different participants will vary during the life cycle of the business case, all staff should be involved at the project kick-off meeting where roles, requirements, resources, and timelines are described at a high-level. This chapter presents a discussion on how a business case can be developed during the planning stage for a selected CV investment that meets a minimum threshold in accordance with agency norms. It focuses on the creation of sufficient evidence to select a CV investment option for further consideration for deployment. For this document, the options analysis is limited to comparing the CV infrastructure option and the status quo option. The discussion presented is a modified version of the Five Case Model developed by HM Treasury, the Welsh Government, and the UK Office of Government Commerce. It is particularly influenced by the practical implementation of the Five Case Model adopted by Metrolinx in Ontario, Canada (Metrolinx, 2018).

64 CREATING AN EFFECTIVE BUSINESS CASE FOR CONNECTED VEHICLE INVESTMENTS Figure 6 presents an overview of the steps involved in constructing a business case. The business case rests on the arguments advanced around four sub-cases: the Strategic Case, the Economic Case, the Financial Case, and the Deployment Case. The Strategic and Economic Cases advance arguments pertaining to the rationale of the investment, while the Financial and Deployment Cases examine the ability of an organization to implement the investment. The remainder of this section describes each of the process steps involved in developing the business case. The Problem Statement The problem statement is the starting point for the business case. It provides a concise statement that highlights the case for change. Table 18 illustrates the considerations for how to frame the problem to mobilize interest and potentially action on the part of the decision-makers. An important aspect of this initial step for CV investments is to compare and contrast the expected outcomes with the status quo option. Note that the status quo option may include consideration of other non-CV related strategies (e.g., TSMO strategies) over the planning period that are also expected to address the problems being articulated. Source: Metrolinx, 2018 Figure 6. The Business Case Structure Problem Statement Defines the problem and the corresponding goals and objectives to addressed. Investment Option(s) Articulates the investment option(s) to be tested against the goals and objectives. Strategic Case How does the investment achieve the strategic goals and objectives? Financial Case What are the financial implications for the agency? Economic Case What is the investment’s overall value to society? Deployment Case What risks and requirements must be met for delivering and operating the investment? Business Case Summary Present core findings from each section along with recommendations for future development.

65 Table 18. Steps for Defining the Problem Statement Step Description of Activity Define Case for Change Identify key external and internal drivers that support the case for change. Compare and contrast with the status quo scenario over the investment analysis period. Articulate Strategic Value Construct a value proposition statement identifying the DOT customer, service provided, the specific outcomes targeted by the investment, and the problem or opportunity it addresses. Describe how addressing the problem or opportunity aligns with DOT strategic planning goals and objectives; making this connection ensures maximum “buy in” for the proposed CV investments. For example, for CV investment options targeting improved safety, the DOT’s the Long Range Visioning Document (e.g., Vision Zero), the Long Range Transportation Plan or Regional Transportation Plan, Transportation Improvement Program, the State Highway Safety Plan, the Highway Safety Improvement Program, or those of federal funding program like the National Highway Performance Program can be referenced. For CV investments targeting mobility, connections can be made to the Long Range Transportation Plan, the Transportation Improvement Program, Congestion Management Plan, ITS and Operations Plan, or TSMO Plan (if it exists). Identify Relevant Experience Articulate experience of the DOT in addressing the problem or opportunity. Experience gathered through smaller scale pilot projects or CV test beds operated by the DOT or other entities or simulated exercises can be used to provide evidence of experience. Investment Options In this section, the options for evaluation in the strategic, economic, financial, and deployment cases are developed. Table 19 illustrates the key steps and activities for developing investment options for further analysis. Table 19. Steps for Developing Investment Options Step Description of Activity Identify Strategic Mechanisms Set out the key changes in the transportation network that could address the given problem. Changes should be mapped to the following categories: • Rules, regulations, and policies. • Travel behavior. • Transportation services. • Transportation infrastructure/technology. Changes to transportation infrastructure (e.g., signal controllers) and technology (telecommunications) are common to several CV

66 infrastructure investments to enable V2I applications. Some changes to rules, regulations, and policies are also warranted. Option Development Identify options that can address the problem. For the purposes of this guidance, investment options must include the proposed CV investment option and the status quo option. The status quo option defines the highway improvements planned in the absence of the V2I application solution to address the identified problem or opportunity over the planning period. Explain the origins of the option and how the option addresses the problem and which strategic mechanisms it will use. STRATEGIC CASE The strategic case establishes why an investment should be pursued from a strategic standpoint. It determines the value of addressing a problem or an opportunity based on the goals, plans, and policies of the agency for a given region. It also evaluates the options against specific objectives to be achieved for each goal area to formulate a clear narrative on how the CV investment can address the problem or opportunity. The strategic case also articulates the risk to the performance of the investment option. The key steps involved in making a strategic case include: Step 1. Strategic Evaluation by Goal/Objective — Assuming the typical structure of a planning product (e.g., Long Range Transportation Plan/Regional Transportation Plan, Congestion Management Plan, State Highway Safety Plan) that articulates a vision, goals/outcomes, and objectives for each goal area, the DOTs should assess how the CV investment option and status quo performs against the objectives established in the plan. The DOT also articulate how each option achieves the strategic value proposition based on performance against each goal/outcome. Table 20 presents the sample goals and specific objectives for CV signal control applications (RLVW or TSP) and how they can be connected to the safety and mobility goals established in a DOT’s existing strategic plans. Table 20. Example Goals, Objectives, and Performance Measures from Long range Transportation Plans that are Relevant for CV Investment Analysis Typical Long Range Transportation Plan Goal Area Goals and Connections to a DOT’s Strategic Planning Products Specific Objectives from the CV Investment Option (Signal Control Applications) Safety Vision Zero: Fatality-free multimodal transportation system • Implementing a RLVW V2I application will reduce fatalities due to red light violations by 25 percent along identified corridors. Mobility Long Range Transportation Plan and TSMO: Congestion- free transportation system • Implementing the TSP application will reduce travel time along identified corridors by 40 percent.

67 Step 2. Strategic Evaluation by Progress toward Value Proposition. This step entails comparing the CV investment option and status quo option and identifying factors that lead to different performance between options. Step 3. Strategic Evaluation Summary of Options. In this step, the DOT identifies key factors that lead to different performance between the CV investment option and the status quo option. The DOT then identifies key risks and uncertainties that may limit the CV investment option from delivering the value and develops key recommendations for the CV investment option. ECONOMIC CASE The economic case establishes “the societal benefits” of the investment using a standard economic analysis approach. It assesses the costs and benefits of the proposed options to individuals and society at large. The economic appraisal spans the entire investment lifecycle— to include initial capital investments, operation and maintenance (O&M) costs, and replacement costs. This appraisal can also include the economic consequences of risks and uncertainties using scenario analyses. The key steps involved in making an economic case include: Step 1. Define the Scope of Economic Analysis – This step entails the selection the recommended list of V2I applications for the economic case analyses. The option may include a single application, a bundle of applications, or basic infrastructure upgrades to support applications. When two or more applications are selected, the bundle should be considered as a single option to account for opportunities in cost and benefit efficiencies. Step 2. Establish the Economic Analysis Framework – A BCA tool has been developed as part of this research to perform deterministic analysis for five popular V2I applications. It is described in Appendix D. The BCA tool developed as part of this research can be extended to any V2I application by adjusting the established cost and benefit categories. Although this tool is deterministic in nature and is meant to be used for a single V2I application at a time, it can be used to understand impacts of the staged or sequenced applications. It can also be used to perform sensitivity analyses to understand the economic consequences of uncertainties associated with the timing of deployment of staged V2I applications, capital and operating costs, CV market penetration rates, expected benefits, benefits accrual year, and discount rates. More information is provided in Appendix D. Step 3. Capital Costs – This step entails an estimation of initial and renewal spending costs by year for all cost items, including RSUs, OBUs, backhaul network, back office infrastructure, CV application development and deployment, other hardware, and miscellaneous costs. Any cost efficiencies associated with bundling applications. Unlike in chapter 2 where ROM costs were used to determine if a business case analysis is needed, rigorous estimation of costs by CV component to be deployed to enable the V2I applications should be undertaken during this step to account for project-specific factors.

68 Step 4. O&M Costs – This step involves an estimation of recurring costs for system operating and maintenance costs. Typical annual O&M costs reported in the literature are in the range of 10 to 15 percent of the initial capital costs for the application under consideration Step 5. CV Market Penetration Rate – This step entails an estimation of the time frame for advancing to different levels of market penetration for equipped public fleet and private CVs. Step 6. Benefits Appraisal – This step entails the quantification and monetization of estimated benefits offered by the option. Major categories include mobility (operational), safety, and environmental benefits. For application bundles, the total benefits can be greater than the sum of their parts. The period over which benefits accrue should be calibrated to CV market penetration rates. Step 7. Summary – The summary report should include benefit-cost ratio, annualized costs and net benefits, return on investment, and breakeven period. Benefit-Cost Analysis Tool A benefit-cost analysis spreadsheet tool (BCA tool) has been developed to provide inputs to a DOT’s economic case. The tool helps document the following: • Target planning horizon and cost phasing options. • Inputs to quantify costs for the various cost categories for select applications, which are useful for extrapolating to the full set of applications presented in chapter 2. • Inputs to quantify benefits for each application. Outputs from the BCA tool include: • Annualized costs and net benefits. • Return on investment (ROI). • Year the investment on-boards even (breakeven year). • Net present value of assessed benefits. The BCA tool examines each V2I application individually. Aggregated benefits of an application bundle would have to be estimated separately. Each V2I application has a distinct set of: • Benefits (external only), quantifiable and monetizable to the extent possible. • Benefits realization stream over the analysis time frame. • Costs incurred by year over the analysis time frame. The key inputs of the BCA tool are derived from this information. BCA TOOL The BCA tool developed as part of this project is a framework to organize costs and benefits over a planning horizon. Although developed for only 5 V2I applications for which a reasonable amount of data is available from literature, this MS Excel based tool is extensible to other applications for which data might emerge in the future. In this sense it can be considered more of a BCA framework. The tool can be used to consider simple, high-level economic analysis including scenario analysis for various CV investment options.

69 V2I Applications in the BCA Tool The BCA tool features five of the 23 V2I applications that state DOTs have deployed, are actively deploying, or are seriously contemplating for deployment in the near term using their existing or planned CV infrastructure investments. Figure 5 previously arranges these applications derived from the pilots and test bed activities which are also summarized in Table 6. The five applications are: • CSW, equivalent to Roadway Departure Warning (RDW) in the literature on benefits. • Incident Scene Work Zone Alerts for Drivers and Workers (INC-ZONE). • Intelligent Traffic Signal System (I-SIG). • Queue Warning (Q-WARN). • Speed Harmonization (SPD-HARM). Appendix D provides further definition of these applications. While selection of these applications was driven to an extent by the availability of benefit data from existing studies and pilot programs, the BCA tool’s five applications provide a reasonable cross-section of the types of V2I applications that agencies are interested in, and by extension, applications for which agencies may need to make an economic case. To help illustrate this, Table 21 summarizes the alignment of the five applications with the external benefits and roadway types of interest, indicating representation across all characteristics. Three applications are part of the USDOT ITS JPO Dynamic Mobility Applications Program (Q-WARN and SPD- HARM in the INFLO bundle, and I-SIG as the overarching application in the MMITSS bundle). Three applications are warning-based and provide location-specific benefits (CSW, INC-ZONE, and Q-WARN), while the other two applications (I-SIG and SPD-HARM) depend on higher levels of CV market penetration to achieve their network-wide benefits. Table 21. V2I Applications Analyzed in the BCA Tool CSW/ RDW INC-ZONE I-SIG Q-WARN SPD-HARM External Benefits Safety X X X X Mobility X X X X Environment X X User Cost Avoidance Roadway Type Urban Freeway X X X X

70 Rural Freeway X X X Arterial X X X Roadway (Any Location) X X The five applications can also be located along a sequencing strategy of CV infrastructure investment as an agency ramps up its commitment to CVs and the market penetration rate increases. For example, initial investment may be made to implement spot-location curve speed warnings and fleet-oriented elements of the MMITSS bundle such as TSP. Later in a 10-year investment timeline, further investment can begin to implement SPD-HARM and I-SIG in regions with sufficient roadside coverage and CV market penetration. The BCA tool is currently set up for five V2I applications and designed to be used for a single V2I application at a time. The tool offers flexibility to perform benefit-cost analysis for a combination of V2I applications or extend the analysis to different V2I applications with ease. The BCA tool’s cost components will apply to additional applications not currently included. The methodology for computing benefits can also be applied to other applications. Additional information is presented in Appendix D. Therefore, the tool serves as a model template for further development as data for additional applications become available. Further information on how to use the BCA tool (e.g., organization and structure, benefit inputs, cost inputs, and the BCA calculation) is presented in Appendix D. A series of excerpts and illustrations (BCA tool screenshots) accompany the explanatory text. BCA Model Confidence Because the CV infrastructure environment is nascent and rapidly evolving, the key inputs of the BCA tool will, at best be, estimates and forecasts. Consequently, these estimates and forecasts are reflected in the outputs of the BCA tool. Key inputs, such as market penetration rates, benefit realization rates and time frame, cost inflation, and traffic volumes, are expected to vary over a plausible range of values and over time, and the analyses should capture these variabilities. Rather than relying on single-point estimates; therefore, the interpretation of BCA outputs should be contingent on these variabilities and the underlying causes contributing to these risks and uncertainties. Similarly, the benefits can be quantified from reported literature, project-specific sketch-planning level analyses or simulation studies. Some risks, particularly those pertaining to model parameters and variables, can be evaluated using scenario analysis. The most commonly used approach is what-if or a sensitivity analysis of the parameters and variables. Each variable is changed by a prespecified quantity, and the resulting change in benefits and costs is captured as a single-point estimate. If a probabilistic distribution can be assigned to the variable(s), techniques like Monte Carlo simulation can be used to develop resulting probabilities for benefit-cost outcomes, such as benefit-cost ratio or breakeven year. The sensitivity analysis, which evaluates how much change a model variable is

71 estimated to cause on the benefit-cost outcomes, would inform decision-makers on whether to undertake a project, delay, or discontinue. Other risks, particularly those that cannot be codified as model variables and parameters directly (e.g., lack of competition or cyber hacking) can be incorporated using a “risk premium.” The risk premium, estimated based on the likelihood of occurrence and severity of the impact, is added to the total cost of the investment (alternatively, benefits or time frame) to obtain a full expected value. FINANCIAL CASE The financial case establishes “how much the investment will cost” a DOT. It focuses on the financial impact to the agency and funding arrangements (primarily the capital, operating, and revenue impacts and risks related to the investment). The financial case identifies potential funding sources and associated risks and uncertainties. Funding Sources DOTs generally rely on three types of funding: • Traditional funding sources • Supplementary funding sources, such as discretionary grants • Alternative public and/or private sector financing. Table 22 presents a list of commonly cited revenue sources for state DOT funding. Local governments also use similar revenue sources to fund transportation projects. The following sections discuss possible funding sources for CV deployment. Traditional Funding Sources State DOTs have long relied on highway construction and maintenance programs for funding project-level deployments. These programs are traditionally funded through state, regional, and local revenues as well as matching federal funds for eligible projects. The CAT Coalition’s nationwide survey substantiates the dependence on traditional funding sources to support the CV initiatives (NOCoE, 2019). Based on an analysis of 2006–-2015 Highway Statistics data, federal funding contributed nearly half of the capital outlays for highway and bridge projects, while state DOTs provided the other half (ARTBA, 2019; Rall, 2016). Many federal funding sources allow infrastructure-based ITS capital improvements as eligible items (FHWA, 2019). Table 22 also presents a list of commonly cited federal funding programs for ITS capital improvement projects. The DOT programs, which are set aside for all statewide construction and maintenance needs, are generally capable of accommodating small-scale deployments. For instance, GDOT has been planning the deployment of 1,700 SPaT-enabled traffic signals in the Atlanta Metro region using the agency's Regional Traffic Signal Optimization Program. GDOT has allocated $23.5 million per year for the program using Surface Transportation Block and National Highway Performance Program funds. Similarly, UDOT has used federal Congestion Mitigation and Air Quality Improvement funds for two TSP deployments (Redwood Road and UVX BRT) in addition to existing state funds.

72 Table 22. Typical Sources of Funding State DOT Revenue Sources Federal Funding Sources* Financing Mechanisms • Fuel Taxes • Passenger Vehicle Fees • Truck Registration Fees • Tolls • General Sales Taxes • General Funds • Interest Income • Taxes on alternative fuels • Oversize/overweight truck permit fees • Outdoor advertising revenue • Driver’s license fees • Special fees on electric vehicles • Sales taxes on rental vehicles • Taxes on vehicle sales/leases • National Highway Performance Program • Surface Transportation Block Program • Highway Safety Improvement Program • Congestion Mitigation and Air Quality Improvement Program • National Highway System • National Highway Freight Program • ITS Research and Development • ITS Integration • Interstate Maintenance • Real-Time System Management Information Program • Railway-Highway Crossing Hazard Elimination • Better Utilizing Investments to Leverage Development Transportation Discretionary Grants Program State Tools • General Obligation Bonds • Revenue Bonds • State Infrastructure Banks Federal Tools • Build America Bonds • GARVEE Bonds • Private Activity Bonds • TIFIA Credit Assistance Innovative Project Delivery Methods • Design-Build-Finance • Design-Build- Finance-Operation and Maintain Note: Federal funding sources may be subject to project eligibility, funding lapse and availability. Unless repurposed for CV deployments, the funding disbursed through existing ITS/TSMO/Operations programs is intended to meet all network level needs. These existing programs could be adequate for funding small-scale or pilot deployments. However, the capital intensiveness of large-scale V2I deployments can render the sole dependence on these programs impracticable. State DOTs may have to find supplementary and alternative funding sources to meet future expansion needs and large-scale deployment. Supplementary Funding Sources This type of funding is available for a special purpose (e.g., ITS deployments) or as non-formula discretionary grants. As special purpose and grant awards are often competitive and subject to funding availability and time lapse, there is an inherent uncertainty with supplementary funding sources. The DOTs can explore the possibility of repurposing of existing funding sources that are dedicated for capacity, operational, safety, freight, and air quality improvement purposes. As V2I deployments continue to yield performance efficiencies, the need for funds typically allocated for these improvement projects could diminish.

73 Furthermore, many DOTs have indicated challenges in availing grant programs. Per the CAT Coalition survey, 73 percent of respondents indicated some or significant barriers with grant programs. The DOTs have indicated the following top three challenges: • Grant requirements are too complex and often require consultant support to develop a competitive proposal. • In-house staff capability and availability to write a competitive proposal. • Identifying matching state funding. Alternative Financing State DOTs have long relied on alternative mechanisms through public and private sector funding to support large infrastructure investments. Some of the mechanisms that state DOTs have used include: • Using debt financing to raise additional revenue through general obligation and revenue bonds or availing federally available instruments for credit assistance and debt financing instruments. • Developing cost-sharing agreements with other agencies, such as airports and public transit agencies. • Exploring the possibility of raising additional revenues using road user charging, transit fare box revenues, tolls, and other transactions where customers are willing to pay in exchange for service efficiencies resulting from V2I investments. • Developing public-private partnership (P3) models that provide access to private sector funds and technical expertise in exchange for revenue sharing. As indicated by the state survey conducted by the CAT Coalition (NOCoE, 2019), some P3 models are emerging especially in the areas of fiber optic provision for improving backhaul communication and in data partnerships related to TMC operation. Developing a Financial Case Developing a financial case for each CV investment option entails a seven-step process: Step 1: Cost Structure – The DOT should develop a cost structure for each investment option that shows required cashflow by year for capital investments, operating costs, and replacement costs. Step 2: Cost Avoidance Due to CV Investments – The DOT should identify cost items that could potentially be avoided by the CV investment option. For example, costs of capacity expansion, safety improvement, traffic incident management, law enforcement, or other direct costs related to operating the system that are avoided due to the proposed investment could be cited and considered. Step 3: Funding Sources – The DOT should present a summary of level of funding available for CV investments from traditional state revenue sources, including fuel taxes, passenger vehicle and truck registration fees, sales taxes, permit fees, and federal-aid funding program.

74 Step 4: Revenue Opportunities – To present how long-term expenditure needs, such as O&M costs, would be meet, the DOT can explore opportunities for additional revenues by leveraging the efficiency gains from V2I investments, such as transit ridership, electronic tolls, and road user charges. Step 5. Alternative Funding Sources – To address how funding shortfalls will be handled, the DOT can identify alternative funding sources, such as grants, federal discretionary funds, or subsidies, if needed. Step 6: Evaluate Funding Risks – The DOT should evaluate potential funding risks and present the findings in the financial case. Examples of such risks include: • Uncertainties with various funding sources (e.g., fuel taxes). • Impact of CV investments on future funding sources, such as a potential decrease in fuel taxes from increased use of alternative fuels or reduction in-vehicle registration and driver license fees due to increased use of AVs. • Macroeconomic risks (e.g., inflation indexing for revenue sources). • Political/legislative risks. Step 7: Financial Case Summary – The financial case should include a high-level summary of cost estimates, potential funding sources and shortfalls, uncertainties and risks, and strategies to mitigate them. DEPLOYMENT CASE The deployment case establishes “what is required to deliver and operate” the investment. Making the deployment case requires developing a high-level plan, evaluating various delivery strategies and procurement plans, and addressing delivery and investment risks. The research team investigated the feasibility of various delivery strategies for CV projects. Understanding the organizational context of the CV programs provided a starting point to further explore the deployment strategies for CV projects. The research team also evaluated how current CV projects are delivered, gathered lessons learned from these early deployments, and synthesized documented risks to inform the deployment case analysis. Comparison of Connected Vehicle Deployment with Intelligent Transportation Systems Projects The CAT Coalition provided the organizational context for CV projects. Per the CAT Coalition survey, most agencies have embedded the CAT/CAV program in ITS/Operations/TSMO divisions in their organizational structure. The survey also observed that the CAT/CAV projects are funded through the ITS/Operations/TSMO programs. Furthermore, as Title 23 Code of Federal Regulations Part 940 Intelligent Transportation System Architecture and Standards suggest, CV projects are treated as ITS projects from a federal-aid funding and regulatory perspective. Given the parallels between CV and ITS projects, understanding how DOTs procure services to deliver ITS projects is important.

75 The NCHRP Project 03-77 laid out a framework for selecting contracting strategies for ITS projects. This study proposed the following four basic dimensions to help structure the procurement framework. • Work Distribution – To define what services are procured, such as systems manager, systems integrator, software development, installation, or operations and maintenance. • Method of Award – To define the criteria for contractor/consultant selection. • Contract Form – To define how work would be authorized. • Contract Type – To define how the payments are made and delivery risks are allocated. Using combinations of the above-listed four dimensions, the NCHRP Project 03-77 proposed seven feasible basic procurement packages. Numbered from 1 through 7 in Table 23, the proposed packages are intended to serve various delivery needs of a DOT. Packages 1 through 4 are intended for traditional system implementation based on project needs and complexity. For instance, low-bid procurement is typically suitable for projects that use commercially off-the- shelf products or where the consultant services are well-defined. On the other hand, best-value, turnkey type approaches or qualification-based selection are more suitable when a DOT acquires new systems or requires capabilities. Similarly, design-build or task-order based multiple contracts would be more suitable for projects requiring complex software development. Table 23. Basic Procurement Packages Proposed by NCHRP Project 03-77 for ITS Delivery Package No. Work Allocation (Package Name) Method of Award Contract Form Contract Type Comments 1 Commodity Supplier Low-bid selection of prequalified packages Single-phase or purchase order Fixed Price Used for COTS 2 Low-Bid Contractor with Consultant Design Low bid for contractor Phased or Task Order Fixed Price for contractor incentives optional Consultant performs 100 percent of design. May provide additional services during implementation 3 Systems Manager Quality-based selection (negotiated procurement) Phased or Task Order Fixed price, cost plus or time & materials incentives optional Field equipment procured by agency using low-bid process

76 Table 23. Basic Procurement Packages Proposed by NCHRP Project 03-77 for ITS Delivery Package No. Work Allocation (Package Name) Method of Award Contract Form Contract Type Comments 4 Design-Build Contractor with Design Consultant Best-value selection (based on consideration of price and quality) Phased Usually fixed price, cost plus or time & materials incentives optional Consultant provides 30 percent design 5 Consultant Negotiated Phased or Task Order Fixed price, cost plus or time & materials incentives optional Used for system design and many other consultant services 6 Outsourcing Agency Activity Low bid may be based on rates Usually single- phase Fixed price or time & materials incentives optional Typical activities include maintenance, operations, signal timing, etc. 7 Outsourcing Agency Function Best value or low bid Single-phase Fixed price, cost plus or time & material contracts Incentives optional Typical functions include traveler information and toll collection. Maybe a P3 Evaluating the Suitability of Intelligent Transportation System Procurement Models for Connected Vehicle Deployments The NCHRP Project 03-77 framework provides a foundation for conducting procurement planning for CV deployments to a larger extent. This framework is generally deemed adequate for small-scale CV deployments where DOTs may use existing ITS delivery approaches for systems planning and hardware installation until the point of integration with the DOT’s traffic management center. Examples from FDOT and GDOT illustrate how the existing contracting strategies can be effectively used for small-scale ITS deployments (Hatcher et al., 2018). FDOT Procurement Example: FDOT has completed the procurement for at least five CV deployments: Osceola County, US 90 in Tallahassee, State Road 434, I-75 Florida's Regional Advanced Mobility Elements (FRAME), and Pedestrian Safe GreenWays Projects. Documentation is available for two of those deployments.

77 On the US 90 deployment project, FDOT used a design-bid-build, using a standard request for proposal process. IFDOT served as the systems manager, the City of Tallahassee installed the RSUs, FDOT and a vendor jointly performed necessary testing, and the FDOT-hired consultant performed the overall system integration functions. On the I-75 FRAME, FDOT procured separate consultant services for a system manager, awarded based on qualifications and costs, and design-build for installation. The design-builder was responsible for vendor coordination, device testing, and installation. FDOT hired a consultant to assess technology (hardware and software) and human resource readiness. On both projects, FDOT used consultant support to integrate CV devices with the existing system. No enhancement to current data environment capabilities was required (Hatcher et al., 2018). GDOT Procurement Example: GDOT deployed four applications at 54 signalized intersections in the Atlanta region that included RLVW, SPaT/MAP, pedestrian crosswalk, and a scaled-down Eco-Approach and Departure application. GDOT also installed ramp meter signals at 12 freeway locations. While GDOT developed systems engineering documentation with consultant assistance, it opted for a design-build turnkey solution using a standard request for proposal process. GDOT is using a single contract with the design-build team to establish, develop, install, and integrate DSRC radios and ramp meters at signalized intersections and freeway ramps, respectively. Despite these parallels, key distinctions should be made between CV and ITS projects. ITS projects typically involve communications between the roadside units and TMCs, while CV deployments introduce new elements into the ITS domains. The CV infrastructure includes OBUs on vehicles and bidirectional information flow between the OBUs and TMC. This additional element, particularly on large-scale CV deployments, entails handling massive amounts of data flowing bidirectionally. Therefore, DOTs may be required to expand their back office systems, data hubs, software applications, and security credential management capabilities to a significant extent. As a result, large-scale deployments might need to look for alternative delivery models beyond those traditionally used for ITS deployments. Many DOTs are exploring P3s for large-scale CV deployments that are different from the delivery models used in capital infrastructure projects. Earlier, DOTs tried to implement P3s, which were modeled after those used in capital infrastructure projects, for statewide ITS deployments. In most instances, the DOT did not continue to pursue this model for future deployments because of challenges posed by the rapid evolution of the technology market. As a result, DOTs continued to prefer the delivery of ITS projects using traditional procurement methods. The P3 models currently explored or adopted by DOTs are intended for a specific purpose. At least two models are currently in place. UDOT has forged a technology partnership with Panasonic; while other DOTs have entered into resource sharing agreements for data sharing, fiber optic cable installation, and so on in a way that mutually benefits each party’s objectives. UDOT-Panasonic Technology Partnership: UDOT established a limited multi-year partnership, modeled after the design-build-operate-maintain delivery method, with Panasonic. Under this partnership, Panasonic will help UDOT install sensors along selected sections of roadway, up to

78 220 installations and 2,000 vehicles using DSRC, and create a CV data environment to broadcast information between UDOT traffic operation centers and vehicle information systems. Panasonic will develop and deploy a cloud-based data analytics, processing, and storage system, and V2I software applications for the CV data environment. Panasonic will employ its CIRRUS traffic management technology, an “open development platform for data sharing and collaboration,” to develop data analytics using vehicle, infrastructure, and weather-related data collected from UDOT infrastructure. Through this partnership, Panasonic benefits from gaining access to real-world deployment experience to help develop its CIRRUS system, while UDOT benefits from perpetual royalty- free rights to the system. UDOT also benefits directly from the collaboration through faster scale up of its CV program, production grade deployment, expertise on vehicle installation, data platform for large-scale data, and potential partnerships with OEMs on basic safety messages. Other current and planned partnerships include Alaska’s partnership with SPaT application developers, Arizona DOT's planned partnership to create a TIM center with CAV Test Bed, and FDOT's plan for P3 procurement for any field deployment with CV infrastructure (NOCoE, 2019). Data or Other Resource Sharing Partnership: The data sharing agreement between FDOT and Waze is an example. Under this agreement, FDOT will have access to the data that Waze collects (e.g., congestion or crash data), and in return, FDOT will supply Waze with advanced traveler and network information on work zones, speed limits, evacuation routes, and tolling. FDOT also developed its Data Integration and Video Aggregation System to collect and share data among various data and agency partners. Many DOTs, such as Maryland, Georgia, and Kentucky, have adopted similar shared resource agreements for backhaul communications. Under this approach, the DOT procures with a private partner to install fiber optic infrastructure on the ROW to meet future data requirements for transportation and public purposes. In exchange for access to the ROW, the private partner bears most of the construction and maintenance costs. Procurement Lessons Learned from Existing CV Deployments Recognizing the procurement challenges associated with CV deployments, FHWA ITS JPO conducted a research study to assess the state of practice (Hatcher et al., 2018). This study conducted a review of procurement approaches used by three DOTs—Florida, Georgia, and Colorado—and documented initial lessons learned from early deployments. • Different procurement approaches will be required to meet the needs of CV deployment. There is no single best approach to procure services for CV deployment. • DOTs may need new delivery strategies, such as a service model. • If traditional procurement methods are used, the DOTs should be prepared to be creative and flexible. For example, FDOT used the request for information to seek information from several vendors on CV testing and implementation in the areas of data, CV infrastructure, system security, and other functions.

79 • When needed, DOTs should consider using multiple contracts to perform installation, upgrades, and equipment replacements. • Schedules should consider that some activities, particularly, system testing and security testing, take additional time. • As FCC licensing process is time- and resource-intensive; DOTs may need expert services to assist with the licensing process. • DOTs must be aware of the exposure to technology risks in a rapidly evolving environment and find ways to effectively mitigate these risks. Mitigation measures, such as using the request for information to stay current on technologies, evaluating back office infrastructure needs, selecting technology agnostic or technologically diverse options, and allocation of risks to the private sector, could be helpful. • Establishing a team of subject matter experts and specialists is helpful during procurement planning to provide feedback/ comments on procurement-related materials, such as requirements and specifications documents. • Lessons learned from pilot projects can serve as a great resource of information. Making a Case for Connected Vehicle Deployment The deployment case involves answering the following questions: • What activities are entailed in the delivery? • What activities will be undertaken using in-house personnel? • What activities will be procured from the private sector? • What are the key procurement issues and opportunities? • What contract methods are being considered? • What are the risks that could affect delivery? • What is the time frame for planning and procurement? The research team proposes a three-step approach to answer the above-stated questions: 1. Establish a project procurement plan. 2. Conduct a risk assessment. 3. Communicate the procurement model(s) and a project management plan. Step 1: Establishing Project Procurement Plan This step is necessary for DOTs to understand how procurement of products and services will be packaged and identify the procurement model. Procurement planning is conducted through: a) Identifying key activities to be accomplished through various phases of delivery. b) Identifying which services will be procured from the private sector through an in-house staffing assessment.

80 Key Activities Involved in CV Deployment Process: Procurement planning begins with identifying key activities to be accomplished through various phases of delivery from planning through O&M. The project development process of ITS projects has traditionally included four key phases: Planning, Design, Implementation, and Operations and Maintenance. As suggested by Sando et al. (2019), and to meet the need for robust and extensive planning, two additional phases can be introduced in the CV deployment process: Post-Planning and Begin Procurement to accommodate upfront work, such as developing a concept of operations, engaging vendors, hiring a system manager, and evaluating system readiness, before procurement begins. Sando et al. (2019) also presents a detailed breakdown of all key activities associated with various delivery phases of a CV deployment project. Identifying Services for Procurement: Presently, CV programs are embedded within TMSO, Traffic Operations, or Planning Divisions of a DOT and staffed with one to four full-time equivalents. Most DOTs have chronic staffing shortages; in addition, DOT staff may not have the necessary expertise and experience with CV technologies. It is not uncommon for DOTs to procure a significant share of work from the private sector. Most DOTs procure consulting services to perform or assist with CV system planning, preparing procurement specifications, and oversight. Reviewing the availability and skills of in-house staffing will help determine (1) which activities can be performed in-house, and (2) whether staffing can be augmented through internal reallocation of resources or training. This exercise sets the stage for the procurement process because the DOT will be able to determine which services to procure from the private sector and the level of support needed. The DOT can also avail additional staffing resources or expertise from FHWA ITS JPO, AASHTO, and other partnering agencies. Large CV deployment projects can use a project governance structure to guide the delivery process. The project governance may include the project sponsor, internal partners (e.g., procurement office), external partners (e.g., local agencies), a systems manager to manage the procurement process, and multiple systems integrators to manage installation of V2I systems and ensure compatibility with legacy systems. Step 2: Conduct Risk Assessment This step entails conducting a risk management exercise to gain a better understanding of risks, devise mitigation strategies, and allocate them efficiently among stakeholders. Various types of risks, including political, legal, contractual, construction, funding and revenue, technological, and O&M risks, are assessed. The risk assessment informs the DOT on the initial risk allocation strategy and determines the risks that the DOT should retain and those that should be transferred to the private sector. Examples of such risks are listed as follows (Hatcher et al., 2018): • Working with Multiple Vendors: When a DOT works with multiple vendors, there is a possibility for compatibility and interoperability issues among various product types installed along the corridor or network. The DOT can test products offered by potential vendors to ensure interoperability and compliance with current and open standards. In lieu of a traditional “furnish and install” approach, the DOT should require device testing before purchasing and allow for sufficient time in the procurement schedule.

81 • O&M Funding of CV Infrastructure: Most DOTs depend on state, regional, and local revenues to meet the O&M needs of CV infrastructure. Federal funding (e.g., the Congestion Mitigation and Air Quality Improvement Program) is typically not available for maintenance for non-interstate infrastructure. As CV deployments grow over time geographically and functionally, the fiscally constrained maintenance programs of many DOTs are less likely to sustain the funding for O&M needs. Therefore, the DOT should strive to secure a dedicated and adequate funding source to meet the O&M needs. To overcome the budgetary shortfalls, DOTs can explore alternative measures, such as warranties and service contracts built-in purchasing, and revenue sources. • FCC Approval. All CV equipment must demonstrate compliance with FCC standards prior to operating for public use. Many DOTs have experienced challenges, such as substantial time and effort and lack of understanding, with the licensing process. DOTs may have to hire an expert to assist with FCC approval and allow for adequate time in the delivery schedule (Sando et al., 2019). • Lack of In-house Expertise. Many agencies do not have in-house expertise or experience with writing requirements for “new to market” products or managing contracts with technology companies. DOTS typically rely on hiring a systems manager or consultants to manage or aid with these activities. • Technological Maturity. In a rapidly evolving landscape, selecting a product with the right technological maturity can be a challenge. DOTs often face the possibility of selecting a product that is yet to be ready or becoming obsolete. To mitigate this concern, DOTs can consider conducting market research to acquire information on technological capabilities and industry capacity, such as through vendor engagement, requesting product literature, and issuance of requests for information. The DOT may consider allocating the risk of technological obsolescence to the private sector through an extended service agreement or a design-build-operate-transfer procurement model. Because the deployments happen when the technologies continue to evolve, DOTs are at risk of installing devices with varying levels of capability and maturity. The early stages of ITS field device deployment faced a similar situation during the 1990s and early 2000s, where the traffic management system inherited a collection of several disconnected subsystems and field devices of varying capabilities and maturities. Over time, the ITS environment “started to gel” into a centralized software control system. The CV projects in the near term are likely to face a similar situation with uncertainties around technologies, data management, and evolving relationships among DOTs, technology companies, and vehicle manufacturers. These risks can be somewhat handled by putting an implementation plan in place to track systems that are being deployed or planned over the next 5, 7, or 10 years. Step 3. Communicate the Procurement Model(s) and a Project Management Plan This step involves communicating the procurement strategy to execute the delivery plan. The procurement strategy includes major features of work to be procured and identifies the feasible procurement model(s). The procurement strategy will also propose a conceptual schedule for the

82 delivery with key milestones and activities that are mandatory, difficult, or time consuming such as FCC approval, procurement of CV equipment, and system and security testing. The selection of a procurement strategy is generally influenced by commonly accepted factors such as the type of services to be procured, project size, statutory limitations, agency experience, staffing capabilities and availability, life cycle considerations (e.g., O&M), financing, cost, and schedule. DOTs have used various models to procure services from the private sectors, including design-bid-build, design-build, and P3s. Procurement examples, described in earlier sections, illustrate how DOTs have used various tools in their procurement toolbox and what lessons were learned from early deployments. The general observation is that traditional procurement tools may not be suitable for CV deployment, where low-bid selection or sequential delivery of phases may not be fit well with technology- intensive projects. There are additional issues, such as data ownership, software licensing, service agreements, intellectual property rights, and operational aspects that need to be worked out in a rapidly changing technological landscape. New contracting tools, such as qualifications- based selection for consultants, project partnering, and alliance contracting for more integrated delivery are also available for DOT consideration to overcome some of the deficiencies associated with traditional procurement. The DOT can also modularize the delivery phases into bid packages and procure each bid package using an appropriate procurement method to achieve the desired outcomes. BUSINESS CASE SUMMARIES OF PLANNED V2I DEPLOYMENTS The business case framework articulated in this chapter was applied to three proposed and initial deployments of V2I infrastructure by public agencies. Summaries of the business cases of these deployments that resulted from this analysis are presented in this section. The purpose of the analysis was to (1) refine the business case framework developed using these “real-world” deployment examples to ensure its applicability for future use and (2) illustrate the summary outputs from the proposed business case analysis framework to establish its value to decision- makers. Information regarding these V2I deployments was obtained through personal communication between the team members and relevant agency representatives and through other publicly available means. Although the agencies supplied the required information to support the analysis, they had no involvement with the analysis itself which was done strictly on a post hoc basis. Further, the research team recognized at the outset of this effort that not all business case components proposed in this chapter would be apparent from these real-world examples, given that this is a post hoc analysis. V2I DEPLOYMENTS STUDIED TO DEMONSTRATE BUSINESS CASE SUMMARY OUTPUTS 1. Colorado DOT Internet of Roads 2. Port Authority Lincoln Tunnel Corridor 3. Florida DOT I-75 FRAME

83 Colorado Department of Transportation Internet of Roads Problem Statement Colorado’s highways suffer from growing safety and mobility challenges brought about by increases in-vehicle miles traveled that have increased 23 percent since 2000 and traffic fatalities that have increased 45 percent since 2011. Existing transportation infrastructure budgets are insufficient to address these problems through traditional capacity and TSMO solutions alone. Without new tools such as V2I applications, continued population growth will worsen these trends and further disrupt the state’s safety, economy, and quality of life. To provide one specific corridor example, the I-70 West Mountain Corridor provides critical access to ski resorts and mountain destinations vital to the state’s economy. According to the I-70 Coalition, these destinations provide $88 million in annual state tax receipts and represent 20 percent of the state’s tourism revenue. However, severe congestion costs the state roughly $839 million per year. The corridor is geographically constrained with steep grades and subject to severe winter weather. The corridor’s capacity has remained largely the same since 1979 because of the prohibitive cost to expand the roadway. In addition, Colorado DOT (CDOT) has few other operational solution options available to apply to the corridor, having already implemented numerous strategies such as advanced traveler information ramp metering, variable speed limits, and high-occupancy vehicle/high-occupancy toll lane operations. CDOT identified a 540-miles network of primarily rural highways to outfit with fiber optic high- speed communication lines and CV infrastructure (RSUs) to enable deployment of safety- and time-critical V2I applications, with an initial focus on SWIW, RDW (CSW), Q-WARN, and SPD-HARM. This investment has been termed an Internet of Roads (IoR). The phased implementation of infrastructure and applications, which will depend on increasing market penetration CVs, will generate significant safety benefits over the 20-year operational analysis period, including avoidance of over 80,000 accidents, 22,000 injuries, and 300 fatalities (CDOT, 2018). Strategic Case The proposed investment in the IoR is consistent with CDOT’s short- and long range plans. For example, in its Performance Plan, two short-term strategic policy initiatives align with the expected outcomes of the investment (CDOT, 2017): • Roadway Fatalities (System Peak): Mitigate the recent surge in roadway fatalities in Colorado, with the long-term goal of moving toward zero deaths. CDOT, in partnership with other safety stakeholders in Colorado, aims to limit roadway fatalities statewide to 800 for calendar year 2018, compared to 608 in 2016. Limit fatalities to 890 in calendar year 2020. • Travel Time (System and Technology Peaks): Slow the increase in average travel times on Interstate 25 between Northwest Parkway and C-470 during peak weekday hours. Slow the increase in average travel times on Interstate 70 between Vail and C-470 during peak weekend hours.

84 The forecasted reduction in accidents, injuries, and fatalities was stated above. Additionally, the investment is expected to deliver $54 million in discounted travel time savings and commercial truck operating savings. The investment in fiber optic cable in rural regions will bring additional quality of life benefits to residents who had no access to high-speed communication infrastructure. Economic Case The capital cost of the IoR project in 2018 was approximately $67 million in fiber and CV equipment. An additional $71.5 million had been allocated to developing the V2I applications and CV platform. A further $24.6 million was programmed for asset renewal of certain project components over the project life cycle. The IoR project was estimated to generate a benefit-cost ratio of 17:1 at a 7 percent discount and of 30:1 at a 3 percent discount (AECOM, 2018). Benefits include accidents, injuries, and fatalities avoided; personal vehicle and passenger hours traveled avoided; and commercial vehicle hours traveled avoided. The analysis used conservative assumptions on the rate of CV market penetration estimating that “all new vehicles will be equipped with V2X technology by 2033, but 100 percent fleet penetration will not be achieved until 2058” (AECOM, 2018). Financial Case The capital cost of the $67 million IoR project was to be paid for through a combination of federal and state funds and private sector investment. The planned budget as of 2018 included an expectation of $23 million in federal grant funding, an additional $7.6 million in unspecified CDOT funds, and $24.9 million and $11.4 million from two telecommunication companies, respectively, that would provide dedicated fiber optic cable in exchange for access to CDOT’s right-of-way. Deployment Case As of 2018, CDOT was using a combination of in-house staff and private sector partners to deliver all elements of the IoR project and related CV ecosystem comprising the V2I applications and CV platform. Installation of the fiber optic cable would be performed by two partner telecommunication companies. Installation of RSUs was performed, in part, by CDOT staff to gain experience with the “engineering design, environmental processes, network architecture, and construction” of CV technology (CDOT, 2018). CDOT had an agreement (since ended) with a technology integrator to develop the CV platform that would collect and analyze data from CVs and infrastructure to enable the V2I applications. In addition to payment by CDOT, the technology integrator would benefit from testing newly developed technologies on CDOT’s network. CDOT would own the intellectual property developed by the technology integrator and lease it back in return for a perpetual license and upgrades to the CV ecosystem.

85 Port Authority of New York and New Jersey Lincoln Tunnel Exclusive Bus Lane Connected Automated Bus Project Problem Statement The capacity-constrained Lincoln Tunnel Corridor crossing the Hudson River and connecting major highway corridors in Northern New Jersey with the Port Authority Bus Terminal in Midtown Manhattan is a vital link for thousands of daily commuters using numerous commuter and interstate bus lines. The tunnel’s designated bus-only exclusive bus lane (XBL) has become a significant bottleneck for travelers because “delays at merge points at both ends of the corridor; longer-than-necessary following distances; slow speeds due to sun glare; the need to [negotiate curves] slowly because of narrow lane geometry; and occasional traffic collisions/breakdowns” (WSP | Parsons Brinckerhoff, 2016). Future forecasts of 2040 demand made relative to 2011 show a 45 percent increase in daily customers, a 15 percent increase in daily buses, and a 40 percent increase in PM peak hour buses at the Port Authority Bus Terminal, which would be replaced with a new terminal by then. At the same time, buses comprise approximately 22 percent of peak hour vehicles in the Lincoln Tunnel but carry approximately 89 percent of peak hour customers. The ability to improve current reliability and accommodate forecasted demand growth are vital economic drivers for commuters using the system and businesses in Manhattan that rely on them. Capacity expansion solutions are prohibitively expensive and take years to implement. Demand management solution have only modest impacts on performance. Certain operational solutions, on the other hand, can address the cited causes of delay and increase throughput by reducing bus headways. Among them, V2I applications show the greatest promise by enabling bus platooning. CV technology would achieve significant mobility benefits, including smoother traffic flow through reduced speed variability, shorter headways, and greater throughput. Safety benefits would also be possible through reduced accidents from lane departures or rear-end collisions. Strategic Case The XBL connected automated bus project would meet several of the Port Authority’s strategic objectives. The agency states, “the XBL presents a unique opportunity where a relatively small reduction in the average bus headway through the use of available [connected and automated vehicle] technology and associated operational improvements could result in improved safety and a significant increase in capacity in an already constrained transportation network” (Port Authority, 2019). Deployment of the CV technology under evaluation, including Forward Collision Warning, lane keeping, CACC, automated merging, as well as mechanical health monitoring, would permit avoidance or deferral of the far more costly conversion of one of the tunnel’s general purpose lanes to a second XBL or high-occupancy toll lane to accommodate projected bus demand. A projected reduction in headway to 4.5 seconds or less would support an increase in XBL throughput by 30 percent from the current 650 buses/hour to 840 buses/hour, exceeding the forecasted need of 810 in the 2040 AM peak hour. The V2I-equipped XBL would contribute to meeting overall Port Authority safety goals by targeting zero collisions. A reduction in emissions and improved fuel efficiency due to reduced incidents and stop-and-go traffic would help meet environmental goals.

86 Economic Case One of the stated objectives of the project is to reduce average peak hour delay by 10 minutes by reducing incidents and breakdowns and increasing throughput. A study proposing the CV- enabled bus platooning concept did not quantify these benefits, but the well-documented criticality of the corridor to the region and nation’s economic vitality suggest significant benefits from even small improvements in corridor throughput, and conversely, significant disbenefits from not addressing constraints and latent or growing demand. Using even the most conservative value of time metrics with the forecasted time savings and the current and projected volume of users would be substantial. The study suggested that reductions in accident liability and insurance costs alone would pay for the system in two years (WSP | Parsons Brinckerhoff, 2016). Financial Case At this time, the project is only a demonstration estimated to cost $4.8 million over 18 months. The demonstration consists of system design and integration, closed track testing, and testing on the closed XBL during weekend mornings. Financial considerations for a follow-on pilot and permanent deployment are not available. Deployment Case The complex operating environment and numerous potential players participating in a CV-enabled bus platooning concept will present several implementation challenges. CV-enabled bus platooning would require a commitment from multiple transportation agencies including the Port Authority (owner and operator of the Lincoln Tunnel and Port Authority Bus Terminal), New Jersey DOT (owner of the roadway that connects the Lincoln Tunnel and the XBL to feeder routes west of the Hudson River), and numerous bus operators whose fleets would need to be equipped. They represent a wide variety of bus agencies and companies in terms of size, market, and fleet characteristics. Gaining concurrence among them to install OBUs and participate in meeting all requirements of the systems and technology (e.g., retrofits and procurement cycles, operator training, maintenance requirements, and others) would be a serious challenge. For example, buses’ lifespans are typically 10 or more years, operators prefer uniform fleet characteristics to minimize maintenance and training differences, and therefore also favor large- scale deployments of new technologies that are inherently more time consuming. However, these preferences naturally conflict with the shorter lifespans of leading-edge technology, which often requires specialized maintenance and training. Nonetheless, equipping only New Jersey Transit commuter buses with the technology would be sufficient to achieve the minimum threshold for mobility and safety benefits. FDOT I-75 Florida’s Regional Advanced Mobility Elements Problem Statement Along the 75-mile-stretch of I-75 and US 441/US 301 between Wildwood and Alachua, FDOT is implementing a FRAME project consisting of CV infrastructure to enable a bundle of V2I applications. A prime focus of corridor is the segments running through the cities of Gainesville and Ocala, where traffic signals will emit SPaT data to implement MMITSS applications, including I-SIG, PED-SIG, TSP, FSP, and EVP. The project will also improve dissemination of

87 real-time information to motorists during freeway incidents to improve response and alternate routing, avoid shutting down freeway lanes, and reduce secondary crashes. FDOT will operate I-75 and US 441/301 with an integrated corridor management approach. The V2I applications will address a series of safety and mobility concerns. Specific problems include (FDOT, 2016): • The crash rates along I-75 near Gainesville and between Ocala and Wildwood are as high as those along Interstates in the state’s largest urban areas, reflecting the mix of cars and trucks and local and long-distance traffic. • The project area experienced 226 vulnerable road user (90 pedestrian and 136 bicyclist) crashes between 2011 and 2014 with 169 crashes along US 301/US 441 concentrated within the cities of Gainesville and Ocala. • A major contributing factor to arterial safety issues is the frequent lane closures and congestion from accidents on I-75 that cause traffic to route onto the parallel arterials. • Over the last five years, incidents have caused at least one I-75 lane or ramp to be closed 2,665 times in the study area. • Portions of US 301/US 441 traffic operate at Level of Service D or worse. The situation worsens when the traffic diverts to the arterial system. Strategic Case The I-75 FRAME project advances FDOT’s TSMO vision to “optimize the use of transportation infrastructure for improved safety and mobility moving from facility management to mobility management” (FDOT, 2016). It is also consistent with Florida’s Future Corridors, a state, regional, and local partnership to plan for the future of Florida’s major statewide transportation corridors over the next 50 years that envisions TSMO solutions and emerging technologies to help optimize existing infrastructure and improve safety. Expected safety and mobility benefits are significant, for example: a 20 percent reduction in fatalities and severe injuries on I-75 and on US 301/441; a 25 percent reduction in secondary crashes on I-75; a 25 percent reduction in intersection crashes within urban regions; and a 20 percent reduction in hours of delay for autos, freight, transit, and pedestrians. These performance improvements are superior to many (more costly) investment options. For example, it is expected that improved incident management response through real-time traveler information can be better achieved through V2I technology relative to other approaches such as greater roadway surveillance with cameras combined with additional dynamic message signs. Economic Case FDOT estimated a benefit-cost ratio of between 10:1 and 20:1, accounting for implementation and O&M costs over a 20-year analysis period. A more rigorous analysis would benefit from additional performance data and methodology to analyze specific V2I applications, such as Crash Modification Factors for CV technology. One safety V2X application example envisioned is targeted advance warnings to drivers alerting them

88 to impaired pedestrians unexpectedly entering the roadway in the dark. FDOT has conducted some initial research into determining appropriate proxy Crash Modification Factors to estimate these potential benefits and associated benefit-cost ratio. FDOT expects that this benefit-cost ratio will show the safety benefits outweigh the public costs of CV infrastructure investment. Financial Case In 2016, FDOT estimated the cost of project deployment to be $42.8 million paid for predominantly with state funds. Project costs components include RSUs, closed-circuit television, MMITSS application development, signal controllers, fiber, and fleet OBUs. As of 2020, FDOT’s Statewide Transportation Improvement Program indicates a mix of state and federal funds being used for preliminary engineering and construction. Deployment Case FDOT has procured separate consultant services for a system manager, awarded based on qualifications and costs, and design-build for installation. The design-builder is responsible for vendor coordination, device testing, and installation. FDOT hired a consultant to assess technology (hardware and software) and human resource readiness. On both projects, FDOT used consultant support to integrate CV devices with the existing system. No enhancement to current data environment capabilities is required (Hatcher et al., 2018). In terms of in-house program management, FDOT has leveraged experience from pilot V2I deployments along corridors in Tallahassee and Gainesville. Observations from the Business Case Analysis of the Sample Projects The following key insights were gained by the research team regarding the proposed business case analysis framework during the course of preparing the business case summaries for these three V2I deployment projects. • Agencies generally have sufficient data at hand to complete several parts of the qualitative aspects of the analysis, e.g., problem statement, strategic case, financial case and deployment case. However, a key shortcoming is in preparing the economic case arguments for which data (especially benefits related data), tools and methodology to perform the benefit-cost analysis are not widely available. Another shortcoming was in the treatment of the deployment case, i.e., enumerating the risks and requirements of V2I implementation projects in a manner that is helpful for agency leadership to take go/no- go decisions. • While the rigor of the analysis to justify investments varies, as is to be expected, when the results from these analyses are aggregated and presented to comply with the business case framework suggested in this chapter, they provide compelling narratives and enable decision-makers to make their go/no-go decisions in an informed manner. These insights were used to refine the framework to enhance guidance especially around the benefit-cost analysis in the economic case and the deployment case.

89 CHAPTER SUMMARY This chapter demonstrated how a business case can be developed for a selected CV investment so that an organization can make an informed decision. The business case begins with a problem statement that highlights the case for change. In particular, the problem statement compares the expected outcomes with the status quo option, i.e. highway improvements planned in the absence of the V2I application solution to address the identified problem or opportunity over the planning period. The business case then rests on arguments advanced around four sub-cases: • Strategic Case establishing why an investment should be pursued from a strategic standpoint. It determines the value of addressing a problem or an opportunity based on the goals, plans, and policies of the agency for a given region. It also evaluates the options against specific objectives to be achieved for each goal area to formulate a clear narrative on how the CV investment can address the problem or opportunity. The strategic case also articulates the risk to the performance of the investment option. • Economic Case establishing “the societal benefits” of the investment using a standard economic analysis approach. It assesses the costs and benefits of the proposed options to individuals and society at large. The economic appraisal spans the entire investment lifecycle—to include initial capital investments, O&M costs, and replacement costs. To aid this analysis, the research developed an Excel-based BCA tool to consider simple, high-level economic analysis including scenario analysis for various CV investment options. • The BCA tool is designed to conduct benefit-cost analysis for five V2I applications the BCA tool builds on the background information on anticipated benefits and costs presented in Appendix D. However, the tool is designed to be flexible in order to modify, add or remove benefit type, cost component, market penetration rates, and other assumptions as well as to any V2I application with ease. While the tool uses single-point estimates for all inputs, the tool can support probabilistic, sensitivity and scenario analyses, with appropriate modifications, to evaluate the impacts of risks and uncertainties. • Financial Case establishing “how much the investment will cost” a DOT. It focuses on the financial impact to the agency and funding arrangements (primarily the capital, operating, and revenue impacts and risks related to the investment). The financial case identifies potential funding sources and associated risks and uncertainties. The chapter reviewed traditional and supplementary funding sources and alternative financing options. • Deployment Case establishing “what is required to deliver and operate” the investment. Making the deployment case requires developing a high-level plan, evaluating various delivery strategies and procurement plans, and addressing delivery and investment risks. The research team investigated the feasibility of various delivery strategies for CV projects. Recognizing the similarities between ITS and CV projects, this chapter explores the dimensions of a typical ITS procurement model as a starting point. However, as

90 examples from real-world CV projects illustrate, this ITS procurement model might be adequate for small-scale CV deployments, but fraught with some challenges. The existing CV deployments provide valuable lessons for consideration to help structure the deployment better. Several planned “real-world” V2I deployments helped to refine the business case framework to ensure its applicability for future use and to demonstrate its applicability in practice. While agencies generally have sufficient data to complete several parts of the qualitative aspects of the analysis, there are some shortcomings. The economic case is hampered by a lack of benefits data and widespread availability of tools and methods to perform the benefit-cost analysis, and it is challenging to enumerate the risks and requirements of V2I implementation projects for the deployment case.