In response to a period of high inflation in the United States in the late 1970s, CDOT began using Life-Cycle Cost Analysis to support its investment decisions. In 1981, CDOT's pavement office, seeking to mitigate the effects of the economic environment, mandated that an LCCA be completed in the design phase for all major projects. These early analyses included specific input values which produced deterministic results. The objective was to implement strategies that optimized the use of available resources.
Similar economic challenges since the late 1990s prompted CDOT to account for fluctuating economic indicators, particularly in the discount rate used in its LCCA. Common practice in representing the present value of future construction costs is to account for the "opportunity cost" or "time value" of money using the real rate of return (nominal rate less inflation) of a Treasury Bill as a surrogate. To provide a better estimate of the appropriate rate to use in the LCCA and mitigate much of the uncertainty in choosing a rate, CDOT implemented an additional analysis method based on probabilistic inputs.
Figure 4: Aerial photo of I-70 near Gypsum.
The population explosion of the past two decades and the growth in daytime traffic increased the viability of performing nighttime work on the CDOT roadway system. Justifying the increased expense of nighttime construction demanded a process to quantify the cost benefit to roadway users.
In addition, CDOT's 2008 Annual Report identified regional demands that far exceeded available resources. For instance, Region 4 identified necessary improvements that exceeded $1 billion, with $60 million needed immediately simply to maintain its roads until improvement projects could be approved and funded. Region 6 expressed concerns about competing demands for expansion and preservation in light of the projected $48 billion Statewide budget shortfall.
Despite the fact that local Metropolitan Planning Organizations (MPOs) requested more funding as well, the State's Transportation Commission recommended sustaining the existing system due to revenue constraints.
In order to operate effectively in this environment, CDOT needed a comprehensive, user-friendly process for analyzing and selecting strategies that could be implemented by the Regions and defended before the State legislature, the public, and industry leaders. LCCA met this challenge.
Figure 5: I-70 near Evergreen.