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Case Study Bigstate Highway Department- Selection of Projects

Question

Bigstate Highway Department

Bigstate's highway department must select projects to be built during the coming year. Eleven

projects have passed the preliminary screening (see Table 47-1). Five projects have mutually

exclusive alternatives (for example A1, A2, and A3 are mutually exclusive alternatives for Project A). Each project and its alternatives must be evaluated at a 10% discount rate. The best set must be selected within a budget constraint of $36 million for the first year's construction cost. For this analysis all projects and alternatives can be assumed to have a life of 20 years.

Political considerations require that at most one project of A and C be selected. Similar

considerations require that at least three projects be selected from projects A, B, D, F, H, and J.

One of the biggest problems you have is that the Commissioner has identified the value for saving a human life with a range of $100,000 to $500,000, rather than a single value. Similarly, the department has determined that preventing a serious injury has a value between one-quarter and two-thirds of the value of a saved life.1

What projects do you recommend?

Table 47-1       Bigstate's Possible Highway Projects

 

 

First Cost ($M)

 

 

 

Annual Operating

Cost ($1000s)

 

Annual

Time and Distance

($1000s)

 

Benefits

 

 

Lives

 

 

 

 

Injuries

A1

8.0

350

950

2

11

A2

10.5

550

1300

2

11

A3

14.2

950

1350

2

11

B1

12.0

400

500

4

8

B2

14.5

500

1600

6

9

C

4.3

150

1100

0

0

D1

7.5

500

1950

1

8

D2

11.0

800

1950

4

10

E

9.4

0

700

3

5

F1

6.6

100

1100

0

6

F2

9.3

150

1500

0

8

G

7.5

200

1150

0

0

H

5.6

300

1500

1

0

I

7.9

1500

2800

1

1

J1

8.3

275

950

0

3

J2

11.4

475

950

2

3

K

16.0

850

2500

1

8

Option

How do your recommendations change over the range of possibilities for the values of lives and injuries? This can be presented graphically or in statements similar to the following: "For values of human life between $175,000 and $238,000, do projects A3, D1.. . ."

Summary

This question is related to a case study Bigstate Highway Department and discusses about selection of projects to be built by analysing various factors.

Total word count: Excel

 

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