The cost behavior of intelligent transportation systems over time

Abstract

The successful deployment of any innovative system relies heavily on conducting a credible ex-ante evaluation and planning. Among such innovative systems are the intelligent transportation systems (ITS), which promise a cure-all remedy to the staggering adverse impacts of traffic congestion. Yet these systems have different characteristics than the traditional transportation systems-such as different lifecycles and cost structures, and higher uncertainties in terms of benefits, costs or obsolescence. This paper investigates the cost behavior of ITS and questions whether the long-established practice of assuming the project-specific inflation rates to be the same as the general inflation rate-that the traditional approach adopted while conducting the economic and financial analysis of the conventional transportation projects-can be applied to ITS projects. The methodology used for this study follows three different approaches that look into the behavior of inflation rate with respect to ITS projects. The results indicate that a sector-specific inflation rate must be derived and used. This recommended practice will lead, on the whole, to better planning, more effective deployment and improved lifecycle management of these technology driven systems.

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