Intercity Passenger and Freight Rail: Better Data and Communication of Uncertainties Can Help Decision Makers Understand Benefits and Trade-offs of Programs and Policies

In February 2011, we found that information on the benefits and costs of intercity passenger and freight rail projects is assessed to varying degrees by those seeking federal funding for investment in rail projects; however, data limitations and other factors reduce the usefulness of such assessments for federal decision makers. Applicants to two discretionary federal grant programs -- the Transportation Investment Generating Economic Recovery program and the High-Speed Intercity Passenger Rail program -- provided assessments of potential project benefits and costs that were generally not comprehensive. For instance, applications varied widely in the extent to which they quantified and monetized some categories of benefits. In addition, our assessment of selected applications found that most applicants did not provide key information recommended in federal guidance for such assessments, including information related to uncertainty in projections, data limitations, or the assumptions underlying their models. While the shortened time frames of the programs and resource limitations among project sponsors were key causes of the varying quality of analyses, data limitations (including a lack of historical data, particularly with respect to high-speed rail), data inconsistencies, and data unavailability also accounted for some limitations in applicants' benefit-cost information and will continue to impact these analyses in future funding rounds. Until data quality, data gaps, and access issues are addressed for the data inputs needed for rail modeling and analysis, projections of rail benefits will continue to be of limited use. We therefore recommended that DOT conduct a data needs assessment and identify which data are needed to conduct cost-effective modeling and analysis for intercity rail projects. In response, in 2011, DOT's Federal Railroad Administration raised this issue with the Transportation Research Board's National Cooperative Rail Research Program (NCRRP). Since then, the NCRRP has funded five research efforts which address data needs and cost-effective modeling and analysis of intercity rail projects. One of these research efforts was completed in 2015 -- Alternative Financing Approaches for Passenger and Freight Rail Projects. Three other research efforts are near their final draft form -- Comparison of Passenger Rail Energy Consumption with Competing Modes, Intercity Passenger Rail Service and Development Guide, and Developing Multi-State Institutions to Implement Intercity Passenger Rail Programs. The fifth effort -- Intercity Passenger Rail in the Context of Dynamic Travel Markets -- is still in the midst of the analytical work, but a final draft is expected the summer of 2015. Collectively, these research efforts go a long way to improve the state of the art with respect to identifying needed data and analyzing the costs and benefits of rail projects, and provide a rich resource for projects sponsors to draw from as they consider rail investments.

Concerns about the economy, congestion in the transportation system, and the effects of air emissions generated by the transportation sector have raised awareness of the potential benefits and costs of intercity passenger and freight rail relative to other transportation modes. In February 2011, we found that many applicants to two discretionary federal grant programs that encourage investment in rail projects-the Transportation Investment Generating Economic Recovery program and the High-Speed Intercity Passenger Rail program-struggled to provide the benefit-cost information requested or to use appropriate values designated for their respective program. For example, we found that challenges-including a lack of clear guidance on standard values to use in the estimation of project benefits-can contribute to variation in the quality of assessments of project benefits and costs in applications to these federal programs. Without clear guidance to applicants on preferred values for use in assessments of project benefits and costs, DOT decision makers may be hindered in their ability to compare the results of those assessments across projects or modes. A standard set of values for key benefit categories may enable transportation officials to more readily compare projects and potentially place more weight on the results of assessments of benefits and costs in decision-making processes. We therefore recommended that DOT provide ongoing guidance and training on developing benefit and cost information for rail projects and more direct and consistent requirements for assessing benefits and costs across programs. In doing so, DOT should: (1) direct applicants to follow federal guidance outlined in Presidential Executive Order 12893 and OMB Circulars Nos. A-94 and A-4 in developing benefit and cost information; (2) require applicants to clearly communicate their methodology for calculating project benefits and costs including information on assumptions underlying calculations, strengths and limitations of data used, and the level of uncertainty in estimates; and (3) ensure that applicants receive clear and consistent guidance on values to apply for key assumptions used to estimate potential benefits and costs. In response, in June 2016, FRA issued Benefit Cost Analysis (BCA) Guidance and has plans in place to provide the associated training that addresses all three aspects of our recommendation. First, FRA's guidance explicitly encourages applicants to follow Executive Order 12893 and OMB Circulars Nos. A-94 and A-4 in developing benefit and cost information and states that FRA will evaluate applications and proposals consistent with those documents. Second, throughout the guidance, FRA lays out expectations that applicants communicate the assumptions underlying the analysis, as well as the level of uncertainty associated with any estimates. Lastly, the guidance enumerates values to apply for key assumptions in several areas. For example, the guidance provides values for discount rates, as well as values, formulas and sample calculations for time savings for both existing and newly generated riders resulting from a rail improvement. Importantly, the guidance also discusses other types of benefits that are difficult to quantify and monetize, and recommends that applicants qualitatively describe such benefits, rather than use unreliable estimates, but also states that the guidance will be updated on an ongoing basis to improve coverage of these areas as research is incorporated into standard BCA practices. As applicants to federal grant programs employ this guidance, the systematic process of identifying, quantifying, and comparing expected benefits and costs will help decision-makers organize information and more clearly and reliably evaluate trade-offs for investments in intercity passenger and freight rail projects, leading to investment decisions that have the greatest net benefit to society.