Cost Benefit Analysis For Road Projects

Cost Benefit Analysis For Road Projects.............................................................................1

Constraints/Limitations faced in the development of the Cost-Benefit matrix for
JSIF Road Projects: -...................................................................................................1
Introduction To The Cost- Benefit Format As Presented.............................................1
COST ITEMS..............................................................................................................3
BENEFITS EXPLAINED...........................................................5
COSTS ITEMS.............................................................................................................10
Benefits......................................................................................................................11
Criterion For The Location of Road Projects............................................................15
Project location Table.................................................................................................18
MATRIX ANALYSIS................................................................................................18
Road Matrix...............................................................................................................19

Constraints/Limitations faced in the development of the Cost-

Benefit matrix for JSIF Road Projects: -

(a) The time period of two weeks (14 calendar days) is extremely
short for the carrying out of the task at the professional level
required.
(b) The experiences of other SIFs, in Africa, Asia and Latin America
points to the usage of the focus group method in identifying Costs
and Benefits,
(c) The experience of other SIFs, in Africa, Asia and Latin America
points to or indicate the usage of technical experts in the field of
Economics, Environmental Management, Cultural Preservation,
Transport Engineers and Civil Engineers among others in
developing these types of tools.

Introduction To The Cost- Benefit Format As Presented

The approach taken in designing the Cost-Benefit Analysis tools

below took into consideration the following two needs of the
organization:- need to allow for flexibility in identifying cost
components as well as benefits , in keeping with the focus of the
organization at a given point in time , as well as the experience and

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level of technical competence of the individual/s using the tools;
secondly the fact that the value cost and benefits identified are
community based ( unique) and thus may not have universal
application.

The potential needs that may come about as a result of the

implementation of “Community Based Contracting “ was taken into
account. It is to be noted that the tools presented below went a bit
further than “traditional Cost-Benefit Analysis” as will be seen on
further evaluation, while seeking to maintain an adequate level of
simplicity . As such while the traditional Cost-Benefit Tables are
presented, a Project Selection Table (Measure) is also added for
completeness . The Lower cut off point for project selection is one
for management to decided on in keeping with priorities and policies
and thus is in no way a technical one. The Project Selection Table is
also intended to act as a control mechanism for the Cost Benefit
Table. While owing a lack of information ,the Cost Benefit Table
might indicate that a given road project proposal is undesirable, the
Project Selection Table (or Measure) will either confirm this finding
or in the case of non –confirmation , indicate that there is a need to
reanalyze the proposal. The Road Matrix , is also an additional tool
that maybe used in conjunction with the Cost-Benefit Table and the
Project Selection Matrix as another layer of control. However please
note that all three tools have been so designed as to have “Stand
Alone” capabilities, with none being dependent on the other.

Once again it is important to note that any given “Cost” or “Benefit”

may be included or ignored without compromising ones objective .
Values of individual Costs and or Benefits must be relevant to and
generated from data from the community where the request was
generated. The Project Selection Table can be done based on data
already existing in or available to JSIF. The Road Matrix similar to
the Project Selection Table (Measure) is a simple tool, it requires no
specialist knowledge and based on simple questions requiring a “Yes”
or “No” answer, to which a number value of either (1) or (0) is
attached.

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 It should be noted however , that these tools would be of greater
value to the organization, if the MIS section were to assist in putting
them in the form required for computer aided processing.

COST ITEMS

(1) The items presented in the COST column are to be valued

at the prices prevailing in the given community at the given
point in time when the cost benefit analysis exercise is
taking place> There is in Jamaica no single unit size price
for land or agricultural outputs, prices are location /
community based.
(2) The effective span for the average tree is taken to be twenty
years (20 years), it is however recognized that the average
tree if undisturbed can live up to any where between 30 to
100 years.
(3) The agricultural output value of the “Common Mango
Tree” over a period of twenty (20 years) is taken to be the
“shadow/non market price” of any given tree, regardless of
type, genius or specie of that tree.
(4) The cost of restoring a given area of disturbed land to its
natural state is taken to be the “shadow/non market “ price
of the damage done to the environment.
(5) The real cost of health problems resulting from civil works
projects is difficult and politically even for JSIF
undesirable, to calculate at full or true value, therefore the
cost of treating sinusitis in an individual for the duration of
the project times the population size, is used as the basis for
the calculating the shadow price of dust related illnesses.
(6) The cost of bringing direct benefits to a particular gender is
not calculated and should not be calculated for JSIF’s civil
work projects, regardless of their type. If the cost of the
benefits of “Maternity Leave With Pay” or “Equal Pay For
Equal Work “ were calculated before their enactment, their

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 enactment would not be affordable or economically
justifiable.
(7) The opening or restoring of long closed road ways, in some
instances, where this type of activity results in a sudden
significant increase in traffic flows or individual
mobility/access to urban centres, can lead to irreversible
loss of cultural forms and or ways of life. The archiving of
cultural information within this framework and within the
context of growing local and tourist demand for Jamaican
Cultural Information is of critical importance. .
(8) An increase in access, and improved communications
generally leads in the Jamaican context of things to increase
urban influences and pressures. Along with these urban
type pressures comes some level of urban type crime e.g.
murder, robbery etc. While it is not possible to predict how
many acts a particular type of crime will be committed in
any give locale, its is recommended that consideration,
within the Jamaican Context, be given to the inclusion of a
shadow /non market price of this eventuality within the
Cost-Benefit Analysis.
Within this context the loss of an individual’s life due to
murder is calculated to be the amount one unskilled
individual is expected to earn over a his working life, while
the base price for wounding regardless of the type of wound
or level of seriousness, it is taken to be the cost of visit the
nearest doctor plus the cost of any medicine used in treating
a knife wound to the limb or face. These
values are then multiplied by the number of these crimes
that occur over the last year in the nearest township or
urban center in order to get the yearly cost of crime against
the individual, the cost of crime over the life time of the
project would be the yearly cost times 25 (the expect
minimum depreciation time of road is taken to be equal to
be that of one human generation or 25 years). Please note,
that this is a minimum cost approach.

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(9) In some communities, there is a cost to be paid by
contractors for project security and or social appeasement
to the area leaders or dons or to the police for permitting
the carrying out of the road project. This is a constant
feature with civil works in urban and near urban settings,
affecting road projects of all sizes from Highway 2000 to the
paving of a dirt road in a squatter community.
(10)Jamaican driving habits have resulted to accidents and
death on nearly all paved surfaces in the country, urban or
rural, especially in those communities where “Robot Taxis “
are the main means of commuter transportation. Therefore
its is recommended that the loss of life of one individual and
the injury of one individual resulting in at least three
months hospitalization, be budgeted for each year of the 25
years life span of a road’s normal unmodified life.

Please note that not each and every cost item will be
relevant to each and every road project. Many of the
cost items listed have no relevance to road works in
urban settings.

BENEFITS EXPLAINED
(1) Not all benefits will be applicable to each and every
community road project.
(2) All prices are local i.e. community based, the cost of visit a
doctor in one community may be $2500.00 in another it
may be only $500.00.
(3) The National Minimum Hourly Minimum Wage Rate is the
Weekly Minimum Wage divided by 40 hours, e.g. if the
weekly minimum wage is J$2500.00 then the National
Minimum Wage Rate is J $2500.00/40 is J$62.50 per hour.
(4) In some communities, there will be more quantifiable
benefits, which should be included in the Cost –Benefits
Analysis. It is the duty of the sponsoring organization to

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 ensure that all possible benefits and costs are duly
identifiable and quantifiable and recorded.
(5) Transport hours saved refers to the number of hours saved
by the average individual over the period of one year owing
to the rehabitation of the road, times the minimum amount
of money the individual could earn doing one hour work in
keeping with wages set by the National Minimum Wage Act
(see 3 above) times the traveling population (i.e. excluding
children under the age of six (6) years, adults over the age
of 65 years and severely physically challenged individuals).
(6) The reduction of teen-age pregnancies benefits refers to the
savings made by the community in not having to take care
of a given number of children not born owing to a reduction
in pregnancies. It is the cost of taking care of one healthy
child for 16 years times the expected reduction of teen-age
pregnancies. For example if the birth rate fell by four
births, then this saving/benefit =4 times the cost of taking
care of a child for 16 years times 25 years i.e. the expected
life span of the road. Here it is assumed that the reduction
of the birth rate by 4 for year will be held constant over the
expected life span of the road.
(7) Increase in school attendance refers to the potential
increase income to be earned by the expected increase in
literate skilled individuals resulting from an increase in
school attendance stemming from the rehabitation of the
road. It is equal to the expected increase in school
attendance times the yearly of a skilled workman e.g.
mechanic times 25 i.e. the expected life span of the road.
(8) Increase access to prenatal and post natal care, refers to the
increase in savings of the community coming from the
expected reduction in home deliveries times cost of
hospitalization stemming from the most common
complications stemming from an unmonitored pregnancy
times 25. It is assumed that this yearly reduction in home
deliveries will be the same throughout the life span of the
rehabitated road.

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(9) Increased prevention of childhood diseases refers to the
savings to the community stemming from an increase access
to vaccinations. It is equal the increase in the number of
children vaccinated in the first year of the rehabitated road
times the cost of treating a child for mums, measles, etc,
plus the income loss to one parent owing the illness of the
child times 25.
(10)The increased ease of carrying shopping or household
supplies refers to the savings made by the individual in
transporting household goods, in terms of time and money,
as a result of the rehabitation of the road. It is equal to the
expected savings in shopping time by the average female
times the national minimum hourly rate times the number
of females in the community falling within the age range of
14-to-65 years, times the number of Saturdays in the
average year times 25.
(11)Time saved going to and from church refers to the savings
by the community stemming from the rehabitation of the
road in going to and from religious activities/events at the
church in terms of reduction in the cost of transportation
and in time by the church going segment of the population
times the number of Sundays in the average year times 25
years.
(12)Number of hours saved by children going to and from
school, is approached in a manner similar to (11) above.
(13)Number of hours saved going to and from cultural events
refer to the savings made by the young people and parents
of the community in maintaining a normal culturally active
life resulting from the rehabitation of the road. It is the
hours saved going to and from the town centre once per
month times 12 (months in the year) times the number of
individuals in the community within the age range of 15 to
45 years times 25 (the expected lifespan of the road).
(14)Number of hours saved going to and from work refers to
the savings made by individuals who have to go to work
outside the boundaries of the community. It is equal to the

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 number of hours saved by the average working individual
going to and from work on the average working day times
the number of individuals working outside the community
times the national minimum average minimum wage (see 3
above) times the number of working days in the average
year times 25 (the expected lifespan of the road is taken to
be 25 years).
(15)Increase in the yearly value of agricultural output refers to
that increase in the value of agricultural output that is
directly attributable to the rehabitation of the road, thus for
example, the increase in output stemming from an increase
in rainfall in a given year would not be included in this
calculation, nor would an increase in value stemming from
a shortage of a given agricultural product be included,
however an increase stemming from the greater use of
chemical fertilizer, or from an increase in the acreage under
cultivation would be included in this calculation. It is the
increase in value of agricultural output directly attributable
to the rehabitation of the road in an average year time 25
(the expected lifespan of the rehabitated road).
(16)Increase in the amount earned by truckers or country bus
operators, refer to the value of the yearly increase in
“loads” carried by these carriers as a direct result of the
rehabitation of the road times 25. The standard load is
given as being equal to 50 pounds of agricultural output.
(17)The increase in the number of taxi coming into the area
refers to the additional income earned by the community’s
taxi operators as a result of the rehabitation of the road. It
equal to the number of taxi entering the community as a
result of the rehabitation of the road times eight (trips per
day) times $200.00 (income earned per trip) times 365 (days
in the year) times 25 (the expected lifespan of the
rehabitated road).
(18)Estimated number of jobs gained as a result of the
rehabitation of the road, refers to the increase number of
jobs /employment gained as a direct result of the

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 rehabitation of the road. It could come about as a result of
individuals who previously could not get to and from work,
now being able to seek employment outside of the
community, it could come about as a result of new business
opening in the community as a result of better access or
previously existing businesses expanding and employing
more individuals. It is equal to the number of new jobs
times the national minimum wage time 25 (assuming that
the amount of new jobs created over the 25 years period
will remain constant).
(19)Increase in the number of community-based business
refers to that increase in the number of new business
operating in the community where this increase is directly
attributable to the rehabitation of the road. It is assumed
that each business is expected to earn an income for its
proprietor at least an amount equal to the yearly Minimum
Wage. Thus value of this benefit is equal to the yearly
National Minimum Wage times the number of new
businesses times 25 years (assuming that each year for 25
years the same number of new businesses will come into
being.
(20)Increase in the number of individuals or tourists visiting
the community as a direct result of the rehabitation of the
road, refers to those visitors who pass through the
community for no other reason than curiosity or for the fact
that the road allows one to drive through. The potential
increase in earnings from this source is calculated to be the
expected number of “visitors “ passing through per year
times the price of a Pepsi Cola times 25. The community
may or may not realize this benefit.
(21)Improved pest/parasite control as a result of the road
project, refers to the savings made by the community as a
result of better hygiene /sanitation/bushing practices as
related to the rehabitated road, resulting in the number of
breeding spaces available to vectors and pests. It is
measured as the amount of money saved by the average

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 family in treating insect bites and purging parasites in the
average year times the number of families in the
community times the number of years.

COSTS ITEMS Cost Pre Cost Post

Construction Construction
J$ J$
Construction & Labour Cost
The cost of agricultural crops
destroyed by construction
Cost of land used or directly affected
by construction ($ per hectare)
Cost of trees lost (20 years times
price of 100 common mango [i.e.
average yearly harvest of mangoes]
times 25 years (life span of road)
Cost of domestic removal of
construction dust (i.e. amount of
hours lost per households for the
duration of project construction
times national minimum hourly rate
time the number of households in
communities)
Minimum cost of treating dust
related illnesses (i.e. cost of treating
one individual with suffering from
sinusitis for the duration of project
construction times the exposed
population)
Cost of restoring the total affected
area to original state (i.e. minimum
cost of environmental damage)
Cost of anthropological recording
and cataloguing of local culture, its
distribution and storage.
Cost of increased exposure to urban
levels and type of crime (i.e. number
of individuals murdered in last

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calendar year times expected life
time earnings of one unskilled
individual plus number of wounding
per year in the nearest urban
settlement times the cost of one visit
to the doctor and the cost of treating
one individual for a knife wound to a
limb or face) times 25 years (life span
of road)
Cost of security and social
appeasement for duration of
construction project
Economic cost of one life and one
serious injury (requiring three
months hospitalization) for a period
of twenty five years
Total costs

Benefits Value J$
Transport hours saved (national minimum
hourly rate times number of hours saved
for 25 years)
The reduction in teen age
pregnancies ((The cost of taking
care of one child for 16 years times
the expected reduction of teen age
pregnancies (, e.g. a expected
reduction by 4 pregnancies per year)
times 25))
Increase in school attendance (the
expected yearly increase number of
individuals attending school in times
the average yearly earnings of a
skilled trades man times 25)
Increase access to prenatal and post
natal care (measured by the expected
reduction in home deliveries times

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the cost of hospitalization as a result
of the most common complication
occurring to both mother and child
during delivery or as a result
unmonitored pregnancy times 25)
Increased prevention of childhood
diseases such as measles, mums etc
(the increased number of children
expected to be vaccinated against
childhood diseases in the first years
after road completition times the cost
of treating illness in one child for
each of the childhood diseases
vaccinated against times 25).
Increased ease of carrying shopping
or household supplies home
(expected reduction in time to carry
goods from nearest market and
supermarket/wholesale time
minimum national hourly rates times
number of females in community
between the age ranges of 14-to-65
years, time the number of Saturday s
in the average year times 25)
Time saved going to and from
church (expected reduction in time
on trips to and from church times
the national minimum hourly rates
times the number of church goers in
the community times the number of
church days in the year times 25)
Number of hours saved by children
going to and from school. Same
approach as above with hours saved
going to church.
Number of hours saved going to and
from cultural events or places e.g.

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cinemas, KFC, dances, library etc
(hours saved going to and from town
centre once per month times 12 (i.e.
months in the year) times national
hourly minimum wage times number
of individuals living in the
community between the ages of 15
and 45 years time 25)
Number of hours saved going to and
from work (hours saved times
number of individuals working
outside the community times the
national minimum hourly rate times
the number of working days in the
year times 25)
Increase in the yearly value of
agricultural output owing to the
rehabitation of the road times 25
Increase in the amount earned by
truckers or country bus operators
owing to an increase in agricultural
output stemming from the road
project (additional yearly output
divided 50 pounds times $100.00
(cost of transporting 50 pounds of
goods) time 25 crop years. One load
for the bus top is assumed to weigh 50
pounds)
Increase in the number of taxi
coming into the community per day
as a result of road project times eight
(8) trips per day times $200.00
(amount of money per trip) times 365
(days per year) times 25
Estimated number of jobs gained per
year as a result of the road project
times National Minimum Yearly

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Income times 25
Estimated increase in new
community based business venture in
the first year after completion of
road project times Year National
Minimum Yearly Wage times 25
Increase in the number of
individuals and tourist per year as a
result of the road project times the
price of one Pepsi Cola or Coco Cola
time 25
Improved pest/parasite control as a
result of the road project (measured
as a saving on the use of household
pesticides and medication for insect
bite and internal parasites per house
hold per year times number of
households times 25.
TOTAL VALUE OF BENEFITS

COST BENETIF = Total Value of Benefits –Total Costs

If the Total Value of Benefits minus Total cost is positive, and if the Total
Value Of Benefits is greater than 25% of Contract value plus Contract
value then JSIF can go ahead with this project.

The Cost-Benefit Analysis Framework as presented above, is intended

to be used the “Project Selection Measure” (PSM) out lined below. This
measure seeks to address the fact that each Quartile 4 or Quartile 3
community is a unique entity, thus while a road “rehabitation “ project
might have measurable impact on alleviating the conditions giving rise
to social poverty in one given Quartile 4 community in another there
might be no significant impact on the determining factors of social
poverty.

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As with the Cost –Analysis Frame Work Outlined above, the PSM
approach suffered from a lack out enough time and related resources
desirable to carry out adequate study and testing before being
developed. As such, it should be seen as a guide to action, and not as a
Bible neither defining right or wrong nor offering prescriptions to all
selection problems.

Criterion For The Location of Road Projects

Given that JSIF road construction or road repair projects are so

designed to meet the objective of alleviating poverty, there is a need to
ensure that these projects actually do what they are intended to do. The
construction of a road by itself does not mean that poverty will be
alleviated, if this road has little or no impact on the day-to-day economic
and social lives of the targeted population.
In addition JSIF movement towards CBC requires the development of
more exacting tools allowing for the filtration of those requests which
are designed to mislead or to milk the organization and in seeking to
encourage the further development of JSIF capability to alleviate
poverty through road construction and or road repair projects, the
following table and formula is being suggested for use in project
selection: -
Scoring System: -
(1) The Quartile from which the request originated (#2Q) is given a
number value matching the Quartile number, which is then multiplied
by it. For example a request from a Quartile 3 community would be
given the value 3, which is then multiplied by 3, giving Q the value 9, for
a Quartile 4 community, the number value would be 4, which would
then be multiplied by 4 given Q a final value of 16.

(2) The level of isolation of the community takes the value i. Where the
community is over two miles from the nearest town the value of i is 3, if
the distance of the community is less than one mile but more than ½
mile from the nearest town i takes the value 1, where the distance is less
than ½ mile from the nearest town i takes the value 0. Therefore the
maximum value that i can take is 3. Whatever value is taken by the

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variable i is then multiplied by 3, the product of which is then inserted into
the PSM table.

(3) The level of female unemployment is given by the variable fum.

Where female unemployment is more than 20% of the female labour
force, the variable fum takes the value 3,where it is under 20% of the
female labour force but over 10% fum is equal to 2, where female
unemployment is less than 10% of the female labour force fum takes the
value 0. Whatever value fum takes, multiply it by 4 and insert the
product into the table.

(4) The job creation potential of the completed road project: - jcp takes
the value 1 or 0. If there is a job creation potential, then jcp is equal to 1,
if there is no job creation potential then jcp is equal to 0. Multiply the
value jcp takes by 3 and insert the value into the table.

(5) Increased market access for agricultural products is given by the

variable ima. Where the completed road project significantly improves
the access of the market for agricultural products, ima takes the value 3,
where the completed road product has only a marginal impact on access
to the market for agricultural products ima takes the value 1, and if the
completed road project has no impact on the access to the market for
agricultural products, ima takes the value 0. Multiply the value of the
ima 2 and insert it into the table.

(6) The potential impact on local business is given by the variable pib. If
the completed road project has a significant positive impact on local
business pib takes the value 3, if the completed road project has only a
marginal positive impact on local business, then pib takes the value 1,
where completed road project has no positive impact on local business
the pib takes the value 0. If the completed road project has a negative
impact local business the pib takes the value –3 (minus three). Multiply
the pib by 2 and insert its value into the table.

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(7) The potential increase in the area under agricultural cultivation
resulting from the completion of the road project is piac If there is a
significant potential of increasing the area under cultivation, piac takes
the value 4, if there is only a marginal potential increase in the area
under cultivation, the piac takes the value 1, if there is no potential
increase in the area under agricultural production the piac takes the
value 0. Should the completed road project has a potential to reduce the
area under agricultural production , the piac takes the value –3 (minus
three). Multiply the value of the piac by 4 and insert it into the table.

(8)The distance from the nearest tourist resort is given by the identity
ntr. If the community in which the road is to be built is 5 miles or more
miles from the nearest tourist resort, the ntr is equal to 4, if the
community is under 5 miles but not less than 3 miles from the nearest
tourist resort, the ntr is equal 2, where the community is less than 2
miles from the nearest tourist resort, the ntr takes the value 1. Multiply
the value of the ntr and insert the product into the table.

(9) The level of teen-age fertility is given by the variable ff. Where
teenage fertility is higher than the national level, the ff takes the value 5,
where it is lower than the national level ff takes the value 2. Multiply the
value of the ff by 6 and insert it into the table.

(11)The level of social organization of the community is

represented by the symbol #so. If a community is highly
organized, the #so is equal to 3, where the community is
poorly organized the #so takes the value 1. This variable
will have a significant role in indicating the community’s
ability to meet its contribution to any given project.
Multiply the #so by 3 and insert the product into the table.
(12)The level of crime in a community is represented by the
variable lc. In communities with a high level of reported
violent crime, the lc takes the value 4, if there is a low level
of reported crime in the community; the lc takes the value
0. Multiply the lc by –6 (minus 6).

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 Add all the numbers in the values column. The higher
the value ,the more desirable is the project for
implementation by JSIF, the lower the value , the less
desirable is the project for JSIF implementation.

Project location Table

Item Value
i
#2Q
fum
jcp
ima
pib
piac
ntr
lc
ff
Total

PSM= #2Q +3.i+4 fum+ 3jcp+2ima+ 2 pib + 4piac+ 5ntr+ 3#so-6lc+6 ff

Where PSM= Project Selection Measure

MATRIX ANALYSIS
The matrix given below is intended to be used in the main for desk
screening. It seeks to analysis the desirability of implementing a given
road project on the basis of simple yes and no answers, where if the
answer to a question is yes a 1 is placed in the value column , if the
answer of the question is no , a 0 is inserted in the value column. At the
end all the number value is added. The maximum score (or value) a
project can get at the end of addition is six 6. This six (6) indicates that
the proposal is desirable . The lowest possible score a proposal can
obtain at the end of addition is 0. This 0 indicates that the project is
undesirable for implementation. For projects with scores between the
values of 3 and 6, the input of the Social Development Manager should

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be sought . For projects with scores between 3 and 0 , they are not very
desirable and should be rejected.
Road Matrix
Question Answer Score
(yes or no) Yes=1
No=0
Are there more than 100 potential road users per
day residing in the community?
Could the road be used as a by pass in the event of
an emergency?
Would the rehabitation of the road increase
agricultural output by at least 15% ?
Would the rehabitation of the road lead to an
increase in the area under cultivation?
Would the rehabitation of the road lead to the
creation of new business possibilities in the given
community?
Would the rehabitation of the road lead to a
significant increase in the possibility of reducing
unemployment
Total (add the ones (1) in the third column)

End
Basil Fletcher

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