Course 1.011: Project Evaluation

Lecturer: Carl D. Martland (martlan@mit..., 3-5326, Room 1-153)
Teaching Assistant: Lexcie Lu
Spring Term 2003: Mon, Wed, Fri at 10.00 in Room 9-057
Office Hours: by e-mail appointment only, or find me in Room 1-151, weekdays noon-17.30.
MIT Center for Transportation Studies

Methodologies for evaluating civil engineering projects, which typically are large-scale, long-lived projects involving many economic, financial, social, and environmental factors. Basic techniques of engineering economics, including net present value analysis, life-cycle costing, benefit-cost analysis, and other approaches to project evaluation. Resource and cost estimation procedures appropriate for large-scale infrastructure systems Incorporating service quality, risk, environmental impacts, and other factors within the evaluation process. Examples drawn from building design & construction, transportation systems, urban development, environmental projects, water resource management, and other elements of both the public and private infrastructure.

Required Text: Sullivan, Bontadelli and Wicks, Engineering Economy, Prentice Hall, 11th edition.

General Overview Material

Syllabus for Spring Term 2003.
Course Overview and selected reading assignments.
Turnpikes of New England, which represents extracts relevant to project evaluation from various books on the the turnpikes, is not published.
Term project remit was handed out in Lecture 4.
If you prefer the old-style course website (no longer being supported), click here.

Part I -- Introduction to Civil & Environmental Engineering Projects

Viewgraphs & Assignments	Supplemental Notes
Introduction (Lecture 1) 19th Century Transportation (Lecture 2) Assignment 1 was on the Panama Canal (hardcopy only)	Notes (Lecture 1) resulting from class discussion on Issues in Large Civil Engineering Projects Handwritten Notes (Lecture 3) on the Panama Canal Case Study. Supporting Material about Henry Longfellow, whose poem we hijacked to describe the view from the Panama Canal.

Part II -- Life Cycle Costs

Viewgraphs & Assignments	Supplemental Notes
Cost Terminology (Lecture 4) Cost & Revenue Functions (Lecture 5) Assignment 2 on Revenue & Cost Function is due Tuesday, February 18, 2003 Principle of Equivalence (Lecture 7) Choosing a Discount Rate (Lecture 9) Assignment 3 was on the Prinicple of Equivalence	Handwritten Notes and Viewgraphs (Lecture 7) was used in Lecture 7 to illustrate where we're going. Contains hints on Assignment 3. Notes and Viewgraph (Lecture 8) was used in the lecture to clarify conversion between present values, future values and annuities. Contains materials summarized from tutorial.

Quiz 1 and Review

Quiz 1 Review is now available.
Quiz 1 Questions are also available.
Sample Spreadsheet Solution for Assignment 3 can serve as a vehicle for quiz review. Download and play. (PDF, XLS)
Solution to Problem 3-65 from Assignment 3 is also something you might look at for quiz review. (PDF, amended 28/02/03)

Good luck on Friday.

Part III -- Comparing Benefits and Costs

Viewgraphs & Assignments

Supplemental Notes

Comparing Costs & Benefits (Lecture 12)
Comparing Alternatives (Lecture 13)
Assignment 4 was handed out in Lecture 12. You should attempt the practice problems, to ensure that you understand the material in the chapter, then attempt the problem. In Part 2, there are different strategies to deal with the problem: some might be very simple and very cheap, others might involve large infrastructure (or other) investment. The question was vaguely based on the book "A Civil Action", but you don't need the information in the book to answer the question.
Prices and Inflation (Lecture 16)
Taxes and Depreciation (Lecture 18)
Assignment 5 was handed out at this Lecture 13. This is difficult, so begin early. On Friday, there will be a recitation, and therefore an opportunity to ask questions.

Notes from Lecture 13 contains some hints on Assignment 5, in case you missed the lecture.
Additional Viewgraphs (Lecture 14) were used to illustrate taxes and depreciation.
Note on Compounding is now converted to PDF. This note answers a question that a student raised about how to convert annual interest rates to monthly interest rates. You can just divide by twelve (for the purposes of Assignment 5), but you will understand the math a lot better if you downloaded this optional package. The spreadsheet contained in the note is also available. (PDF, XLS, or ZIP)
Notes on Assignment 4 detailing common mistakes. Also contains extension material on Risk profiles, Scale of disasters, Risk per event versus probability of event, and Costing different mitigation technologies.
Notes on Assignment 5 in which Carl discusses how developers make money without spending a dime of their own cash.
Solution to Assignment 5 is not for publication.
Assignment 5 Grading Sheet may simplify that task.
Handout relating to Assignment 5 was used to illustrate sensitivity analyses that you could perform.

Quiz 2 and Review

Quiz Two Review will be covered on Wednesday. (PDF)
Quiz Two from last year can serve as practice questions for the quiz. We think the Skyscraper problem set will help you understand these concepts much better than the old quiz, however. We will make up a new quiz for this year.
Quiz Two from this semester was deemed too difficult to be completed within alloted time, and was not administered. The level of difficulty in this quiz represents a take-home problem set for the most able students.

Part IV -- Evaluating CEE Projects

Viewgraphs & Assignments

Supplemental Notes

Case Studies in Accessibility (Lecture 22)
Case Studies in Quality of Life (Lecture 23)
Assignment 6 is on Cash Flow Models, the first of two series of assignments designed to guide students towards a final project. Students will create their own spreadsheet, similar to that created in Assignment 5, but for their own project of choice.
Dealing with Risks and Uncertainty (Lecture 29)
Assignment 7 is on Risk and Uncertainty. Students will use the spreadsheet they created in Assignment 6, and conduct risk & scenario analyses for their projects.

Slides (Lecture 22) discusses the "Rule of a Half" for measuring benefits of transportation projects, the Chesapeake Bay Bridge, and Bay Area Rapid Transit.
Additional Notes (Lecture 29) discusses the South Boston Convention Center, and how you do sensitivity analyses intelligently.
Notes (Lecture 30) covers a review of choosing between mutually exclusive alternatives (PDF, ZIP).
Assignment 6 Debriefing covers how you might approach a question involving some consideration of costs as well as benefits.
Assignment 6 Grading Sheet might make the task easier for instructors.
Assignment 7 Debriefing & Grading Sheet covers how you might conduct scenario analyses, and the macroeconomic considerations you might include.

Quiz 3 and Review

Quiz Review for Quiz 3 was discussed in Lecture 30.
Quiz 3 has now been made available.
Quiz 3 Debriefing is available, detailing common mistakes, summary answers, and grading criteria.

Optional Reading -- an informative view of Project Evaluation and Life Cycle Costs from a policy perspective

Lee, Douglass. Fundamentals of Life Cycle Cost Analysis, in Transportation Research Record 1812, Paper No. 02-3121. National Academy Press, Washington, D.C. (2002).

Guest Lecturer: Susan Murcott on Sustainability

Viewgraphs & Assignments

Supplemental Notes

Environmental Values & Environmental Impact Assessment (Lecture 26, Part A)
Orange County Groundwater Replenishment System's EIA (Lecture 26, Part B)
Sustainability Assessment of OCGRS (Lecture 28, Part A)
Seven Questions Methodology Applied to OCGRS (Lecture 28, Part B)

Notes (Lecture 25) in which students watched the PBS documentary "Mulholland's Dream" and assessed the Los Angeles Water Project in light of the Pinchot four-pronged framework.
Notes (Lecture 27) in which the issues in the Mulholland project was discussed.
The reading for Lecture 28 can be found at: http://www.iisd.org/pdf/2002/mmsd-sevenquestions.pdf. The link is dead just now, so here's a local copy.
Seven Questions to Sustainability, International Institute for Sustainable Development, Winnipeg, Canada.

Readings for this part of the course:

Ortolano, Leonard. Chapter 1: Historical Perspectives on Environmentalism, in Environmental Planning and Decision Making, John Wiley & Sons, New York, N.Y. (1983).
Orange County Sanitation & Water District. Executive Summary, from Draft Program EIR/Tier I EIS for Groundwater Replenishment System, OCSD/OCWD, Orange County, Calif. (2001).

Optional Readings -- on Water Resources and Sustainability is available in the 1.011 folders in 1-163. The readings are:

Easter, K. William et al. Chapter 8: Benefit-Cost Analysis and Its Use in Regulatory Decisions, in Better Environmental Decisions, Island Press, Washington, D.C. (1999).
Bishop, Richard C. et al. Chapter 9: Contigent Valuation -- Incorporating Nonmarket Values, in Better Environmental Decisions, Island Press, Washington, D.C. (1999).
Reisner, Marc Chapter 2: The Red Queen, in Cadillac Desert, Penguin Books, New York, N.Y. (1993).

Term Project Presentations -- Programme

Jodie Misiak: Federation Square in Melbourne, Australia	PDF	PPT	Paper, Map, PPT.2
Steve Alpert: The Cross Bronx Expressway in New York City	PDF	PPT	Paper
John R. Velasco: 'Sprinter' Commuter Transit Corridor in San Diego, California	PDF	PPT	Paper
Will Fowler & Alex French: South Station Transportation Center in Boston	PDF	PPT	Paper
Libby Wayman, Michael Star & Ana Albir: Tidal Power in the Severn Channel (England)	PDF	PPT	XLS
David Tobias: Wind Farms off the Shore of Long Island	PDF	PPT	Paper
Ali Baker, Cecily Way & Austin Zimmerman: Oil Pipelines in Alaska	PDF	PPT	Notes, Paper
Wintana Debassay & Patrick Hereford: The Eurostar v.s. The Shinkensen	PDF	PPT	Paper
Alia C. Burton: The Humber Bridge in East Yorkshire, England	PDF	PPT	Map
Abraham Reyes: The Wheeling Bridge in West Virginia	PDF	PPT	Paper, Map
Raquel Escatel: The Tacoma Bridge in Washington State	PDF	PPT	Map
Jennifer Moore: The Carquinez Strait Bridges of Northern California	PDF	PPT	Map
Roberta Hsu & Leslie Robinson: The Anton Anderson Memorial Tunnel/Whittier Access Project in Alaska	PDF	PPT	Paper
Brittany Price: Building Transportation at over 10,000 ft -- Narrow Gauge Railroads in the San Juan Mountains of Colorado	PDF	PPT
Tom Kilpatrick: Nickajack Damn in the Tenneesee River Valley	PDF	PPT
Marc Washington, Jeneane Thomas & Jazlyn Carvajal: WTC	PDF	PPT
Constantinos Tsoucalas, Jad Karam, Lyle Paladin-Tripp: Sawkra-Lakbi Road in Oman	PDF	PPT

Additional Material for Tom Kilpatrick's final presentation
From the Tennessee Valley Authority report: TVA Limits of Authority, Nickajack Dam (1970), Proposed Nickajack Resevoir Plan.

Supplementary Material

The ScotRail Electric Express Case Study -- optional case material developed for recitation use.
Note: This is a hypothetical case intended for the purposes of classroom discussion, and was not based on any actual events. Any plans and opinions expressed herein do not represent the plans or views of any of the parties concerned.
Optional Reading is on the Hancock Tower (from the Boston Globe, 29 April 2003, Section E1). This project is somewhat similar to the Skyscraper problem set (Assignment 5), and you could do your own analyses based on the figures available in this article.

Maintained by lexcie@mit.edu