The time period starts with the first project expenditures, and extends through the useful life of the project or its most long-lived alternative, or some future time at which meaningful estimates of effects are no longer possible.
Choice of bus type — For an analysis of which type of bus to purchase for a transit service, the time period of the analysis might extend until the time at which the least durable bus would be retired from service. The analysis would include the residual value of all types of buses at that point in time.
Comparison of two highway widening projects — The time period would extend through complete construction until the time at which highway demand can no longer be reliably estimated.
Alternatives with very different schedules — The time period of analysis is particularly important when one project has a very different schedule from another, such as a new light rail system and an alternative bus system. The bus system could be implemented sooner and would have lower initial capital costs, but might have higher operating costs. In this case the period of analysis should extend until ridership and operating cost estimates cease to be reliable. Sensitivity analysis can be used to determine how the relative performance of the alternatives is affected by the time period of the analysis.
Alternatives with very different physical lifetimes — Sometimes different alternatives include components having very different physical lifetimes. For example, rail vehicles and railways may give longer periods of service between replacement and reconstruction compared to buses and bus lanes. In these comparisons, the analysis time period should be long enough to capture the full life cycle of the longest-lived alternative with due consideration of residual values of components of other alternatives which may have undergone replacement or rehabilitation close to the end of the time period.
A theoretical argument is made that the time period for a benefit-cost analysis should be that which maximizes the estimated economic efficiency of the project, on the grounds that a replacement project should be considered for implementation after that time. While this approach is reasonable, it has practical difficulties which may result in the time periods being instead based on data availability or project durability.
Analysis Framework >