SECTION 7

Benefit-Cost Analysis

This section presents the benefit-cost analysis for adoption of the ABQT device for each of the three adoption scenarios. This analysis begins with a discussion of FHWA investments in the ABQT program.

7.1 FHWA ABQT Expenditures

In this analysis, the public sector includes the FHWA and state DOTs. FHWA expenditures on the development, demonstration, and technology transfer of the ABQT device included the following:

• FHWA/TFHRC staff hours for development, specifically the development of the ANN because the engineering and hardware production costs were mainly covered by LTI;
• Production of six prototype devices used for demonstration at conferences/meetings and loaned to DOTs for testing; and
• FHWA/TFHRC staff’s role in demonstrating the ABQT at conferences/meetings and publishing papers and articles on the ABQT.

Table 7-1 presents FHWA’s expenditures from 2010 through 2020. Expenditures were adjusted to 2021 dollars to be comparable with the benefit calculations. FHWA’s total investment in the ABQT program was less than $1 million. (Note that FHWA staff hours for conferences and presentations were not included as additional costs for the device in Table 7-1 because staff planned to attend the conferences anyway for other industry work, and the hours for producing reports and presentations were included in the staff hours for development.)

Three adoption scenarios were presented in Section 6 of this report. The following sections detail a potential benefit-cost analysis for each of the three adoption scenarios.

7.2 Time Series of Benefits and Costs: Scenario 1

Scenario 1 assumes that the ABQT will be adopted by 50 state DOTs only. In the scenario, the state DOTs’ expenditures would include the following:

• Purchase of an average of four devices per state and one-time training of four staff members for 8 hours each.
• Ongoing purchase of materials for operations, such as the nitrogen or compressed air tank, assumed to average $500 per year per device.
• Annual maintenance costs of $1,100 per device, as specified by LTI.
• Ongoing staff time to conduct the ABQT tests. Although no DOT said they would need to hire additional staff to conduct ABQT tests, their time is not free, so its value was included

Table 7-1. FHWA expenditures for development of the ABQT.

Note: FTE = full-time equivalent.

Table 7-2. Costs for Scenario 1.

Note: Cost and benefit numbers were rounded to the nearest $1,000 due to the precision of the evaluation team’s underlying assumptions. This may result in minor discrepancies due to rounding.

in the analysis. FHWA indicated it would take a technician 8 hours to conduct 30 tests with the ABQT. Assuming an average of 1,200 tests per year, per state, that would be 320 hours of additional labor. The wage for a construction inspection worker from the Bureau of Labor Statistics (BLS) was used as a proxy for the wage.

Table 7-2 presents expenditures for Scenario 1.

To calculate the net benefits for the lifespan of the ABQT devices, the evaluation team used the average maintenance savings over a 15-year lifespan for the devices for Scenario 1 (presented in Section 6.5). A 3% discount rate was used for the net benefits calculation. The benefit-cost analysis found the net annual benefits (potential savings) from DOT adoption of the ABQT to be about $8 million. Table 7-3 details the net benefits of the benefits and costs.

7.3 Time Series of Benefits and Costs: Scenario 2

Scenario 2 assumes the ABQT will be adopted by 50 state DOTs and by binder suppliers. In Scenario 2, in addition to the state DOTs’ expenditures, there would be the following suppliers’ expenditures:

• Each binder supplier will purchase an average of four ABQT devices for their terminals:
  • 107 binder supplier organizations were assumed for this adoption scenario. This is the total number of domestic organizations that were members of the Asphalt Institute in 2018 because they would be the most likely suppliers to adopt the ABQT.
  • One-time training of 8 hours for a single staff member for each device would be needed.
• Ongoing purchase of materials for operations, such as a nitrogen or compressed air tank.
• Annual maintenance costs of $1,100 for each device.

Table 7-3. Benefit-cost results of Scenario 1 adoption.

Note: Cost and benefit numbers were rounded to the nearest $1,000 due to the precision of the evaluation team’s underlying assumptions. This may result in minor discrepancies due to rounding.

• Ongoing staff time to conduct the ABQT tests. Although no DOT said they would need to hire additional staff to conduct ABQT tests, their time is not free, so its value was included in the analysis. FHWA indicated it would take a technician 8 hours to conduct 30 tests with the ABQT. Assuming suppliers tested four samples per workday, and there were 250 workdays a year, that would be 1,000 samples tested per year. At 0.267 hours per sample (8 hours/30 samples), that would be about 267 hours of additional labor per organization that adopted the ABQT. The wage for a construction inspection worker from BLS was used as a proxy for the wage.

Table 7-4 presents all expenditures for Scenario 2.

To calculate the net benefits for the lifespan of the devices, the analysis used the average maintenance savings calculated for Scenario 2 over a 15-year lifespan of the devices (presented in Section 6.8). A 3% discount rate was used for the net benefits calculation. The benefit-cost analysis found the net annual benefits of the potential savings from DOT and supplier adoption to be about $13 million. Table 7-5 details the net benefits of the benefits and costs.

7.4 Time Series of Benefits and Costs: Scenario 3

Scenario 3 assumes the ABQT will be adopted by 50 state DOTs, binder suppliers, and asphalt mix plants. In addition to the expenditures by state DOTs and binder suppliers, the expenditures of asphalt mix plants would include the following:

• Each mix plant would purchase a single ABQT device for its terminals. The National Asphalt Pavement Association (2020) reported that there were 3,600 mix plants in the United States in 2019. Scenario 3 assumes that 1,000 large mix plants purchase a single ABQT device.
• Ongoing purchase of materials for operations, such as a nitrogen or compressed air tank.
• Annual maintenance costs of $1,100 per device.

Table 7-4. Costs for Scenario 2.

Note: Cost and benefit numbers were rounded to the nearest $1,000 due to the precision of the evaluation team’s underlying assumptions. This may result in minor discrepancies due to rounding.

Table 7-5. Benefit-cost results of Scenario 2 adoption.

Note: Cost and benefit numbers were rounded to the nearest $1,000 due to the precision of the evaluation team’s underlying assumptions. This may result in minor discrepancies due to rounding.

• Ongoing staff time to conduct the ABQT tests. Although no DOT said they would need to hire additional staff to conduct ABQT tests, their time is not free, so its value was included in the analysis. FHWA indicated it would take a technician 8 hours to conduct 30 tests with the ABQT. Assuming suppliers tested one sample per workday, and there were 250 workdays a year, that would be 250 samples tested per year. At 0.267 hours per sample (8 hours/30 samples), that would be about 67 hours of additional labor per organization that adopted the ABQT. The wage for a construction inspection worker from BLS was used as a proxy for the wage.

Table 7-6 presents all expenditures for Scenario 3.

To calculate the net benefits for the lifespan of the devices, the analysis used the average maintenance savings over a 15-year lifespan for the devices presented for Scenario 3 in Section 6.8. A 3% discount rate was used for the net benefits calculation. The benefit-cost analysis found the net annual benefits of the potential savings from adoption by DOTs, suppliers, and mix plants to be about $10 million. This is less than the net benefits of adoption in Scenario 2 because of the large number of mix plants that would purchase the ABQT in this scenario and the diminishing benefits associated with adding testing at mix plants to the testing being done by other stakeholders. Table 7-7 details the net benefits of the benefits and costs.

Table 7-6. Costs for Scenario 3.

Note: Cost and benefit numbers were rounded to the nearest $1,000 due to the precision of the evaluation team’s underlying assumptions. This may result in minor discrepancies due to rounding.

Table 7-7. Benefit-cost results of Scenario 3 adoption.

Note: Cost and benefit numbers were rounded to the nearest $1,000 due to the precision of the evaluation team’s underlying assumptions. This may result in minor discrepancies due to rounding.

7.5 Quantitative Estimate of the Potential Benefits and Costs of the ABQT

Table 7-8 provides a summary of the annual benefits in $2021, equivalent annual costs, and net equivalent annual benefits for each of the three adoption scenarios. The FHWA investment to date has been approximately $0.5 million. If adoption levels across the three scenarios were to be achieved, the net annual benefits over the 15-year life expectancy of the ABQT device would be about $10 million. Scenario 1, adoption by state DOTs, has the largest rate of return (ROR). However, this is in part because DOTs are likely to be the first adopters, with suppliers and mix plants following their lead.

From FHWA’s perspective, the ROR on their investment has the potential to be quite high. For the DOT adoption scenario (Scenario 1), FHWA’s initial investment of $0.4 million has the potential to yield an annual return of $8 million. These figures are based on a high level of adoption by state DOTs. However, if the ABQT is adopted by only two states, the FHWA investment will break even on its investment.

Table 7-8. Summary of the economic impact analysis for three ABQT adoption scenarios.

Note: Cost and benefit numbers were rounded to the nearest $1,000 throughout due to the precision of the evaluation team’s underlying assumptions. This may result in minor discrepancies due to rounding.

From an individual DOT’s perspective (Scenario 1), the return on investment from adopting the ABQT as a screening tool depends on the number of asphalt lane-miles the state DOT is responsible for, which determines the resulting decrease in maintenance costs. Table 7-9 provides a summary of the annual benefits in $2021, equivalent annual costs, and net equivalent annual benefits for three individual states. The three example states shown are the states with the lowest, median, and maximum total lane-miles of state-managed asphalt pavement roads (note the FHWA expenses are not included in the costs because they were incurred by the federal government and not the individual states). For example, Michigan is the median state with about 20,000 asphalt lane-miles. For Michigan, the use of the ABQT is estimated to have a net annual benefit of about $112,000, which corresponds to an ROR of 380% and a benefit-to-cost ratio of 5.0. A large state like Texas has a much larger return. Hawaii, the state with the fewest asphalt lane-miles, has an ROR of −5% and a benefit-to-cost ratio slightly under 1.0.

Table 7-9. State DOT net benefits to adoption.

Note: Cost and benefit numbers were rounded to the nearest $1,000 due to the precision of the evaluation team’s underlying assumptions. This may result in minor discrepancies due to rounding.