TM 5-623
CHAPTER 5
PROCEDURE FOR PERFORMING ECONOMIC
ANALYSIS OF M&R ALTERNATIVES
pavement will be equivalent to a new pavement. All
5-1. Introduction
cost estimates should be based on current prices.
The results of the pavement condition evaluation and
the guidelines for M&R selection may indicate that the
d. Present worth computation. The present worth
engineer should consider more than one M&R
(PW) for each M&R alternative is computed as follows:
alternative. Selecting the best alternative often requires
performing an economic analysis to compare the cost-
effectiveness of all feasible alternatives. This chapter
presents an economic analysis procedure which
compares M&R alternatives based on present worth.
5-2. The procedure
The procedure for determining the present worth of each
M&R alternative consists of the steps described below.
a. Economic analysis period. Select an economic
analysis period (in years). The period generally used in
pavement analysis ranges from 10 to 30 years,
depending on future use of the section (abandonment,
change of mission, etc.). The analysis period should be
the same for all alternatives.
b. Interest and inflation rates. Interest and inflation
rates to be used in calculating the present cost should
be obtained from the installation comptroller. This is a
very important step, since the selected rates have a
significant impact on the ranking to the alternatives with
respect to their present worth. The selection of the
The physical interpretation of equation 5-1 is that the
rates, therefore, should be based on Army policies and
present worth of any M&R alternative is the sum of all
guidelines. It should also be noted that the inflation rate
the discounted M&R costs during the analysis period
used to compute present worth is the differential
plus the cost of rehabilitating the pavement at the end of
inflation rate, i.e., the rate of cost increase above the
the analysis period (so that it will be equivalent to a new
general inflation rate. Therefore, if the cost increase of
pavement), discounted to the present. After the steps
a specific item is in line with the cost growth
described in a through d above are completed for each
experienced by the economy, the differential inflation
M&R alternative, the present worth's of all M&R
rate is assumed to be zero. For example, if the cost of
alternatives are compared to help the pavement
M&R for asphalt pavements is increasing at an annual
engineer select the most cost-effective repair alternative
inflation rate of 14 percent while the general inflation
e. Predictions and assumptions. A number of
rate is 8 percent, the differential inflation is 6 percent.
predictions and assumptions must be made to perform
c. Annual cost estimation. The annual cost should
the economic analysis. The engineer must therefore
be estimated for each M&R alternative for every year
use judgment in selecting the best inputs.
work is planned during the analysis period. The cost of
rehabilitation at the end of the analysis period for each
M&R alternative should also be determined so that the
5-1
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