United States Department of Transportation
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Developing and testing a framework for alternate ownership, tenure and governance strategies for the proposed Detroit-Windsor River crossing : phase II report.
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2010-10-01
[PDF-2.43 MB]
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Alternative Title:Developing and testing a framework for alternate ownership, tenure and governance strategies for the proposed Detroit-Windsor River crossing : phase 2 report;Developing and testing a framework for alternate ownership, tenure and governance strategies for the proposed Detroit-Windsor River crossing : phase two report;
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Abstract:Transportation infrastructures are integral parts of a nation’s network connectivity. Largescale
transportation projects represent major investments devoted to the construction, operation,
and maintenance of facilities over an extended period. Typically, these investments are
irreversible in nature and require long-term commitment by the public at large relative to
utilization, maintenance, and operation.
Traditional economic analysis techniques are based upon the assumption of future cash
flows that are fully deterministic in nature. Thus, there is an implicit assumption that these
cash flows are not subject to any risk or uncertainty during the life of the project. In reality,
many of these infrastructure projects are associated with significant uncertainties stemming from
lack of knowledge about future cost streams. Revenue generation is also characterized by
demand uncertainty. In emerging markets, macroeconomic, legal, institutional and regulatory
concerns may add a level of uncertainty that can add complexities and introduce greater
levels of risk. The term “risk” refers to situations where the decision maker can assign
mathematical probabilities to the randomness relative to future outcomes. In contrast, the
term uncertainty refers to situations when this randomness cannot be expressed in terms of
mathematical probabilities. Transportation decisions have not typically considered risks and
uncertainties in investment analysis. Current transportation literature does not indicate the
availability of a comprehensive methodology in dealing with risks and uncertainties,
though significant research has been conducted in economics, industrial engineering and
financial management.
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