Atm Network

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The National Center of Excellence Federal Aviation Administration

For Aviation Operations Research

2nd National Airspace System Infrastructure Management Conference NAS Infrastructure in Transition
June 13, 2006 University of California Washington Center Washington, DC 115 West Avenue • Jenkintown, PA 19046 • USA ℡ 215-884-7500 • 215-884-1385 richg@gra-inc.com

Richard Golaszewski GRA, Incorporated

Acknowledgement
The following presentation includes work performed by a number of organizations and persons supporting the JPDO Evaluation and Analysis Division

GRA, Incorporated

GRA, Incorporated

June 13, 2006

1

Background
Questions on value of NGATS
Funding bodies Users

Potential need for regulatory changes
Require benefit-cost analysis (BCA)

Justification for investment program
NASA R&D FAA JRC OMB 300

Sound program management must understand benefits and costs to government and users Need to consider interdependencies User equipage Benefits estimates
GRA, Incorporated
June 13, 2006
2

Approach to Long-Term Investment Analysis
Understand performance of future system without NGATS investment What is already underway (e.g., OEP)? Secular improvement in ATM system productivity

Models abstract futures that can be highly divergent
2 X capacity in 2025 vs. 3 X capacity in 2025

Order of investment can affect results (some capacity benefits overlap) Marginal delays without investment can be quite large—expand demand while holding capacity constant In sector with very long lived physical assets (such as aircraft), sequencing and coordination of implementation plans are essential GRA, Incorporated

June 13, 2006
3

Cost-Benefit Approach for JPDO
Differences from internal FAA cost benefit analysis
Multi-agency Longer time horizon Not only discounted “cash-flow” analysis (traditional internal FAA process)

Provides reference and context for all agencies participating in NGATS Provides platform for input of industry on specific product/segment costs Uses modeling and simulation platforms to estimate benefits of acquiring package(s) of improvements Allows JPDO to respond to multiple needs FAA (ATO-F, ATO-P, APO, JRC, etc.) NASA (PART) Other agencies OMB GRA, Incorporated

June 13, 2006
4

Identifying Benefits and Costs
Both intangible and tangible benefits and costs should be recognized Calculation of net present value should be based on incremental benefits and incremental costs Possible interactions between the benefits and costs being analyzed and other government activities should be considered Analyses should focus on benefits and costs accruing to the citizens of the United States; impacts outside of U.S. economy noted separately There are no economic gains from a pure transfer payment matched by the costs borne by those who pay for it

GRA, Incorporated

June 13, 2006

5

Measuring Benefits and Costs
The principle of willingness-to-pay Market prices Externalities, monopoly power, and taxes or subsidies can distort market Inframarginal benefits and costs—The economist’s concept of consumer surplus measures the extra value consumers derive from their consumption compared with the value measured at market prices Indirect measures of benefits and costs—Most reliable when they are based on actual market transactions Multiplier effects—Employment or output multipliers that purport to measure the secondary effects of government expenditures on employment and output should not be included in measured social benefits or costs GRA, Incorporated

June 13, 2006
6

NGATS Benefit-Cost Framework
Noise Emissions Congestion Safety Security Spillovers Passengers Shippers Aircraft Operators Airports ATM Providers Aircraft Manufacturers Other

Unpriced Benefits and Costs

With NGATS Without NGATS

Private Benefits and Costs

Net Benefits of NGATS (NPV of all benefits and costs)

GRA, Incorporated

June 13, 2006

7

Issues in Estimating NGATS Costs...
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