Evaluating Alternative Operations Strategies to Improve Travel Time ...

SHRP 2 L11: Final Appendices
has also been found that trips during peak periods and during congested travel conditions tend to
have a higher value of time. The higher value of time in peak periods also reflects the higher value
of time for commute trips, in particular for morning commute trips, which tend to be less flexible.
The value of time during the morning commuting period has been observed to be 75 percent of the
wage rate.
Freight Mover Value of Time
There are few studies devoted to the value of time for freight movers (trucks) beyond the
relationship between the value of time and driver pay and inventory costs. Kawamura (2000) noted
the shortage of research, particularly with respect to the lack of research on the variation of truck
value of time with respect to carrier and shipper operating characteristics. (Shippers generate the
need to move freight and carriers accommodate that need.) Just as passenger vehicle value of time
varies by user characteristics and trip purpose, the value of time for freight movers also seems to
depend on carrier characteristics and shipment attributes. Factors such as the carrier operations
(for-hire or private, truckload or less-than-truckload), driver pay type, and shipment characteristics
(such as commodity value or shipper characteristics) are recognized as potential factors
influencing the freight mover value of time.
Kawamura (2000) lists three methods used in studies to determine freight mover value of time.
The first method is a cost-based approach (or factor cost), which divides the value of time into its
constituent cost elements. The largest portion of the hourly cost is the truck driver wage and
compensation, with vehicle depreciation and inventory costs comprising a much smaller share of
the hourly cost. (The vehicle operating costs should be accounted for separately and not included
in the value of time.) The second method is the revenue-based approach, in which the freight
mover value of time is estimated as the increase in carrier revenues derived from one hour of
travel-time savings. The third method is the stated-preference survey, using data from motor
carrier managers and shippers to estimate the value of freight-mover time based on their choice
among hypothetical travel scenarios.
Freight value-of-time estimates from the cost-based approach is based on the hourly opportunity
(or direct) cost of the truck driver and inventory, excluding vehicle operating costs. (Vehicle
operating costs such as fuel, tires, maintenance should be accounted for separately in benefit-cost
and other analyses, though some studies do report vehicle-related expenses or the total marginal
costs of truck operation as the value of time.) The cost-based approach produces more conservative
estimates because the value of time includes only the costs of driver time and inventory (also
sometimes the time-based vehicle depreciation cost) and does not take into account the value of
time from the shipper’s perspective. Cost-based estimates should, however, include the inventory
cost, which is calculated using an hourly discount rate, and the value of the shipment. The
inventory costs are generally a very small portion of the value of time and do not reflect damage or
the perishability of the shipment.
The revenue approach calculates the value of time as the net increase in profit from the reduction
in travel time by making assumptions about the level of utilization for the time savings. Though
the revenue method seems to be rarely used, compared to the cost-based and stated preference
methods, two studies—Hanning and McFarland (1963) and Waters et al. (1995)—report ranges for
the value of time using the revenue approach. Hanning and McFarland estimated the value of truck
time as $17.40 to $22.60 (1998 dollars), while Waters et al. (1995) find a wide range for the value
of truck time, from $6.10 to $34.60 per hour. Kawamura notes that using the revenue-based
approach is potentially problematic: “[because] actual behavioral changes under a policy or
DETERMINING THE ECONOMIC BENEFITS OF IMPROVING TRAVEL-TIME RELIABILITY Page B-23