Public Works: Rational Choice of Design Period

Abstract

Engineers have relied generally on judgment in selecting a design period for a project. Yet it can be argued that designers of public works owe a duty to future people to minimize constraints upon future actions to the extent that such constraints arise from present decisions. It is held that the public policy which most nearly satisfies this moral obligation to the future is to find an “economic life” over which the annual total project cost is minimized. Total cost is defined as capital cost plus all future cost throughout the design period. A mathematical model is developed, a nonhomogeneous compound Poisson process which gives optimum design period. One required parameter is the ratio between capital cost and initial annual maintenance and operation cost. The other parameter is an empirically determined exponent which accounts for the increase of annual costs with time. Parameters are estimated and examples given.