The process of determining which projects to implement under a given budget, and which to defer until later, is central to the planning and management of highway systems. With a limited budget for construction, maintenance, and safety improvements, investments which will produce the optimal benefits must be chosen. This is often impossible to accomplish without the aid of a computer because of the complexity of the problem. Dynamic programming has been tested and verified as an efficient method for selecting priority projects to derive maximum benefits.

There are several approaches to priority programming as it is related to the capital allocation problem. Benefit-cost, present worth, and rate-of-return calculations have traditionally been used as an integral part of the transportation planning process. Construction and maintenance programs continually face the task of having to assign priorities when insufficient funds are available to complete all projects. Safety improvement programs, which were initially funded through the Highway Safety Act of 1966 and expanded through the Federal-Aid Highway Act of 1973, have become so large that they are unmanageable without a clear and concise means of priority allocation.

A dynamic programming procedure was developed in this study which selects the optimal combination of safety improvement projects for a given budget. Sixty-one projects, each with one or more alternatives, were evaluated. The input consisted of the designated budget for the safety improvement program, the improvement cost, and the benefits derived from each improvement. The accuracy and reliability of dynamic programming is dependent upon the accuracy of benefits and costs used as input.

In a comparison with benefit-cost analyses, it was shown that dynamic programming can yield a higher return for a given budget. An optimal allocation of funds will always be obtained if the individual project costs are multiples of the increment used in dynamic programming.

Applicability of dynamic programming to budget allocation in transportation planning is practically unlimited. In addition to the various highway programs, dynamic programming can be used to optimize investments for entire transportation departments.

Report Date


Report Number

No. 398

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The contents of this report reflect the views of the authors who are responsible for the facts and the accuracy of the data presented herein. The contents do not reflect the official views or policies of the Kentucky Bureau of Highways. This report does not constitute a standard, specification, or regulation.