V3211021_SSJ_V2_Redacted.pdf

V220T.12 (01/15)

Procurement Request No. V3211021

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE ASSISTANT SECRETARY FOR RESEARCH AND TECHNOLOGY

VOLPE NATIONAL TRANSPORTATION SYSTEMS CENTER (VOLPE CENTER)

Volpe Economic Analysis Division

SOLE SOURCE SAP JUSTIFICATION

A. Description of Supplies/Services.

The Volpe National Transportation Systems Center (Volpe Center) is performing a comprehensive analysis of the socioeconomic impacts of highway investment for the Federal Highway Administration (FHWA). As part of this analysis, the Volpe Center requires the use of an outside highway investment model and specialized contractor staff to perform scenario runs in this model. The contractor shall: (1) collaborate with the Volpe Center to incorporate modifications into the United States Applied General Equilibrium – Highway (USAGE-Hwy) model; and (2) conduct and report on new USAGE-Hwy model runs addressing highest-priority research questions centering on the socioeconomic impacts of highway investment. The Volpe Center will supply the contractor with: (1) descriptions of the objectives and constraints associated with each modification to USAGE-Hwy; and (2) all required outputs from the Highway Economic Requirements System (HERS) model, consistent with the process used to generate previous analyses under procurement request (PR) V3211010. The contractor shall conduct analytical runs of highway investment scenarios using the USAGE- Hwy model, and shall provide a written report describing how the model results differ across the scenarios.

B. Market Research.

Previous market research performed under IAA HW7AA1 and HW7AA2 by Volpe Center economist staff found that Victoria University’s United States Applied General Equilibrium (USAGE) was the most appropriate macroeconomic model to use within its socioeconomic impacts of highway investment analysis performed under this project. That original market research also found that LIFT was the next-best available alternative but contained several critical algorithmic and policy deficiencies for the purposes of the analysis. Other computable general equilibrium and macroeconomic models were found to have additional deficiencies that rendered the models inadequate for the purposes of the analysis. Such deficiencies include a lack of a representation of the transportation sector, a lack of representing productivity by industry, and a lack of structural linkages between different sectors of the U.S. Economy. Ultimately, Victoria University’s USAGE was chosen as the sole capable model for the Volpe Center’s analysis, and sole source DTRT5716P80111 was awarded to Victoria University for the required analyses.

The Volpe Center’s modeling requirements for the analysis under IAA HW7AA3 are the same as the requirements listed above for the research performed under HW7AA1 and HW7AA2: The scenarios will center on empirical study of complex policy questions on the roles of changes in highway investment levels on macroeconomic outcomes. The Volpe Center also requires expertise that enable a methodologically sound mapping of outputs from the Highway Economic Requirements System (HERS) to a model of the United States economy that accounts for linkages among costs of production, labor supply, household expenditures, and travel costs (both monetary and temporal). The required model of the US Economy must have a robust representation of several industries related to highway transportation including highway and bridge construction, street repairs, in-house trucking, and private road transportation. It must also represent impacts on global interest rates from increased borrowing to fund highway investments.

USAGE-Hwy is the only macroeconomic model that has these required features and is only available from the Center for Policy Studies (CoPS) at Victoria University (Australia). No other model has the track record of successful and compelling analysis that USAGE-Hwy has in analyzing the macroeconomic impacts from highway investment.

V220T.12 (01/15)

C. Supporting Rationale.

(1) Sole Source: Only one responsible source and no other supplies or services will satisfy agency requirements.

(i) The market research confirmed that USAGE-Hwy is the only available model capable of mapping outputs from the HERS model to a model of the United States economy that accounts for linkages among costs of production, labor supply, household expenditures, and travel costs and contains the appropriate industry definitions that have been developed to represent the impacts of highway investment. USAGE-Hwy also would offer a superior means of analyzing all relevant linkages between highway investment and economic outcomes. USAGE-Hwy is proprietary to CoPS at Victoria University. Because Victoria University is the only source capable of conducting the required analysis in USAGE-Hwy, it is necessary for Victoria University to conduct the required analysis.

(ii) It would be infeasible to educate another contractor to obtain the required expertise and it would be impractical to reconfigure other existing models to achieve the requirements of the research within prevailing practical constraints.

With respect to timeframes, it is essential to generate results quickly once the target highway funding scenarios are available. The application of USAGE-Hwy in this task would enable Volpe to satisfy its research requirements;

conversely, the application of an alternative model under the required education needed to meet Volpe’s needs would not likely meet the timetable appropriate for the research, as the various algorithmic and policy issues with alternative models would need to be painstakingly fixed.