An ROI framework for state transportation projects

(7 pages)

In a progressively more complex operational landscape, US state departments of transportation (DOTs) are at a critical juncture in their capital planning: To obtain the funding required for projects, their proposals need to demonstrate a high level of efficiency coupled with the ability to deliver the best possible ROI.

Primary factors that impact planning and delivery of DOT capital projects include competing priorities and tightening budgets due to rising material costs and inflation. Macroeconomic conditions such as shortages of skilled labor, both internally to administer projects and externally to deliver them, also play a role, as does the uncertainty surrounding federal reauthorization of the Infrastructure Investment and Jobs Act (IIJA) in 2026, which could affect current funding sources and program continuities.

Against this backdrop, DOTs need to put forward a compelling case for investment. This article puts forward a framework that can help state DOTs to clearly articulate capital priorities, highlight the ROI on taxpayer money, and show what successful outcomes could look like for all stakeholders, including the public. This framework can be used by DOTs to effectively prioritize projects and compete for funding opportunities. The article also highlights examples of large infrastructure projects where this type of approach has proven successful.

At a crossroads: State departments of transportation face critical decisions

Multiple challenges are at play in the current capital planning environment, requiring state DOT leaders to carefully consider trends that could impact their ability to effectively plan, develop, and implement capital programs. Three key challenges could have the greatest impact.

Competing capital priorities, tight project budgets, and increasing asset management needs

State DOTs face significant challenges in managing competing capital priorities due in part to systemic inefficiencies in capital portfolio management. Capital is often treated as a budgetary tool rather than a strategic asset, leading to the prioritization of projects on an asset-by-asset basis rather than dynamically across business units or project types. This approach can result in biased decision-making, where benefits are overstated and marginal projects are pushed forward, further complicating the allocation of limited resources.

Tightening project budgets is a persistent issue for state DOTs, exacerbated by funding constraints and declining revenue from traditional sources such as fossil fuel taxes. These financial limitations make it difficult to meet the growing demands of infrastructure maintenance and development. Operators often struggle to maximize operational and capital expenditure, leading to inefficiencies in project delivery. Efforts to improve efficiencies require significant effort in planning, resource allocation, and performance measurement, which are often lacking due to budgetary constraints.

The increasing demands of asset management present another challenge. Aging infrastructure, rising traffic volumes, and the adoption of heavier electric vehicles (EVs) contribute to accelerated wear and tear on roadways, necessitating more frequent maintenance and updated design approaches. Additionally, asset management practices now are required to align with sustainability goals and the energy transition, further complicating the situation. These challenges are compounded by gaps in staff capabilities, labor shortages, and low productivity, all of which limit the ability of DOTs to manage and maintain their assets effectively.

Last, increasing competition for funding could mean that transportation agencies will need to present their plans through an economic development lens that shows how the maximum ROI can be obtained. However, agencies may struggle to determine which of their projects have the best potential to promote economic growth, and how to prioritize them. This could be due to a lack of the necessary resources or capabilities to determine the potential positive impact of a project on GDP and job growth.

The impact of macroeconomic challenges on capital delivery

Several factors, including a shortage of skilled labor, rising material costs, and supply chain uncertainty, are causing increases in project expenses and extended timelines. Uncertain market conditions could impact both asset economics (such as construction material and equipment costs) as well as the broader economy. This increased uncertainty makes planning and executing projects more challenging.

In the current landscape, labor shortages are a reality. Monthly unfilled construction positions in the United States have increased by 38 percent since 2001, compared to monthly hires, which declined by around 25 percent over the same period.¹ Although construction labor supply has risen since the end of the COVID-19 pandemic, labor demand is still high. The sector saw an estimated 253,000 unfilled construction positions in February 2025.² Construction firms may need to reassess workforce planning, and training, to ensure the sector has the skilled workforce it needs. And DOTs may need to factor labor supply into project timelines.

Meanwhile, essential construction materials costs have increased by more than 30 percent over the past five years.³ Ongoing market uncertainty could continue the upward cost trajectory and potentially disrupt supply chains.

Uncertainty around federal funding

The extent and types of federal funding available beyond fiscal year 2026 have to be determined, a factor which will likely impact both short- and long-term DOT capital plans, making it difficult for state DOTs to commit to future projects.

DOTs need to consider that disbursements under the IIJA could change. The IIJA led to a 44 percent increase in funding from 2021 to 2022 and dictated federal disbursements of state DOT formula funds from the 2022 through 2026 financial years at a steady 2 percent CAGR.⁴ As the IIJA expires in the 2026 financial year, DOTs are faced with uncertainty about future funding levels within the next surface transportation bill, and thus are developing capital plans and achieving project fiscal solvency based in part on programmatic assumptions.

Developing a compelling case for investment

Against the backdrop of increasing costs and uncertainty about what funding will be available, state DOTs need to be able to successfully translate their capital and operating plans into clear and potentially beneficial results—with a compelling narrative that incorporates stakeholders’ priorities across the public and private sectors, as well as the general public’s interests. State DOTs can benefit from adopting a strategic, multiphased approach that emphasizes market understanding, stakeholder engagement, and innovative investment strategies. A successful narrative would typically contain three key components.

1. Demonstrate an understanding of outcomes critical at the state, population, and business level

Developing a business case for a private road operator to contribute to economic growth

A privately operated toll road in the United States provides evidence of how road infrastructure can support economic growth—achieved by developing an understanding of the full potential and value of its asset. The toll road connects several economic hubs in its state and passes through rural communities. A three-phase approach was followed to identify key growth drivers and the corresponding trends impacting them.

A correlation analysis was used to identify the drivers of light and heavy vehicle traffic on the toll road. In addition, a GDP sensitivity study correlated trips across assets with county-level, industry-specific, and year-on-year changes in GDP.

Trends impacting each of the key drivers of traffic were identified, establishing how these would change over time, and the extent of the impact of each. The operator used analytics tools that helped assess where to locate operational sites (for example, testing location factors to correlate markets and the most attractive type of facility). This allowed the operator to analyze its competitive position relative to other regions and enable or accelerate the development of new businesses or industries along the asset. The operator also used a freight intensity model that provided detailed industry- or sector-level, point-to-point freight flows across the country that accounted for economic outlook or growth. The latter was an important factor as emerging trends affecting the future of freight flows could have direct and indirect impacts on toll roads.

By developing targeted, strategic management initiatives that aligned with its key objectives, the operator was able to create the business case for growth along the corridor, with limited downside. The three-pronged approach allowed it to demonstrate how toll roads contribute to economic growth and improve quality of life through better connectivity. The business case proved that developments along the corridor increase economic output by creating new jobs, both directly and indirectly.

Successful DOTs often work closely with various stakeholders—state and local officials, private sector investors, and the general public—to ensure that they are aware of the metrics that matter and how to measure them. Transportation agencies usually track critical metrics, such as expected travel time and congestion, but including economic indicators can be valuable, such as the potential impact on regional economic growth, job creation, and social costs for users and property owners (see sidebar “Developing a business case for a private road operator to contribute to economic growth”).

Ideally, the key outcomes should be backed up by market research to ensure that evolving stakeholder needs are aligned. State DOTs can prioritize investments that have the potential to spur economic growth—for example, those that take into account how market changes and new technologies could influence industries that rely heavily on transportation infrastructure (such as logistics and manufacturing). Building strong partnerships with the private sector and local stakeholders can assist in successfully identifying, developing, and delivering suitable projects. Such a partnership can also provide valuable insights and additional resources for state DOTs.

Engaging with private sector entities and regional partners can follow a structured approach, including defining key requirements for subject matter experts to serve on the advisory council, setting up collaborative workshops, and scheduling regular meetings. These collaborations could focus on defining KPIs, identifying bottlenecks, and shaping mobility strategies. In addition, incorporating local communities’ perspectives can help ensure that projects address the concerns of those most affected by infrastructure developments. Targeted surveys could obtain feedback on the current situation and help to elicit suggestions for mitigation options to help drive change.

2. Prioritize projects tied to quantifiable economic outcomes

Performing an analysis at the project level can help develop an outline of the outcomes and impacts across the identified KPIs that matter most to the state. This provides DOTs with a deep understanding of the cost and timing components of a project as well as how they could generate additional benefits to the broader region and economy.

The process can include developing a suite of KPIs that are measurable, easy to track, and comprehensible to both DOT program managers and external stakeholders. These KPIs would guide decision-making and communicate progress effectively, as well as articulate the expected outcomes of individual projects, including improvements in speed, reliability, and safety. Demonstrating tangible benefits can reinforce the value of infrastructure investments to stakeholders and decision-makers.

Developing a freight infrastructure funding strategy for a US state department of transportation

A state department of transportation (DOT) wanted to enhance its $500 million freight infrastructure planning strategy, with the goal of developing a multimodal freight plan that could boost the state’s overall economic competitiveness. A business-focused lens was applied to the planning process, using a private sector advisory committee to inform capital investment priorities for key freight corridors. The business-backed approach involved three phases.

The first phase defined the anticipated market dynamics facing the state DOT’s key users. Considerations included identifying what factors were important to key industries, the trends expected to make an impact, and what type of freight moved around the state, and how. The DOT estimated the potential freight impacts from infrastructure improvements, as well as the likely economic development implications for the workforce at the county level. The DOT further investigated the possible impact of technology and policy changes on freight flows and shipper or carrier decision-making.

In the second phase, the state DOT developed a structured approach to engaging with the private sector and key local and regional public partners. It defined KPIs by subindustry, validated key freight corridors by commodity and mode, identified bottlenecks and degradation points for KPIs, and considered other factors that shape how freight will move, by industry. This KPI-driven approach allowed the DOT to quantify ROI for various project types.

Phase three involved scenario modeling that used a private equity investment lens. This approach tested project performance at a system level, as well as against different investment theses. Such modeling created a prioritization strategy that ranked projects based on performance outcomes—those that would put the state in a position to maximize the deployment of funds to the most impactful projects, investment packages, or even individual projects. This approach helped to drive private sector support and buy-in.

The resultant plan met all the federal requirements and positioned the state to maximize its infrastructure investments. In aggregate, each $1 invested across the portfolio is expected to yield a nine-times monetary return for businesses by 2050 by improving safety, speed, reliability, and cost throughout the freight network. By 2050, the estimated impact of the identified portfolio of projects compared with the current project pipeline includes an approximate 3 percent improvement in average network speed across freight corridors, a 25 percent reduction in cost to shippers and carriers in dollars per vehicle mile traveled, and an approximate 35 percent improvement in safety, as measured by the social cost of crashes.

Private sector expertise can be sought to help validate project priorities and ensure alignment with industry needs. This approach can foster buy-in and support for infrastructure initiatives (see sidebar “Developing a freight infrastructure funding strategy for a US state department of transportation”).

3. Align scenario modeling with desired outcomes

Detailed scenario modeling can allow state DOTs to assess the potential impact of different capital programs and effectively communicate the possible trade-offs of different project portfolios, both in terms of investment as well as regional and economic outcomes. Key components of scenario modeling include performing an investment analysis to evaluate the overall performance of the investment packages and communicating plans effectively.

A private equity investment lens can help to test the performance of a portfolio or project package against various investment theses, such as consistent growth, potential funding shortfalls, and potential growth in certain funding sources. This type of approach would allow state DOTs to assess the impacts of various investment strategies on system-level performance. Analyzing the trade-offs of different investment choices could provide a better understanding of their implications for various aspects, including network reliability, safety, and cost. Understanding project sequencing would help to avoid competition for resources that could cause delays and increase costs.

Transforming a European national road operator into a customer-centric service provider

The operator wanted to transform its road network to benefit its users, including both citizens and businesses. These benefits included improving safety and customer experience while optimizing the use of taxpayer funds and developing new capabilities within the organization. Through capital and operational expenditure benefits, the operator was able to achieve a total of approximately $768 million in optimized taxpayer funds.

The program that was developed and implemented evolved around three key principles and five key themes. The principles focused on delivering benefits for the end users of the network, developing internal capabilities, and creating sustained improvements. The five key themes comprised the following actions:

Optimizing capital scheme and maintenance portfolios through the alignment of investments and actions with business needs, in tandem with proactive, forward-looking bundling as well as project value optimization through a fact-based approach. Apart from connecting communities and empowering new businesses, the organization was able to increase work delivered by between 20 and 30 percent whilst reducing road-space occupancy by contractors by an average of 17 percent across five regions.
Maximizing planning and program development by consistently challenging asset needs (for example, repair versus replace) and integrating delivery plans across internal and external needs, such as supply chain partners’ requirements to optimize delivery.
Streamlining the organization’s internal setup through a zero-based budgeting approach to align with regulatory outputs and focusing on road users’ and contractors’ needs. This included working through natural attrition and reskilling to rebalance the organization based on end-user needs.
Following a data-based and risk-based approach for maintaining productivity and providing intelligence to ensure delivery on time and on budget.
Building capacity at scale. To ensure the long-term sustainability of change, 1,800 agency members across operations, major projects, and engineering standards were upskilled and trained in new ways of working.

Four years into delivery, the national road operator has seen a 12-times ROI with a 15 to 30 percent improved unit cost across capital and operations. It also has achieved direct customer-focused benefits and internal organizational efficiencies, such as increased trip-to-trip reliability and speed. Other benefits include significantly improved safety metrics for on-road staff and contractors, and more partnerships and collaborations with businesses and the community.

Investment strategies, as well as the potential trade-offs of the different scenarios, would need to be communicated broadly both in terms of the required investment and regional and economic outcomes. Obtaining successful buy-in from citizens and businesses requires transparency about the process of developing these strategies—a document that sets out the state-level investment plan, for example. Although not a US example, a European national road owner and operator that maintains and improves the national road network provides a compelling transformation case study (see sidebar “Transforming a European national road operator into a customer-centric service provider”).

State DOTs would do well to consider how infrastructure investments can deliver measurable outcomes for the public good. However, achieving the best ROI from state DOT capital planning is not a one-size-fits-all exercise. As funding still needs to be finalized and operational challenges persist, state DOT leaders now have the opportunity to act decisively and adopt effective strategies that prioritize collaboration, transparency, and data-driven decision-making. Aligning capital investments with clear, quantifiable benefits—such as economic growth, safety improvements, and enhanced mobility—can empower state DOTs to build compelling business cases for funding and to deliver tangible value to their communities. The choices made today will shape the future of transportation infrastructure for decades to come.

The case for a clear ROI framework for state transportation projects

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