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BENEFIT COST RATIO ANALYSIS OF SUKOREJO – BATU PASS

ROAD PROJECT

1Darwin Simangunsong, 2Bambang Syairudin

1Magister Program Student, Magister Management of Technology, Project Management,

Sepuluh Nopember Institute of Technology at Surabaya, Indonesia; 2Department of Industrial Engineering, Industrial Technology Faculty, Sepuluh Nopember

Institute of Technology at Surabaya, Indonesia

ABSTRACT

Sukorejo - Batu Road is one of the efforts of local government of East Java

Province, to build new road access network that will have a big impact on

community activities and beneficial to the development of economy,

tourism, regional development, industry, services and agriculture

especially in Malang, Batu City as well as the surrounding area which will

generally have an impact for East Java Province.

Road construction, which requires a relatively large cost, will have an

impact on spatial structure and regional development in general. The

greater the amount of funds needed in the investment, the more important it

is to develop an analysis of the benefits of the project with the aim of

avoiding too much investment increment for unprofitable activities. One of

the analytical methods used to determine the feasibility of a proposed

project is the method of Benefit Cost Ratio (B/C Ratio).

This study aims to analyze the benefits of the Sukorejo - Batu toll road

development project using the Benefit Cost Ratio (B / C Ratio) Method,

taking into account the components of the cost, the job cost component

(construction cost and land acquisition), and the components of the traffic

accident cost. Benefit-Cost Ratio (B/C Ratio) is a comparison between

benefits / benefits that have been present-value with the cost that has been

in-present value.

From this research, it is found that the selected project is worth Rp

1,296,050,611,000 where the total intangible benefits and intangible

benefits are Rp 8,281,018,856,509 while the value of benefit cost ratio is

6.4 which means that the construction of Sukorejo - Batu is worth it,

because its value is more than 1.

Keywords : project, benefit cost ratio, present value, effect

INTRODUCTION

Sukorejo - Batu Road is one of the efforts of East Java provincial government to build new road

access network which has a big impact on community activity and beneficial for economic

development, tourism, regional development, industry, services and agriculture in Malang, Kota

Batu and the surrounding area and in general in East Java (Bina Marga Service of East Java

Provinces, 2012). The development of the road will affect the spatial structure and regional

development in general. The objectives of this research are to predict the impact of increasing

Sukorejo - Batu road to economic benefits and trade activities for producers, traders and

consumers for agricultural commodities, fisheries, small businesses, handicrafts and industries.

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In addition, Sukorejo - Batu passenger road will shorten the travel route so that there are savings

on travel expenses, increased local revenue, especially the potential increase in land and

building tax (PBB).

The Sukorejo - Batu development project has a significant investment value and is planned to be

funded by the regional budget, where land acquisition uses the district / city revenue budget and

the cost of construction and maintenance will be financed by the regional income budget of East

Java Province. Some emerging alternatives are related to financial analysis using an economic

engineering approach that will produce several alternatives where the best alternative is selected

by judging on certain criteria.

LITERATURE REVIEW

Existing Condition of Sukorejo and Batu Road

Sukorejo is Pasuruan Regency whereas Batu is a municipality of Batu. To go to Batu from the

direction of Sukorejo or vice versa required distance of approximately 56 Km with normal

travel time 1,5 hours. But if the trip is done during the holiday season or at the time of departure

and work hours home from work it can take 3 hours more. Traffic for Sukorejo Road - Simpang

Tiga Karanglo is relatively diverse and dense every day, while the traffic for Simpang Tiga

Karanglo - Batu is diverse and less crowded. On holidays the number of vehicles that travel on

these three road segments, and tend become very crowded and jammed, so need to be addressed.

Figure 1. Existing Condition of Sukorejo and Batu Road (www.petajatim.jatim.co.id)

Impact of Pass Road Sukorejo Batu Project

Direct Impact

The development of Sukorejo - Batu as a strategic mega project is the most appropriate solution

to overcome traffic jam in Surabaya - Malang - Batu vital lane. Ease of access will be able to

move the economic activities of agriculture, tourism, and services. So that can synergize the

development of East Java region with rapid growth. The objectives of regional governments to

promote and stimulate economic activity will be realized. The rapid growth and development in

East Java which has a lot of agricultural potential, manufacturing and service industries,

tourism, mining, marine and so on will make East Java economic actors make the area the main

target market, especially the marketing of agricultural products from Batu City region which is a

necessary commodity Community of East Java.

Indirect Impact

Construction of Sukorejo - Batu access road - This stone will provide easy access for economic

actors or farmer groups to market agricultural products. Indirectly will make the economy of

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East Java in general and Malang, Surabaya and Batu in particular squirm, economic centers

with agricultural commodities and agro industry will be more enthusiastic and alive because

East Java is a potential market and easy to reach. Subjects that indirectly have a positive impact

are farmer groups and industrial business actors. Increase the stretching of community activities

which then impact on increasing income and community productivity. Activity structure will be

more solid, because of the ease of access between East Java Province. The output is the

improvement of people's quality of life as an estuary of income increase (Tourism Department

of East Java Province, 2015).

Benefit Cost Ratio (BCR)

BCA is the most common technique for calculating costs and benefits of a project. Basically,

the cost-benefit measurement and analysis method is based on management's way and

perspective in assessing project performance implemented (Indrajit, 2010).

……………. (1)

There are several criteria of BCR value associated with the above formulation, namely; First if

the BCR index value is greater than 1 (BCR> 1) then the project is said to be feasible to work,

second if the BCR index value <1 (BCR <1) then the project is not feasible to work considering

the cost is greater than the benefit Benefit) received. While the components of BCR, among

others, as follows:

1. Procurement Cost. Procurement costs are all costs incurred in relation to project

procurement. Among them are the cost of project material procurement consultation,

purchase cost or leasing of machinery and project support tools, project installation cost,

capital cost for procurement and project work, and expenses related to management and

staff for project work.

2. Start Up Cost. Is an operational cost that is all costs incurred in an effort to make the

project ready for operation. These costs include purchase costs, networking,

reorganization, management and personnel.

3. Project Related Cost. Is a cost associated with the cost of system development and its

application. Project costs include documentation costs, meeting fees, system cost

analysis, managerial and personnel.

4. Ongoing Cost. Is the operating cost of the system for the system to operate properly.

Including maintenance cost system. Costs that include ongoing costs include personnel

costs, overhead costs (telephone, electricity, etc.), project maintenance, managerial

costs in system operations. These costs occur routinely over the operational life of the

system.

Some of the tangible benefits gained from the construction of Sukorejo - Batu passage are:

1. Reduction of Vehicle Operating Cost (BOK)

a. Fuel consumption. The cost of fuel consumption is determined by calculating the

fuel used (liter / 1.000 Km) multiplied by the price of each liter.

Y = 0,05693 S2

– 6,42593 S + 269,18567 ...... (2)

b. Oil / lubricant usage. The use of oil / lubricant oil for the type of passenger car

according to the following equation:

Y = 0,00037 S2

– 0,04070 S + 2,20403 ........... (3)

c. Use of tires. The use of tires for the type of passenger car according to the

following equation:

Y = 0,0008848 S - 0,004533 ................... (4)

d. Cost of vehicle maintenance. The cost of vehicle maintenance consists of the cost

of parts and mechanics, according to the following equation:

(1) Spare parts

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Y = 0,0000064 S + 0,0005567 ..................... (5)

(2) Vehicle Depreciation Cost

Y = 1 / (2,50 S + 125 ) .................................... (6)

(3) Assurance

Y = 38 / (500 S)...................................... (2.8)

(4) Capital Interest

Y = 150 / 500 S ...................................... (2.9)

2. Reduced Fee Charges

The delay is the time lost by being influenced by an element that can not be controlled by

the rider either within the traffic flow itself or from other traffic flows (Pignataro, 2003).

3. Accidents

Technically traffic accidents are defined as incidental events caused by many

unintentional factors (random multy factor events).

RESEARCH METHODS

In this study there are several stages of the methodology that will be described as follows:

1. Data Collection

a. Field Research. In this field research, interviews and questionnaires were conducted

on the concept of the Sukorejo - Batu project implementation of the Year 2017

implementation.

b. Library Research. Done by looking for references in journals, books, and previous

research on project management, ratios and financial aspects.

Figure 2. Research Methodology

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2. Data Analysis Method

f. Conducting quantitative and qualitative analysis of project feasibility using capital

budgeting and sensitivity analysis method

g. Perform cost of capital calculation

h. Analyze the project based on benefit cost ratio method

3. Benefit Cost Ratio Analysis

Benefit-Cost Ratio (B / C Ratio) is a comparison between present-value benefits with

present-value costs. The larger the B / C Ratio, the greater the comparison between

benefit and cost, which means the project is relatively more profitable. A project will be

selected if B / C Ratio> 1, if B / C Ratio <1 then the project proposal will be rejected.

4. Stage of Withdrawal Conclusion and Suggestion

Conclusions are drawn to the results obtained that are tailored to the objectives of this

study. Furthermore, they try to give suggestions on the application of research results as

well as efforts to avoid project failures.

Result and Discussion

Alternate Route

1. Route Alternate 1

This route is through Desa Karangsono (Kecamatan Sukorejo), Desa Sumbersuko – Desa

Pager – Desa Sekarmojo – Desa Tejowangi (Kecamatan Purwosari), Desa Capang – Desa

Gajahrejo – Desa Parerejo – Desa Sentul (Kecamatan Purwodadi, Kabupaten Pasuruan),

Desa Turirejo – Desa Wonorejo – Desa Ketindan – Kelurahan Kalirejo – Desa Bedali

(Kecamatan Lawang), Desa Toyomarto – Desa Gunungrejo – Desa Klampok – Desa

Langlang (Kecamatan Singosari), Desa Girimoyo - Desa Ngenep – Desa Bocek – Desa

Donowarih – Desa Tawangargo (Kecamatan Karangploso, Kabupaten Malang), Desa

Giripurno (Kecamatan Bumiaji, Kota Batu).

2. Route Alternate 2

This route is through Desa Karangsono (Kecamatan Sukorejo) - Desa Pager - Desa

Sekarmojo - Desa Tejowangi (Kecamatan Purwosari), Desa Capang - Desa Gajahrejo -

Desa Parerejo - Desa Sentul (Kecamatan Purwodadi, Kabupaten Pasuruan) - Desa Turirejo

- Desa Ketindan - Desa Bedali (Kecamatan Lawang), Desa Toyomarto - Desa Klampok -

Desa Langlang (Kecamatan Singosari), Desa Ngenep - Desa Bocek - Desa Tawangargo

(Kecamatan Karangploso, Kabupaten Malang) - Desa Giripurno (Kecamatan Bumiaji,

Kota Batu).

3. Route Alternate 2

This route is through Desa Karangsono (Kecamatan Sukorejo) - Desa Pager - Desa

Sekarmojo - Desa Tejowangi (Kecamatan Purwosari), Desa Capang - Desa Gajahrejo -

Desa Parerejo - Desa Sentul (Kecamatan Purwodadi, Kabupaten Pasuruan) - Desa Turirejo

- Desa Ketindan - Desa Bedali (Kecamatan Lawang), Desa Toyomarto - Desa Klampok -

Desa Langlang (Kecamatan Singosari), Desa Ngenep - Desa Bocek - Desa Tawangargo

(Kecamatan Karangploso, Kabupaten Malang) - Desa Giripurno dan Desa Pandanrejo

(Kecamatan Bumiaji, Kota Batu).

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Table 1. Description Alternative Route 1 of Pass Road Sukorejo – Batu (Mono Heksa,

2017)

Tabel 2. Description Alternative Route 2 of Pass Road Sukorejo – Batu (Mono Heksa,

2017)

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Tabel 3. Description Alternative Route 3 of Pass Road Sukorejo – Batu (Mono Heksa,

2017)

Cost of Road Works Tembus Sukorejo – Batu

Table 4 Costs of Land Acquisition, Construction and Maintenance of Pass Road Sukorejo

- Batu for 2 Line Alternating 1

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Table 5 Costs of Land Acquisition, Construction and Maintenance of Pass Road Sukorejo

- Batu for 2 Line Alternating 2

Table 6. Costs of Land Acquisition, Construction and Maintenance of Pass Road Sukorejo

- Batu for 2 Line Alternating 3

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Table 7. Costs of Land Acquisition, Construction and Maintenance of Pass Road Sukorejo

- Batu for 4 Line Alternating 1

Table 8. Costs of Land Acquisition, Construction and Maintenance of Pass Road Sukorejo

- Batu for 4 Line Alternating 2

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Table 9. Costs of Land Acquisition, Construction and Maintenance of Pass Road Sukorejo

- Batu for 4 Line Alternating 3

Benefit of Pass Road Sukorejo – Batu Project

Table 10. Tangible Benefit of Pass Road Sukorejo – Batu Project

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Table 11. Intangible Benefit of Pass Road Sukorejo – Batu Project

BCR Analysis

Table 12. Benefit Cost Ratio Calculate of Pass Road Sukorejo – Batu Project 2 Line

Alternating 1

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Table 13. Benefit Cost Ratio Calculate of Pass Road Sukorejo – Batu Project 2 Line

Alternating 2

Table 14. Benefit Cost Ratio Calculate of Pass Road Sukorejo – Batu Project 2 Line

Alternating 3

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Table 15. Benefit Cost Ratio Calculate of Pass Road Sukorejo – Batu Project 4 Line

Alternating 1

Table 16. Benefit Cost Ratio Calculate of Pass Road Sukorejo – Batu Project 4 Line

Alternating 2

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Table 17. Benefit Cost Ratio Calculate of Pass Road Sukorejo – Batu Project 4 Line

Alternating 3

From the above calculation it can be seen that the value of all benefit cost ratios on 6

alternativef is with the average value of BCR is the largest for the construction project of

Sukorejo - Batu with 2 lanes alternative 3 which has an average of 6.97 where the value of ratio

1 is obtained After the useful life of the road is used for 15 years, which is also the fastest time

of benefit associated with the ratio of BCR to a value of more than 1. This means that the

construction of the Sukorejo - Batu passage with 2 alternative lanes 3 is feasible to choose on

These factors are beyond the geographic and demographic conditions.

Managerial Implication

This research can have an impact on decision making for managerial related to decision making

in Sukorejo - Batu road development with Benefit Cost Analysis Method. The highest

consideration of the BCR ratio allows the project to have maximum benefits in the future and

the most immediate beneficiary considerations after the project is completed.

CONCLUSION AND SUGGEST

CONCLUSION

1. Selection of Sukorejo road construction - This stone has three alternatives and the chosen

one is the third alternative because of consideration: no crossing with railway, shorter route

distance, shorter travel time and fewer bends or climbs. In addition, the cost required is less

than the two other projects amounting to Rp 1,296,050,611,000.

2. The total tangible benefits consisting of the benefits of operating vehicle operating expenses,

reduction of deferred costs and accident reduction amounted to Rp 7,743,313,602,563. While

intangible benefits consist of new business growth, APBD increase and human resource

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performance improvement is Rp 537,705,253,946. So the total intangible manfat and

intangible benefits of Rp 8.281.018.856.509.

3. The Sukorejo - Batu Strip construction project with 2 alternative lanes 3 being the best

choice with the highest average BCR compared to other alternatives of 6.97 where the ratio

value 1 was obtained after the useful life of the road was used for 15 years, This is also the

fastest benefit time associated with the BCR ratio for values over 1.

SUGGESTION

2. This study only looks at cash flows on investments, while profit and loss posts are not

overly discussed. Investors should be more strict in seeing the profit and loss of this

project because it will determine dividends.

3. This research does not include risk analysis on Sukorejo - Batu road investment. Risk

analysis of this investment to see how big the effect of risk on investment decisions.

4. The Sukorejo – Batu Road Construction Project- This stone should be careful in

spending, the actual cost of the project should not exceed the RAB, and if there is an

urgent fee that requires the cash outflow beyond the post in the RAB, then it should be

adjusted to anticipate Cost over run, one example is the adjustment of design and

quality of Sukorejo - Batu passage.

LIMITATION

1. This research is still using cost benefit analysis for Sukorejo - Batu toll road project

development using 2 lane, in next research it is expected to do research with 4 lane.

2. This research does not analyze Payback Ratio and Break Event Point value nor value of

Internal Rate of Return (IRR), so in other research it is possible to enter the variable.

3. This study incorporates the intangible benefits of three aspects of new business growth,

an increase in APBD and an increase in HR performance so that in other studies it is

possible to examine other aspects beyond those aspects.

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