A large scale project was carried out in brazil between 1975 and 1981 to develop vehicle operating cost and pavement deterioration models for the economic evaluation of alternative highway investment strategies. the project was funded by the brazilian government and the united nations development program (undp), with the world bank as the executing agency. data collected and analyzed in the study were incorporated into the highway design and maintenance standards model (hdm-iii), a program which is intended to meet the needs of highway authorities, particularly in developing countries, for evaluating policies, standards and programs of road construction and maintenance. phase 1 of the present rtac study involved four major objectives: 1) to review the results of the brazil study and other subsequent work in the areas of vehicle operating cost, road deterioration and highway investment analysis, 2) to assess canadian government and industry needs in these areas, 3) to determine the applicability of the brazilian research to canadian needs, and 4) to formulate the terms of reference to modify existing models or develop new models that will be suitable for canadian needs and conditions. results of the study indicate that the hdm-iii model has the potential to be a useful network road policy analysis tool, but that a good deal of work will be required to adapt and calibrate the model to accurately reflect canadian conditions. in particular, further research is recommended in two major areas: 1) the relationship between road deterioration and vehicle operating costs, and 2) the development and calibration of a common road roughness scale for canada.