A new rural by-pass has been proposed for a small town, with three possible routes under consideration. Using the data in the table below and the procedures in WebTAG (see the link below), undertake an economic appraisal of the proposal, comparing its capital and recurrent costs with benefits deriving from:
(i) Travel time savings
(ii) Accident savings
(iii) Changes in Vehicle Operating Costs (VOC) and carbon emissions
Assumptions
- Traffic levels and speeds remain constant over the appraisal period.
- All vehicles cover the whole length of the road
- The project life is 30 years
- There areonly petrol carson this road
- For Values of Time, use values for the 'average car'
- Use 'link and junction' combined accident rates. (Don't subdivide accidents by severity).
- Fuel costs vary over the project life as forecast by the central oil price scenario in WebTAG.
- Use VOC values for the 'average car'
- Base year for discounting is 2012 and the base test discount rate is 3.5%.
- Use market prices at 2012 levels. Adjust for indirect tax where appropriate.
- Assume maintenance costs etc. for the old road are the same whether or not the new road is built.
Make and justify all other assumptions as necessary.
1.Using MS Excel or similar, calculate the PVC, PVB, NPV, BCR, IRR and FYRR of the four options detailed on the attached data sheet.Summarise these in a report along with sufficient text and details of the calculations made to explain what you have done and why.State which option should be chosen based on these criteria, and give reasons for your choice. Note that you are dealing with a variable trip matrix and that you should use the rule of half to account for generated traffic.
2.To what extent might your results be affected by optimism bias and how should you adjust for this?
3.Outline the advantages and disadvantages of the main alternatives to cost benefit analysis
Note: Always indicate which section of WebTAG the procedures you are using come from.
Option 0: Do nothing- retain existing road
Option A: Build scheme A alongside retention of existing road
Option B: Build scheme B alongside retention of existing road
Option C: Build scheme C alongside retention of existing road
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Option 0- Do nothing
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Option A
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Option B
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Option C
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Road Type
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Older S2 A Road
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Modern D2 Road
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Modern D2 Road
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Modern D2 Road
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Road length (km)
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6
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10
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8.5
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12
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Average speed on original road (km/hr)
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22 (30 mph limit)
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28 (30 mph limit)
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28 (30 mph limit)
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28 (30 mph limit)
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Average speed on new road (km/hr)
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n/a
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65 (60 mph limit)
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55 (60 mph limit)
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65 (60 mph limit)
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Traffic on original road (AADT)
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16000
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4000
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6000
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4500
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Traffic on new road (AADT)
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n/a
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14000
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12000
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13500
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Construction costs per km
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n/a
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£9m
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£12m
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£6m
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Construction period (years)
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n/a
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2
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2
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2
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Road management, maintenance etc. per km per annum
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£10k
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£10k
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£10k
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Sources and Some References:
Department for Transport (2011) The Transport Business Case.
https://www.dft.gov.uk/publications/transport-business-case/
Design Manual for Roads and Bridges (DMRB) Volume 13.www.standardsforhighways.co.uk/dmrb
Highways Agency Post Opening Project Evaluation (POPE) of Major Schemes
https://www.highways.gov.uk/roads/18386.aspx
Includes evaluation of a number of by passes.
WebTAG: Website for Transport Analysis Guidance
https://www.dft.gov.uk/webtag/
Adler, H.A (1987) Economic Appraisal of Transport Projects: A Manual with Case Studies. John Hopkins University Press.
Flyvbjerg, B., Bruzilius, N. and Rothengatter, W.(2003). Megaprojects and Risk. An Anatomy of Ambition. Cambridge University Press.
HM Treasury (2011) The Green Book. Appraisal and Evaluation in Central Government.https://www.hm-treasury.gov.uk/data_greenbook_index.htm
Rogers, M. (2001) Engineering Project Appraisal. Blackwell. Chapter 7 onwards
Snell, M. (1997) Cost-benefit Analysis for Engineers and Planners. Thomas Telford, London.
Willis, K., Garrod, G. and Harvey, D. (1998) A Review of Cost-Benefit Analysis as Applied to the Evaluation of New Road Proposals in the UK. Transportation Research D,3, 3, 141-156.