Institute for Climate Change and Sustainable Development, University …€¦ · ·...

Institute for Climate Change and Sustainable Development, University of Malta

Incomplete cost-incomplete benefit analysis

in transport appraisal

Dr Robin Hickman

Bartlett School of Planning

[email protected]

mailto:[email protected]

Key Issues and Questions

Transport appraisal involves making choices between different

projects and budget allocations – deciding which projects might be

the best spend of funding. The current appraisal approaches in

transport infrastructure in the UK are based on WebTAG –

primarily cost-benefit analysis (CBA), with a weak application of

multi-criteria analysis (MCA).

QUESTIONS:

1. Does this deliver the right projects?

2. Should we have a stronger critical debate on the appraisal

approaches used in transport?

Key Issues and Questions

• CBA is important in the assessment of all projects – but has only

a narrow remit – it is concerned with financial and ‘economic

efficiency’ outcomes. In particular, it suffers from the problem of

‘quantifying the unquantifiable’ (Self, 1970; Adams, 1994;

Ackerman and Heinzerling, 2004; Naess, 2006; Naess, 2016).

• Contemporary public policy problems cover wider issues of

sustainability – but the definition is ‘fuzzy’ and open to multiple

interpretations (Swyngedouw, 2007).

• WebTAG interprets sustainability, through the appraisal

summary table (AST), as having three pillars (economic, social

and environmental) – the economic pillar is given an implicit

greater weighting – social and environmental objectives are

poorly covered. Different interpretations of sustainability – as a

‘nested’ concept (Giddings et al., 2002), would mean that

thresholds couldn’t be breached – this might lead to very

different projects being developed?

• Two projects are examined – the South Fylde Line Electrification

project and Heysham-A6 Link – the CBAs reveal the important

components of decision-making – which are mainly time

savings.

• We suggest participatory MCA might help the process –

incorporating different actor views and assessing projects

against local policy criteria – leading to a public policy debate

facilitated by MCA?

Does the UK appraisal system allow this quality of

investment in urban LRT systems?

BORDEAUX, FRANCE

Is the transport project framed to achieve

sustainability – is it assessed against the

‘correct’ success factors? Who does the

assessment? Are some thresholds being

breached, say the implications for the

environment? Why are these not discussed?

THAMES ESTUARY AIRPORT (LONDON)

Tram-train systems are expensive – and are difficult to justify

in the UK – but they bring the city-region together, allowing

trips beyond the urban area, and peripheral areas to prosper.

KASSEL, GERMANY

In the UK, and many contexts, the ‘winners’ from transport investment are usually

the larger urban areas and high income groups.

Elsewhere, social goals are given much greater priority – the transport investment

here is justified in terms of the regeneration of the former coal mining area. But the

‘economic efficiency’ of this project is very weak – it wouldn’t be funded in the UK.

VALENCIENNES, FRANCE

There are some examples in the UK – where the transport investment

is used to support the regeneration of deprived areas. There is little

demonstrable ‘benefit’ in the CBA – and the investment is justified

against other policy goals. But there are very few of these.

DROYLSDEN (MANCHESTER), UK

CBA is seen, by its proponents, as providing:

“Much of the information needed when making decisions

about whether to approve an investment and how it might rank

when compared with other transport schemes competing for

limited funds.” (Worsley, 2014, p.17)

“A framework within which impacts are quantified on a

consistent basis, forcing decision makers to face up to

numbers.” (Mackie et al., 2014, p.4).

And, even, provides an example of “decision-making by

democratic consent.” (Mackie et al., 2014, p.3).

The Practice of CBA

Key Problems with CBA in Transport Planning

“Many of the judgements relative to the appraisal (and calculation of the

likely impacts) of a transport infrastructure project can only be

reasonably expressed and argued in fairly broad terms [...] they belong

to the arena of public debate – and not to a world of endlessly

hypothecated and quantified sums […] ultimately, they can only be

taken through a series of policy judgements, which should be as open

and explicit as possible, and supported by relevant information which by

itself can never be conclusive. Greater rationality in the final decision is

not helped, but hindered, by the use of notional monetary figures which

either conceal relevant policy judgements or involve unrealistic and

artificial degrees of precision. Those who suppose otherwise are

heading for a peculiarly dreary version of 1984.”

(Self, 1970, p.255, p.260)

Why is the CBA process inaccessible to everyone but the economists

involved: allowing the transport economists, transport planners and

politicians to ‘hide their vested interests behind a supposed technical

debate’? (Ackerman and Heinzerling, 2004).

Impacts that are

quantified &

monetised

Impacts that can be

monetised but are not

reported in the AST

Impacts that it is not

currently feasible to

monetise

All impacts

The Partiality of CBA (within the AST)

• Business users

and private sector

providers

• Noise

• Air quality

• Greenhouse gases

• Commuting and

other uses

• Accidents

• Physical activity

• Journey quality

• Reliability impact on

business users

• Regeneration

• Wider impacts


commuting and other

users

• Option and non-use

values

• Landscape

• Townscape

• Historic

environment

• Biodiversity

• Water environment

• Security

• Access to services

• Affordability

• Severance

https://www.gov.uk/government/publications/we

btag-tag-unit-a1-1-cost-benefit-analysis

Impacts that are

quantified &

monetised

Impacts that can be


reported in the AST



monetise

• Business users

and private sector

providers

• Noise

• Air quality


• Commuting and

other uses

• Accidents


• Journey quality


business users

• Regeneration

• Wider impacts


commuting and other

users


values

• Landscape

• Townscape

• Historic

environment

• Biodiversity


• Security


• Affordability

• Severance



• Estimation of benefits

and costs of intervention

– of the (partial) items

that can be monetised –

comparing a ‘with

scheme’ and ‘without

scheme’ case, over 60

years

• Sometimes this is very

partial

All impacts

The Partiality of CBA (within the AST)

Impacts that are

quantified &

monetised

Impacts that can be


reported in the AST



monetise

All impacts

• Business users

and private sector

providers

• Noise

• Air quality


• Commuting and

other uses

• Accidents


• Journey quality


business users

• Regeneration

• Wider impacts


commuting and other

users


values

• Landscape

• Townscape

• Historic

environment

• Biodiversity


• Security


• Affordability

• Severance



• What if the issues not

captured in the CBA are

important?

• Should impacts be

traded off against each

other?

• Should thresholds be

used?

• Should different actor

views matter – including

political and public

acceptability?

Incomplete cost v. incomplete benefit analysis

Project 1: Tram Extension to Lytham

Project 2: Tram-Train Preston-Blackpool

Project 3: M6 Heysham Link Road

Case Studies

Monetary Economic

Value*

Project 1: Tram

Extension to the South

Fylde Line (to Lytham)

(2010 prices and values)

Project 2: Tram

Train on the

South Fylde Line

(Preston to

Blackpool) (2010

prices and

values)

Project 3(A): M6

Heysham Link

Road (Fixed

Demand)

(2010 prices and

values)

Project 3(B):M6

Heysham Link Road

(Variable Demand)

(2010 prices and

values)

Benefits

Consumer User Benefits 399.4 209.5 625.5 237.3

Business User Benefits 216.4 51.8 1074.6 539.0

Indirect Tax Revenue 10.4 6.4 77.8 108.2

Carbon Benefits 3.4 2.1 -14.6 -20.8

Delays During

Construction

- - -5.4 -5.4

Accidents Benefits 12.9 6.6 111.9 55.4

**Regeneration

Benefits

111 132 - -

Present Value Benefits

(PVB)

643.8 277.1 1869.9 913.9

Costs

Investment Cost 301.7 382.0 157.9 157.9

Operating Cost 154.0 65.9 5.1 5.1

Present Value Costs

(PVC)

301.1 381.6 163.2 163.2

Net Present Value

(NPV)

342.7 -104.6 1706.7 750.7

Benefit to Cost Ratio

(BCR)

2.1 0.7 11.5 5.6

Benefit to Cost Ratio

(BCR) including

regeneration benefit

2.5 1.1 - -


The supposedly ‘technical’ and objective

CBA is based on a range of assumptions

that can be disputed and potentially framed

in different ways:

•.

B. Public transport investment cannot

demonstrate the same time saving benefits

as highways.

D. There are no assumed operating costs for

road projects (these fall on the driver – and

are not included in the CBA), and indirect tax

revenue is included as a benefit (the more

cars, the better) – hence the system is

heavily biased towards favouring road

investment.

A. There are only a narrow selection of

issues that go into the CBA – consumer

users (commuting, shopping) and business

users (travel during work) make up over 90%

of benefits – other issues are marginal.

C. The scale of benefit given to time savings

subsumes all other impacts – e.g. the CO2

adverse impacts are less than 1% the size of

the time savings gains (for the M6 Heysham

Link) – and similar to delays during

construction.

E. The BCRs for the road projects are much

higher, as more time savings can be

demonstrated. BCRs for public transport

projects are low – there are high investment

and operating costs.

There is a misplaced application of economic principles in public policy

(infrastructure) appraisal – transport projects are too complex for CBA.

Too much priority is given to the CBA result – and the application of MCA

through WebTAG is too weak.

Public policy goals include, but are much broader than, narrow financial

criteria – there are also wide-ranging sustainability goals (with economic,

social and environmental dimensions).

Key problems:

1. Limits of quantification: there are many impacts that cannot effectively

be monetised, and currently these are either poorly monetised or left

out of the assessment – this leads to a very partial CBA (Ackerman &

Heinzerling, 2004; Naess, 2006).

2. Use and application of travel time savings: why is saving time used as

an important policy goal? Does aggregating a large number of small

travel time savings help? The presumption that travel time savings are

‘realised’ and turned into productive time is strongly disputed (Metz,

2008). In particular, the concept of travel time savings does not

transfer well to public transport journeys (Jain and Lyons, 2007),

where at least some of the journey time is valued, and can even be

productive.


3. Discounting: the practice of discounting doesn’t work for

environmental or social issues, as long term problems are reduced

in scale, and count for too little in the net present calculations (a £1

billion environmental cost in 50 years time = £146.8m in NPV).

4. Distributional and equity issues: calculations are usually made net

across a population; richer cohorts are favoured in the CBA through

values of time; poorer cohorts may disproportionately receive the

costs of noise, poor air quality; there is no consideration of the

quality of development (gentrification), etc. – this is a major

difficulty when social objectives, such as the need for regeneration

or improve social equity, are important to a particular area.

5. Limited ex-post (after the fact) validation: there is evidence to

suggest that the numbers that go into the CBA are not accurate

over time (Flyvbjerg et al., 2002) and that do-nothing projections

are inaccurate (Nicolaisen and Naess, 2015).

In the end, there is too little progress being made against important

policy goals, such as the social and environmental dimensions of

sustainability.


An Alternative: Participatory MCA?

Participatory multi-criteria assessment as an alternative (replacement or

complementary?) approach (after Macharis, 2010):

Masterplan-led (an integrated urban plan and transport plan) – to lead the

transport projects and give strategic direction, and to give consistency with

the planning approach.

Process for participatory MCA?

1. Develop locally derived policy objectives and criteria, to match local

policy requirements

2. Weight criteria, to prioritise important local policy objectives

3. Develop criteria indicators

4. Assess impacts – incorporating different stakeholder views

5. Use a decision-making conference (Leleur, 2012) to hold a public

policy debate over different views on criteria, weighting and impacts

http://www.vibat.org/participatory_mca/

user: UCL

pw: MCA

http://www.vibat.org/participatory_mca/

An Alternative: Participatory MCA?

• Multi actor workshops – comparison of results between

groups and discussion on criteria and impacts

• Final decision takes into account multiple criteria impacts

and views

Conclusions

• Self (1970) labelled the practice of CBA in transport as ‘nonsense on

stilts’ – and we can see many difficulties in contemporary appraisal. The

CBA is often leading the decision-making – and there are huge

problems as a result.

• Similarly, in the EU Sintropher study there are difficulties in justifying

funding for the ‘right’ projects – the appraisal system sifts out the wrong

projects – in policy terms, and public transport investment proves very

difficult to provide funding for.

• CBA is still the primary approach to prioritising funding for transport

investment projects – but it suffers from issues of quantification, use of

time savings, discounting, distributional issues, and limited ex-post

validation.

• For some, it “perpetuates the deregulatory agenda under the cover of

scientific objectivity” (Ackerman and Heinzerling, 2004) – it is biased

towards funding road schemes.

• A revised approach to decision-making on infrastructure projects is

required – perhaps participatory and MCA-based – with a stronger

emphasis on environmental and social sustainability issues – and a

much stronger participatory dimension – used for public policy debate.

You get what you measure, and perhaps we are measuring – and

discussing it – in the wrong way?www.sintropher.eu

http://www.sintropher.eu/

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