Principles and Guidelines for Economic Appraisal of Transport Investment and Initiatives.pdf

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Unformatted text preview: Principles and Guidelines for Economic Appraisal of Transport Investment and Initiatives Transport Economic Appraisal Guidelines March 2016 Principles and Guidelines for Economic Appraisal of Transport Investment and Initiatives Transport Economic Appraisal Guidelines Evaluation and Benefits, Finance and Investment March 2016 2 VERSION CONTROL AND DOCUMENT HISTORY Version: Version Release Date: Status: Document Name: 1.4 March 2013 Version No: Version Release Date: Amendment: 1.5 1 Nov. 13 Version No: Version Release Date: Amendment: 1.6 March 15 Version No. Version Release Date: Final Draft Principles and Guidelines for Economic Appraisal of Transport Investments and Initiatives Updated Appendix 4 for 2012/13 1. Updated Appendix 4 Economic parameter values indexed for 2013/14 prices Included infrastructure cost benchmarks Reference to the Willingness to pay (WTP) approach in value of travel time (VTT) –flag NSW Stated Preference Study including for rail, bus, ferry, car drivers and car passengers 2. Incorporated new sections Clearways CBA methodology and case study Road safety advertising campaign CBA methodology and case study ICT Investment benefits 3. Included Program Evaluation section 4. Expanded Benefit Realisation section 5. Expanded Post Completion Evaluation section 1.7 July 2016 1. Updated/indexed Appendix 4 economic parameter values for 2015/16 prices 2. Included estimating travel time reliability benefits of transport projects 3. Included Pro-Forma Brief to Economic Appraisal Consultants and CBA Summary Reporting Template (Appendix 5) 4. Included practice guide and worked examples in estimating de-congestion benefits 5. Expanded Technical Appendix 9 on consumer surplus by including a resource cost correction in using the public transport project model (PTPM) 6. More detailed guidance on probabilistic cost benefit analysis including @risk and a worked up example (Appendix 10) 7. More detailed guidance on estimation of wider economic benefits (Appendix 12) 3 FOREWORD The Transport for NSW is committed to achieving greater value for money from our significant investment in transport assets and to improving the efficiency and quality of transport services. The conduct of economic appraisal provides evidence that aids sound decision making towards making these investments. The TFNSW Principles and Guidelines for Economic Appraisal of Transport Investment and Initiatives sits within the Transport Investment Policy Framework and aims to help managers across the Transport Cluster to plan and conduct economic appraisal based on a consistent framework. The use and application of the guidelines facilitate evaluation of economic efficiency of investment proposals and contribute to improved resource allocation by ensuring that the strategic alignment and value for money assessment have been consistently determined across the Transport cluster. The Guidelines set out the principles, concepts, methodology and procedures to be used in the evaluation of proposed investments and initiatives in the transport cluster. Analytical steps, illustrative calculations, practice guides and advice and references to reports and tools are provided. User friendly models and tools have been developed covering prototype transport projects to assist in cost benefit analysis of similar projects. The links to these calculation models are embedded in the document to make them accessible to users. Economic parameter values are provided for consistent use across the Transport Cluster. These are updated on an annual basis and are disseminated to the whole cluster for continued and consistent application. Both instructor-based and online training modules are provided including demonstrations and customised case studies on the application of economic appraisal methods and models to particular projects, programs or activities in the work areas. The Economic Appraisal Guidelines is a living document that is continuously being reviewed and updated to enhance its relevance and ensure adherence to best practice. New methodologies are included as they become relevant to ensure that Transport is at the leading edge of robust, transparent decision making and driving value for money. We welcome your feedback on this document. Please send any comments to [email protected] or [email protected] Tim Reardon Secretary Contents FOREWORD BY THE SECRETARY ..................................................................................................................................4 1 INTRODUCTION ..............................................................................................................................................................10 1.1 1.2 1.3 1.4 1.5 OBJECTIVE OF THIS DOCUMENT .................................................................................................................................10 VARIOUS EXISTING ECONOMIC ANALYSIS GUIDELINES ..................................................................................................11 ECONOMIC APPRAISAL WITHIN THE INVESTMENT DECISION FRAMEWORK ....................................................................12 PROCESS OF ECONOMIC APPRAISALS ........................................................................................................................14 FUNDING AND ASSESSMENT FRAMEWORK OF GOVERNMENT AGENCIES .......................................................................15 2 ECONOMIC APPRAISAL FRAMEWORK, PROCESS AND DECISION CRITERIA .................................................18 2.1 2.2 2.3 2.4 2.5 2.6 2.7 INTRODUCTION .........................................................................................................................................................18 COMMON APPROACHES............................................................................................................................................21 MAJOR STEPS IN COST BENEFIT ANALYSIS ................................................................................................................22 SENSITIVITY AND RISK ANALYSIS ................................................................................................................................53 ECONOMIC VERSUS FINANCIAL ANALYSIS AND SUSTAINABILITY ANALYSIS....................................................................57 OPTIMISATION OF ROAD MAINTENANCE .....................................................................................................................59 ECONOMIC PARAMETERS – MEASUREMENT AND UPDATED VALUES............................................................................67 3 SOCIO, ECONOMIC AND ENVIRONMENTAL ASSESSMENTS ...............................................................................68 3.1 BROADER ASSESSMENT APPROACHES AND TOOLS ....................................................................................................68 3.1.1 Multi-Criteria Analysis (MCA) ..................................................................................................................68 3.1.2 Goal Achievement Matrix (GAM) ............................................................................................................69 3.1.3 Strategic Merit Test..................................................................................................................................70 3.1.4 Objective Impact Assessment (OIA) .......................................................................................................70 3.1.5 Appraisal Summary Technique (AST) ....................................................................................................71 3.1.6 Economic Impacts Assessment (EIA) ....................................................................................................71 3.1.7 Wider Economic Benefits ........................................................................................................................71 3.2 SAFETY....................................................................................................................................................................76 3.2.1 Procedures for Road-based Countermeasures .............................................................................................76 3.2.2 Major Steps in the process ...................................................................................................................77 3.3 ENVIRONMENTAL ASSESSMENT .................................................................................................................................79 3.3.1 Introduction ..............................................................................................................................................79 3.3.2 Environmental Impact Assessment ........................................................................................................80 3.3.3 Measurement...........................................................................................................................................81 3.3.4 Valuation Methodologies .........................................................................................................................81 3.3.5 Environmental Externalities.....................................................................................................................86 4 LAND USE INTEGRATION IN ECONOMIC APPRAISAL ...........................................................................................97 4.1 4.2 4.3 4.4 SPATIAL ZONES ........................................................................................................................................................98 LAND USE VARIABLES REPRESENTED IN A SPATIAL ZONE .............................................................................................99 ACCESSIBILITY..........................................................................................................................................................99 IMPACTS OF TRANSPORT SYSTEM ON LAND USE SYSTEM ...........................................................................................101 5 ECONOMIC ANALYSIS OF FREIGHT INITIATIVES .................................................................................................104 5.1 FREIGHT VERSUS PASSENGER.................................................................................................................................104 5.2 FREIGHT COST BENEFIT ANALYSIS (CBA).................................................................................................................105 5.2.1 Freight investment evaluation framework .............................................................................................105 5.2.2 Freight demand forecast .......................................................................................................................107 5.2.3 Identification and measurement of freight benefits...............................................................................108 5.3 EVALUATION TECHNIQUES .......................................................................................................................................109 5.3.1 Macro and Input Output Approach........................................................................................................109 5.3.2 Use of Computable General Equilibrium Model (CGE) .......................................................................111 5.3.3 Hybrid model..........................................................................................................................................112 6 PATRONAGE DEMAND MEASUREMENT: ESTIMATING TRIP MOVEMENT ......................................................114 6.1 LINKING DEMAND MODELS WITH ECONOMIC APPRAISALS ...........................................................................................114 6.1.1 Outputs...................................................................................................................................................114 6.2 DEMAND FORECAST................................................................................................................................................117 6.2.1 Four step transport models ...................................................................................................................117 6.2.2 Behavioural travel demand models ......................................................................................................117 5 6.2.3 Linked urban land use and transport models .......................................................................................118 6.2.4 Integrated urban land use and transport models .................................................................................118 6.2.5 Generalised cost specification ..............................................................................................................118 6.3 DEMAND MODELS USED IN TRANSPORT FOR NSW PORTFOLIO..................................................................................120 6.3.1 Sydney Strategic Models ......................................................................................................................120 6.3.2 Road traffic models................................................................................................................................121 6.4 RAIL PATRONAGE FORECAST ...................................................................................................................................125 6.5 BUS PATRONAGE FORECAST ...................................................................................................................................125 6.6 FIXED TRIP MATRIX AND VARIABLE TRIP MATRIX TECHNIQUES .................................................................................126 6.6.1 Definition ................................................................................................................................................126 6.6.2 When to use of the variable trip matrix .................................................................................................126 6.6.3 Variable trip matrix in transport modelling.............................................................................................126 6.6.4 Benefit estimate in variable matrix technique .......................................................................................127 6.6.5 Economic parameters to support variable matrix technique ................................................................127 7 ESTIMATING TRAVEL TIME RELIABILITY ...............................................................................................................129 7.1 FRAMEWORK FOR ESTIMATING TRAVEL TIME RELIABILITY BENEFITS .........................................................................130 7.2 KEY STEPS IN ESTIMATING TRAVEL TIME RELIABILITY BENEFITS ...............................................................................131 7.2.1 Estimate the expected travel time variability.........................................................................................132 7.2.2 Estimate the buffer time applied by drivers as a collective group ........................................................134 7.2.3 Estimate the economic benefit of travel time reliability .........................................................................135 7.3 USING PUBLIC TRANSPORT INFORMATION AND PRIORITY SYSTEMS (PTIPS) AND OPAL DATA IN MEASURING TRAVEL TIME VARIABILITY ....................................................................................................................................................................138 8 PRACTICE GUIDE – CASE STUDIES.........................................................................................................................140 8.1 ECONOMIC APPRAISAL OF ROAD UPGRADE AND MAINTENANCE................................................................................140 8.1.1 HW10 Pacific Highway Devils Pulpit Upgrade: REVS Case Study.....................................................140 8.2 NORTH SYDNEY RAIL FREIGHT CORRIDOR ECONOMIC EVALUATION .........................................................................144 8.3 ECONOMIC APPRAISAL OF GROWTH BUSES, INTERCHANGE AND PARKING FACILITIES, INTELLIGENT TRANSPORT SYSTEMS (ITS) .............................................................................................................................................................................146 8.3.1 Bus acquisition CBA tool .......................................................................................................................146 8.3.2 Interchanges - Assessment and Ranking.............................................................................................149 8.3.3 Intelligent Transport Systems – CCTV .................................................................................................159 161 8.3.4 Intelligent Transport Systems – Variable Message Signs (VMS) ........................................................162 8.3.5 Bicycle facility CBA tool .........................................................................................................................165 8.3.6 High Occupancy Vehicle (HOV) Lanes ................................................................................................168 8.3.7 Strategic Bus Priority Measures............................................................................................................171 8.3.8 Economic Appraisal of Clearways Proposals.......................................................................................177 8.3.9 Economic Evaluation of Road Safety Campaigns ...............................................................................184 8.4 ECONOMIC APPRAISAL OF POLICIES AND REGULATIONS ...........................................................................................194 8.5 ECONOMIC APPRAISAL OF ICT PROJECTS ...............................................................................................................196 9 REPORTING AND PRESENTATION OF ECONOMIC APPRAISAL RESULT .......................................................200 10 PRIORITISATION OF INVESTMENT BASED ON ECONOMIC APPRAISAL RESULTS ...............................209 11 POST COMPLETION EVALUATION AND BENEFIT REALISATION ...............................................................214 11.1 BENEFITS OF CONDUCTING A POST COMPLETION EVALUATION .................................................................................214 11.2 PRINCIPAL AREAS OF INTEREST IN POST COMPLETION REVIEW ................................................................................215 11.3 SCOPE OF POST COMPLETION EVALUATION ............................................................................................................215 11.4 APPROACHES TO POST COMPLETION EVALUATION ..................................................................................................216 11.5 REPORTING POST COMPLETION EVALUATION ..........................................................................................................216 11.6 BENEFIT REALISATION ............................................................................................................................................217 LIST OF ABBREVIATIONS .............................................................................................................................................219 GLOSSARY OF TERMS ..................................................................................................................................................222 APPENDIX 1 .....................................................................................................................................................................230 AUSTRALIAN EC...
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