Post on 18-Jan-2018
ECONOMIC EVALUATIONECONOMIC EVALUATION
Economic evaluation: what is it?
Economic evaluation is the traditional tool for prioritizing road investment
It provides a monetarised indicator which can be used as an absolute (good or bad) or relative (better or worse) for prioritising
It is unavoidable for road investments where benefits are largely direct, quantifiable and financial (user savings)
Very unreliable when benefits are difficult to quantify or measure and are more concerned with wellbeing
Techniques can be complex (HDM-4) or simple (see reference)
Economic evaluation tools
Economic evaluation tools are part of the family we will look at: the others are: Basic access planning Integrated rural accessibility planning
They are the most distant relative in that they are generally centred on user benefits and prefer to sweep wider social questions under the carpet
They are very useful when we want an efficient technocratic investment strategy
But they throw up their hands when confronted with the complicated mix of social and economic objectives of rural roads
Economic evaluation tools (2) Compare forecasts of user benefits with
costs to obtain a rate of return on investment
Good for prioritisation when direct user savings are large (lots of traffic) and social impacts can be ignored
Marginally applicable for low-volume rural roads if motor traffic 30+/day
Powerful tools available for use on main and secondary roads
Economic evaluation: how it is done (HDM-4 and RED) Collect data on road user
characteristics, traffic types and volumes
Collect data on existing road characteristics, geography, climate
Collect data on expected improvement and maintenance costs
Combine and mix well Use with moderation!
Economic evaluation: what comes out? Optimal maintenance strategy for
each road option (do nothing to complete rebuild)
Internal rate of return (IRR) for each optimized investment option for ranking
Investment plan (what to do? When?)
Economic evaluation tools: HDM
What it does: Uses sub-models to calculate road wear and
resulting costs to users as a function of traffic, climate, topography for different levels of improvement and maintenance
Determines the optimal investment and maintenance programme (road costs+user costs minimum)
Comments Essential when traffic is high (secondary and main
roads) and effectiveness can be measured in monetary terms
Economic evaluation tools: RED
Allows flexible treatment of the analyis and results (easier to play around with it)
Takes account of non-motorised traffic Quantifies periods of road closure Calculations not centred on road
roughness (IRI) Can be used when traffic over 30 per day
Economic evaluation: for and against For:
Provide standardised method to compare investments nationally or internationally
Generally obligatory for major projects because coherent and reasonably transparent
Against: Power of complex models to simulate real life often over-
estimated Reliance on user savings obscures land-use planning and
social issues Results can be easy to manipulate Favours short run benefits over long run sutainability Takes for granted that users pass on benefits (lower
fares, better service)
Economic evaluation tools: RONETS
Economic analysis tools: my own I developed this Excel application in Vietnam
about ten years ago Applied it in Uganda (twice) and other places It allows almost split-second comparison of
upgrading strategies using basic unit costs and an IRR criterion
Takes into account all types of users, even walkers
Use it to prioritize network links when traffic over about 20 vpd and/or some heavy vehicles
Practical considerations
Models need calibration as they often produce nonsense
Use them for comparing rather than absolute values
Very sensitive to IRI (road roughness) and not to others
VOC v. roughness equations not valid for very bad roads
References: economic evaluation
Economic evaluation notes User guide: road management tools Simple Cost-Benefit Analysis for low-v
olume roads