Cost Benefit Appraisal for Transport Projects

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Overview

Cost Benefit Appraisal (CBA) helps decision makers select and compare alternative projects and policies. In transport, projects may range from road and bridge construction and maintenance to changes in bus and rail services to road and rail freight to bicycle lanes to airports and sea-ports. CBA can also be used to evaluate transport policy proposals such as speed reductions, seat belt legislation and electric vehicle subsidies. 

CBA helps determine the allocation of scarce resources and funding.  

  • The course will start from by showing how economic CBA takes a wider perspective than financial CBA by including benefits such as travel time savings, accident savings, air and noise pollution and greenhouse gas reductions.  
  • Willingness to pay, consumer surplus, price demand curves and generalized cost demand curves are described. The ‘rule of a half’ that is used to calculate the benefits to ‘induced’ demand is explained.
  • Conventional CBA adds benefits and costs to ‘whomsoever they accrue’.  The course will discuss the concept of income compensation and show how ‘equity’ valuations are often used to give the same value for travel time savings and accident savings amongst the public. 
  • After converting time into money, user benefits can be added to vehicle operating savings and compared with construction and operational costs.  
  • The rationale and need for economic CBA (as opposed to financial CBA) lies in departures from ‘perfect competition’.  These departures will be discussed to demonstrate when and why the effects on other markets need to be taken into account.  Road v rail competition is described here.
  • Costs and benefits accrue in different years which introduce the discount rate.  The basis for setting the discount rates is discussed and how different rates affect the CBA result is demonstrated.
  • Perspective is important in deciding whose benefits to include. Should a city evaluation be different from a regional evaluation or a national evaluation?  
  • The course then looks at different measures of a project’s net worth can be calculated.  The Net Present Value, Benefit Cost Ratio, Net Present Value of the Capital Investment, Internal Rate of Return and First Year Rate of Return are calculated. 
  • How the analyst should report the results remembering that CBA is only one aspect that decision makers may take into account. 
  • The NZ Transport Agency’s Economic Evaluation Manual will then be introduced. 

If you are in a role where you or your team needs to assess alternative solutions and/or be able to understand the economic justification for projects, then this course will help you understand the fundamentals.

 
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Length

1 day course.

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Facilitator

Neil Douglas

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Cost

$520 +GST per person

(Minimum numbers apply before a course is confirmed)

 

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Topics include

  • Value of Travel Time 
  • Value of Statistical Life 
  • Defining options and a Base Case
  • Discounting future costs and benefits
  • Calculating economic measures NPV, BCR NPVI, FYRR
  • The NZ Transport Agency’s Project Evaluation Manual
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On completion of this course participants will

  • Understand the concepts of discounting and Net Present Value
  • Be aware of the procedures detailed in the NZ Transport Agency’s Economic Evaluation Manual, and the tools available on their website.
  • Understand the use of Simplified Procedures, and have participated in some workshop exercises 
  • Know when a project requires evaluation by Full Procedures, and have an overview of this process
  • Know how to identify a preferred option through an incremental analysis
  • Know how to calculate the First Year Rate of Return
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Who should attend

Transportation Engineers from Local Authorities, Consulting Engineers, Policy Analysts, Architects and Planners.

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