Ever since reading through the cost-benefit analysis of the Waterview Connection (the old full tunnel version, we don’t even know what the cost-benefit analysis of the newer version is) I have become somewhat skeptical of the ways in which we analyse the costs and benefits of various transportation projects. To refresh our memories, here is the basic CBA of the Waterview Connection (the full tunnel option): Now as I said above, this analysis is just for the full tunnel option – so the costs will be different to what has been chosen by the government as the preferred alignment. The construction costs will be a lot less, and I imagine the social and environmental costs will be higher. But that’s not really the issue here.
What I am much more interested in is how the benefits are calculated. How do we come up with $2.62 billion in time savings benefits? How do we work out $607 million of agglomeration benefits? How are the $690 million in congestion cost benefits different to the time-savings benefits? How can building a motorway actually create a CO2 benefit?
I have started digging into a few international transport policy journals to try and find out a bit more about international best-practice for making decisions on what transport projects should be built first, and more specifically how the estimated transport benefits of a particular project are calculated. One method is the New Approach to Appraisal (NATA) that is “a framework used to appraise transport projects and proposals in the United Kingdom”. This framework appears much more complex than the simple cost-benefit approach that is used in New Zealand, and includes a wide variety of effects (both positive and negative) that should be looked at when deciding whether to proceed with a transport project.
If we have a look into a bit more detail of what the NATA is, we can see that complexity:
Within the NATA framework, the impacts of transport projects are categorised in terms of five high level criteria (economy, safety, environment, accessibility and integration), reflecting the Government’s objectives for transport. Each of these criteria is divided into a number of sub-criteria and it is against each of these sub-criteria that the impacts of a proposal are assessed and presented in a 1 page Appraisal Summary Table (AST).The division of the five criteria is shown below:
1) Economy (Public Accounts, Transport Economic Efficiency: Business Users & Transport Providers, Transport Economic Efficiency: Consumers, Reliability, Wider Economic Impacts)
2) Safety (Accidents, Security)
3) Environment (Noise, Local Air Quality, Greenhouse Gases, Landscape, Townscape, Heritage of Historic Resources, Biodiversity, Water Environment, Physical Fitness, Journey Ambience)
4) Accessibility (Option values, Severance, Access to the Transport System)
5) Integration (Transport Interchange, Land-Use Policy, Other Government Policies)
Now I really am no expert on the details of how things are done in New Zealand (hence my numerous questions above) but it certainly seems as though we look into the first three criteria, but kind of get lost when it comes to accessibility and integration. Perhaps this is because our system is so focused on the road system, rather than public transport projects, so these issues aren’t seen as significant, but I am guessing that leaving out effects on accessibility and integration potentially plays a major role in how the analysis of transport projects in New Zealand seems to end up favouring expensive roading projects.
Further interesting analysis is available in a journal article in “Transport Policy” by A. Cundric, T. Kern and V. Rajkovic (can’t link for copyright reasons unfortunately) entitled: ‘A qualitative model for road investment appraisal.’ This article critiques the simplicity of the quantitative models that are currently used to analyse transport projects and their cost-effectiveness, and is particularly critical of the simple cost benefit analysis system that we see in New Zealand:
In the paper, we focus on road investments and firstly present an international overview of road appraisal methodologies which have been recently moving away from the traditional cost benefit analysis (CBA) estimating direct effects of road investment. These methodologies are thus evolving towards CBA that aims at monetising also some indirect effects and towards multi-criteria analysis (MCA) that aims at evaluating road projects by both quantitative and qualitative criteria.
After trying to make sense out of the “journal-speak”, I think what is importantly mentioned here is how the general trend of assessing the cost-effectiveness of a transport project (the appraisal process) is moving away from the cost-benefit system and its focus on direct effects.
I certainly have a lot more reading to do with regards to these issues, but it certainly seems to me that something’s broken in the way we look at transport projects in New Zealand – where it is somehow justifiable to spend the vast bulk of our transport funds on roading projects that are unsustainable in the medium to longer term due to oil price increases, and are unnecessary as demand for them is falling. It seems like the way we analyse the value for money from transport spending is as outdated as the thinking behind our general transport policies.