Op-Ed. The Old Transport Appraisal Shell Game: Who wins, who loses and what to do about it

scratching-headWhy is it that virtually every major transport project built in the last decades in just about any part of the world has cost a great deal more than the original engagement, and served far fewer people than originally forecast?  And since this pattern repeats itself time and again, and since in the process the one who ends up holding the bag every time is the hard-working and apparently infinitely gullible taxpayer, it is possible to come to a conclusion.  And that has to be that, up to now at least, we are terminally stupid, we fall for the same old trick every time. Why is that, and what are its implications for the quality of mobility services in your city and metro area?  We invited Dr. Colin Black who is currently working to get a handle on these issues from an overall European perspective to share his thoughts with us.

Are Current Transport Appraisal Techniques the Elephant in the Room?

– Dr. Colin Black. Contemporary Transport. Kent, United Kingdom.

Does the way in which we appraise transport projects penalize sustainable transport measures and initiatives from the outset? Perhaps this is the ‘elephant in the room’ that transport professionals recognize exist, but have for some time being putting in the ‘too difficult to address without opening a can of worms’ ?

We question whether it is possible to change the appraisal process to make it able to respond to the policy objective of changing travel behavior. After all, what is the logic of valuing time saving for one mode and then promoting travel modes that increase travel time, or including health benefits for one mode and not as a dis-benefit for another? It is perhaps not surprising that Sustainable Urban Mobility Plans (SUMPs) are in vogue as they offer an opportunity to retain the appraisal process to justify continued major infrastructure investment, whilst at the same time promoting sustainable travel methods.

The ‘cloak of appraisal

When we start to understand the appraisal process we begin to better appreciate the challenge of changing the way that things are done. Governments hold on to the current notions of ‘value of time’ in order to justify major infrastructure investment. Without it the economic benefit of many infrastructure schemes would be very difficult to demonstrate. But interestingly we chose not to apply the time values to potential congestion created by road space reallocation, and many such contradictions exist in transport planning which stymie effective decision making. Transport investment decisions are politically driven hidden behind the ‘cloak of appraisal’ to justify economic benefit. Politics currently decide how to spend transport money; it is not allocated according to economic benefit.

If we were to allocate funding according to economic benefit we would need a different system of appraisal. Highway appraisal techniques are not appropriate for sustainable transport schemes and visa-versa. Increasingly we are drawn towards adopting different appraisal systems for different types of scheme. This leads to claims of superiority of one type of appraisal over another and claims that they are non-comparable.

It is perhaps not surprising therefore that appraisal tends to be used to prioritize schemes within an existing funding pot determined by politicians rather than to decide transport investment priorities per se. The promoters of major infrastructure projects remain staunchly defensive of current appraisal techniques extremely concerned about the prospect of having to compete against smaller, more cost-effective, sustainable transport schemes that commonly report cost-benefit ratios in a different ballpark.

The EVIDENCE project

We all need to better understand the institutionalized practices of allocating funding, and traditional approaches to determining priorities. The new report recently published by the EVIDENCE project led by Contemporary Transport, conveys an understanding of the challenges of determining a sustainable transport project’s viability, and the role that impact assessments – most commonly cost benefit analysis (CBA) – play in current decision-making. The EVIDENCE project is making the proven value-for-money of sustainable urban transport measures more visible and widely recognized. A report exploring in depth the current problems with appraisal has recently been published by the Wuppertal Institute in Germany. It makes interesting reading and helps explain why funding for sustainable transport infrastructure still currently remains at woefully inadequate levels across Europe.

CBA and other appraisal methods favor traditional transport investments (e.g. road expansion) over small-scale sustainable projects, and discourage the inclusion of complementary sustainable transport measures within traditional transport projects. Although not the only method available, CBA is often used by policy makers to justify substantial transport project investment in cities. However, it is often only used for major infrastructure projects and even then, it is a process that does not always evaluate the full range of costs and benefits. CBA should not be considered the definite view, but too often it is treated as so. It focuses predominately on monetizing benefits, often omitting social and environmental impact, or other aspects that are more challenging to monetize.

How CBA is used varies from country to country, within the country, and differently for various funding pots or the requirements of different institutions. The robustness of CBA results can be questionable especially as the comparability of CBA results is limited, and does not encapsulate the full range of externalities. It is infrequently conducted for small scale sustainable transport initiatives.

Conventional CBA often fails to appropriately incorporate wider social, environmental and economic costs and benefits such as real estate value, employment, and quality of life. Many effects, such as noise or air pollution associated with a transport project or measure, although highly valued, are difficult to gauge in precise economic terms. A reason for this lack of a broader picture of benefits can be that an accurate CBA requires a considerable amount of data and design information. This can mean that the effort to conduct a CBA will only be approved if the implementation of a measure is likely or has already been decided.

Some countries have national guidelines which are often mandatory for those major infrastructure investments that are eligible for public funding. For example, in the Netherlands, all local and regional spatial infrastructure plans that require national funding have to undergo a CBA. Since 2000, the EU cohesion policy requires a CBA for projects in order to qualify for funding from various EU program sources. However, a recent survey of 14 European cities revealed that cities do not have a standard appraisal method for all transport projects, and often cities select or adopt a method depending on the measure being assessed.

Monitizing benefits

National guidelines on appraisal do not always pay attention to local effects or objectives. Indeed there are a variety of urban transport measures which are not approved or prioritized according to national appraisal guidelines. When assessed, the benefits of these smaller schemes are often calculated according to factors not typically included in national appraisal guidelines – which are set up predominately to prioritize major infrastructure investment. For example, the benefits of many local schemes may typically be assessed with reference to health benefits, crime reduction, improved air quality, enhanced safety, or improvements to quality of life. All of these policy aspirations are important, but it is only practical to monetize benefits for some.

Sustainable transport measures come with clear social, environmental and economic benefits, but these benefits can often be overlooked within a CBA carried out on transport investment projects.

Many sustainable transport measures are low-cost compared to large-scale infrastructure projects and the data and effort required to conduct a CBA is excessive in comparison with the costs of the measure itself. Where attempts have been made to assess the benefit-cost ratios of sustainable transport measures, the results are frequently very impressive and many examples are highlighted in this report.

There are some inherent contradictions in the use of economic appraisal. Generally speaking it tends to used to prioritize and justify funding for schemes funded by money allocated to a specific (usually ring-fenced) funding stream. Where sustainable transport schemes demonstrate substantially higher CBR than other, normally mode-specific schemes, there are often strict rules which prevent the funding from being re-allocated to projects that are better able to improve value for money.

Within each funding-stream appraisal is applied differently. For example, a major benefit of cycle schemes is the value of improved health which is increasingly being monetized within appraisal. Conversely there is a negative impact on health of road schemes which further car-dependent lifestyles, but this is not monetized as a negative in the appraisal approach used. For each mode there are subtle, but important differences in the way that appraisal is applied. The value of many small time savings is frequently the primary source of monetized benefit of highway schemes. Whether this value is appropriate or correct is a subject of much debate.

Differences in the application of appraisal make it challenging to compare the CBR for different types of scheme. It is however reasonable to assume that every type of scheme, whether it rail, road, cycling, mobility-management, urban design, etc – will generally optimize the benefits derived. The size of the funding pots however does not currently appear to be related to the potential economic return on investment. Decisions on the size of funding pots tend to be politically motivated, based on historical, institutional, and cultural practices. For example, we frequently hear politicians justifying the need for major infrastructure investment on the basis of an assertion that there has been “under-investment” for years, not because it offers best value for managing transport requirements.

Hopefully the Evidence project publications will add fuel to the debate about how transport funding is allocated for different projects. After all, most national and municipal governments are committed to achieving ‘best value’ from their investment of tax-payer money. In many ways the application of appraisal for each type of scheme tends to set out the ‘best case’. Assimilating this evidence on CBR for different sustainable transport schemes is part of our ongoing work.

If the CBR for certain sustainable transport projects, as we suspect, is substantially higher than for many traditional transport projects – then this should help further build justification for increasing budgets allocated for sustainable transport measures.

Better still, greater flexibility in the way funding streams are defined would help facilitate the integration of sustainable transport measures. In doing so, this should also enable traditional transport schemes to demonstrate better CBR than they currently do. Bundling together sustainable transport measures and initiatives (e.g. in the SUMP process) can maximise the socio-economic benefits. This then provides a stronger case for insisting on the inclusion of sustainable transport measures within the CBA of traditional transport infrastructure projects – to ensure best value.

 

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About the author:

UK Colin BlackDr Colin Black is a sustainable transport professional with over 20 years of experience. He specialises in travel behaviour change, across areas, within organisations and in specific locations. He has an internationally recognised track record advising leading businesses, national and local governments, and the European Commission. Colin has a strong understanding of the evidence base, which combined with practical experience, provides a sound foundation for programme development. He has an established profile in assisting strategic organisational change, embedding sustainable behaviour, re-location studies, research, and behaviour change interventions.

 


The EU Evidence Based Transport Project

logo eu evidence based transport projectThe EU Evidence Based Transport Proejct at http://evidence-project.eu/ has carried out a literature review of current practices in evaluation of sustainable transport measures under the title How sustainable transport projects are appraised. If you call up their report — http://evidence-project.eu/wp-content/uploads/2014/10/EVIDENCE_D2-2-Common-Practice-Reader_141002.pdf — you will see their findings on:

  • Travel Time dominates Cost Benefit Analysis results
  • Cost Benefit Analysis excludes wider societal impacts
  • Comparability of Cost Benefit Analysis results is limited

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Eric Britton
9, rue Gabillot, 69003 Lyon France

Bio: Trained as a development economist, Eric Britton is a public entrepreneur specializing in the field of sustainability and social justice. Professor of Sustainable Development, Economy and Democracy at the Institut Supérieur de Gestion (Paris), he is also MD of EcoPlan Association, an independent advisory network providing strategic counsel for government and business on policy and decision issues involving complex systems, social-technical change and sustainable development. Founding editor of World Streets, his latest work focuses on the subject of equity, economy and efficiency in city transport and public space, and helping governments to ask the right questions and in the process find practical solutions to urgent climate, mobility, life quality and job creation issues. More at: http://wp.me/PsKUY-2p7

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