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Economic Evaluation of Transport
Projects
Camilo Prez
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The evaluation of transport projects requirescomparing the
situation with and without theproject, as well as comparing it with
the next bestalternative.(With / Without / Or)
The purpose of most transport projects is to lowertransport
costs.
The most common direct benefits of transportprojects include
Savings in vehicle operating costs
Time savings
Reduction in the frequency and severity of accidents
Increased comfort, convenience, and reliability ofservice.
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Logic
More cars
CongestionIndividual
Costs & Road
Maintenance
COSTLY!
People still go out but
will be expensive and
not a good experience
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TravelCostpervehicle/Km
Traffic Volume per unit of time
a
bd
C1
C2
Q1 Q2
S1
S2
D
New project
Base load Traffic
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TravelCostperve
hicle/Km
Traffic Volume per unit of time
a
bd
C1
C2
Q1 Q2
S1
S2
D
New project
Base load Traffic
Benefits
For Old users
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TravelCostperve
hicle/Km
Traffic Volume per unit of time
a
bd
C1
C2
Q1 Q2
S1
S2
D
New project
Base load Traffic
Benefits
For New users
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Net Benefits for new users
Cost = (Q2 - Q1 ) x Cost of each trip
TravelCostpervehicle/
Km
Traffic Volume per unit of time
a
bd
C1
C2
Q1 Q2
S1
S2
D
New
project
Net Benefit =1
2(Q2 - Q1 )(C2 - C1 ) per unit of time
Benefit = Area Q1 dab Q2
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Economic Analysis
Q1 (C1 - C2 )
+1
2(Q2 - Q1 )(C2 - C1 )
+ road maintenance costs+ benefits reduced traffic in
alternative routes
costs of increased traffic in feeder roads.
Benefits of old users
Benefits of new users
Analysts can apply this conceptual
framework to any transport project
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Forecasting Demand
The first step in assessing demand is to estimate baseline
traffic flows
The second step is to project future demand with the project,
and without the
project
The simplest method to estimate demand stemming from normal
traffic
is to extrapolate from past trends and assume that growth will
remain
constant in either absolute or relative terms.
Demand = F (Expected GDP growth, Pop. growth, Fuel prices
changes,
Other explanatory variables)
Demand-based projections also require income and price
elasticities.
Use demand functions for new projects that estimate the response
of
traffic flows to changes in transport costs
Normal, Generated, and Diverted Traffic
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Reduction of Vehicle Operating Costs
Such savings usually include fuel and lubricants; tires;
maintenance; and economic
depreciation, such as vehicle wear and tear.
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Time saving
Can be measured depending of its use:
The Value of Working Time: Time saved = Time used to produce
G&S. Valuated
at wage rate. (But in terms of the employer / include SS)
Leisure time: Time saved cost < Cost of working time saving.
In the absence of
evidence, a good rule of thumb is to value all leisure time
saved equally at
about 30 percent of the travelers hourly wage.
Walking and Waiting Time: Highly valuated because nobody likes
these.
Country-specific values is always preferable, in the absenceof
such values a good rule of thumb is to value walking, waiting,
and
transfer time 50 percent higher than in-vehicle traveling
time
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Brazilian case Belo Horizonte
City: Belo Horizonte
State: Minas Gerais
Population (2010): 20 Million
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Brazilian case Belo Horizonte
Aimed to create an Integrated urban transport system to reduce
travel andwaiting time. Other benefits included savings in vehicle
operating cost, fewer
accidents, and reduction of motor vehicle-related emissions. The
project was
also expected to facilitate access to employment and services,
particularly for
the poor.
What the did?- Was underestimated because they measured time
savings from diverted
demand but not from the additional trips
How they measured?
Time spent in
transportation in
morning peak hours
without the project
Time spent in
transportation in
morning peak hours
withthe project
Hours saved
Time saved x Average hourly wage
17,5% AHV
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Valuing Time saving / Summary
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Valuing Accident reduction
Physical damage to vehicles and property Costs of
hospitalization
Loss of output by and, hence, earnings for injured
individuals
Physical injury to drivers, passengers, or third
partiespedestrians, for exampleincluding
fatalities
Pain and suffering.
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Questions
