1. ECONOMIC EVALUATION

2. 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)

4. 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

6. 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

7. 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!

8. 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?)

9. 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

10. 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

11. 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)

12. Economic evaluation tools: RONETS

13. 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

14. 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

15. References: economic evaluation  Economic evaluation notes Economic evaluation notes  User guide: road management tools User guide: road management tools  Simple Cost-Benefit Analysis for low- volume roads Simple Cost-Benefit Analysis for low- volume roads