IDEAS home Printed from https://ideas.repec.org/a/eee/transa/v120y2019icp277-294.html
   My bibliography  Save this article

The accuracy of benefit-cost analyses (BCAs) in transportation: An ex-post evaluation of road projects

Author

Listed:
  • Odeck, James
  • Kjerkreit, Anne

Abstract

Ex-post evaluations of benefit-cost analyses (BCAs) of transportation projects are scarce in the literature. If conducted frequently, they could reveal the extent to which objectives are achieved and may give inputs that can improve the quality of ex-ante BCAs. We first explain the usefulness of ex-post BCA evaluations of transportation projects, depending on which planning phase a project is in. We then perform ex-post BCAs on 27 Norwegian road projects that have been in service for at least 5 years and compare the results with the ex-ante BCAs that were presented to the decision-makers. We use two different measures of aggregating the magnitudes of accuracy; the Mean Percentage Error (MPE) and Mean Absolute Percentage (MAPE). Using MPE, we find that: (1) ex-ante BCAs underestimate the actual net present value (NPV) by 50% on average and, the NPV per dollar invested by a mere 0.14% points on average; (2) the traffic level and traffic growth rates are often underestimated ex-ante, leading to an underestimation of the benefits and; (3) construction costs are underestimated by 5% on average, which is too small to offset the observed underestimation of benefits. By default, MAPE shows higher values of inaccuracies implying that one should not be indifferent as to the measure used. Overall, the Norwegian ex-ante BCAs perform fairly well. We urge that the authorities concerned must improve their traffic forecasts and construction cost estimates to assure that the ex-ante objectives are met. The upkeep of ex-ante data is essential to enable ex-post evaluation which, ceteris paribus, will enhance the transparency and credibility of BCA as an appropriate decision-making tool.

Suggested Citation

  • Odeck, James & Kjerkreit, Anne, 2019. "The accuracy of benefit-cost analyses (BCAs) in transportation: An ex-post evaluation of road projects," Transportation Research Part A: Policy and Practice, Elsevier, vol. 120(C), pages 277-294.
    • Handle: RePEc:eee:transa:v:120:y:2019:i:c:p:277-294
    DOI: 10.1016/j.tra.2018.12.023
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0965856417309667
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tra.2018.12.023?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Börjesson, Maria & Jonsson, R. Daniel & Lundberg, Mattias, 2014. "An ex-post CBA for the Stockholm Metro," Transportation Research Part A: Policy and Practice, Elsevier, vol. 70(C), pages 135-148.
    2. Odeck, James, 2004. "Cost overruns in road construction--what are their sizes and determinants?," Transport Policy, Elsevier, vol. 11(1), pages 43-53, January.
    3. Jonas Eliasson & Maria Börjesson & James Odeck & Morten Welde, 2015. "Does Benefit-Cost Efficiency Influence Transport Investment Decisions?," Journal of Transport Economics and Policy, University of Bath, vol. 49(3), pages 377-396, July.
    4. Bent Flyvbjerg, 2007. "Policy and Planning for Large-Infrastructure Projects: Problems, Causes, Cures," Environment and Planning B, , vol. 34(4), pages 578-597, August.
    5. Kelly, Charlotte & Laird, James & Costantini, Stefano & Richards, Phil & Carbajo, José & Nellthorp, John, 2015. "Ex post appraisal: What lessons can be learnt from EU cohesion funded transport projects?," Transport Policy, Elsevier, vol. 37(C), pages 83-91.
    6. Morten Skou Nicolaisen & Patrick Arthur Driscoll, 2014. "Ex-Post Evaluations of Demand Forecast Accuracy: A Literature Review," Transport Reviews, Taylor & Francis Journals, vol. 34(4), pages 540-557, July.
    7. Boardman, Anthony E. & Mallery, Wendy L. & Vining, Aidan R., 1994. "Learning from ex ante/ex post cost-benefit comparisons: the coquihalla highway example," Socio-Economic Planning Sciences, Elsevier, vol. 28(2), pages 69-84.
    8. Minken, Harald, 2016. "Project selection with sets of mutually exclusive alternatives," Economics of Transportation, Elsevier, vol. 6(C), pages 11-17.
    9. Odeck, James, 2014. "Do reforms reduce the magnitudes of cost overruns in road projects? Statistical evidence from Norway," Transportation Research Part A: Policy and Practice, Elsevier, vol. 65(C), pages 68-79.
    10. Morten Welde & James Odeck, 2017. "Cost escalations in the front-end of projects – empirical evidence from Norwegian road projects," Transport Reviews, Taylor & Francis Journals, vol. 37(5), pages 612-630, September.
    11. Odeck, James, 2013. "How accurate are national road traffic growth-rate forecasts?—The case of Norway," Transport Policy, Elsevier, vol. 27(C), pages 102-111.
    12. Odeck, James & Welde, Morten, 2017. "The accuracy of toll road traffic forecasts: An econometric evaluation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 101(C), pages 73-85.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Coker, Ayodeji Ajibola Alexander, 2021. "Accuracy of in Medias RES and EX-Post Cost-Benefit Analyses: A Case of National Special Programme for Food Security, Nigeria," 2021 Conference, August 17-31, 2021, Virtual 314936, International Association of Agricultural Economists.
    2. Wubeshet Woldemariam, 2021. "Prioritization of Low-Volume Road Projects Considering Project Cost and Network Accessibility: An Incremental Benefit–Cost Analysis Framework," Sustainability, MDPI, vol. 13(23), pages 1-15, December.
    3. Munday, Max & Reynolds, Laura & Roberts, Annette, 2023. "Re-appraising ‘in-process’ benefits of strategic infrastructure improvements: Capturing the unexpected socio-economic impacts for lagging regions," Transport Policy, Elsevier, vol. 134(C), pages 119-127.
    4. Chi, Sae & Bunker, Jonathan, 2021. "An Australian perspective on real-life cost-benefit analysis and assessment frameworks for transport infrastructure investments," Research in Transportation Economics, Elsevier, vol. 88(C).
    5. Bos, Ernst & de Swart, Linette, 2024. "Towards a better comparison of ex-post and ex-ante BCA's by decomposing potential causes of difference," Transport Policy, Elsevier, vol. 151(C), pages 36-45.
    6. Petr Halámek & Radka Matuszková & Michal Radimský, 2021. "Modernisation of Regional Roads Evaluated Using Ex-Post CBA," Sustainability, MDPI, vol. 13(4), pages 1-20, February.
    7. Dorota Kuchta & Paolo Canonico & Vincenza Capone & Guido Capaldo, 2023. "Uncertainty in the Planning Phase of Public Projects—Its Scope, Consequences, and Possible Remedies," Administrative Sciences, MDPI, vol. 13(6), pages 1-17, June.
    8. Zhou, You & Zhang, Lingzhu & Chiaradia, Alain J F, 2021. "An adaptation of reference class forecasting for the assessment of large-scale urban planning vision, a SEM-ANN approach to the case of Hong Kong Lantau tomorrow," Land Use Policy, Elsevier, vol. 109(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Walker, Joan L. & Chatman, Daniel & Daziano, Ricardo & Erhardt, Gregory & Gao, Song & Mahmassani, Hani & Ory, David & Sall, Elizabeth & Bhat, Chandra & Chim, Nicholas & Daniels, Clint & Gardner, Brian, 2019. "Advancing the Science of Travel Demand Forecasting," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt0v1906ts, Institute of Transportation Studies, UC Berkeley.
    2. Petr Halámek & Radka Matuszková & Michal Radimský, 2021. "Modernisation of Regional Roads Evaluated Using Ex-Post CBA," Sustainability, MDPI, vol. 13(4), pages 1-20, February.
    3. James Odeck, 2019. "Variation in cost overruns of transportation projects: an econometric meta-regression analysis of studies reported in the literature," Transportation, Springer, vol. 46(4), pages 1345-1368, August.
    4. Cavalieri, Marina & Cristaudo, Rossana & Guccio, Calogero, 2019. "On the magnitude of cost overruns throughout the project life-cycle: An assessment for the Italian transport infrastructure projects," Transport Policy, Elsevier, vol. 79(C), pages 21-36.
    5. Miranda Sarmento, J.J., 2014. "Public private partnerships," Other publications TiSEM c7d4c978-234c-4f88-83ed-1, Tilburg University, School of Economics and Management.
    6. Munday, Max & Reynolds, Laura & Roberts, Annette, 2023. "Re-appraising ‘in-process’ benefits of strategic infrastructure improvements: Capturing the unexpected socio-economic impacts for lagging regions," Transport Policy, Elsevier, vol. 134(C), pages 119-127.
    7. Carlos Oliveira Cruz & Joaquim Miranda Sarmento, 2020. "Traffic forecast inaccuracy in transportation: a literature review of roads and railways projects," Transportation, Springer, vol. 47(4), pages 1571-1606, August.
    8. Halse, Askill Harkjerr & Fridstrøm, Lasse, 2019. "Explaining low economic return on road investments. New evidence from Norway," MPRA Paper 94389, University Library of Munich, Germany.
    9. Solvoll, Gisle & Mathisen, Terje Andreas & Welde, Morten, 2020. "Forecasting air traffic demand for major infrastructure changes," Research in Transportation Economics, Elsevier, vol. 82(C).
    10. Cantarelli, C.C. & Flyvbjerg, B. & Buhl, S.L., 2012. "Geographical variation in project cost performance: the Netherlands versus worldwide," Journal of Transport Geography, Elsevier, vol. 24(C), pages 324-331.
    11. Love, Peter E.D. & Ika, Lavagnon A. & Ahiaga-Dagbui, Dominic D., 2019. "On de-bunking ‘fake news’ in a post truth era: Why does the Planning Fallacy explanation for cost overruns fall short?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 126(C), pages 397-408.
    12. Hugo Priemus & Bert van Wee (ed.), 2013. "International Handbook on Mega-Projects," Books, Edward Elgar Publishing, number 14791.
    13. Asplund, Disa & Eliasson, Jonas, 2016. "Does uncertainty make cost-benefit analyses pointless?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 195-205.
    14. Chantal C. Cantarelli & Bent Flyvbjerg, 2013. "Mega-projects’ cost performance and lock-in: problems and solutions," Chapters, in: Hugo Priemus & Bert van Wee (ed.), International Handbook on Mega-Projects, chapter 15, pages 333-355, Edward Elgar Publishing.
    15. Verweij, Stefan & van Meerkerk, Ingmar & Korthagen, Iris A., 2015. "Reasons for contract changes in implementing Dutch transportation infrastructure projects: An empirical exploration," Transport Policy, Elsevier, vol. 37(C), pages 195-202.
    16. Chong, Uven & Hopkins, Omar, 2016. "An international experience on the evolution of road costs during the project life cycle," Transport Policy, Elsevier, vol. 48(C), pages 60-66.
    17. Hoque, Jawad Mahmud & Erhardt, Gregory D. & Schmitt, David & Chen, Mei & Wachs, Martin, 2021. "Estimating the uncertainty of traffic forecasts from their historical accuracy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 147(C), pages 339-349.
    18. Wasiu Olayinka FAWOLE & Burhan ÖZKAN, 2017. "Identifying the Drivers of Food Security Based on Perception among Households in South Western Nigeria," European Journal of Interdisciplinary Studies Articles, Revistia Research and Publishing, vol. 3, ejis_v3_i.
    19. Abeysekara, Baudhi & Perera, Piyaruwan & Chhipi Shrestha, Gyan Kumar & Gunaruwan, Lalithasiri & Kumarage, Amal & Sadiq, Rehan & Hewage, Kasun, 2021. "Improving the capital deployment efficiency: An infrastructure investment planning process in transportation project," Research in Transportation Economics, Elsevier, vol. 88(C).
    20. Kim, Kangsoo & Cho, Hyejin & Park, Sunwook & You, Soyoung Iris, 2024. "Uncertainties in the economic analysis of Korea’s preliminary feasibility study," Transportation Research Part A: Policy and Practice, Elsevier, vol. 184(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:120:y:2019:i:c:p:277-294. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.