Post Opening Evaluation of Road Investment Projects in Norway: How Correct Are the Estimated Future Benefits?
A Kjerkreit, J Odeck, K O Sandvik, Norwegian Public Roads Administration, NO
An ex post study of Cost Benefit Analysis of Norwegian road projects is presented. Underestimation of the traffic growth rate and, both over- and under estimation of investment costs is found. Challenges in ex post evaluations are addressed
The Norwegian Public Roads Administration (NPRA) carries out cost- benefit analysis for all of its trunk road schemes. This tradition has existed since the early sixties and was formalised in the early seventies. The purpose of cost-benefit analysis is to provide decision makers with information regarding the economic viability of projects e.g. by how much will travel time, accidents and air pollution be reduced, and whether these reductions are large enough to offset the investments cost. Essentially, the analyses are performed ex ante. They are thus a prediction of what will occur if projects are implemented.
A question often raised by the government auditors and the decision makers is whether the predicted benefits and costs are actually achieved. Thus in 2005, the Norwegian Ministry of Transport and Communication authorised the NPRA to carry out ex post studies of implemented road projects to reveal the extent to which predictions are correct. The purpose of the ex post re-evaluations is to determine how far the NPRA is achieving its objectives and benefits from its road programme. The NPRA has developed a guideline for conducting ex post studies focusing on the cost- benefit analysis. The aim is that at least five major road projects annually should be subjected to ex post studies.
This paper reports the findings of ex post studies in a Norwegian context. Using 8 projects, and recalculating the cost- benefit analysis 5 years after the opening of the project with actual data on traffic, construction costs and accident rates, we reveal the accuracy of the forecasted impacts. Key contributors to the deviations in NPV between the original and recalculated cost-benefit analysis are investigated. Further, we suggest areas of emphasis that should improve the ex post evaluations and predictions that are made.
Tentative results reveal both under- and over estimation of the traffic forecast for the opening year and underestimation of the general traffic growth rate. Investment costs have been both under- and overestimated. Net present value is greater than forecasted for 7 out of the 8 projects. One of the main reasons for this is that the traffic growth rate has been higher than forecasted. Knowing the history of the project is of importance for the ex post analysis. The divergence between forecasted and actual impacts can be due to the project being built differently than was assumed in the original analysis. Lack of good documentation for the forecasted impacts for some of the projects have been a challenge for the ex post evaluation.
Association for European Transport