Introduction

Cost-benefit analysis (CBA) is the most commonly used economic assessment tool (Mouter, 2018; van Wee & Tavasszy, 2008) and the most coherent and robust tool available (Laird, Nash, & Mackie, 2014). CBA is used extensively in the US, New Zealand, England, Australia, Singapore, Chile and Ireland (Marcelo, Mandri-Perrott, House, & Schwartz, 2016). This study aims to provide an Australian perspective on the use and efficiency of CBA in transport infrastructure investment assessment frameworks, by adopting a holistic approach that examines the guidelines used in practice and previously conducted CBA of real-life transport projects. The examination will reveal the implications for wider CBA use, including the practical issues that should be addressed in guidelines and the challenges of implementing CBA outcomes in investment decision making.

There are radically different approaches in the use of CBA (Beria, Giove, & Miele, 2012), highlighting the need for local research in CBA, accounting for the specific geographical context. While CBA is used extensively in the US, New Zealand, England, Australia, Singapore, Chile and Ireland (Marcelo et al., 2016), the Australian context is not as well- studied as elsewhere. Conversely, particularly in the European, American and Chilean contexts, CBA has received much academic attention (Annema, 2014; Beria, Giove, et al., 2012; Beukers, Bertolini, & Te Brömmelstroet, 2012; Godavarthy, Mattson, & Ndembe, 2015; Gómez-Lobo, 2012; Mackie, 2010; Quinet, 2010). Additionally, this study differs from the previous studies that reviewed international guidelines (Mackie, Worsley, & Eliasson, 2014) and compared the CBA methodology used in practice (Chi, Bunker, & Kajewski, 2016) by examining the guidelines and CBA practices altogether, and widening the scope by also examining investment assessment frameworks.

This study first raises questions (see Table 1) that are formulated as a result of the literature review conducted (Section 2) and then incorporated into the analytical framework developed and applied. The questions relate to the costs and benefits considered in CBA (Section 4) and the CBA as a tool to inform investment decision making (Section 5). Section 3 provides methodology, Section 6 provides results and discussion, and a conclusion is formulated in Section 7.

The novelty of this study is that it brings the Australian perspective which is relatively less referred to in the traditional literature. Another merit of this is the review of real-life projects, which can reveal tangible insights into the actual influence of CBA in decision-making. Improving CBA practices and assessments of transport infrastructure investments contributes to ensuring that investment decision making is well-informed.

Literature review

2.1 Strengths of CBA

Transport infrastructure investments often require considerable investment costs and their economic justification is crucial. CBA is the most commonly used economic assessment tool for these investments (Mouter, 2018; van Wee & Tavasszy, 2008), and the most coherent and robust tool available (Laird et al., 2014). CBA can be conducted along with other tools for the investment to be assessed against multiple criteria, which is referred to as multi-criteria assessment (MCA) when conducted systematically using systems such as scoring.

CBA’s guard against double counting is particularly valuable in avoiding exaggerated claims (Laird et al., 2014). Also, CBA improves the planning process by producing a structured list of benefits and costs (Mouter, 2017), and contributes substantially in decision-making about infrastructure investments (Asplund & Eliasson, 2016). The results of CBA are expressed in monetary costs and benefits of the infrastructure investment (van Wee & Tavasszy, 2008) and incorporate the broad perspectives of users, non-users and governments, which can provide comprehensive assessments of public-private partnership (PPP) projects (Decorla-Souza, Lee, Timothy, & Mayer, 2013). This means that trade-offs of various policies can be assessed using CBA which is valuable to decision-makers (Annema, Mouter, & Razaei, 2015). CBA is used extensively in the US, New Zealand, England, Australia, Singapore, Chile and Ireland (Marcelo et al., 2016).

2.2 Weaknesses of CBA

CBA has several weaknesses. First, the commonly highlighted weakness of CBA is its inability to include the costs and benefits that are difficult to monetise (Annema & Koopmans, 2015; Mouter, Annema, & Van Wee, 2014). For instance, CBA cannot capture the benefits that arise from land-use changes (Börjesson, Jonsson, Berglund, & Almströmb, 2014; Laird et al., 2014). Also, environmental impacts are excluded or not monetised in CBA, with monetisation methods used in CBA unsophisticated (Annema & Koopmans, 2015; Hwang, 2016).

Second, assessing multiple investment proposals together in CBA is complex. When assessing and prioritising investments that must consider government policies and long-term transport planning objectives, a challenge is presented when there are multiple investment proposals of various investment sizes and scope. Vickerman (2017) also raised the question of how the improvements in a local network should be compared with national improvements using CBA. Aggregated effects of many small improvements can be exaggerated compared to those of a single major investment and their assessment is more intricate. Additionally, when the intervention is planned as part of a large transport network improvement, the anticipated benefits may not arise until all other proposed interventions are built and provided.

Third, capturing travel time reliability within conventional CBA and traffic models is complex. The value of the reliability depends on trip purposes and destinations (Mackie, 2010), which means that each traveller would have various values that cannot simply be modelled within conventional models. A more detailed breakdown of trip purposes such as “heading in for an important meeting” than simply “commuting” would be needed.

Fourth, one study (Jones, Moura, & Domingos, 2014) claims that the residual value (RV) is often inaccurately calculated due to the range of different assets, each with a different economic life. The RV reflects the remaining value of the assets at the end of the appraisal period.

Fifth, CBA assumes perfect competitions, while it is rather imperfect in many contexts such as rail and air transport (Quinet, 2010). Also, this decision making presumes travellers know and do what is best for them. That is, travellers have access to real-time journey information and always choose the route and mode that offers the shortest travel time, however, this is hardly the reality.

Finally, there are often many simplified assumptions in CBA, using general parameter values (Mouter et al., 2014), which can result in considerable uncertainty in the CBA outcome, particularly when assessing large investments. Also, the consequences of using a particular assumption are often inadequately communicated (Annema & Koopmans, 2015). The lack of considerations and communication of investment risks and uncertainties can lead to misinformed decision making. One study (Beukers et al., 2012) suggests that there can be a communication deficit and inferior cooperation in CBA practices which are led from mistrusts between planners and CBA practitioners towards each other and the plan or instrument which they represent.

2.3 Conducting CBA as part of an MCA process

The most commonly suggested approach to overcome the limitations of CBA is to conduct CBA as part of a multi-criteria assessment (MCA) process. A full assessment of all relevant impacts can be conducted by combining the MCA with the CBA (Beria, Maltese, & Mariotti, 2012a, 2012b). The MCA provides a systematic process to consider an investment proposal from various perspectives and the outcomes of various assessment tools. Essentially, MCA allows both non-monetary and monetary attributes to be assessed within the same framework without rejecting CBA, and has considerable potential for application to mega infrastructure projects and complex urban projects as risk and opportunity registers, that usefully complement more traditional appraisal methods (Dimitriou, Ward, & Dean, 2016).

A case study that combined CBA and MCA to assess road projects (Gühnemann, Laird, & Pearman, 2012) concluded that MCA facilitates a closer alignment between transport policy and the tools used to support the application of that policy. This suggests that strategic objectives can be incorporated into the assessment. A study that reviewed cost-effectiveness analysis (CEA), planning balance sheet (PBS), goal achievement matrix (GAM), as well as CBA and MCA, for infrastructure investment prioritisation (Dimitriou et al., 2016), suggested that the MCA framework offers both informing and complementarity options to CBA. Also, another study that compared life-cycle assessment (LCA), social life-cycle assessment (SLCA) and rating systems, along with CBA and MCA as tools to assess the proposed transport infrastructure investments (Bueno, Vassallo, & Cheung, 2015) recommended using MCA along with these various tools to support sustainability assessment.

Many countries use comprehensive assessment frameworks that combine CBA with other assessment tools to include both monetised and non-monetised costs and benefits (Mackie et al., 2014). This was not the case in another study (Hickman & Dean, 2018) which reviewed CBA for a road project and a rail project in the UK, and claimed that CBA prevails in the decision-making of investments, therefore, lacking many intangible factors.

Methodology

This study aims to provide an Australian perspective on the use and efficiency of CBA in transport infrastructure investment assessment frameworks, including the aspects of the costs and benefits considered in CBA and the CBA as a tool to inform investment decision making. Figure 1 illustrates the study methodology. This study adopts a holistic approach by examining the guidelines used in practice and the CBA of real-life transport projects. It first raises two sets of questions which are formulated through the literature review (see Section 2). The questions are incorporated in the analytical framework used in this study (see Table 1); and are investigated by reviewing investment assessment guidelines and relating documents, CBA guidelines and the reports of previously conducted CBA. Table 1 also ensures that the investigation is undertaken systematically. Finally, through the investigation, this study identifies the implications for wider CBA use, including the practical issues that should be addressed in guidelines and the challenges of implementing CBA outcomes in investment decision making. Note that the review particularly focuses on the Australian CBA practices. For instance, when reviewing whether the costs and benefits that are difficult to be monetised are included, whether they are discussed in the guidelines and if they are included in the previously conducted CBA will be investigated, instead of what other studies claim can be or should be included in CBA.

Figure 1 Study methodology

Table 1 Analytical framework

3.1 Reviewing investment assessment guidelines and relating documents

Various investment assessment guidelines and relating documents including the frameworks that are used in practice are examined. Also, the frameworks used at federal-level and state- level are reviewed for comprehensiveness. It is important to note that some frameworks may be used across sectors and are, not specific to transport.

3.2 Reviewing CBA guidelines

CBA guidelines including the Australian guidelines (at both federal- and state government- levels) and those from the EU, New Zealand (NZ), the UK and the US are examined. This will reveal the parameters and methodologies provided in the guidelines. Infrastructure Australia (IA) is the federal-level statutory body with a mandate to prioritise nationally significant infrastructure investments (Infrastructure Australia, 2019). Australian Transport Assessment and Planning (ATAP) guidelines provide best practice for transport planning and assessment in Australia and are endorsed by all Australian jurisdictions (Australian Department of Infrastructure and Regional Development, 2019). At the state level, agencies such as Building Queensland (BQ), Transport for New South Wales (TfNSW), and Queensland Department of Transport and Main Roads (QTMR) play similar roles in the transport infrastructure investment assessment and prioritisation process. These bodies provide guidance documents, to which, for simplicity, we refer to as: the IA guideline (Infrastructure Australia, 2018), the BQ guideline (Building Queensland, 2016), the TfNSW guideline (NSW Government, 2018), the QTMR guideline (Queensland Department of Transport and Main Roads, 2011) and the ATAP guideline (Australian Transport and Infrastructure Council, 2016, 2018) in this paper. Most guidelines have been recently updated and would reflect the latest advice by the Australian transport authorities. Additionally, for simplicity, the international guidelines reviewed here are referred to as: the EU guideline (European Commission Directorate-General for Regional and Urban Policy, 2014), the NZ guideline (NZ Transport Agency, 2018), the UK guideline (UK Department of Transport, 2018a, 2018b) and the US guideline (US Department of Transportation, 2018).

3.3 Reviewing the reports of previously conducted CBA

CBA is conducted differently according to the type of intervention. Toll road projects adopt traditional and well-established road CBA methodology, and yet, contain an additional level of complexity by incorporating tolls. As a result, the guidance provided for this type of project should be comprehensive and the analyses conducted in the practice should also be thorough and consistent with each other. Therefore, previously conducted CBA for Australian toll road projects are examined. The purpose of the review is not for post-completion reviews, rather it compares the reports to each other and examines whether they follow the guidelines.

Detailed CBA reports are often included in the appendices of final business case documents and many are not publicly available. Also, Australia has fewer toll roads compared to other countries such as the UK and the US, which further limits the number of CBA reports for toll road projects that are available for comparison. Seven toll road CBA (completed between 1996 and 2018) are selected here based on their availability and the level of detail sufficient to conduct the review. Table 3 summarises toll road projects reviewed in this study and the abbreviations for each project, which include both already delivered and opened projects, and those still in the planning or construction phases. The projects are located across three Australian states where toll roads are implemented: Queensland, NSW and Victoria.

Costs and benefits considered in CBA

For clarity, the following sections discuss technical details of the guidelines and the previously conducted CBA without referencing. Table 6, Table 7 and Table 8 provide the original sources and details.

4.1 Costs and benefits that are difficult to be monetised

Environmental and externality impacts are difficult to be monetised as valuing them requires non-market values to be estimated, which is complex (Australian Department of the Prime Minister and Cabinet, 2014). Also, across international guidelines, there is no common understanding of what kind of environmental and externality impacts should be included in CBA. For example, the EU guideline only provides recommended values for various air pollutions, while the NZ and Australian guidelines provide a long list of values for different environmental and externality impacts, not limited to air pollutions. Austroads guidelines (Evans et al., 2014; Tan, Lloyd, & Evans, 2012) have been often referred to in the CBA reports. However, Austroads advises not to use these values due to concerns over the emission data (Austroads, 2015). This means that there are no standard environmental and externality impact values available for practitioners in Australia.

The toll road CBA did not include any other costs and benefits that are difficult to be monetised. Also, the guidelines did not provide guidance on any other costs and benefits that are difficult to be monetised.

4.2 Residual value (RV)

Many guidelines provide the well-established straight-line depreciation (SLD) method to estimate RV, which has been used in the previously conducted CBA. However, with regard to whether the RV should be included, the guidelines advise two different approaches. One is to adopt an appraisal period between 30 to 50 years depending on the asset type and assume the RV to diminish by the end of the appraisal period. Another is to adopt an appraisal period shorter than 30 years and include the RV in the CBA. RVs have been either considered to diminish at the end of an appraisal period or omitted altogether in NL2, AL2 and MCL, while they have been consistently included in more recent analyses. The reports of the three projects do not specify whether this is due to the length of the appraisal period or different RV assumptions. Other reports explain that the SLD method has been used to estimate RV, calculated by summing the RV of each asset item, using different economic life and costs for each.

In addition to RV, discount rates and appraisal period lengths are also important assumptions as they all interact with each other. The discount rates used in NL2, PL2 and MCL differ between each project; while more recent analyses adopted the same discount rate of 7%. This indicates the establishment of consistent discounting policies over the years. Additionally, the reports lack justification for using a specific discount rate. In the guidelines, inconsistent advice on the discount rate is given in Victoria, which would require four different BCR (i.e. 7% for the IA requirement, 6% for the state requirement, and 4% and 10% for sensitivity analysis) as a result. While the length of the appraisal period should be the same or similar for the same type of intervention, the lengths adopted in the previously conducted CBA vary. Therefore, inconsistent guidance on the appraisal period occurs in the guidelines.

4.3 Travel time reliability benefit and the impacts due to imperfect competitions

In the previously conducted CBA, recent analyses included travel time reliability and congestion improvement benefits. However, different benefit estimation methods were used in the analyses and the Australian guidelines do not provide guidance on how to estimate the benefits. The methods also did not consider varying benefits between trip purposes and destinations. Some international guidelines provide guidance on travel time reliability (NZ Transport Agency, 2018; UK Department of Transport, 2018a, 2018b).

In the previously conducted CBA, recent analyses included the impacts due to imperfect competitions as part of wider economic benefits, which is consistent with the UK guidance (UK Department of Transport, 2018a, 2018b).

CBA as a tool to inform the decision making

For clarity, the following sections discuss technical details of the guidelines and the previously conducted CBA without referencing. Table 6, Table 7 and Table 8 provide original sources and details.

5.1 Using CBA results in infrastructure investment decision making

Transport infrastructure investment assessment frameworks used in Australia adopt an MCA approach that includes CBA as an economic assessment tool. The MCA approach is also included in government and multilateral project appraisal and selection practice in regions including the Pacific Island Countries and Argentina, as well as Chile, Ireland, and the UK (Marcelo et al., 2016). Table 4 summarises the decision criteria used in Australia. The criteria highlight the weaknesses of the MCA approach including potential for double counting and subjectivity. For instance, “service need” and “strategic alignment” can go both ways without clear definitions (e.g. the service is needed as it aligns with the government’s strategic objectives). The business case document that is used for the assessment generally includes a set of analyses. For instance, the submission requirements for the Commonwealth funding include CBA, a probabilistic risk-adjusted cost estimate that is used in the CBA and in the funding request, a financial model, a delivery plan, analysis of the scope of private funding where government funding is likely to be sought; and independent reviews of the risk-based cost estimate, risk assessment, demand models and economic appraisal (Infrastructure Australia, 2018). The commonly discussed criticism of CBA is that it prevails in the decision- making of investments, therefore, lacking many intangible factors (Hickman & Dean, 2018). However, the Australian frameworks evidently include a variety of analyses and do not only rely on CBA outcomes.

Generally, assessment tools such as CBA and MCA are used to select good investment proposals (OECD, 2011). Many studies exist that assess accuracies of CBA (Odeck & Kjerkreit, 2019) and inaccuracies due to misrepresentations of costs, benefits and risks (Flyvbjerg, 2007b; Flyvbjerg, Holm, & Buhl, 2002). The sources of inaccuracy can be explained as optimism bias and strategic misrepresentation, which are particularly evident in mega projects (Flyvbjerg, 2007a). However, in Australian practice, the focus is more on the prioritisation of the proposals rather than the accuracy. As shown, the Western Australia (WA) framework (see Section 5.2) does not contain post-completion reviews. The framework contains numerous review processes for MCA score moderations to ensure fair and consistent assessments.

5.2 Assessing multiple investment proposals

The WA Transport Portfolio uses a comprehensive framework to assess and prioritise transport infrastructure investments (see Figure 2). In WA, the assessments and submission requirements of the agency-prioritised investments are prepared by each proponent agency. The proposals are combined as a long list and are scored against the Portfolio decision criteria which consist of six criteria supported by criteria scoring guidance (see Table 4) (WA Portfolio Investment Coordination, 2017). Then, multiple agencies and subject experts review the scores to ensure consistent and fair scoring. The prioritisation is based on the average score, along with investment costs and BCR. Once assessment and prioritisation have been conducted, a set of short summaries of the prioritised investment proposals will be submitted to the Transport Minister for budget approval. The summary contains the key outcomes of analyses that are not limited to CBA. The non-prioritised proposals can be considered for the next round prioritisation.

Because each proposal is prepared by each proponent agency, interactions with other investment proposals are often less discussed in the proposal in WA. Additionally, the specific direction is lacking in the guidelines with regard to how other uncommitted investments should be addressed in the proposal. For instance, the IA guideline advises that inclusion of other complementing projects depend on the level of commitment made and an assessment of realistic probabilities, which essentially leave this issue to be dealt on a case-by-case basis, and can potentially result in misestimations of costs and benefits. When uncommitted investment proposals are excluded in CBA, it can ignore the benefits that arise from the overall network improvements that could also be achieved through multiple road interventions over a number of years.

5.3 Communicating CBA and its results

While justifications on choosing specific parameter values are lacking in the CBA reports, the standard of CBA and its reporting have improved over the years as shown in Table 8 and the original documents. For instance, more detailed information is now generally included in CBA documents, which suggests improvements in the Australian guidelines and building on practical experiences. The analysis has become more comprehensive by including additional benefits that are not established in the Australian guidelines. This indicates the efforts being made by CBA practitioners to learn from international guidelines. However, conducting a complete CBA requires expertise in both transport engineering and economics. Many recently conducted CBA have been conducted by accounting firms including KPMG and PWC, while traffic modelling has been conducted by an engineering firm such as VLC (see Table 8). As interpreting traffic modelling outcomes require another set of expertise, how well they are interpreted by the CBA practitioner requires further study.

6.2 Implications due to the costs and benefits considered in CBA

As a discount rate of 7% is generally used in Australia, benefits become negligible at the end of the appraisal period when the period is long. Adopting a shorter appraisal period can overestimate the RV. In theory, RV should never be used to justify the investment. Therefore the length of the appraisal period and RV are important assumptions and further guidance on these need to be provided. Invalid assumptions can lead to overestimations of the benefit.

Estimating travel time reliability benefit can be complex as it depends on trip purposes and destinations (Mackie, 2010). Recent CBA considered and included the benefit by adopting the NZ and UK’s methods, which, however, do not address the complexity. Although the IA guideline advice needs to include all relevant costs and benefits that can be monetised, it should emphasise that care needs to be taken when estimating the impact using a method that is not yet well-established as it can lead to misestimations.

6.3 Implications when using CBA as a tool to inform the decision making

In Australian practices, more focus is given on investment prioritisation than the accuracy of CBA, which can be driven by two key factors. One is ever-increasing costs and demand for transport infrastructure. Although transport infrastructure investments attract most funding across sectors (Infrastructure Partnerships Australia, 2019), increasing population and growing traffic volume demand more funding. The existing infrastructure is aging and separate budget needs to be allocated for necessary maintenance and rehabilitation works, which further decreases the amount of funding that can be spent on new investments. Within the limited budget, not all good investments can be funded. Second, due to the budget constraints, as a result, the proposals that reach the final business case stage are likely already deemed beneficial to society with benefit-cost ratio (BCR) above 1.0 in Western Australia (WA). Generally, in Australia, several analyses, including feasibility assessment, options analysis and rapid economic assessment are conducted before the proposal requires a detailed CBA. Any unbeneficial proposals would be identified in the early stage and are unlikely to progress through the planning process unless it has a strong justification to do so, such as election commitments. To use CBA for prioritisation, one suggested having a cut-off BCR value (Mackie, 2010) and others (Deloitte, 2012; Marcelo et al., 2016) propose using MCA scores for investment prioritisation.

The challenge of assessing multiple investment proposals is evident in practice. As shown in previously proposed frameworks (Deloitte, 2012; Marcelo et al., 2016), the challenge is due to the limitation of the MCA approach. Using the same set of decision criteria for all types of transport investment proposals can lead to inaccurate or flawed assessments depending on how they are defined. However, using flexible criteria can lead to unfair assessments. Also, the decision criteria often are designed to assess each proposal individually and cannot incorporate interactions with other proposals. While the current advice is to omit any uncommitted investments, omitting other relevant initiatives and projects can lead to underestimations of benefits. Assessing small and large projects, and projects that are different in nature such as road projects, public transport projects and active travel projects altogether is extremely complex.

Similar to Dutch studies (Annema & Koopmans, 2015; Mouter et al., 2014), the lack of communicating risks and uncertainties is evident in the Australian practices. Sensitivity analysis is generally conducted, however, it lacks comprehensiveness. The previously conducted CBA also showed limitations that can lead to benefit overestimations, such as annualisation factors and data interpolation methods. As quantitative risk assessment such as stochastic CBA requires extensive data and resources, the practice needs to improve to include a qualitative risk assessment.

Conclusion

This study used a set of questions that relates to two considerations: the costs and benefits considered in the CBA; and the CBA as a tool to inform investment decision making. It investigated an Australian perspective on the use and efficiency of CBA in transport infrastructure investment assessment frameworks. Through the investigation, this study revealed the implications for wider CBA use.

First, this study highlighted the practical issues that should be addressed in CBA guidelines, including the assumptions related to RV, appraisal period, discount rate, and the estimation of travel time reliability benefit. Further work is needed in this space to avoid potential benefit overestimations as a result.

Furthermore, this study also highlighted the challenges of implementing CBA outcomes in investment decision making. The investigation revealed that the Australian practice focuses more on investment prioritisation than the accuracy of CBA, however, it also highlighted the complexity of assessing multiple investment proposals using the CBA outcomes. Although some studies (Deloitte, 2012; Marcelo et al., 2016) propose to utilise MCA scores for the prioritisation, designing a comprehensive set of MCA criteria that are appropriate for a wide range of transport projects is extremely complex. Further research is needed to address this limitation of the MCA and the CBA. Another limitation that was identified is the lack of comprehensiveness of the tool used for the risk assessment. Further research is needed to identify a method that is more comprehensive than sensitivity analysis and does not require as much data and resources as stochastic analysis.

Improving CBA practices and the transport infrastructure investment assessment frameworks contribute to ensuring that investment decision making is well-informed and public funds are invested wisely.

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Freeway Upgrade (MUP)	additional lanes and new shared paths	Option 3B: $0.59b	3A: 4.6 Option 3B: 3.9	$1.96b Option 3B: $1.33b	approved; listed on the Infrastructure Priority List as a high priority	Road Projects Victoria, 2019; PwC, 2018)
North East	Provisions of a	$16.63b	1.3	$2.30b	Waiting for	(Ernst and
Link	new freeway				planning	Young,
(NEL)	with sections of				approval;	2018;
	tunnels and				listed on the	North East
	dedicated				Infrastructure	Link
	busway				Priority List	Authority,
					as high	2019)
					priority
WestConn	Widening,	$18.29b	1.71	$9.42b	Under	(KPMG,
ex (WCX)	duplication and				construction	2015;
	extension of the					WestConne
	existing					x, 2019)
	freeways
Western	Provisions of a	Undiscounted cost	State	State	Under	(PwC,
Distributo	new freeway	not documented	guideline	guideline:	construction	2015; West
r (WSD)	with sections of		: 1.3	$1.16b	(now called	Gate
	tunnels and additional lanes		IA guide: 1.9	IA guide: $3.32b	West Gate Tunnel)	Tunnel Authority, 2019)
Northern	A provision of a	$3.23b	1.2	$0.71b	Delivered	(SKM &
Link	new freeway				(now called	Connell
Phase 2	(tunnel)				Legacy Way)	Wagner,
(NL2)						2008)
Airport	A provision of a	$4.24b	1.1	$0.18b	Delivered	(SKM &
Link	new freeway					Connell
Phase 2	(tunnel)					Wagner,
(AL2)						2006)
Melbourn	Provisions of a	$5.41b	2.04	$2.49b	Delivered	(The Allen
e City	new freeway					Consulting
Link	with sections of					Group,
(MCL)	tunnels and					1996)
	widening of
	existing
	freeways and
	arterial roads

Table 3 Summary of previously conducted CBA that are reviewed

Nationally significant investments

Western Australia (WA)

Infrastructure Australia (2019)

WA Portfolio Investment Coordination (2017)

· Strategic fit

· Deliverability

· Economic, social and environmental value

o Economic impact: This includes limiting productive capacity; reducing productivity; constraining economic capability; constraining global competitiveness; safety impacts.

o Social impact: Including problems which result in, maintain or exacerbate major issues of social exclusion and/or quality of life, such as access to services and employment and safety

o Environmental impact: Including issues such as greenhouse gas emissions, waste creation, noise pollution, visual intrusion, heritage impacts and more

· Strategic alignment

o To what extent does the proposal contribute to government policy and transport service delivery objectives?

· Criticality and urgency

o How critical are the consequences of delaying the investments to government services?

· Economic outcomes

o How valuable are the economic benefits to the government and does the investment demonstrate value for money?

· Social outcomes

o What is the scale and extent of the social benefits of the investment?

· Achievability

o Is the investment proposal likely to be supported by key stakeholders or face significant opposition?

· Maturity and deliverability

o How well developed is the preferred solution and how mature is the investment proposal?

Queensland Queensland Treasury (2017)

Queensland Building Queensland (2013)

· Economic efficiency

o Are economic benefits likely to exceed economic costs?

Infrastructure NSW project assurance objectives

· Strategic alignment

o Is there a clear alignment with key government and departmental policies and strategies?

· CBA

o How robust is the CBA?

· Level of planning

o How advanced is planning, design and technical feasibility?

· Complements and alternatives

o Have other alternatives been considered? Does the project enable benefits for other projects?

· Social, economic and environmental impacts

o Are there significant non-monetary social, economic and environmental impacts?

· Project management

o Is there a project team/agency with appropriate skill and experience to manage/monitor/deliver?

· Major risks

o Have all major risks been identified? If so, is there a strategy to mitigate major risks?

· Stakeholder support

o Have issues raised by stakeholders been considered with common agreement achieved?

· The benefit realisation plan is documented

· Strategic alignment, deliverability

· Statutory and procedural requirements are met

· The procurement strategy is agreed

· Stakeholder support, implementation and risk management plan are agreed

· Availability of expertise and resources to manage the supplier relationship

· Draft contracts and service level agreements are agreed

· Service need

· The validity of options assessment

· Strategic alignment

· Legal and regulatory requirements

· Design and deliverability

· Public interests

· Environment

· Economic benefits

Guide

Notes about the organisation

Publication year

Discount rate

Appraisal period

Annualisatio n factor

Value of time value (per

vht)

VOC value (per vkt)

Crash cost (per crash)

Crash rate

Environmental and externality impacts (per vkt)

Travel time reliability

Sensitivity analysis

(Infrastructur e Australia, 2018)

An independent statutory body with a mandate to prioritise nationally significant

infrastructure.

2018

7% with sensitivity for 4% and 10%

ATAP guide is referred

No advice on the estimation method

ATAP guide is referred

Austroads 2012 guide is referred

ATAP guide is referred

No advice

Discount rate, CAPEX, OPEX, total benefits, appraisal periods, total traffic volume, the proportion of heavy vehicles, traffic growth rate, traffic

generated, traffic diverted

ATAP

(Australian Transport and Infrastructure Council, 2016, 2018)

ATAP guidelines have been developed as a single national source of guidance on transport planning, assessment and appraisal.

2018

use the discount rate nominated by the funding jurisdiction

It is usual to assume a 30- year life for road initiatives (except bridges, which have much longer life) and a 50-year life for rail initiatives.

285 days

The straight- line depreciation (SLD) method

$26.34 for private car travel $36.71 for trucks

$4.56 for freight

Uninterrupted flow:

$0.327 for cars,

$0.624 for trucks (straight, flat road) Interrupted flow:

$0.380 for cars and

$0.807 for trucks using the stop-start model and $0.317 for cars and $0.593 for trucks using free-flow model

Fatal crash

$8,560,750,

serious injury

$465,186, other injury $29,146

Use default values for both Base and Project Cases or to calculate a ‘crash reduction factor’ (proportional reduction in crashes) from the default values and apply it to the forecast Base Case crash numbers. Crash reduction factors are provided in Austroads "Effectiveness of Road Safety Engineering Treatment" 2012 report

(Austroads, 2012)

No advice

CAPEX, OPEX, traffic estimate, total traffic volume, the proportion of heavy vehicles, average car occupancy, traffic growth rate, traffic generated, traffic diverted, traffic speed changes, changes in crash rates

TfNSW (NSW

Government, 2018)

The guideline published by a state transport agency.

2018

7% with sensitivity for 4% and 10%

It is usual to assume a 30- year life for road initiatives (except bridges, which have much longer life) and a 50-year life for rail initiatives.

345 days

The straight- line depreciation (SLD) method

Based on ATAP except for occupancy rate (NSW specific values),

$23.65 for private car travel $34.76 for trucks

$4.32 for

freight

$0.247 for cars and

$0.709 for trucks using the stop-start model and $0.240 for cars and $0.610 for trucks using free-flow model

Fatal crash

$7,653,597,

serious injury

$497,393,

moderate injury

$83,423, minor injury $76,668, other injury

$173,632, PDO

$10,139

Guide refers to the Safer Roads team within TfNSW to obtain the crash reduction factor matrix (not available online).

Cars: air pollution $0.033, greenhouse gas emissions $0.026, noise $0.0108, water pollution

$0.005, nature and landscape

$0.0006, urban separation $0.0076, upstream/downstream costs $0.0444 Trucks: air pollution $0.1246, greenhouse gas emissions $0.0277, noise $0.0208, water pollution

$0.0187, nature and landscape

$0.002, urban separation $0.0139,

upstream/downstream costs $0.111

National Guidelines/ NZ model is recommen ded (too complex to summarise here)

No advice

BQ (Building Queensland, 2016)

An independent statutory body that provides expert advice to Queensland government agencies and authorities to enable better infrastructure

decisions.

2016

7% with sensitivity for 4% and 10%

No specific advice other than the appraisal period should not exceed 30 years.

No advice

QTMR

(Queensland Department of Transport and Main Roads, 2011)

The guideline published by a state transport agency.

2011

6% with sensitivity for 4%, 7% and

10%

The period over which costs and benefits are calculated in a CBA should reflect the physical life of the asset. The economic life of various assets is provided. Measurement of project impacts longer than 30 years is not recommended.

365 days

The straight- line depreciation (SLD) method

$23.75 for private car travel $30.70 for trucks (articulated)

$38.17 for freight

A complex model with many factors, adjustments and assumptions. Not easily calculated.

Recommends the human capital approach. Fatal crash

$2,447,364,

serious injury

$588,717,

minor injury

$25,749, PDO

$9,374

Crash rates for various road widths are provided (e.g. 4 lane divided sealed road = 0.374119718

million vkt)

Cars: air pollution $0.033, greenhouse gas emissions $0.026, noise $0.0108, water pollution

$0.005, nature and landscape

$0.0006, urban separation $0.0076, upstream/downstream costs $0.044 Trucks: air pollution $0.999, greenhouse gas emissions $0.222, noise $0.167, water pollution $0.150, nature and landscape $0.0165, urban separation $0.111,

upstream/downstream costs $0.889

No advice

CAPEX, travel time saving, VOC saving, crash cost, excluding private travel time costs

Table 6 Comparison of Australian guidelines

Note: Parameters shown for: fleet of cars and medium rigid trucks, urban setting, WA values for those location-specific parameters, vehicles travelling at 60 km per hour, and willingness-to-pay values instead of human-capital approach values. Throughout the paper, Australian dollar values are shown at June 2018 prices including those originally shown in foreign currencies.

Jurisdiction	Guide	Discount rate	Appraisal period	RV	Travel time benefit	VOC saving	Crash cost (per crash)	Environmental and externality impacts	Travel time reliability	Sensitivity analysis
EU	Guide to Cost- Benefit Analysis of Investment Projects (European Commission Directorate- General for Regional and Urban Policy, 2014)	5% is used for major projects in Cohesion countries and 3 % for the other Member States	25-30 years for road projects including construction period	No advice	A brief explanation of how it should be estimated is provided	A brief explanation of how it should be estimated is provided	A brief explanation of how it should be estimated is provided	Air and noise pollutions, and greenhouse gas are considered. A brief explanation of how they should be estimated is provided.	No advice	CAPEX, OPEX, traffic, the value of time parameter, VOC parameter, crash saving, CO2 saving
NZ	Economic Evaluation Manual (NZ Transport Agency, 2018)	6% with sensitivity for 4% and 8%	40 years	The RV after 40 years is considered negligible and omitted from CBA	NZD 7.80 (AUD 7.57) for private car travel NZD 20.10 (AUD 19.50) for trucks NZD 17.10 (AUD 16.59) for freight	NZD 0.216 (AUD 0.210) for cars and NZD 0.938 (AUD 0.910) for trucks	Full crash rate estimation method is provided. Crash costs at various speeds, movements and travel modes are provided. At 50km/h, all movements, all vehicles: Fatal NZD 4,770,200 (AUD 4,627,094), serious injury NZD 492,575 (AUD 477,798), minor injury NZD 29,036 (AUD 28,165), PDO NZD 2,904 (AUD 2,816)	Individual assessment is recommended for noise, vibration and water pollution, ecological, visual, community severance, overshadowing impacts. PM10 NZD 475,192 (AUD 460,937) per tonnes, NOx NZD 16,886 (AUD 16,380) per tonnes, CO NZD 4.27 (AUD 4.14) per tonnes, HC NZD 1,353 (AUD 1,313) per tonnes, CO2 NZD 67.74 (AUD 65.71) per tonnes	The estimation method is given	Sensitivity is advised but does not specify parameters to be tested
UK	Web TAG: Transport Analysis Guidance (UK Department of Transport, 2018b, 2018a)	3.5% for the first 30 years then 3%	Appraisal period should not exceed 60 years	RV should not be included for projects with indefinite lives with 60 years appraisal period	GBP 14.30 (AUD 26.74) for private car trip GBP 18.33 (AUD 24.28) for trucks including freight	Work: GBP 0.139 (AUD 0.260) for cars GBP 0.164 (AUD 0.307) for trucks Non-work: GBP 0.117 (AUD 0.219) for cars GBP 0.167 (AUD 0.312) for trucks	Fatal GBP 2,189,962 (AUD 4,095,229), serious injury GBP 250,388 (AUD 468,226), slight injury GBP 26,154 (AUD 48,908), PDO GBP 2,335 (AUD 4,366)	Various noise values provided for various noise level change, PM10 GBP 117.60 (AUD 219.91) /household/1μg/m³, NOx GBP 1,198 (AUD 2,240) per tonnes, CO2 petrol GBP 2.13 (AUD 3.98) per litres CO2 diesel GBP 2.511 (AUD 4.70) per litres, GHG GBP 67.31 (AUD 125.87) per CO2 tonnes	The estimation method is given	Sensitivity is advised but does not specify parameters to be tested
US	Benefit-Cost Analysis Guidance for Discretionary Grant Programs (US Department of Transportation, 2018)	7%	20 years plus construction period	The straight-line depreciation (SLD) method	USD 25.58 (AUD 36.06) for private car travel USD 29.42 (AUD 41.48) for trucks	USD 0.646 (AUD 0.910) for cars USD 1.490 (AUD 2.101) for trucks	Fatal USD 9,875,520 (AUD 13,924,483), critical injury USD 5,856,183 (AUD 8,257,219), severe injury USD 2,626,888 (AUD 3,703,913), serious injury USD 1,036,930 (AUD 1,462,071), moderate injury USD 464,149 (AUD 654,451), minor injury USD 29,627 (AUD 41,773), PDO USD 4,423 (AUD 6,237)	CO2 USD 1.03 (AUD 1.45) per tonnes, Volatile organic compounds USD 1,868 (AUD 2,634) per tonnes, NOx USD 7,751 (AUD 10,930) per tonnes, PM25 USD 352,831 (AUD 497,491) per tonnes, sulphur dioxide USD 45,668 (AUD 64,392) per tonnes	No advice	Not considered

Table 7 Comparison of international guidelines (foreign currencies are converted to Australian dollars using the currency exchange rate as of 16 March 2019)

Case

Conducted by

Analysis conducted

Discount rate

Appraisal period

Annualisation factor

Interpolation method

CAPEX

OPEX

Treatment of tolls

Value of time (per vht)

VOC value (per vkt)

Crash cost (per crash)

Environmental and externality impacts (per vkt)

Travel time

reliability

Improved congestion

Sensitivity analysis

Guidelines referred

MUP (PwC, 2018)

Economic consultancy

2018

7% with sensitivity for 4%

and 10%

34 (4 years for construction and 30 operational years)

various factors were applied for different sections of the road, varies between 315

and 344 days

Not stated

Supplied by other consultants

The toll was considered as financial transfer

SLD

$16.52 for private car travel $54.69 for business car travel

$50.61

including freight for trucks

$0.120 for cars and $0.556 for trucks using the stop-start model and

$0.081 for cars and $0.293 for trucks using the free-flow model. The same value was used for both

LCV and HCV.

The fatal crash was considered. Fatal crash cost varied between

$605,536 and

$305,406 for different road types.

Cars: air pollution $0.0329, greenhouse gas emissions

$0.0040, noise $0.0105, water

$0.0050, nature and landscape $0.0044, urban separation $0.0077 Trucks: air pollution $0.0131, greenhouse gas emissions $0.0009, noise

$0.0035, water $0.0013, nature and landscape

$0.0035, urban separation

$0.0030

Web TAG guide was referred

Improved congestion was considered separately as part of the WEB, NZ guide approach using PwC values

Discount rate, CAPEX, OPEX,

annualisation, total benefits, growth rate assumption, construction disruption

Travel time: ATAP guide, VOC: ATAP, travel time reliability: UK Web TAG, crash rates: VicRoads, crash cost: ATAP guide, environmental and externality impacts: ATAP

NEL (Ernst and Young, 2018)

Economic consultancy

2018

7% with sensitivity for 4%

and 10%

58 years (8 years for construction)

330 days

Linear

Supplied by other consultants

The toll was considered as financial transfer

SLD

$16.56 for private car travel $53.71 for business car travel

$81.05

including freight for trucks

$0.413 for cars and $2.335 for trucks using the stop-start model and

$0.574 for cars and $1.564 for trucks using free-flow model

Fatal crash

$9,242,133,

serious injury

$653,535, other injury $43,793

Car: air pollution $3.27, Greenhouse gas emissions

$0.021, noise $1.072 Truck: air pollution $0.416, Greenhouse gas emissions

$0.083, noise $0.073

Web TAG guide was referred

NZ guide

Discount rate, CAPEX, OPEX,

different rump- up assumption, different VOC assumptions and parameters, benefit growth assumption, annualisation factor

Travel time: ATAP guide, VOC: ATAP and Austroads, travel time reliability: UK Web TAG, crash rates: VicRoads, crash cost: ATAP guide, environmental and externality

impacts: ATAP

WCX (KPMG, 2015)

Economic consultancy

2015

7% with sensitivity for 4%

and 10%

34 (4 years for construction and 30 operational years)

345

Linear

Supplied by other consultants

Toll was considered as financial transfer

SLD

$22.56 for private car travel $56.71 for business car travel

$73.61

including freight for trucks

$0.366 for cars and $0.735 for trucks using stop-start model and

$0.257 for cars and $0.473 for trucks using free-flow model

Fatal crash

$7,132,418,

minor injury

$150,338, PDO

$10,175

Cars: air pollution $0.0128, greenhouse gas emissions

$0.0068, noise $0.0031, soil and water $0.00069, biodiversity $0.00060 nature and landscape $0.00014, urban separation $0.00219, upstream/downstream costs

$0.00833 Trucks: air pollution

$0.13224, greenhouse gas emissions $0.03062, noise

$0.02803, soil and water

$0.01378, biodiversity

$0.0093, nature and landscape $0.00106, urban separation $0.00895, upstream/downstream costs

$0.0326

Web TAG guide was referred

Discount rate, CAPEX, OPEX,

total benefits, benefit growth rate assumptions, annualisation factors

Travel time: TfNSW guide, VOC: Austroads, travel time reliability: UK Web TAG, crash rates: Austroads, crash cost: TfNSW guide, environmental and externality impacts: Austroads

WSD (PwC, 2015)

Economic consultancy

2015

7% with sensitivity for 4%

and 10%

Both 30 years

and 50 years were conducted

Various factors were applied: cars 340 days,

LCV 285 days,

HCV 275 days based on the observed traffic volume along nearby freeways

Not stated

Supplied by other consultants

The toll was considered as financial transfer

SLD

$16.45 for private car travel $56.71 for business car travel

$80.51

including freight for trucks

$0.293 for cars and $1.740 for trucks using the stop-start model and

$0.241 for cars and $0.894 for trucks using free-flow model

The fatal crash was considered. Fatal crash cost varied between

$649,425 and

$365,418 for different road types.

Cars: noise $0.0105, water pollution $0.00526, nature and landscape $0.00105, urban separation $0.0105 Trucks: unknown

Values for surface and tunnel were shown separately. Some values were shown as "0.01". Air pollution and greenhouse gas were shown as $/tonne values. The table was cut out and values for LCV and HV were not readable.

Web TAG guide was referred

NZ guide approach using PwC values

Discount rate, CAPEX, OPEX,

toll price assumptions used in traffic modelling, the proportion of commercial vehicles, fuel price

Two guides were referred: IA and Victorian guide, which led to two different appraisal period and traffic modelling assumptions. This resulted in benefits of $4.6 billion vs $6.6 billion and BCR of

1.3 vs 1.9.

Travel time: ATAP, improved congestion: NZ guide, travel time reliability: UK Web TAG, VOC:

ATAP, crash cost: ATAP,

environmental

and externality

impacts:

Austroads 2012

NL2 (SKM

& Connell Wagner, 2008)

Engineering consultancy

2008

6% with sensitivity for 4%

and 8%

45 years (4 years for construction)

340 days

Linear growth

Detailed estimation approach was not documented

The toll was considered as financial transfer

RV was assumed to diminish at the end of the appraisal period

Main Roads and Austroads report values were used.

$23.95 for private car travel $29.96 including freight for trucks (articulated)

Main Roads and Austroads report values were used.

Parameters were not documented.

2002 price year was used.

Parameters were not documented.

Cars: air pollution $0.033, greenhouse gas emissions

$0.026, noise $0.011, water

$0.005, nature and landscape

$0.0006, urban separation

$0.008,

upstream/downstream $0.044 Trucks ($/1000 tonnes): air pollution $204.7, greenhouse gas emissions $63.8, noise

$34.9, water $30.7, nature and landscape $22.8, urban separation $33.4,

upstream/downstream $212.5

Not considered

Discount rate

Environmental and externality impacts: Austroads

AL2 (SKM

& Connell Wagner, 2006)

Engineering consultancy

2006

6.8% with sensitivity for 5.5%

45 years (50 months for construction)

330 days

Linear growth

Supplied by other consultants

The toll was considered as financial transfer

RV was assumed to diminish at the end of the appraisal period

Main Roads and Austroads draft values were used.

$23.65 for private car travel $30.81 for trucks

$4.21 for freight

Main Roads and Austroads draft values were used. Freeway:

$0.251 for cars,

$2.252 for trucks Other roads: $0.246 for cars,

$16.342 for trucks

Raw parameters for crash cost and crash rate were not provided in the report. The outcome crash cost per vkt was provided. The outcome crash cost varied between

$0.025/vkt to

$0.110/vkt for different road

types

Car: noise $0.011, air pollution

$0.032, water $0.005 trucks (shown as $/1000 tonnes) noise $3.5, air pollution

$3211, water $3.1

Not considered

Discount rate, CAPEX, OPEX,

faster population growth assumption

Environmental and externality impacts: Austroads

MCL (The

Allen Consulting Group,

1996)

Economic consultancy

1996

36 years (5 years for construction)

Not documented

The estimation method is not

documented

The estimation method is not

documented

Not considered

$35.59 for all vehicles

Included but estimation method is not documented

Not considered

Not conducted

No guidelines were referred

Table 8 Comparison of previously conducted CBA

Sae Chi: Conceptualization, Methodology, Validation, Formal analysis, Investigation, Resources, Data Curation, Writing - Original Draft, Writing - Review & Editing, Visualization, Supervision

Jonathan Bunker: Project administration, Conceptualization, Writing - Review & Editing

Introduction

Literature review

2.1 Strengths of CBA

2.2 Weaknesses of CBA

2.3 Conducting CBA as part of an MCA process

Methodology

3.1 Reviewing investment assessment guidelines and relating documents

3.2 Reviewing CBA guidelines

3.3 Reviewing the reports of previously conducted CBA

Costs and benefits considered in CBA

4.1 Costs and benefits that are difficult to be monetised

4.2 Residual value (RV)

4.3 Travel time reliability benefit and the impacts due to imperfect competitions

CBA as a tool to inform the decision making

5.1 Using CBA results in infrastructure investment decision making

5.2 Assessing multiple investment proposals

5.3 Communicating CBA and its results

5.4 Assessing risks and uncertainties

Results and discussion

6.1 Results

6.2 Implications due to the costs and benefits considered in CBA

6.3 Implications when using CBA as a tool to inform the decision making

Conclusion

References

Appendix