5.8 - Cost benefit evaluation
- 5.1- Evaluation of transport services
- 5.2 - Method of evaluation
- 5.3 - Scope of analysis
- 5.4 - Stages in analysis
- 5.5 - Do minimum
- 5.6 - Benefits and costs
- 5.7 - Period of analysis
- 5.8 - Cost benefit evaluation
- 5.9 - Alternatives and options
- 5.10 - Sensitivity analysis
- 5.11- Additional information required if simplified procedures are
5.8 - Cost benefit evaluation
Introduction
Unlike the vast majority of road infrastructure projects, passenger and freight transport proposals will usually involve a private operator providing a service and receiving revenue directly from users.
In this situation, it is necessary to calculate both:
- the national benefit cost ratio (BCRN) as described in section 3.10 of this volume and section 2 of volume 1 (PV of net national economic benefits/PV of net national economic costs)
- the government benefit cost ratio (BCRG) as described in section 3.10 of this volume (PV of net national economic benefits/PV of net central plus local government costs).
National benefit cost ratio for PT services
The national benefit cost ratio (BCRN) for a passenger transport is
where:
national economic benefits = net transport service user benefits + net road user benefits + other net monetised benefits
national economic costs = service provider costs − government road capital cost savings
National benefit cost ratio for freight services
The national benefit cost ratio (BCRN) for a freight service is
where:
national economic benefits = net transport service user benefits (where applicable) + net road user benefits + other net monetised benefits
national economic costs = service provider costs − government road capital and road maintenance cost savings
Government benefit cost ratio for PT services
The government benefit cost ratio (BCRG) for a passenger transport is
where:
national economic benefits = net transport service user benefits + net road user benefits + other net monetised benefits
costs to government = funding gap* − government road capital cost savings
*funding gap = service provider costs − service provider revenue
Government benefit cost ratio for freight services
The government benefit cost ratio (BCRG) for a freight service is
where:
national economic benefits = net transport service user benefits (where applicable) + net road user benefits + other net monetised benefits
costs to government = funding gap* − government road capital and road maintenance cost savings + road user charges (RUC) foregone
*funding gap = service provider costs − service provider revenue
Application to passenger transport services
Generally, the benefits of passenger transport services are limited to the additional peak period services that remove commuters from cars. Thus the cost of the service should only include the capital costs and the maintenance and operating costs of providing the additional peak period services where benefits accrue to the road user.
There may be cases where a new or improved passenger transport proposal includes an off-peak component. The off-peak component should be evaluated and included in the evaluator's report, along with an explanation clarifying the reasons for its inclusion and any assumptions in the evaluation.
