Services
Methods for evaluating benefits of freight and passenger transport services
Methods for evaluating the benefits of transport services for both freight and passengers are provided in Chapter 5 of the Economic evaluation manual volume 2, 2007.
Method of evaluation
Section 5.2 of the Economic evaluation manual volume 2, 2007, covers:
- Consumer surplus basis
- Packages involving transport services
Scope of analysis
Section 5.3 of the Economic evaluation manual volume 2, 2007, covers:
- NZTS/LTMA principles and objectives
- Impacts considered in economic efficiency evaluation
- Rule
- Business benefits
- Equity impacts
Cost benefit evaluation
Passenger and freight transport services proposals usually involve a private operator that receives a revenue directly from users of the service. It is therefore necessary to calculate both the national benefit cost ratio and the government benefit cost ratio. Section 5.8 of the Economic evaluation manual volume 2, 2007, covers:
- What is required for transport services proposals
- National benefit cost ratio for PT services
- National benefit cost ratio for freight services
- Government benefit cost ratio for PT services
- Government benefit cost ratio for freight services
- Application to passenger transport services
Alternatives and options
Normally there are a variety of ways of achieving the transport services objectives. This section discusses how alternatives should be considered. Section 5.9 of the Economic evaluation manual volume 2, 2007, covers:
- Alternatives and options explained
- Rules
- Number of options
- Incremental analysis
- Target incremental BCR
Sensitivity analysis
Section 5.10 of the Economic evaluation manual volume 2, 2007, covers:
- When sensitivity analysis is required
- Major contributors to benefits
- BCR of delaying proposal
- Incremental analysis
- Results of sensitivity tests
Additional information required if simplified procedures are used
Additional information is required if simplified procedures are to be used for proposals where the PV funding gap is greater than $1 million. Section 5.11 of the Economic evaluation manual volume 2, 2007, covers:
- When additional information is required
- Demand estimates
- Dis-benefits during implementation/construction
- Supporting information on transport service user benefits, road user benefits, and road cost savings
- Fit with regional land transport strategy or transportation plan
Detailed procedures for determining benefits and costs of freight and passenger transport services
Detailed methods for calculating and reporting benefits and costs are provided in Chapter 7 of the Economic evaluation manual volume 2, 2007.
Transport service user benefits
Section 7.2 of the Economic evaluation manual volume 2, 2007, covers:
- Factors that affect transport services
- Transport service user definitions
- User benefits for new transport service
- Analysis of user benefits on existing services
- Rules
- Passenger transport user benefits
- Freight transport user benefits
- Increased service frequency benefits
- Benefits of eliminating interchanges between transport services
- Other transport service user benefits
- Benefits of fare changes)
- Demand change impact on existing users
Congestion benefits
Section 7.3 of the Economic evaluation manual volume 2, 2007, covers:
- Types of benefits from transport services
- Nature of congestion benefits
- Extent of analysis
- Level of detail
- Time periods
- Variation of effects
- Methods for travel time benefits
- Definitions
- Choosing a method for travel time analysis
- Valuing travel time saving benefits
- How to use speed flow relationships
Accident reduction benefits
Accident reduction is not normally the primary objective of the service but the benefits may be counted in the evaluation of the service. Section 7.4 of the Economic evaluation manual volume 2, 2007, covers:
- Causes of accident reduction
- Nature of accident benefits
- Accident evaluation procedures
- Accident rates and prediction models
- Urban transport services accident rates
- Rural transport services accident rates
- Procedure for accident rate analysis
Dis-benefits during implementation / construction
Section 7.5 of the Economic evaluation manual volume 2, 2007, covers:
- Disruption to road users
- Disruption to existing transport service users
- Disruption costs to the wider community
Costs to government
Section 7.7 of the Economic evaluation manual volume 2, 2007, covers the costs to government and the need to determine the funding gap:
- What the costs to government are
- The funding gap
- Road maintenance and construction cost savings
- Road user charges (RUC) foregone
Present value of benefits and costs
All benefits and costs must be discounted to determine their present value. Section 7.8 of the Economic evaluation manual volume 2, 2007, covers:
- Why calculate present value
- Calculation steps for benefits
- Calculation steps for costs
- Complete benefits and costs table
- Need to indicate basis of deriving benefits
- Suggested format for reporting
Funding gap analysis for freight and passenger transport services
Financial assistance may be available from Land Transport NZ when the cost of the transport service is higher than the revenue. Chapter 6 of the Economic evaluation manual volume 2, 2007, discusses eligibility and the analysis of the funding gap.
Service provider costs
Section 6.2 of the Economic evaluation manual volume 2, 2007, covers:
- Basis for determining costs
- Rules
- Indicative quotes
- Proposal costs
- Capital costs
- Physical infrastructure costs
- Vehicle, vessel or rolling stock costs
- Disruption costs
- Operating and maintenance costs
- Treatment of depreciation
- Treatment of interest
- Salvage value of capital assets
Service provider revenue
Revenue generated by the service needs to be included in the evaluation of the service. Section 6.3 of the Economic evaluation manual volume 2, 2007, covers:
- Basis
- GST
- Existing services
- New services
Net present value of cash flow
Section 6.4 of the Economic evaluation manual volume 2, 2007, covers:
- Definition
- Service provider required rate of return
- Post-tax rate of return
Funding gap
Section 6.5 of the Economic evaluation manual volume 2, 2007, covers:
- What the funding gap is
- Method
- Example calculation
Sensitivity testing of the funding gap
Section 6.6 of the Economic evaluation manual volume 2, 2007, covers:
- Why test for sensitivity
- Required sensitivity tests
- Service provider required rate of return
- Timing of capital expenditure
- Period of analysis
