BITRE finds road spending cases full of holes

By: Rob McKay

ATA concern as probe highlights sloppy approaches to projects worth billions

BITRE finds road spending cases full of holes
Roads are being built without rigour, the report argues


The Bureau of Infrastructure, Transport and Regional Economics (BITRE) has questioned the veracity of road infrastructure planning for 12 projects worth more than $1 billion cast doubt on the systems used for billions of dollars more.

With eye-watering amounts of cash focused on new roads nationally, not least on trucking’s fuel tax, the report, Ex-post Economic Evaluation of National Road Investment Projects, takes governments to task over the state of cost-benefit analysis approaches used to justify them.

"Cost-benefit analysis (CBA) has long been the preferred way to assess transport infrastructure investment projects in Australia," BITRE states in its executive summary.

"However, CBA, as applied in practice, is prone to errors.

"Available evidence suggests that there is much room for improvement in the quality of practical Australian road CBAs if they are to be used as an effective tool for option ranking and project prioritisation."

Based on the case study results of what it admits is a small sample, BITRE observes:

  • the net present value (NPV) was over-estimated by significant margins in most of the selected case study projects.
  • over-estimation in NPV was largely caused by over-estimation of road user benefits, with errors in travel time cost saving estimates accounting for 60 per cent of the total absolute variation between the NPV from the ex-ante CBA and that from the ex-post CBA
  • inaccurate traffic forecasts and methodology errors were mostly responsible for the over‑estimated road user benefits
  • there was no systematic evidence of cost overruns for the projects selected for ex‑post review.

The situation is not new and the report notes Austroads raised the CBA issue is 2011.

BITRE is also critical of the lack of peer reviews of CBAs, traffic forecasting errors and the plausibility of base case for projects.

Base cases are said to suffer from:

  • over-estimation of travel time cost savings
  • inappropriate speed-flow curves
  • vehicle operating cost (VOC) saving errors
  • and safety benefit estimates shortfalls.

On safety benefits, the report explicitly notes crash information was below what is needed for proper decision making.

"Crash analysis was hampered by lack of good data and analysis," the report says.

"Until crash data and analysis are significantly improved, there may be a case for using model default rates for both the base and project cases, as these are subject to less uncertainty."

The review looks at road investment projects on the National Land Transport Network in 2005–2007 and in 2014–2016.

The Australian Trucking Association (ATA) reacted with deep concern at the findings.

"The trucking industry is being over-charged for our use of the road network, there’s no guarantee those funds will actually be spent on roads, and then, when they are spent on roads, there’s no guarantee that those funds will be spent efficiently and effectively," ATA policy officer Samuel Marks says.

"This latest BITRE report highlights the need to improve traffic forecasting and to have independent, external reviews of proposed road projects.

"There’s a long line of reports about the need to improve the assessment of road projects, including from the Productivity Commission and the Harper Competition Review.

"The ATA has urged the Australian Government to introduce an independent road fund in the 2018-19 Budget to improve the long term efficiency and effectiveness of new road investment, so we can improve the safety and productivity of the road network." 

The Australian Logistics Council (ALC) is also unimpressed.

"This report is further evidence that a paucity of reliable data is preventing optimal resource allocation when it comes to making investment decisions on road infrastructure," ALC MD Michael Kilgariff says.

"ALC has consistently noted that the freight logistics sector is one that would benefit from the collection and more effective use of data relating to our freight transport network, including roads.

"As part of our major submission on the development of the National Freight and Supply Chain Strategy, ALC noted opportunities for the Federal Government to support the collection of data – based upon where and when vehicles travel – that could better inform road pricing and investment decisions.

"ALC supports bodies such as Infrastructure Australia providing expert advice to governments as to which infrastructure projects should be prioritised. Their task would be made significantly easier if, as part of the Strategy, the Government supported the collection of more accurate, real-time data on traffic movement and road congestion. The technology exists – and it is time we embraced it."

The full report can be found here.


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