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What cost-benefit ratios should be like

With many motorway projects having extremely marginal cost-benefit ratios, such as the Transmission Gully motorway near Wellington having a BCR of 0.6 and the Puhoi-Wellsford “holiday highway” having a BCR of around 0.8, one can wonder whether the analysis process is perhaps a bit too harsh. Do any projects stack up well?

Well I came across a project the other day that just goes go show that there are areas where money can be spent on upgrading our transport infrastructure where the rate of return on the project is excellent. Of course these projects aren’t quite as flash and fancy as 35 kilometre long motorways, but they generally involve the elimination of critical bottlenecks that cause significant delays, but don’t really cost that much to fix. They’re the low hanging fruit that we seem to be ignoring while throwing money at huge motorway projects that don’t seem to stack up.

The project that I am talking about is an upgrade of Smales Road and Allens Road in East Tamaki, Manukau City. This upgrade will widen the sections of road shown in green on the map below from two lanes to four lanes, add additional turning lanes at key intersections and provide cycling infrastructure. Here’s where it’s generally located: Essentially, this route links up the Flat Bush/Botany/East Tamaki area with the Southern Motorway – via the relatively new Highbrook Drive interchange. Highbrook Drive is a pretty high standard road for most of its length, as is Smales Road once you get east of where the green line runs out. But in the middle the road is bizarrely narrow and the intersection is completely inadequate for the amount of vehicles trying to use it. It’s a natural bottleneck.

The traffic effects of undertaking the project against a simulation of what would happen if you “did nothing” ¬†have been compared via a traffic model. I must say overall I am somewhat sceptical about traffic models because of the “garbage in, garbage out” principle, and my sneaking suspicion that most models are based on far lower petrol prices than what we can expect in the future – but that’s another matter entirely. For this particular situation, the various options have been modelled and the results outlined in the table below: I do sometimes wonder whether traffic models take into account actual human behaviour rather than thinking about people like stormwater that needs to be “gotten rid of”. One would imagine that once average speeds dipped below 10kph people would stop throwing themselves at this corridor and use somewhere else. But anyway, even taking the exact figures with a rather large grain of salt it is pretty obvious that unless something is done the intersection of Springs/Harris road with Smales/Allens road is going to get pretty damn ugly in the future.

So what are the benefits, once turned into a monetary value? This is shown in the table below: Most of the benefits are in those rather dicey “travel time costs” savings, but even taking my skepticism of those benefits into account, it’s pretty obvious that the project will make¬†a big difference.

Now if we stack up the benefits of the project against its costs, we actually end up with a pretty amazing result: When one is used to seeing BCRs that hover around 1, seeing something at 8.5 is pretty staggering. So therefore even taking into account many of the fundamental issues I have with how cost-benefit analyses are calculated, and the over-reliance on time-savings benefits, it is clear that this project is worth undertaking many times over. I don’t know what its priority is and when we might expect it to be constructed, but I imagine that there are a great number of little projects out there that would be very similar to this one. Nasty intersections that cause huge delays, bizarre areas of road that narrow and cause bottlenecks and so on.

Sadly, the powers to be don’t seem to be focusing on these clever, smaller, projects but rather want to spend $11 billion on motorway projects over the next decade, half of which seem to not stack up at all financially.

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