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How to avoid unrealistic appraisal results? A concept to reflect the occurrence of risk in the appraisal of transport infrastructure projects

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  • Miller, Michael
  • Szimba, Eckhard

Abstract

Planning, constructing, financing and operating transport infrastructure involves a wide range of different risks. This poses a challenge for the appraisal of transport infrastructure projects. The current paper addresses this challenge by elaborating on a concept that considers the issue of risk by transport infrastructure evaluation concepts, on the basis of already applied methodologies. The paper begins by substantiating the pattern of ‘risk’ in transport infrastructure planning. Subsequently, five basic methodologies that incorporate the issue of risk in transport project appraisal are briefly presented: sensitivity analysis, scenario analysis, Monte Carlo Simulation, Quantified Optimism Bias and qualitative approaches. For each methodology, real-world applications of infrastructure appraisal in individual countries, regions or supranational organizations are presented. After providing a synoptic overview of these methodologies, a concept is presented that reflects the occurrence of risk in the assessment of transport infrastructure projects.

Suggested Citation

  • Miller, Michael & Szimba, Eckhard, 2015. "How to avoid unrealistic appraisal results? A concept to reflect the occurrence of risk in the appraisal of transport infrastructure projects," Research in Transportation Economics, Elsevier, vol. 49(C), pages 65-75.
    • Handle: RePEc:eee:retrec:v:49:y:2015:i:c:p:65-75
    DOI: 10.1016/j.retrec.2015.04.007
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    References listed on IDEAS

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    1. Bent Flyvbjerg, 2008. "Public Planning of Mega-Projects: Overestimation of Demand and Underestimation of Costs," Chapters, in: Hugo Priemus & Bent Flyvbjerg & Bert van Wee (ed.), Decision-Making on Mega-Projects, chapter 7, Edward Elgar Publishing.
    2. Robert Bain, 2009. "Error and optimism bias in toll road traffic forecasts," Transportation, Springer, vol. 36(5), pages 469-482, September.
    3. Cantarelli, C.C. & Molin, E.J.E. & van Wee, B. & Flyvbjerg, B., 2012. "Characteristics of cost overruns for Dutch transport infrastructure projects and the importance of the decision to build and project phases," Transport Policy, Elsevier, vol. 22(C), pages 49-56.
    4. Flyvbjerg,Bent & Bruzelius,Nils & Rothengatter,Werner, 2003. "Megaprojects and Risk," Cambridge Books, Cambridge University Press, number 9780521009461.
    5. Salling, Kim Bang & Banister, David, 2009. "Assessment of large transport infrastructure projects: The CBA-DK model," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(9-10), pages 800-813, November.
    6. Hugo Priemus & Bent Flyvbjerg & Bert van Wee (ed.), 2008. "Decision-Making on Mega-Projects," Books, Edward Elgar Publishing, number 4112.
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    Cited by:

    1. Miranda Sarmento, J. & Renneboog, L.D.R., 2014. "Anatomy of Public-Private Partnerships : Their Creation, Financing, and Renegotiations," Discussion Paper 2014-017, Tilburg University, Center for Economic Research.
    2. Miranda Sarmento, J.J. & Renneboog, Luc, 2016. "Anatomy of public-private partnerships : Creation, financing, and renegotiations," Other publications TiSEM dc944be7-8594-4439-90da-6, Tilburg University, School of Economics and Management.
    3. Raphael Konde Kazungu & Ayyoob Sharifi, 2023. "Investigating Risks to the Implementation of the Great Equatorial Landbridge (GELB) Highway Project across Africa," Sustainability, MDPI, vol. 15(14), pages 1-22, July.
    4. Abeysekara, Baudhi & Perera, Piyaruwan & Chhipi Shrestha, Gyan Kumar & Gunaruwan, Lalithasiri & Kumarage, Amal & Sadiq, Rehan & Hewage, Kasun, 2021. "Improving the capital deployment efficiency: An infrastructure investment planning process in transportation project," Research in Transportation Economics, Elsevier, vol. 88(C).

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    More about this item

    Keywords

    Transport infrastructure; Risk; Assessment; Sensitivity analysis; Scenario analysis; Monte Carlo simulation; Optimism bias; Project appraisal;
    All these keywords.

    JEL classification:

    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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