IDEAS home Printed from https://ideas.repec.org/a/eee/trapol/v38y2015icp8-18.html
   My bibliography  Save this article

Accounting for the inaccuracies in demand forecasts and construction cost estimations in transport project evaluation

Author

Listed:
  • Salling, Kim Bang
  • Leleur, Steen

Abstract

For decades researchers have claimed that particularly demand forecasts and construction cost estimations are assigned with/affected by a large degree of uncertainty. Massively, articles, research documents and reports agree that there exists a tendency towards underestimating the costs and overestimating the demand for transport infrastructure projects. It is therefore claimed that ex-ante evaluations of transport-related projects are often based on inaccurate material, which ultimately can lead to severe socio-economic misperformance. This paper seeks to bridge the gap between the inaccuracies in demand and cost estimations and hence the evaluation of transport infrastructure projects. Currently, research within this area is scarce and scattered with no common agreement on how to embed and operationalise the huge amount of empirical data that exist within the frame of Optimism Bias. Therefore, a full version of the UNITE-DSS model, which contains an integrated approach to socio-economic analysis, risk-based simulation and database information, will be presented. The procedure is based upon quantitative risk analysis and Monte Carlo simulation and conventional cost-benefit analysis converting deterministic benefit-cost ratios (BCRs) into stochastic interval results. A new data collection (2009–2013) forms the empirical basis for any risk simulation embedded within the so-called UP database (UNITE project database), revealing the inaccuracy of both construction costs and demand forecasts. Accordingly, the UNITE-DSS approach is therefore tested and further explored on a number of fixed case examples to investigate the performance and robustness of the traditional CBA results. Ultimately, a conclusion and perspectives of the further work will be set out.

Suggested Citation

  • Salling, Kim Bang & Leleur, Steen, 2015. "Accounting for the inaccuracies in demand forecasts and construction cost estimations in transport project evaluation," Transport Policy, Elsevier, vol. 38(C), pages 8-18.
  • Handle: RePEc:eee:trapol:v:38:y:2015:i:c:p:8-18
    DOI: 10.1016/j.tranpol.2014.11.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0967070X14002480
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Parthasarathi, Pavithra & Levinson, David, 2010. "Post-construction evaluation of traffic forecast accuracy," Transport Policy, Elsevier, vol. 17(6), pages 428-443, November.
    2. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    3. Eliasson, Jonas & Fosgerau, Mogens, 2013. "Cost overruns and demand shortfalls – Deception or selection?," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 105-113.
    4. Vickerman, R., 2000. "Evaluation methodologies for transport projects in the United Kingdom," Transport Policy, Elsevier, vol. 7(1), pages 7-16, January.
    5. Bent Flyvbjerg & Mette K. Skamris holm & Søren L. Buhl, 2003. "How common and how large are cost overruns in transport infrastructure projects?," Transport Reviews, Taylor & Francis Journals, vol. 23(1), pages 71-88, January.
    6. Salling, Kim Bang & Leleur, Steen, 2011. "Transport appraisal and Monte Carlo simulation by use of the CBA-DK model," Transport Policy, Elsevier, vol. 18(1), pages 236-245, January.
    7. Van den Honert, R. C., 1998. "Stochastic group preference modelling in the multiplicative AHP: A model of group consensus," European Journal of Operational Research, Elsevier, vol. 110(1), pages 99-111, October.
    8. 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.
    9. Peter Mackie, 2010. "Cost-Benefit Analysis in Transport: A UK Perspective," OECD/ITF Joint Transport Research Centre Discussion Papers 2010/16, OECD Publishing.
    10. Robert Bain, 2009. "Error and optimism bias in toll road traffic forecasts," Transportation, Springer, vol. 36(5), pages 469-482, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:transa:v:101:y:2017:i:c:p:238-251 is not listed on IDEAS
    2. repec:eee:transa:v:113:y:2018:i:c:p:88-100 is not listed on IDEAS
    3. Chong, Uven & Hopkins, Omar, 2016. "An international experience on the evolution of road costs during the project life cycle," Transport Policy, Elsevier, vol. 48(C), pages 60-66.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:trapol:v:38:y:2015:i:c:p:8-18. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/30473/description#description .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.