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

    File URL: https://libkey.io/10.1016/j.tranpol.2014.11.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    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. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    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. Bert van Wee, 2011. "Transport and Ethics," Books, Edward Elgar Publishing, number 14281.
    10. Peter Mackie, 2010. "Cost-Benefit Analysis in Transport: A UK Perspective," OECD/ITF Joint Transport Research Centre Discussion Papers 2010/16, OECD Publishing.
    11. Robert Bain, 2009. "Error and optimism bias in toll road traffic forecasts," Transportation, Springer, vol. 36(5), pages 469-482, September.
    12. S. M. Grant-Muller & P. MacKie & J. Nellthorp & A. Pearman, 2001. "Economic appraisal of European transport projects: The state-of-the-art revisited," Transport Reviews, Taylor & Francis Journals, vol. 21(2), pages 237-261.
    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. Jaller, Miguel & Harvey, John T. & Saremi, Sogol & Ambrose, Hanjiro & Butt, Ali A., 2018. "Development of a Freight System Conceptualization and Impact Assessment (Fre‐SCANDIA) Framework," Institute of Transportation Studies, Working Paper Series qt05g8p7tn, Institute of Transportation Studies, UC Davis.
    2. Manout, Ouassim & Bonnel, Patrick & Bouzouina, Louafi, 2018. "Transit accessibility: A new definition of transit connectors," Transportation Research Part A: Policy and Practice, Elsevier, vol. 113(C), pages 88-100.
    3. Gaisha Shulenbayeva & Aigul Jondelbayeva & Aliya Nurgaliyeva & Azamat Zhanseitov & Ainur Myrzhykbayeva, 2022. "Organization of construction accounting in the process of sustainable development," RIVISTA DI STUDI SULLA SOSTENIBILITA', FrancoAngeli Editore, vol. 0(2), pages 11-28.
    4. Carlos Oliveira Cruz & Joaquim Miranda Sarmento, 2020. "Traffic forecast inaccuracy in transportation: a literature review of roads and railways projects," Transportation, Springer, vol. 47(4), pages 1571-1606, August.
    5. Huimin Liu & Canhui Jiang & Yan Liu & Marcel Hertogh & Xue Lyu, 2018. "Optimism Bias Evaluation and Decision-Making Risk Forecast on Bridge Project Cost Based on Reference Class Forecasting: Evidence from China," Sustainability, MDPI, vol. 10(11), pages 1-29, October.
    6. Marsden, Greg & Reardon, Louise, 2017. "Questions of governance: Rethinking the study of transportation policy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 101(C), pages 238-251.
    7. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mouter, Niek & Annema, Jan Anne & van Wee, Bert, 2013. "Ranking the substantive problems in the Dutch Cost–Benefit Analysis practice," Transportation Research Part A: Policy and Practice, Elsevier, vol. 49(C), pages 241-255.
    2. Barfod, Michael Bruhn & Salling, Kim Bang, 2015. "A new composite decision support framework for strategic and sustainable transport appraisals," Transportation Research Part A: Policy and Practice, Elsevier, vol. 72(C), pages 1-15.
    3. Nicolaisen, Morten Skou & Næss, Petter, 2015. "Roads to nowhere: The accuracy of travel demand forecasts for do-nothing alternatives," Transport Policy, Elsevier, vol. 37(C), pages 57-63.
    4. Maria Börjesson & Jonas Eliasson & Mattias Lundberg, 2014. "Is CBA Ranking of Transport Investments Robust?," Journal of Transport Economics and Policy, University of Bath, vol. 48(2), pages 189-204, May.
    5. Lindsey, Robin & de Palma, André, 2014. "Cost recovery from congestion tolls with long-run uncertainty," Economics of Transportation, Elsevier, vol. 3(2), pages 119-132.
    6. Nikolaos Thomopoulos & Susan Grant-Muller, 2013. "Incorporating equity as part of the wider impacts in transport infrastructure assessment: an application of the SUMINI approach," Transportation, Springer, vol. 40(2), pages 315-345, February.
    7. Dejan Makovšek & Marian Moszoro, 2018. "Risk pricing inefficiency in public–private partnerships," Transport Reviews, Taylor & Francis Journals, vol. 38(3), pages 298-321, May.
    8. Metz, David, 2021. "Economic benefits of road widening: Discrepancy between outturn and forecast," Transportation Research Part A: Policy and Practice, Elsevier, vol. 147(C), pages 312-319.
    9. 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.
    10. Morten Skou Nicolaisen & Patrick A. Driscoll, 2016. "An International Review of Ex-Post Project Evaluation Schemes in the Transport Sector," Journal of Environmental Assessment Policy and Management (JEAPM), World Scientific Publishing Co. Pte. Ltd., vol. 18(01), pages 1-33, March.
    11. Carlos Oliveira Cruz & Joaquim Miranda Sarmento, 2020. "Traffic forecast inaccuracy in transportation: a literature review of roads and railways projects," Transportation, Springer, vol. 47(4), pages 1571-1606, August.
    12. Xu, Xiangdong & Chen, Anthony & Wong, S.C. & Cheng, Lin, 2015. "Selection bias in build-operate-transfer transportation project appraisals," Transportation Research Part A: Policy and Practice, Elsevier, vol. 75(C), pages 245-251.
    13. Mouter, Niek & Annema, Jan Anne & Wee, Bert van, 2013. "Attitudes towards the role of Cost–Benefit Analysis in the decision-making process for spatial-infrastructure projects: A Dutch case study," Transportation Research Part A: Policy and Practice, Elsevier, vol. 58(C), pages 1-14.
    14. Andersson, Matts & Brundell-Freij, Karin & Eliasson, Jonas, 2016. "Validation of reference forecasts for passenger transport," Working papers in Transport Economics 2016:15, CTS - Centre for Transport Studies Stockholm (KTH and VTI), revised 07 Jul 2016.
    15. Hugo Priemus & Bert van Wee (ed.), 2013. "International Handbook on Mega-Projects," Books, Edward Elgar Publishing, number 14791.
    16. Bent Flyvbjerg & Alexander Budzier, 2018. "Report for the Edinburgh Tram Inquiry," Papers 1805.12106, arXiv.org.
    17. Walker, Joan L. & Chatman, Daniel & Daziano, Ricardo & Erhardt, Gregory & Gao, Song & Mahmassani, Hani & Ory, David & Sall, Elizabeth & Bhat, Chandra & Chim, Nicholas & Daniels, Clint & Gardner, Brian, 2019. "Advancing the Science of Travel Demand Forecasting," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt0v1906ts, Institute of Transportation Studies, UC Berkeley.
    18. Chantal C. Cantarelli & Bent Flybjerg & Eric J. E. Molin & Bert van Wee, 2013. "Cost overruns in Large-Scale Transportation Infrastructure Projects: Explanations and Their Theoretical Embeddedness," Papers 1307.2176, arXiv.org.
    19. Kenneth Button & Brien Benson, 2013. "Handling biases in forecasting when making transportation policy," Chapters, in: Thomas Vanoutrive & Ann Verhetsel (ed.), Smart Transport Networks, chapter 4, pages 49-67, Edward Elgar Publishing.
    20. Zhu, Jingjing & Xu, Xiangdong & Wang, Zijian, 2023. "Economic evaluation of redundancy design for transportation networks under disruptions: Framework and case study," Transport Policy, Elsevier, vol. 142(C), pages 70-83.

    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.

    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 bibliographic 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.

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

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.