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					Workshop with EU Member States: Work
Package B
Session 2 – Summary of findings from case studies

3 February 2011
    Content

    ● Results
      □   Ex ante evaluation
      □   Ex post evaluation
      □   Ex ante vs. Ex post

    ● Observations for future discussion
    ● Annexe – detailed results




2                                          Frontier Economics
    ● Review of ex ante CBA
    ● Ex post evaluation
    ● Ex ante vs. ex post
    ● Discussion points
    ● Annexe - detailed results




3                   Frontier Economics
    Ex ante CBA – quality of the analysis


                              Good quality of core analysis for areas
                                     covered by guidelines




             Review of        Limited analysis of alternative options

              ex ante
            Cost Benefit
             Analysis           Limited use of sensitivity analysis




                                Documentation available often not
                                   sufficiently comprehensive




4                                                                       Frontier Economics
    Ex ante CBA – its role in decision making

           Compliance with EC CF application requirements (9)



           Ensure value for money (6)


           Choose
           alignment (2)

           Choose
           design
           standards (2)

                   Prioritise elements of national transport
                   strategy (1)


           Allocate budget and optimise timing (0)

Projects
                           2               4                   6   8              10

5                                                                      Frontier Economics
    Ex ante stated objectives

               Improve safety (8)



               Reduce travel time (6)



               Increase capacity/reduce
               congestion (4)


               Reduce
               operating
               costs (2)

               Improve
               connectivity
               (2)

    Projects
                              2           4   6   8              10

6                                                     Frontier Economics
    Ex ante impacts taken into account in CBA

               Impacts on users (Time Savings, VOCs) (10)



               Impacts on safety (10)



               Impacts on the environment
               (4)


               Impacts on transport
               operators (3)


               Other
               impacts (2)

    Projects
                             2              4               6   8              10

7                                                                   Frontier Economics
    ● Review of ex ante CBA
    ● Ex post evaluation
    ● Ex ante vs. ex post
    ● Discussion points
    ● Annexe - detailed results




8                   Frontier Economics
    Ex post economic evaluation – benefit/cost ratio




9                                                      Frontier Economics
 Ex post financial analysis



                     For non-revenue generating projects the financial NPV is
                     generally negative and there is no difference between
                     Low and High case

       Ex post
       financial     Negative financial IRRs however are to be expected, as
                     these projects are not meant to be self-financing.
      analysis

                     EC financial contributions are required to „unlock‟ the
                     economic benefits identified in the CBA.




10                                                                       Frontier Economics
 Benefit distribution
     140%

     120%

     100%

     80%

     60%

     40%

     20%

      0%

     -20%

     -40%
            Railway -   Road -   Railway -   Road -    Road -   Road -    Railway - Road - Railway -    Road -
             Spain      Poland   Portugal    Spain     Greece   Ireland    Greece Lithuania Slovakia   Hungary


                    Travel time                       VOCs                         Fares
                    Transport operators               Safety                       Carbon
                    Air pollution                     Noise                        Other

11                                                                                                      Frontier Economics
 Wider economic effects

                                      Supply      GDP /                                  Social
                          Land Use                         Employment   Population                   Environment       Other
                                      Chain       output                               Inclusion

     Railway - Spain         ✓          ✓           ?          ✓             ?             ✓                             ✓

     Road - Poland           ✓          ✓                                                                 ✓

     Railway - Portugal                             ?                                                                    ✓

     Road - Spain                       ✓           ?

     Road - Greece                                             ✓             ✓             ✓              ✓

     Road - Ireland          ✓                                               ✓

     Railway - Greece        ✓                                                                            ✓

     Road - Lithuania                   ✓

     Railway - Slovakia                             ?          ✓                                          ✓

     Road - Hungary          ✓          ✓           ?                                                     ?

                                                                Note: ✓ (Observed effect) ?(Difficult to establish a direct causality)



        ●   It is complicated to establish a causality link between the infrastructure and the observed effects
        ●   The majority of the effects are related with Land Use, Supply Chain and Environment



12                                                                                                                   Frontier Economics
     ● Review of ex ante CBA
     ● Ex post evaluation
     ● Ex ante vs. ex post
     ● Discussion points
     ● Annexe - detailed results




13                   Frontier Economics
 Ex ante vs. Ex post – reasons for differences
                             Outturn
                                        Economic   Population                   Marginal   Discount   Opening year
                           investment                           Travel demand                                          Other
                                         growth     growth                       values      rate       (delay)
                              costs

 Railway - Spain             ✓✓                                     ✓✓                        ✓          ✓✓            ✓✓

 Road - Poland                ✓           ✓           ✓             ✓✓           ✓✓          ✓✓           ✓

 Railway - Portugal          ✓✓                                     ✓✓           ✓✓           ✓          ✓✓            ✓✓

 Road - Spain                                                       ✓✓           ✓✓           ✓

 Road - Greece               ✓✓          ✓✓           ✓             ✓✓            ✓           ✓           ✓

 Road - Ireland               ✓          ✓✓          ✓✓             ✓✓                        ✓           ✓

 Railway - Greece             ✓           ✓                          ✓           ✓✓           ✓           ✓

 Road - Lithuania            ✓✓                                                               ✓          ✓✓

 Railway - Slovakia           ✓          ✓✓                         ✓✓           ✓✓          ✓✓           ✓

 Road - Hungary              ✓✓          ✓✓                         ✓✓                        ✓           ✓

                                                                                 Note: ✓✓ (Primary reason) ✓(Secondary reason)




                  ●   The ex ante evaluation and the ex post evaluation exhibit differences.
                  ●   Most of the discrepancies are related with differences in travel demand, cost overruns
                      and discount rate used in the analysis


14                                                                                                                   Frontier Economics
 Ex ante vs. Ex post - NPV




       Overall NPV of the majority of the projects was overestimated in the ex ante
                 evaluation (except for M1 Northern Motorway in Ireland)




15                                                                                    Frontier Economics
     ● Review of ex ante CBA
     ● Ex post evaluation
     ● Ex ante vs. ex post
     ● Discussion points
     ● Annexe - detailed results




16                   Frontier Economics
 Discussion points

     Satisfactory ex     ●   With a couple of exceptions, projects have so far delivered positive ex post
     post BCR                NPVs and benefit-cost ratios higher than 1


                         ●   Generally, road projects tend to yield a higher BCR – but:
     Road projects           □   rail projects tend to have higher capital costs by definition
     vs. rail projects       □   core CBA is a partial assessment of impact – does not include all factors that may
                                 make a rail investment preferable to road investment


     Short elapsed       ●   This raises two issues for ex post evaluation
     time since              □   need to make assumptions about future demand (almost like in ex ante CBA)
     opening                 □   in most cases, wider impacts take a long time to emerge


                         ●   Lack of monitoring since opening makes the identification of wider impacts
     Identification of
                             particularly challenging (especially for projects implemented as part of a wider
     wider impacts           investment strategy, against a backdrop of rapid economic change)


                         ●   Wider impacts mainly come from new infrastructures because of a step change
                             in accessibility. Socio-economic impacts are more easily identifiable, even
     Source of
                             anecdotally. In the case of upgrades, most of the key benefits are already
     wider impacts           captured in the core CBA analysis, and wider impacts are harder to identify
                             against a background of economic and social change


17                                                                                                    Frontier Economics
     ● Review of ex ante CBA
     ● Ex post evaluation
     ● Ex ante vs ex post
     ● Discussion points
     ● Annexe - detailed results




18                   Frontier Economics
 Projects
     ● LAV Madrid – Barcelona – French border (Spain)

     ● A2 Motorway (Poland)

     ● Algarve Railway (Portugal)

     ● A23 Motorway (Spain)

     ● Agiou Konstantinou Bypass (Greece)

     ● M1 Northern Motorway (Ireland)

     ● Thriassio – Kiato Railway (Greece)

     ● IX B Corridor (Lithuania)

     ● Bratislava Rača – Trnava Railway (Slovakia)

     ● M0 Budapest Ring Road (Hungary)


19                                                      Frontier Economics
 Project description
 ● The LAV (Línea de Alta Velocidad ) Madrid –
   Barcelona – French border is a high speed
   railway line connecting Madrid to the French
   border via Barcelona.
 ● The LAV between Madrid and Barcelona
   covers 621 kilometres, and it was developed
   in three stages:
     □   Section Madrid – Lleida (442 km): opened in
         October 2003
     □   Section Lleida – Tarragona (78 km): in
         operation since December 2006
     □   Section Tarragona – Barcelona (100 km):
         operational since February 2008.
                                                       ● Construction of 72 km of rail bed and the
 ● Section Barcelona – Figueres (132 Km) is              installation of 610 km of railway tracks
   still under construction. Expected to be
                                                       ● Part of the TEN-T Priority Project 3 (high-
   completed in 2012.
                                                         speed railway axis of south-west Europe),
 ● Project includes 12 subprojects. Total                whose main objective is to provide high-
   Cohesion Fund contribution was equivalent             speed rail connections between the
   to 72.25% of eligible costs (€1,042m)                 Iberian Peninsula and the rest of Europe.


20                                                                                      Frontier Economics
 Results of ex ante and ex post CBA
                                                NPV
                                                                   Economic IRR          Benefit / Cost ratio
                                           (€ million, 2008)

                    Low case                   -2,736                    2.6%                     0.6
     Ex post
                    High case                  -1,948                    3.7%                     0.7
     Ex ante     Economic CBA                  1,091                     6.3%                    1.07
     Ex ante       Social CBA                  4,125                     8.9%                    1.26

 Two cases (High / Low) considered in ex post CBA based on traffic growth rate from 2009 onwards. High (low)
 case assumes 5% (2.5%), 2.5% (1.25%) and 1.3% (0.6%) for short, medium and long run respectively.

 Ex ante CBA (May 2001 by INECO) covers the 1997 – 2025 period. It is a single cost-benefit analysis of the
 whole LAV (including the Barcelona – French border section, which is not completed at the moment)

                                                Ex ante CBA analyses the whole line for the 1997-2005 period.
                        Infrastructure          Ex post analyses only the Madrid – Barcelona section for the
Key sources of                                  1997-2033 period
  discrepancy
between ex ante        Traffic / Capital        Ex ante CBA assumes higher number of passengers. Ex post
  and ex post               costs               capital costs are substantially higher
 assessments
                          Additional            Ex ante CBA includes employment generation in the social
                            effect              analysis

21                                                                                                 Frontier Economics
 Wider impacts and use of CBA in decision making

                             Significant increase in the number of passengers. Change in the average
                 Mobility
                             traveller profile. A new type of traveller: the commuter

                             Effects especially in Zaragoza and Lleida. Number of visitors grow, increase the
                 Tourism     number of congressional and business meetings and increase of overnight stays.
       Wider
     economic                Zaragoza: logistics, international events and business land. (2008 International
      impact      New        Exhibition about Water and PLAZA, a logistics platform). Lleida: the LAV and the
                activities   technology park (Parque Científico y Tecnológico Agroalimentario de Lleida –
                             PCiTAL)

                Additional   New industrial park, PLHUS, located near the city of Huesca. It covers an
                 effects     area of around 1.150.000 m2




   CBA in the
 decision making                                        TO BE UPDATED
     process




22                                                                                                   Frontier Economics
 Projects
     ● LAV Madrid – Barcelona – French border (Spain)

     ● A2 Motorway (Poland)

     ● Algarve Railway (Portugal)

     ● A23 Motorway (Spain)

     ● Agiou Konstantinou Bypass (Greece)

     ● M1 Northern Motorway (Ireland)

     ● Thriassio – Kiato Railway (Greece)

     ● IX B Corridor (Lithuania)

     ● Bratislava Rača – Trnava Railway (Slovakia)

     ● M0 Budapest Ring Road (Hungary)


23                                                      Frontier Economics
 Project description
     ● Construction of approximately
       100 km of „non-toll‟ A2
       motorway between Konin and
       Strykow
     ● Total cost: €406m
     ● Two subsections:
       □   Konin to Emilia (€348m)
       □   Emilia to Strykow (€58m)
     ● Total Cohesion Fund
       contribution was EUR 325m
       (82% Konin - Emilia, 75%
       Emilia - Strykow)
     ● EIB also contributed financing                                            Source: Openstreetmap.org

       up to the overall maximum        ● Dual two-lane motorway – substitute for a wide single
       allowed (90%)                      lane road (the R2), subject to varying speed limits and
                                          route quality
                                        ● The R72 (former route between Konin and Lodz) is
                                          similar to R2 and passes through a number of towns
                                          and villages

24                                                                                      Frontier Economics
 Results of ex ante and ex post CBA
                                                   NPV                    Economic IRR             Benefit / Cost ratio
                                         (€ million, 2003 ex post,     (discount rate = 5.5%        (discount rate = 5.5%
                                               2003 ex ante)            ex post, 8% ex ante)         ex post, 8% ex ante)

                      Low case                      523                         18%                          3.0
      Ex post
                      High case                     900                         23%                          4.4
      Ex ante                                     1,867                        20.2%                         3.1

 Two cases (Low / High) considered in ex post CBA, based on different assumptions on traffic flows and
 speed

     Key sources       Value of           Ex post CBA uses updated values for parameters such as value of time,
           of         parameters          reduction in VOC, accident costs
     discrepancy
                       Additional         Ex post CBA considers some induced traffic and foregone government
      between ex
                        impacts           revenues, which ex ante CBA does not consider
      ante and ex
         post
     assessments     Discount rate        Ex post CBA uses a 5.5% discount rate. Ex ante uses 8%

                    Large amount of (gross) benefits generated, in excess of €11billion - reasons for this result have been
                    investigated

 Review of ex       CBA documents not always provide enough clarification regarding key assumptions used in
  ante CBA          the analysis (e.g. journey times, split between light and heavy vehicles)

                    Formal risk assessment not undertaken, even though key risks were identified and some results from
                    various sensitivity test are available

25                                                                                                          Frontier Economics
     Wider impacts and use of CBA in decision making
●        Wider impacts as a direct result of the
         scheme are difficult to determine in
         quantitative terms
●        A2 regarded as a key enabler of economic
         regeneration and development (Lodz Special
         Economic Zone)
●        Faster and more reliable connectivity within
         Poland and to bordering countries has helped
         increase Foreign Direct Investment;
●        Assisted in the growth of Logistics sectors
         and has facilitated the emergence of a                                  Source: LODZ SEZ Flexicurity –
         broadened industrial base                                               Our Key to Success (Lodz Special Economic Zone, 2008)

●        Greater business efficiency and productivity      ●   Benefits of scheme partially offset by poor reliability on the R14
         brought about by improved journey times               between Lowicz and Warsaw;

●        Quality of life benefits through removing         ●   Increased traffic on the R14 has contributed to worsening road
         traffic from built up areas along the parallel        safety, air quality and noise;
         routes (R14 and R72);                             ●   Increased access to tourist and cultural opportunities; and
●        Increased land values in the vicinity of the A2   ●   Some disturbance to agricultural patterns (severance) and animal
         and proposed A1 alignment (Strykow)                   movements.


                         CBA played no role in the choice of the route alignment
     Lessons
     on use of           As a result of EU guidance, the establishment of CUPT and greater experience of CBA
       CBA               analysis for EU projects, it is generally felt that the reliability and application of CBA at the
                         national level is improving.

    26                                                                                                                           Frontier Economics
 Projects
     ● LAV Madrid – Barcelona – French border (Spain)

     ● A2 Motorway (Poland)

     ● Algarve Railway (Portugal)

     ● A23 Motorway (Spain)

     ● Agiou Konstantinou Bypass (Greece)

     ● M1 Northern Motorway (Ireland)

     ● Thriassio – Kiato Railway (Greece)

     ● IX B Corridor (Lithuania)

     ● Bratislava Rača – Trnava Railway (Slovakia)

     ● M0 Budapest Ring Road (Hungary)


27                                                      Frontier Economics
 Project description
 ● Modernisation of railway link (more than
   300Km) between Lisboa (south) and Faro
 ● The project was subdivided in four
   subsections, involving:
     □   duplication of the rail track
     □   construction (3) and renewal (12) of
         stations
     □   installation of a new control system to
         increase maximum speed
 ● Total cost: €490m (NPV, 2008 prices)
     □   Pinhal Novo to Ermidas + Linha de Sines
         (€137m)
     □   Coina to Pinhal Novo (€114m)
     □   Pinheiro to Km 94 (€12m)                  ● Modernisation of the railway line, Lisboa
     □   Ermidas to Faro (€227m)                     to Algarve (Faro)
                                                   ● The project is part of the TEN-T Priority
 ● Total Cohesion Fund contribution was
                                                     Project 8 (Multimodal axis Portugal/
   €323m, equivalent to 80% of eligible              Spain-rest of Europe – Railway)
   costs (€405m)

28                                                                                    Frontier Economics
 Results of ex ante and ex post CBA
                                              NPV
                                                                  Economic IRR           Benefit / Cost ratio
                                         (€ million, 2008)

                    Low case                  48.2                      6.7%                      1.15
     Ex post
                   High case                  79.2                      7.4%                      1.24
     Ex ante                                 156.7                      9.1%                      1.6

 Two cases (High / Low) considered in ex post CBA, based on different evolution in future passenger volumes
 and freight volumes and their impact on operating costs

 Ex ante CBA barely complete (insufficient information on key assumptions and no Sensitivity and risk
 assessment). Section Coina to Pinhal Novo excluded in this ex ante CBA. Overestimation of time savings


                                               Forecast traffic in ex ante CBA does not match with actual
                        Traffic volumes
                                               traffic outturn in the first ten years of the project
Key sources of
                                               Differences in the period when capital costs were incurred.
  discrepancy                Costs
                                               Treatment of foregone fuel tax revenues
between ex ante
  and ex post               Benefit            Differences in the value of parameters, application of the
 assessments              calculation          “rule of half” and treatment of revenues (REFER and CP)

                         Discount rate         Ex post CBA uses a 5.5% discount rate. Ex ante uses 5%


29                                                                                                  Frontier Economics
 Wider impacts and use of CBA in decision making

                   Effects largely captured by the core CBA


                   Counties (concelhos) that have a direct relation with the Lisbon – Algarve railway
                   have increased their IPC (Indicador per Capita) with the exception of Setúbal


 Wider economic    Additional environmental action: implementation of a noise barrier in Funcheira,
     impact        according to legal requirements.

                   REFER: journey times to Setúbal, Évora, Beja and Faro are normally higher than
                   for road transport due to limited capacity on the “25 de April” bridge.

                   Future projects: Lisbon – Porto; Porto – Vigo (Spain); and Lisbon – Madrid (will use
                   part of the Lisbon – Algarve railway track, specifically the Lisbon – Évora section)




                   Limited role of ex ante CBA in the decision-making process
   CBA in the
 decision making
     process       From discussions with project stakeholders in Portugal it seems that the quality of
                   CBA has increased, playing now a central role in the project appraisal



30                                                                                            Frontier Economics
 Projects
     ● LAV Madrid – Barcelona – French border (Spain)

     ● A2 Motorway (Poland)

     ● Algarve Railway (Portugal)

     ● A23 Motorway (Spain)

     ● Agiou Konstantinou Bypass (Greece)

     ● M1 Northern Motorway (Ireland)

     ● Thriassio – Kiato Railway (Greece)

     ● IX B Corridor (Lithuania)

     ● Bratislava Rača – Trnava Railway (Slovakia)

     ● M0 Budapest Ring Road (Hungary)


31                                                      Frontier Economics
 Project description
 ● Construction of approximately 75 km of
   „non-toll‟ A23 motorway
 ● The project was subdivided in four
   subsections:
     □   Huesca – Nueno (11.5 Km)
     □   Monreal del Campo – Calamocha (14.8 Km)
     □   Santa Eulalia – Monreal del Campo (21.9 Km)
     □   Teruel – Santa Eulalia (26.8 Km)
 ● Total cost: €247m (NPV, 2010 prices)
     □   Huesca – Nueno: €29m
     □   Monreal del Campo – Calamocha: €78m
     □   Santa Eulalia – Monreal del Campo: €98m       ● Construction of 75 km of „non-toll‟ A23
     □   Teruel – Santa Eulalia: €43m                    motorway in Spain

 ● Total Cohesion Fund contribution was                ● Although the A23 is not part of any TEN-T
                                                         corridor, it belongs to the European route
   equivalent to 85% of eligible costs (€205m,
                                                         E07 connecting Pau in France to
   NPV, 2010 prices)                                     Zaragoza in Spain



32                                                                                      Frontier Economics
 Results of ex ante and ex post CBA
                                              NPV
                                                                 Economic IRR          Benefit / Cost ratio
                                        (€ million, 2010)

                    Low case                 -27.7                    4.6%                      0.9
     Ex post
                   High case                 27.6                     6.3%                      1.1
     Ex ante                                 120.3                    9.1%                      1.6

 Two cases (High / Low) considered in ex post CBA based on traffic growth rate from 2010 onwards. We used
 5% (i.e. the average annual growth rate for the A23 between 1998 and 2008) for the High case and 2.5% for
 de Low case.

 Not a unique ex ante CBA for all the 4 subprojects. New segments were not generate induced traffic. Time
 saving is the main driver of economic benefit. It more than compensates increase in VOC and fuel
 consumptions due to higher speed.


                                              Ex post: Fuel costs is more that 100% higher while value of
                          Parameters
                                              time is approx. 50% higher than in the ex ante CBA
Key sources of
  discrepancy                                 Ex post: significant lower minutes saved. Ex ante assumes
between ex ante           Time saving         27 and 33 mins. and ex post used 13 and 9.3 mins for
  and ex post                                 cars/LGV and HGV respectively.
 assessments
                                              Ex ante CBA assumes around 3% annual traffic growth rate
                         Traffic growth
                                              on the new A23

33                                                                                                Frontier Economics
 Wider impacts and use of CBA in decision making

                           New logistic and industrial park, PLATEA, developed by the Government of
                           Aragón and managed by Platea Gestión S.A.

                           Industrial aeronautical platform, PLATA, developed by the Government of Aragón
                Teruel     and the Teruel City Council. It is expected to be completed by late 2010

       Wider               Spanish Government is considering two new road connections, providing
     economic              links to the A23 (Alcolea - Monreal del Campo and Cuenca - Teruel)
      impact

                           New industrial park, PLHUS, located near the city of Huesca. It covers an
                           area of around 1.150.000 m2
                Huesca
                           The technology park, WALQA. It is situated in the outskirts of Huesca, on the
                           dual carriageway Autovía Mudéjar that directly links to Madrid


                     Ministerio de Fomento - Unidad de Carreteras de Aragon (stakeholder): the
   CBA in the        decision to construct the A23 motorway was mainly political.
 decision making     Economic analysis where carried out to decide on different alternatives on the exact
     process         configuration of the new A23 by the “Demarcación de Carreteras del Estado en
                     Aragón”



34                                                                                               Frontier Economics
 Projects
     ● LAV Madrid – Barcelona – French border (Spain)

     ● A2 Motorway (Poland)

     ● Algarve Railway (Portugal)

     ● A23 Motorway (Spain)

     ● Agiou Konstantinou Bypass (Greece)

     ● M1 Northern Motorway (Ireland)

     ● Thriassio – Kiato Railway (Greece)

     ● IX B Corridor (Lithuania)

     ● Bratislava Rača – Trnava Railway (Slovakia)

     ● M0 Budapest Ring Road (Hungary)


35                                                      Frontier Economics
 Project description
     ● Construction of dual two lane
       Agiou Konstantinou Bypass
       (Motorway Standard)
     ● Complex structure including
       the construction of 7 tunnels
       through mountainous
       landscape
     ● Total cost: €317.8m
     ● Total Cohesion Fund
       contribution was €117m (37%
       of total cost)
 Objectives
 •     To increase motorway speeds and    Source: Openstreetmap.org
       road connectivity between Greece
       and other EU countries;
 •     To improve safety record;
 •     Reduce load/capacity ratio; and
 •     Improve journey times


36                                                Frontier Economics
 Results of ex ante and ex post CBA
                                                 NPV                   Economic IRR            Benefit / Cost ratio
                                        (€ million, 2000 ex post,    (discount rate = 5.5%      (discount rate = 5.5%
                                              2000 ex ante)           ex post, 5% ex ante)       ex post, 5% ex ante)

                     Low case                     233                      12.6%                         2.1
      Ex post
                     High case                    283                      13.4%                         2.4
      Ex ante                                   422.1                      17.6%                         3.1
 Two cases (Low / High) considered in ex post CBA, based on different assumptions of GDP growth and
 therefore Do Something demand – these are shown for the 30 yr assessment (as per the ex ante)
                    Re-assignment and   Ex post CBA showed that 84% of corridor traffic has switched to the new road
     Key sources      Traffic Growth    compared to a forecast of 64%. Furthermore post opening traffic volumes were
           of          Assumptions      lower than forecast (recession effects)
     discrepancy
      between ex      Additional        Ex post CBA did not quantify the maintenance costs benefits that were
      ante and ex      impacts          included in the ex-ante appraisals
         post
     assessments    Discount rate       Ex post CBA uses a 5.5% discount rate. Ex ante uses 5%

                    No assessment of the monetary impacts of externalities was made e.g. noise, CO2, Air Quality
                    impacts

 Review of ex       There was absence of evidence regarding how the accident benefits were derived and monetised
  ante CBA
                    The CBA was conducted on the assumption that revenues would contribute to the national treasury,
                    rather than the concessionaire that operates the scheme. No detailed risk assessment was
                    undertaken as part of the ex-ante appraisal
37                                                                                                      Frontier Economics
 Wider impacts and use of CBA in decision making
●    Wider impacts as a direct result of the scheme are difficult to
     determine in quantitative terms
●    Removal of traffic from bypassed settlements supports better
     urban spatial planning (car parking; pedestrianisation; access to
     cultural opportunities; provision of holiday accommodation –est.
     2000 new homes) and growth of the tourist industry in particular.
●    Facilitate drainage works to address historical flooding
     problems;
●    Anecdotal evidence of improved air and noise conditions;
●    Enhanced access to ferry port in Agios Konstantinos (shipping
     route to Skiathos);
●    Creation of better conditions for local economic growth with
     faster and more reliable links to Athens, Thessalloniki and
     countries north of Greece; and
●    Landscape impacts have been mitigated through construction of
     tunnel sections


                  Only one option considered and therefore CBA played no role in option choice. CBA good tool
                  for scoping out impacts prior to scheme construction
 Lessons
                  CBA doesn‟t necessarily fully capture measurable impacts on regional development which
 on use of
                  may take time to materialise
   CBA
                  EU Guidance on CBA regarded as useful tool for standardising CBA across the community

38                                                                                                Frontier Economics
 Projects
     ● LAV Madrid – Barcelona – French border (Spain)

     ● A2 Motorway (Poland)

     ● Algarve Railway (Portugal)

     ● A23 Motorway (Spain)

     ● Agiou Konstantinou Bypass (Greece)

     ● M1 Northern Motorway (Ireland)

     ● Thriassio – Kiato Railway (Greece)

     ● IX B Corridor (Lithuania)

     ● Bratislava Rača – Trnava Railway (Slovakia)

     ● M0 Budapest Ring Road (Hungary)


39                                                      Frontier Economics
 Project description
     ● Construction of approximately
       16.5 km of motorway
       between Dublin Airport and                                                         Balbriggan Bypass
       Balbriggan Bypass
     ● Total cost: €232m
     ● Two subsections:
       □   Dublin Airport to Lissenhall                                                    Lissenhall Interchange

           (€163m)
       □   Lissenhall to Balbriggan
                                                                                        Airport Interchange
           (€69m)
     ● Total Cohesion Fund                                                     Dublin

       contribution was:                                                      Source: Openstreetmap.org

       □   €152m
       □   65% total costs, 88%           ● Dual two-lane motorway – substitute for a single
           eligible costs                   carriageway road (the N1), subject to varying speed
                                            limits and route quality




40                                                                                                    Frontier Economics
 Results of ex ante and ex post CBA

                                              NPV
                                                                  Economic IRR          Benefit / Cost ratio
                                         (€ million, 2002)

                   Low case                  3,805                      53                      17.2
     Ex post
                  High case                  3,905                      53                      17.6
     Ex ante                                  534                       16                      5.5

 Ex ante CBA was objective and consistent with standards of the day (1995). Used a „link based‟ only
 model.

                                                 Current traffic volumes are between 177% and 218% of
                                                 those forecast for 2020. Traffic growth was significantly
                         Traffic flows
                                                 underestimated due to higher than expected economic and
Key sources of                                   population growth between 2003 and 2007.
  discrepancy
between ex ante       Investment costs           Outturn costs were 58% higher than anticipated in 1995.
  and ex post
 assessments
                                                 Journey time modelling, maintenance costs, accident
                            Other
                                                 predictions, valuation parameters and discount rate


41                                                                                                Frontier Economics
 Wider impacts and use of CBA in decision making

                       Difficult to establish causal link between the project and wider impacts:
                       - Project is small (16km) with respect to overall investment in Ireland‟s transport
                         network
     Wider impacts     - Occurred at a time of rapid economic and population growth in Ireland


                       Linked to expansion of Dublin Airport and growth in Swords (population increased
                       by 6,500 up 25%)


                       In Ireland CBA forms an integral part of:
                       - Public sector expenditure assessment
                       - Transport appraisal

      Use of CBA in    With respect to transport :
     decision-making
                       - Value for money indicators are part of the case made for transport budget to the
                         DoF
                       - CBA forms part of route selection, preliminary design and project close out;
                       - CBA elements form part of a Multi-Criteria Assessment




42                                                                                                  Frontier Economics
 Projects
     ● LAV Madrid – Barcelona – French border (Spain)

     ● A2 Motorway (Poland)

     ● Algarve Railway (Portugal)

     ● A23 Motorway (Spain)

     ● Agiou Konstantinou Bypass (Greece)

     ● M1 Northern Motorway (Ireland)

     ● Thriassio – Kiato Railway (Greece)

     ● IX B Corridor (Lithuania)

     ● Bratislava Rača – Trnava Railway (Slovakia)

     ● M0 Budapest Ring Road (Hungary)


43                                                      Frontier Economics
 Project description
     ● Construction of a new grade
       separated double track
       standard gauge railway line
       between Thriasio and Kiato.
       Replaces an outdated single
       track metric line
     ● In total the line included four
       applications for cohesion
       funding
     ● Total cost: €508.0m Total
       Cohesion Fund contribution:
       €238.4m (47% of total spend)

     OBJECTIVES
     ● Reduce rail journey times
     ● Increase revenues and decrease operating costs
     ● Improve safety
     ● Improve connectivity to the wider rail network
     ● Promote mode shift from highway to rail          Source: Openstreetmap.org


44                                                                 Frontier Economics
 Results of ex ante and ex post CBA
                                              NPV
                                                                  Economic IRR          Benefit / Cost ratio
                                        (€ million, 2000)

                    Low case                   32                     6.05%                     1.10
      Ex post
                    High case                 258                     9.30%                     1.79
      Ex ante                                 396                      7.3%                     1.50
 Two cases (Low / High) considered in ex post CBA, based on different assumptions regarding rail
 demand originating from beyond Kiato

     Key sources    Scope of the      Ex ante CBA considers the planned future extent of the line to Patra in
           of       assessment        the West, rather than the current extent of the line to Kiato
     discrepancy
                      Value of        Ex post CBA uses updated values for parameters such as value-of-
      between ex
                     parameters       time, value of externalities, accident costs and operating costs
      ante and ex
         post        Additional       Ex post CBA considers the safety benefits of removing level crossings
     assessments      impacts         from the line, this was not considered in the ex ante CBA

                    Assumptions that future year operating costs would be comparable to costs per passenger
                    km on existing standard gauge railways in Greece are dependant on comparable utilisation
     Review of ex
                    The CBA does not apply the rule of half to new rail passengers diverted from the highway
      ante CBA
                    Formal risk assessments were not undertaken although the results of various sensitivity test
                    were presented

45                                                                                                 Frontier Economics
 Wider impacts and use of CBA in decision making
                                                                                      Old Metric Line (passing loop)
 ●     The scheme has only been open in its entirty for just over three
       years, it may take many years for significant social and
       environmental impacts to materialise
 ●     Although new out of town station locations have received some
       negative feedback they offer potential for new development sites
       and are included in a number of local expansion plans
 ●     Removal of trains from built up areas has offered local congestion
       benefits and associated benefits in terms of noise, air quality and
       congestion caused by disruption at level crossings                               New Standard Gauge Line

 ●     The line has improved gateway access; the line accesses Piraeus
       directly where ferries depart to Greek islands, and via interchange
       at Piraeus to Athens International Airport.
 ●     The existing line will contribute to further wider economic benefits if
       the line is extended to Patra port, as planned, providing a rail link to
       EU markets



                   CBA had played no role in the choice of the route alignment as there was little potential for an
                   alternative route.
     Lessons
     on use of     Stakeholders recognised CBA as being a necessary procedure to gain funding and a useful
       CBA         tool for prioritising options where alternatives can be tested

                   The OSE Group reorganisation plan for 2010 includes the objective to manage the real
                   objectives of investments both in terms of feasibility and in terms of economic profitability
46                                                                                                          Frontier Economics
 Projects
     ● LAV Madrid – Barcelona – French border (Spain)

     ● A2 Motorway (Poland)

     ● Algarve Railway (Portugal)

     ● A23 Motorway (Spain)

     ● Agiou Konstantinou Bypass (Greece)

     ● M1 Northern Motorway (Ireland)

     ● Thriassio – Kiato Railway (Greece)

     ● IX B Corridor (Lithuania)

     ● Bratislava Rača – Trnava Railway (Slovakia)

     ● M0 Budapest Ring Road (Hungary)


47                                                      Frontier Economics
 Project description
 ● Modernisation of one of the two main
   motorway routes in Lithuania.
 ● The project was subdivided in four
   subprojects:
     □   2000/LT/16/PT/001: widening and
         strengthening of 32.7 km and the
         strengthening of 135 km of motorway
     □   2002/LT/16/PT/007: widening and
         strengthening of 30.9 km and the
         strengthening of 70.9 km of motorway
     □   2004/LT/16/CPT/003:widening and
         strengthening of 37.8 km and the
         strengthening of 20.1 km of motorway     ● Modernisation of one of the two main
                                                    motorway routes in Lithuania. This is part
     □   2004/LT/16/CPT/008:construction of the
                                                    of the IX B transport corridor, 315km of
         Vilnius bypass, a new road 3.2 km long
                                                    motorway linking the port city of Kleipeda
 ● The total aggregate cost €154m. Total            with the capital city of Vilnius, via Kaunas.
   amount eligible: €148,8m. Total ISPA /           The route then links Lithuania with other
   Cohesion Fund contribution was €121,9m           destinations in Eastern Europe.
   (82% of the eligible costs)                    ● The project also involved the construction
                                                    of the Vilnius Southern bypass


48                                                                                   Frontier Economics
 Results of ex ante and ex post CBA
     Upgrading of the IX B Corridor   NPV (€ million, 2009)         Economic IRR          Benefit / Cost ratio
                      Low case                 200.3                      55%                      3.3
      Ex post
                      High case                212.2                      56%                      3.4
      Ex ante                                  83.2                       21%                      2.5

        Vilnius Southern bypass       NPV (€ million, 2009)         Economic IRR          Benefit / Cost ratio
      Ex post                                  142.1                     29.1%                     n/a
      Ex ante                                  111.9                     22.8%                     4.5

Two cases (High / Low) considered in ex post CBA based on traffic growth rate from 2010 onwards. High
Case applies growth rates that the LRA assumed in the ex ante CBA. Low Case assumes no traffic growth


Ex ante CBA was carried out separately for the upgrading of the motorway and for the Vilnius bypass




 Key sources of             Upgrading of the          Higher NPV in the ex post CBA driven by higher – than -
   discrepancy               IX B Corridor            forecast VOC.
 between ex ante
   and ex post
                            Vilnius Southern          Higher NPV in the ex post CBA driven by higher – than -
  assessments
                                 bypass               expected traffic volumes


49                                                                                                  Frontier Economics
 Wider impacts and use of CBA in decision making

                               Traffic flows had grown fasted than assumed in the ex ante analysis

                               Expansion of the Kleipeda Free Economic Zone and the set up of the
                  Socio        Kaunas Free Economic Zone.
                economic
                 impact        3 public logistic centres were set up alongside the route of the IX corridor
       Wider
     economic
      impact                   Empty lots near the major cities have been developed and turned into
                               shopping centres as they became more accessible to the public.

                               Impact of the project on soil pollution, both during construction and
                Environment
                               operation, has not been significant,

                  Other
                               Vilnius Western bypass and a new outer bypass are being developed
                 projects


                        In 1994, the Lithuania Road Administrator (LRA) developed its own CBA guidance
                        manual. In Lithuania, however, ex ante CBA is not used to choose between
   CBA in the           alternative projects competing for limited funding.
 decision making
     process            LRA uses ex ante CBA as a way to identify the project specifications (such as the
                        design of a junction) and technologies (such as the asphalt type) that would yield
                        the best value for money

50                                                                                                 Frontier Economics
 Projects
     ● LAV Madrid – Barcelona – French border (Spain)

     ● A2 Motorway (Poland)

     ● Algarve Railway (Portugal)

     ● A23 Motorway (Spain)

     ● Agiou Konstantinou Bypass (Greece)

     ● M1 Northern Motorway (Ireland)

     ● Thriassio – Kiato Railway (Greece)

     ● IX B Corridor (Lithuania)

     ● Bratislava Rača – Trnava Railway (Slovakia)

     ● M0 Budapest Ring Road (Hungary)


51                                                      Frontier Economics
 Project description
 ● Modernisation and upgrade of
   37 km track between
   Bratislava Rača and Cίfer,
   supporting line speeds of up to
   160km/hr. Station upgrades to
   all stations between Rača and
   Trnava.
 ● Total cost: €213m
 ● Two subsections:
     □   Rača to Šenkvice track (€46m)
     □   Šenkvice to Cífer track and
         Rača to Trnava stations
         (€167m)
                                                                                Source: Openstreetmap.org
 ● Total Cohesion Fund
   contribution was €127m (75%           ● TEN-T Corridor Va track upgraded to support line speed
   of Rača-Šenkvice and 50% of             between Rača and Cίfer up to 160km/hr , with station
                                           improvements at all stations shown
   Šenkvice-Cίfer eligible costs)
                                         ● Later applications for funding submitted to improve
 ● Remaining costs paid for by             sections northbound of Trnava (under implementation)
   the state budget                        to complete upgrade from Bratislava – Ţilina – Košice

52                                                                                          Frontier Economics
 Results of ex ante and ex post CBA
                                               NPV                  Economic IRR           Benefit / Cost ratio
                                      (€ million, 2008 ex post,   (discount rate = 5.5%    (discount rate = 5.5%
                                            2001 ex ante)         ex post, 10% ex ante)    ex post, 10% ex ante)

                     Low case                   104                      9.7%                       2.1
      Ex post
                     High case                  216                     12.4%                       3.2
      Ex ante                                  -0.77                    9.93%                      0.99
 Two cases (Low / High) considered in ex post CBA, based on different assumptions of GDP growth and
 therefore Do Something demand – these are shown for the 20yr assessment (as per the ex ante)

     Key sources
                      Value of         Ex post CBA uses updated values for parameters such as value of time
           of        parameters        and accounts for inflation of these values over the evaluation period
     discrepancy
                      Additional       Ex post CBA considers externality benefits (noise, CO₂, air pollution) and
      between ex
                       impacts         foregone government revenues, not considered in the ex ante CBA
      ante and ex
         post
     assessments    Discount rate      Ex post CBA uses a 5.5% discount rate. Ex ante uses 10%


                    Assumption that all new users would transfer from highway – no allowance for induced travel

 Review of ex       Do Minimum assumes no growth of patronage on the line without the scheme, with Do
                    Something demand growing proportionally with GDP growth
  ante CBA
                    CBA documents not always clear on price base used, and rounding of small numbers in the
                    document means precision is lost
53                                                                                                  Frontier Economics
 Wider impacts and use of CBA in decision making
● Wider impacts as a direct result of the scheme                                                                 80.0

  are difficult to determine;




                                                                                                 % Modal Split
                                                                                                                 60.0

● Improvements upstream of the project cause                                                                     40.0
  delays and disruption to this section of track;
                                                                                                                 20.0
● Overall decline of rail patronage across national
                                                                                                                  0.0
  ŢSR network, with increasing car ownership;                                                                           2000 2001 2002 2003 2004 2005 2006 2007 2008
                                                                                                                               Trains     Buses      Cars
                                 18%
 % rate of employment increase




                                 16%
                                                                                                 ● Beneficial for linking people to jobs in
                                 14%
                                 12%                                                               Bratislava and Trnava (where a number of
                                 10%                                                               global firms are present);
            from 2000




                                  8%
                                  6%                                                             ● Draws tourists from Bratislava out to rural
                                  4%                                                               provinces (Carpathian Mountains); and
                                  2%
                                  0%                                                             ● Following completion of upstream projects,
                                       2000   2001   2002    2003   2004    2005   2006   2007     improved links between the business cities of
                                                            Employment
                                                                                                   Bratislava, Ţilina and Košice will enhance
                                                                                                   national development and trade links.
                                 Slovak Republic     Region of Bratislava     Region of Trnava


                                              Only one option considered (upgrade) therefore CBA played no role in option choice
         Lessons
                                              Ex ante CBA seen as a thorough assessment process which is taken very seriously by the Slovak
         on use of                            authorities – demonstrated by the level of detail in the application
           CBA
                                              Use of CBA in Slovakia is improving, particularly with the development of local CBA guidelines

54                                                                                                                                                      Frontier Economics
 Projects
     ● LAV Madrid – Barcelona – French border (Spain)

     ● A2 Motorway (Poland)

     ● Algarve Railway (Portugal)

     ● A23 Motorway (Spain)

     ● Agiou Konstantinou Bypass (Greece)

     ● M1 Northern Motorway (Ireland)

     ● Thriassio – Kiato Railway (Greece)

     ● IX B Corridor (Lithuania)

     ● Bratislava Rača – Trnava Railway (Slovakia)

     ● M0 Budapest Ring Road (Hungary)


55                                                      Frontier Economics
 Project description
     ● Construction of approximately
       39 km of motorway around                                                  M0 Eastern Sector
                                                                                 Lots 2, 3 and 4)
       Budapest
                                                                                 M31 not constructed
     ● Total estimated cost: €371m                                               in 2008

     ● Two subsections:
       □   M0 Eastern Sector
       □   M31 Gödöllö Connection
     ● Total Cohesion Fund
       contribution is:
       □   €285m
       □   85% eligible costs          2008 truck flows in Hungary            Source: http://www.kti.hu




                                       ● New dual two-lane motorway – part of new orbital
                                         route around Budapest




56                                                                                        Frontier Economics
 Results of ex ante and ex post CBA
                                           NPV
                                                               Economic IRR          Benefit / Cost ratio
                                      (€ million, 2002)

                 Central case             1,522                    25.8%                      6.8
     Ex post     Zero growth
                                           317                      13.6                      2.2
                  post 2010
     Ex ante     Central case             1,178                     16.1                      3.2

 Ex ante CBA was systematic, objective and consistent with standards of the day (2004). Traffic
 modelling did not include induced traffic.

                                              Traffic growth in general from 2003 to 2010 has been lower
                                              (24%) than was anticipated (approx 50%). This is due to
                         Traffic flows        lower economic growth. Traffic flows on southern sections of
                                              M0 project are higher than expected due to absence of
Key sources of
                                              competing infrastructure
  discrepancy
between ex ante
  and ex post         Investment costs        Outturn costs are 25% lower than anticipated.
 assessments

                                              Growth over time in valuation parameters, discount rate,
                        Other sources
                                              opening year


57                                                                                              Frontier Economics
 Wider impacts and use of CBA in decision making


                       Difficult to establish causal link between the project and wider impacts:
                       - Project is „youthful‟.
                       - Definition of the counterfactual (economic recession and other transport projects)
     Wider impacts
                       -- Local (to M0) visual, air and noise pollution issues
                       -- Improved accessibility between outer suburbs in north and east Budapest
                       -- Some new retail parks and logistic centres adjacent to M0.


                       CBA is an integral part of the decision-making process:
                       -- Route selection; alignment selection; prioritisation

      Use of CBA in    There exists a tension between CBA and environmental assessment:
     decision-making
                       - Environment permit needed for construction;
                       - Environment authorities look to minimise impact on environment. Reportedly they
                         pay little heed to CBA;
                       - There is a need to better integrate the environment and the CBA.




58                                                                                                 Frontier Economics
     Frontier Economics Limited in Europe is a member of the Frontier Economics network, which consists of separate companies
     based in Europe (Brussels, Cologne, London and Madrid) and Australia (Melbourne & Sydney). The companies are
     independently owned, and legal commitments entered into by any one company do not impose any obligations on other
     companies in the network. All views expressed in this document are the views of Frontier Economics Limited.


59                                                                                                                              Frontier Economics
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60                                                        Frontier Economics

				
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