Macroeconomic aspects of the evaluation of transport projects in terms of user

This is an automatic translation of original Czech paper “Makroekonomické aspekty hodnocení dopravních projektů z hlediska uživatele”

Paper presented at the conference “Transport systems and user value” 22nd October 2009 to Jan Perner Transport Faculty, University of Pardubice and published in the conference proceedings.

Each transport project fulfills many goals that are motivated by goals higher authority. Nevertheless, all projects have in common is that, from a macroeconomic perspective require an investment financed from public budgets, on the other hand lead to increased benefits to their users and increase economic performance. Among these inputs and outputs, there is a simple and clearly quantifiable relationship, despite the authorities of transport projects must specifically with regard to these principles, decisions and evaluate individual projects. The paper aims to summarize the development process of economic and political decision-making in the transport sector, which has undergone in the last two decades, a significant change from the technical and cost optimization analysis to multi-criteria analysis take into account the “soft” data, and assess the adequacy of institutional structures defining the role of all stakeholders . In particular the analysis of the underlying risks of failure of the institutional system, which may lead to sub-optimal solution, bringing a macroeconomic perspective, the high fiscal costs and low increases performance and user relatively low increases utility.

Introduction
Deciding on transport policy strategy and specific transport projects conducted in certain institutional structure and is based on more or less standardized models. Own transport engineering modeling, however, is only one part of a complex process whose participants are primarily except for transport analysts authorities – in this sense it takes to become a central institution authorized by him, as well as self-governing regions (regions in the Czech Republic) and at the local level municipalities (in the Czech Republic particular statutory cities with mass transport and integration into regional integrated transport systems). The decision-making mechanism are also drawn users, as has been said above, directly or indirectly bear the costs of transport projects including external costs.

The problem, which deals with this text, the relationship of these entities within the economic and political decision making, particularly in the railway sector, taking into account the fiscal context. In the first part of the text first briefly summarize the genesis methods of transport policy, in the second part of a closer focus on the problems in the real decision-making process and in the third section we analyze the resulting macroeconomic, fiscal impacts and formulate a conclusion.

first The methodology of decision-making in transport policy
discussed problems (see eg Checkland 1999 Kane – The Master 2003 Timms 2008 Gwilliam 2008 ) is the lack of decision-making system in some countries that would be able to reflect the above indicated conflicting interests and reallocation aimed to direct the traffic most efficiently to achieve the objectives. This is particularly true of countries that have undergone economic reforms (such as the Czech Republic) or the countries in which ongoing reforms transport systems (like back in the Czech Republic). So the question is, what institutional environment and based on what methodology might face in the current conditions for optimum transport solution, ie. both with a minimum expenditure of scarce public resources to achieve maximum benefit transport users?

Overview of the failure of these models gives as Flyvbjerg ( 2006 , 1), which compared 210 transport infrastructure projects from 14 countries with a total value of 58 billion USD: The study shows that in terms of rail transport, was 90% of projects forecast traffic demand overestimated by 72% overestimation was higher than 60%. Of the many studies that the issue of decision-making paradigm criticized (see Talvitie 1976 Pas 1995 Wachs 1985 Khisty 1992 Goetz – Szylowicz 1997 Linstone 1984 and others, which mostly belong to current “new realism”) showed that it is necessary to approach to the analysis of transportation systems, and related economic and political decision-making change and set so as to be taken into account only hard (technical and economic) data and outputs rigid model, but that it also pursues an objective authority, evaluating alternative solutions and analyzed the cost impact of these complex solutions.

2 Current approaches to decision-making processes in rail transport
Regardless of the model, or technical apparatus, we in the field of railway transport detect certain stereotypes decision-making processes in the second half of the 20th century determined the development of this mode of transport. The thing is, based on what the basic principles of the contracting authority decided to invest in rail transport. (I) The first type, which can be characterized by the slogan “Invest when it is economically profitable”, corresponds to the structure of private vertically integrated railway companies and reflects the optimization behavior patterns of business entities whose primary objective and motive of action is to achieve economic gain. It is a typical decision-making principle for the North (and 90s and South) America. Analytical and decision-making principles based on the optimization of public interest, apply only marginally in urban areas and densely populated regions. The result of this model is a network of private railway companies competing effectively and providing freight transportation; outside these companies operate economically less successful, private or public carriers operating passenger services in the public interest.
(ii) The second type, expressible motto “invest, where technically feasible” is applied especially in continental Europe. Corresponds to the structure of the national state-owned railway company with a clear focus on the provision of transport services in the public interest. Underestimating the economic criteria led to inefficient operation, reducing the competitiveness of the railway sector and as churn – especially in freight transport. Soft budget constraints but at the same time allow the use of technologically demanding solutions, resulting in the development of high-speed passenger transport (inter alia, the construction of the Channel Tunnel under the English Channel) and at subsidized prices maintain a relatively constant demand for personal transportation.

3rd The macroeconomic context and the search for solutions
Strategy “content expert” is based on gathering information, analyzing and formulating recommendations or alternative solutions. The success of this solution depends on the fulfillment of the necessary conditions: (i) the contracting authority knows what information is needed, he knows where to get them and has adequate technology to acquire them; (ii) The contracting authority is able to transmit that information to the analyst in adequate structures to analyst could perform on the basis of the analysis, (iii) the contracting authority means the workflow analytics and results of the analysis and is able to make decisions based on them. Bottleneck of this procedure are high demands on the competence of the contracting authority: if it is not able to correctly formulate the task or even specify the objectives, the analyst can not handle a credible analysis and therefore the solution adopted is hardly optimal.
Strategy “doctor” is based on the authoritative analyst access, ie. problem defines itself analyst and based on an analysis proposes a solution to the contracting authority. Condition for the success of the solution is in addition to the soundness analyst primarily Authority’s ability to implement solutions without creating a permanent dependency on the analyst. Bottleneck of this solution is the requirement for sufficient information and impartiality of the analyst and the ability to authority unaffected by the analyst beyond the solution. As in the case of doctors, doctors-not-dependence of contracting for the good of the patients, but leads to the prejudice of chronic disease and needs constant care and treatment – with all the costs, which, as in the case of transport is not a contracting entity (patient) alone, but carries on entities outside the system (ie in the case of internal costs to taxpayers in case of external costs for a random set of subjects).
If you can not meet the conditions for the strategy of “content expert” or “doctor” can be utilized strategy “process consultant”. This strategy is based on close cooperation between the sponsor and the analyst, it is basically a drawing of authority in analytical processes and vice versa open admission influence the analyst to decision making. In the model “process consultant” can be very complex to analyze the problem and propose alternative solutions, including a comparison of costs. Success will require an institutional structure that such cooperation authority and allows the analyst. In any case, it may lead to optimal solutions and thus the optimal use of public resources just such an institutional structure that allows to apply any of these approaches – knowing the conditions from which the system operates and conscious objective possibilities of the system. Structure, where decisions are made at random, according to current requirements, can not formulate a long-term quality transport policy and procedural aspects of creating a non-transparent environment with the possibility of corruption and purpose of redistribution of resources and benefits between the different entities.
The decision to transport projects have a big impact on the size and distribution of the benefits of their users and also have a huge fiscal impact (see eg Tomes – Pospisil 2006 ). From a macroeconomic perspective, creating long-term obligations of the State (or public sector) and logically should calculate the return on invested resources in this way – either directly in the form of fiscal revenues through taxes and fees related to transport, or indirectly through the elimination or reduction of negative externalities. With this, however, several problems.
The Czech Republic is the problem of the investments made in infrastructure typically associated in particular with the decision at the state level, but in the context of regional and municipal transportation systems are in decision-making increasingly involved, regions and cities. These investments are based on ex ante to create a line of traffic-free paths, it would be clear how much capacity will be a long-term effective demand exist – effective in the sense that users will be able and willing to buy transport services, the return to the investor money spent, and yet it will achieve higher benefits and at the same time it will contribute to meeting the objectives of higher authority (eg the environment).

Long-term unsolved problem is the redistribution between different transport modes. State Fund for Transport Infrastructure essentially selects the source of road transport and places them in rail transport – but in what proportion? Is this an adequate ratio of the benefits to users? It is a reasonable objective pursued, such as the reduction of negative externalities? It is better to achieve the goal of increasing traffic safety measured by the number of injuries and fatalities increased investment in rail corridors, or it is better to build roundabouts at the crossroads? It is better to build a protected railway line of cross regional, or should modify dangerous to highway D1? Is greater environmental benefit construction of the railway corridor or parallel highway? Drag the corridor adequate traffic flow from a parallel road and will be so busy?

Conclusion

To assess the adequacy of macroeconomic reallocation of resources in the field of transport more questions than answers. The spoken questions is no simple answer, but it is clear that from the evaluation and decision-making on transport projects hinges on the efficiency of transport projects. The positive shift in the Scheme evaluation of transport projects should therefore consist in redefining relationships of stakeholders in setting transparent decision-making procedures in the exact setting goals transport solutions and the use of new models. It seems that the problem lies not only in transport planning methodology – the methodology is under development and reflects the objective needs of transport as a sector.

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