Comparative case study on cost-benefit analysis for toll road projects

Project evaluation is a process to measure impacts and risks of a project as a public good. Cost-Benefit Analysis is a most commonly used project evaluation methodology for major road projects. Cost-Benefit Analysis conducted for Australian toll road projects have tended to mirror those for non-toll road projects, because they generally treat tolls as a financial transfer. However, a number of project impacts and risk characteristics are unique to toll road projects. It is therefore hypothesised that Cost-Benefit Analysis for toll road projects should treat tolls uniquely, on the basis that risk allocations and concession arrangements are different. This paper reviews Cost-Benefit Analysis methodologies used to evaluate major public road projects. Examining the treatment of project impacts and risks in practice, and the outcomes of the analyses revealed both the advantages and limitations of each extant Cost-Benefit Analysis methodology used in practice. Moreover, the suitability of different methodologies in terms of Cost-Benefit Analysis for toll roads was assessed by studying project characteristics and risk characteristics of each project. Identifying an appropriate treatment of tolls contributes to determining an appropriate Cost-Benefit Analysis methodology for toll road projects. The refined methodology would ensure that all relevant impacts and risks of the toll road project are addressed in decision-making. This will provide a basis for ensuring that the full and true impact to the community is properly assessed.