Measuring impacts and risks to the public of a privately operated toll road project by considering perspectives in cost-benefit analysis

Abstract

Decision making about transport infrastructure investment is based on the net impacts and risks to the community. The private sector is often involved in toll road projects, including various schemes to design, build, operate and/or finance the project either in a partnership with a host government, independently, or in some combination. Cost-Benefit Analysis of a privately operated toll road require careful allocations of project impacts, in order to properly reflect the net impacts and risks to the community from the host government’s perspective. This study investigates whether alternative assumptions are valid from differing perspectives, when toll roads are delivered and operated privately rather than by a host government. Treatments of tolls and other toll road project related payments are considered from different perspectives. Cost-Benefit Analysis is conducted for a synthesised toll tunnel project case by considering alternating treatments of some impacts. This leads to the exploration of analyses outcomes when the treatment of tolls differ when two perspectives of “toll as a transfer payment” and “toll as an end user cost” are considered. Various scenarios are explored including public versus private operations. The Monte Carlo simulation approach is used to account the risks of variables in the analysis. The synthesised case study revealed that, for privately operated toll roads, treating toll charges as a transfer payment, and alternatively as an end user cost, can both be valid approaches but from two perspectives. Moreover, the analysis outcomes under different perspectives are particularly helpful to make decisions on the basis of the impacts and risks solely from the perspective of the host government. The proposed methodology can examine various scenarios other than the ones examined in this study and is extremely useful in the project evaluation of privately operated toll road projects.