Basic Overview of Economic Evaluation

Question 1

Why do we undertake Economic Appraisals of Transport Infrastructure

Answer 1

1) Provide evidence that aids sound decision making towards making investment decisions
2) Provides a consistent framework
3) improves resource allocation by ensuring: strategic alignment, consistency in approach and value for money

Question 2

What is the 3 level appraisal process investment framework in NZ

Answer 2

Strategic merit test
Rapid Appraisal
Detailed Appraisal

Question 3

What is usually compared for typical business investment proposal viability

Answer 3

Estimated initial capital costs and subsequent operating costs vs Expected returns

1) if returns exceed outgoings, the proposal is usually justified.
2) alternatives ranked in order of ratio of returns to outgoings

Question 4

What is the significance of transport for NZers’

Answer 4

1) enable mobility and a range of activities
2) significantly contributes to NZs’ economic growth and productivity.
3) Transport enables accessibility to basic things such as education, health, social and family connectivity.

Question 5

What is the hierarchy of investment framework? (Hint: Ministry of transport->NZTA-> Regional Networks)

Answer 5

GPS on land transport>National Land Transport programme (NLTP)> Regional land transport plans (RLTP)

Question 6

What is the general purpose of investment framework

Answer 6

Provide the data, process governance and tools that enable decisions to be made.

Question 7

What are the factors used by the investment assessment framework (IAF) to asses how well activities meet GPS?

Answer 7

1) Strategic fit
2) Effectiveness
3) Benefit- cost appraisal

Question 8

Describe what the business case approach (BCA) is, the process in the BCA and the expected outcomes/benefits for using the BCA

Answer 8

1) BCA is a structured process for integrating best practice decision-making, programme management and investment assurance tools
2) Identify:core problem,identify consequence of not addressing and identifying benefits to be gained by investing in the solution
3) More efficient decision for funding from the NLTF,investments targeted to priorities,improved confidence of investment through efficient usage of resources, better value for money, achievement of desired outcomes

Question 9

Describe value of money by defining what it is, and the scope (how many years and what is being covered)

Answer 9

1) Value of money is linked backed to the 3 factors used by the IAF eg; right things to do (strategic fit), right way of implementing ( effectiveness), right time for the right price

Question 10

what is the largest cost for infrastructure and why?

Answer 10

maintenance cost due to long life cycles

Question 11

How are strategic fit, effectiveness and the benefit cost appraisal measured and what benchmarks must they meet for being considered?

Answer 11

Strategic fit and effectiveness = L, M,H
Benefit cost ;
None = BCR <1
1= Not enough information
2.9= L
3-4.9 = M
5+ = H

Projects must meet at least medium for fit and effectiveness for being considered a priority

Question 12

What is transport competing against for funds from the govt?

Answer 12

health, education and social services etc

Question 13

what is the GPS and its purpose

Answer 13

guideline which:
sets out Govt. priorities for expenditure to NLTF for 10 years
sets out how funding is allocated between activities

Question 14

what are the 4 strategic priorities that the government wants to achieve?

Answer 14

Safety
access
environment
Value for money

Question 15

What are some common themes for the GPS?

Answer 15

Mode neutral approach to transport
incorporating technology and innovation into design and delivery
integration of land use and transport planning and elievery

Question 16

what are the funds for each class of activity in the GPS/

Answer 16

public transport
walking and cycling improvements
local road improvement
 regional improvements
state highway improvements
road policing
promotion of road safety and demand management
investment management
state highway maintenance
local road maintenance
rapid transit 
transitional rail

Question 17

Describe safety in the GPS

Answer 17

1) reflects the ambition for freed death and serious injury
2) signals a greater focus on safety improvement on high risk state highways and local roads across the network
3) outlines a commitment to deliver a new road safety strategy
4) drives safety improvements for all road users