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Tydskrif vir Geesteswetenskappe

versão On-line ISSN 2224-7912
versão impressa ISSN 0041-4751


PIENAAR, W.J. (Wessel). Proposed methods to maximise the benefits of road projects. Tydskr. geesteswet. [online]. 2019, vol.59, n.1, pp.142-156. ISSN 2224-7912.

This article proposes methods that a transport authority can apply to maximise the benefits of road provision both when the rationing of funds leads to a curtailed and fixed budget limit, and, proactively, when a variable budget subject to a funding rule is available. With a fixed limit on public capital expenditure, public projects compete with one another for funding. When a number of mutually exclusive and independent projects are under consideration for selection and prioritisation and the decision maker has to maximise benefit subject to a fixed budget constraint, a method of project selection based on incremental benefit-cost ratio analysis is recommended. The proposed selection process in the case of a fixed budget limit is demonstrated by an example. The proposed procedure consists of the following five steps: 1) Identify all projects that may be considered for selection, having due regard to the budget limit, and eliminate all projects (a) of which the implementation cost exceeds this limit, and (b) that are not economically viable, technically feasible and environmentally acceptable. 2) Classify all mutually exclusive projects (i.e. alternative projects) that qualify for consideration into separate, independent groups, and arrange the alternatives in each group in order of increasing implementation cost. 3) Provisionally select in each group the project that has the highest benefit-cost (BC) ratio. 4) From these projects, select the one with the highest ratio and then note the remaining balance in the capital budget. The more expensive projects in the group from which the highest-ratio project was provisionally selected are then considered in terms of their incremental BC ratios. Put the alternative in this group with the highest viable incremental BC ratio, if there is such an alternative, on the list of the other projects still to be considered. In the remainder of the selection process (i.e. the subsequent iterative rounds) selecting the best project in each group follows a two-step process. Firstly, the project with the highest (viable) incremental BC ratio is identified and compared with the rest of the independent projects. Then projects are chosen consecutively in order of descending economic viability; they are identified by either the BC ratio of an independent project (in another group) or the incremental BC ratio of a mutually exclusive project (in the same group). Secondly, as each project is provisionally selected, the balance in the budget is adjusted to reflect the effect of the projects selected. All remaining projects of which the implementation cost exceeds this balance are excluded. This iterative process ends when the balance of the budget is (a) exhausted or insufficient to cover any other project's implementation cost, or (b) when no viable projects remain for consideration. 5) If a balance remains in the available budget, consider whether inclusion of any of the excluded projects or exclusion of any of the included projects would increase the aggregate net present value (NPV) of the final budget. If the budget has no fixed limit, the problem is one of weighing public against private uses of the resources. One now follows the rule that an indivisible public project (such as a road facility) is worth undertaking provided its benefits exceed its investment cost. The justification for the rule is that the cost of investing one rand in the public sector is the loss of one rand of benefits in the private sector - a loss which results from not investing n rand in the private sector. The article proposes and outlines a procedure to select road projects subject to a funding rule based on expenditure productivity. The rule may be that each unit of capital expenditure should yield at least a certain threshold amount more in benefits. All the alternative projects in each independent group that comply with the funding criterion of minimum productivity are considered for possible selection. When using a funding rule, therefore, projects are selected from the alternatives in each independent group. With a funding rule based on a productivity criterion, a project cannot be eliminated from the selection process on account of its implementation expenditure exceeding a certain budget limit. The procedure for project selection is simpler than with a given budget constraint. Different independent groups are no longer in competition - the most productive alternative project in each group can be selected on condition that it meets the funding rule. The proposed selection method according to a funding rule consists of the following three steps: 1) Consider only those alternative projects in each group of mutually exclusive projects that are economically viable, technically feasible and environmentally acceptable, and arrange them per group in order of increasing implementation cost. 2) Identify in each group the project that has the highest BC ratio. If the ratio of this project exceeds the prescribed threshold ratio value, funding of the project is acceptable, and if not, no project is chosen from the group. 3) Choose from the more expensive projects in each group the one with the highest incremental BC ratio, provided this ratio exceeds the prescribed threshold value. If there are no costlier projects with an incremental BC ratio that exceeds the threshold ratio value, the project identified in Step 2 is the selected project. If there are costlier projects with an incremental BC ratio that exceeds the funding rule threshold value, the one with the highest ratio is chosen. The process should be repeated until there are no costlier alternatives left with incremental BC ratios that satisfy the funding rule than the last one considered most justified. The proposed method to select projects subject to a funding rule is demonstrated by an example in the article.

Palavras-chave : cost-benefit analysis; incremental benefit-cost ratio; mobility; independent projects; mutually exclusive projects; accessibility; fixed budget; variable budget; traffic components.

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