Generally, Benefit-Cost Ratio is used as an effective tool to measure benefits and costs of a road project in determining its economic feasibility as part of the project valuation (Næss, 2006). Benefit-Cost Ratio is an indicator, used in Cost-Benefit Analysis, which summarises the net value for money of a project. It is an analytical technique to justify roads investment (Langmyhr, 2000). Prest and Turvey (1965) argue that BCR is a practical way of assessing a project’s desirability because it involves an evaluation and enumeration of all relevant benefits and costs. According to Næss (2006) and Lohmann (1997), Benefit-Cost Ratio determines the benefits and costs of projects to the community with a view to deciding whether such projects are worthwhile.
With the increase in the influence of neoclassical economics in policy decision- making, a number of countries are employing BCR as a tool when decided whether to or not to implement a particular policy initiative (Heinzerling & Ackerman, 2004). However, it was noted that the tool of BCR has the tendency to ignore many important socio-economic factors such as societal values, continuous changes in the population density and associated externalities (Preston & Holvad, 2005; Root, 2003). Therefore, many developed countries, such as the United Kingdom, are more concerned about the environmental and social benefits of road projects (ibid). These countries are re-evaluating the BCR methods with a greater focus on externalities, acknowledging that these traditional road assessment methods have
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weaknesses in calculating the benefits (Hanley & Spash, 1993, p. 7; Vickerman, 2000).
SACTRA (1992), for example, presents a 28 step process on the needs to build a road in which the formal evaluation methods (such as BCR) constitute only a small part. This process recommends several ways to address the contextual challenges such as ‘making due allowance for the roads environmental effects’ and ‘keeping a balance between CBA and appraisal based on judgement’ (ibid). Omega (2011), based on thirty case studies from around the world, concluded that mega transport projects indeed become ‘agents of change’ because of contextual challenges in terms of spatial, economic, environmental and other externalities. These contextual challenges are highly under-appreciated by the decision-makers (ibid).
As the credibility of traditional measurability tools is in question (Hanley & Spash, 1993, p. 7; Vickerman, 2000), the methodological assumptions linking roads investment with economic growth become dubious. Such assumptions may, therefore, give rise to uncertainty and risk in advancing massive roads infrastructure on the basis of the economic growth argument. However, there is generally a practice that transport planners heavily emphasise modelling forecasting expertise to justify road investments (Langmyhr, 2000; Wachs, 1982). This makes the determinism of BCR less effective in giving monetary values to road benefits, such as travel time saving and environmental impacts. Suppose, for example, a newly built highway has reduced the accident rate and enhanced the value of adjacent properties. In such a case, giving a monetary value to the rise in properties is an obvious benefit. However, giving travel time saving and safety another monetary value is multiple counting of benefits because property value has risen because of the benefits of travel time saving and safety. Because of the double counting of benefits, BCR has a tendency to systematically downplay the environmental and social concerns of road projects (Heinzerling & Ackerman, 2004; Næss, 2006).
Some countries use rules and regulations to strengthen their top-down approach in dealing with the BCR criterion by keeping strategic power with them. For example,
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in New Zealand, the criteria of ‘strategic fit’ and ‘effectiveness’ were introduced in addition to the BCR criterion in advancing Roads of National Significance (Pickford, 2013). ‘The top-down perspective refers to the hierarchical implementation of policies at different levels and across different sectors, whereas the bottom-up perspective considers grassroots initiatives from individuals and communities’ (Mehmood & Franklin, 2013). The passage of the Local Government Act 2002 was earlier perceived as ‘a quantum leap forward in community-led strategic planning in New Zealand’ (Brosnan & Cheyne, 2010, p. 38). However, it actually did not happen because many roads with lesser BCR were advanced (BECA, 2011) mainly on the basis of strategic fit and effectiveness criteria (Pickford, 2013) suggesting an absence of community-led strategic decision-making. Such rules, regulations and practices in planning have weakened the argument of achieving economic efficiency (Pickford, 2014). It is possibly because planners keep changing these practices as per their legal and administrative requirements. For example, in periods of stable economic growth, planners usually rely on predictions by trend extrapolation (Langmyhr, 2000). However, trends are difficult to predict with certainty due to digital connectivity (Lyons, 2014). This suggests that future trends of transport are likely to face more complex challenges (Ministry of Transport, 2014a). These include, but are not limited to, higher use of the internet and less physical travel (ibid). In view of ever changing nature of externalities, therefore, the tools to measure economic growth need to incorporate such changes by engaging with people affected by the advancement of roading infrastructure.
As BCR attempts to yield the value for money of a project, its predictions are usually problematic because they are evaluated from the philosophy of science perspective in terms of numbers (Næss, 2006). Langmyhr (2000) believes that BCR may reduce uncertainty and risk if its assumptions and results earn credibility among the decision-makers. One way to get legitimacy is to debate BCR results in public forums and stakeholder meetings (Forester, 1989) because planning problems associated with transport are increasingly becoming ‘wicked’ (Langmyhr, 2000, p. 679). Cheyne (2015, p. 428) argues that communities have the ability to respond to
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complex challenges and ‘wicked’ problems, such as urban growth and decline, requiring participatory planning and urban governance at the local levels. Here ‘wicked problem’ refers to a complex problem that can be a symptom of another problem (Langmyhr, 2000, p. 679). This dimension sets the stage for formal inquiry into the roles of discussions, better communication, and critical pragmatism in linking roads investments with economic growth. Therefore, the establishment of real links between roads investments and economic growth needs attention from several angles such as the real utility of BCR, the role of stakeholders and an understanding of the complexities involved in advancing transport and policy agendas.