A new report from the Bureau of Infrastructure, Transport and Regional Economics (BITRE) suggests there is 'much room for improvement' in the quality of Cost Benefit Analysis (CBA) on major road projects in Australia.

The conclusion is based on evaluations of 12 road projects conducted over two rounds - seven in 2005-2007 and another five in 2014-2016 - ranging in cost from $11 million to more than half a billion dollars.

Based on the case studies, BITRE found that:

  • the net present value (NPV) was over-estimated by significant margins in most of the selected case study projects;
  • over-estimation in NPV was largely caused by over-estimation of road user benefits, with errors in travel time cost saving estimates accounting for 60% of the total absolute variation between the NPV from the ex-ante CBA and that from the ex-post CBA;
  • inaccurate traffic forecasts and methodology errors were mostly responsible for the over-estimated road user benefits; and
  • there was no systematic evidence of cost overruns for the projects selected for ex-post review.  

Among the lessons BITRE has drawn from the study is the need for improvements in CBA documentation and review, traffic forecasts, and estimation of road user benefits and residual values.