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01.01.2012

A cost performance analysis of transport infrastructure construction in Slovenia

verfasst von: Dejan Makovšek, Polona Tominc, Klavdij Logožar

Erschienen in: Transportation | Ausgabe 1/2012

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Abstract

Due to limited data availability only a few studies have been able to provide statistically significant evidence on cost overruns in transport infrastructure investments and their systematic nature, and fewer still for road infrastructure investments. The body of available evidence refers to the most economically developed countries, while very little evidence was found regarding other countries. In this article the authors focus on cost performance of road infrastructure constructed through the National Motorway Construction Programme in Slovenia. Methodologically the study departs from other studies in this field by building on detailed expenditure data and not aggregate reports from the relevant institution. This enabled the analysis of four individual project cost categories (construction cost, land acquisition damages and others) and comparably more accurate results. A representative sample of randomly selected completed projects in the period 1995–2007 revealed that the cost overruns (19%; SD = 46.10%) in the entire period studied do not appear to be higher than in other comparable studies. At the same time the study results showed that cost overruns were unstable, i.e. much higher for older projects.

Vorheriger Artikel Weekly activity-travel behaviour in rural Northern Ireland: differences by context and socio-demographic

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A comprehensive study of the World Bank (Guasch 2004) describes a situation with infrastructure concessions in Latin America in 1990s.

For example, the level of corruption as defined by Transparency International, EBRD's Transition Indicators methodology, EBRD Transition Indicators and others.

Flyvbjerg et al. (2002, 2003) discuss technical, psychological, and economic or political reasons. In their opinion the latter has the greatest explanatory power.

The cost estimate is just an estimate based on incomplete information on quantities and past unit cost information, but the bid price is the offer by contractors to actually build the project. The analysis in the paper pertains to decision to build, it is not a cost overrun from the bid price.

To be comparable with similar studies, it was necessary to exclude taxes, cost of financing, and sectoral price level fluctuations.

For example the sample from the Danish team was based on data from annual project accounts, questionnaires, interviews, and other studies as is evident from Flyvbjerg (2004). It has been argued (ibid.) that such data may provide a non-representative or conservative reflection of the actual cost overruns (i.e., well managed projects with respect to data availability may also be managed well in other respects; where managers made cost data available they may have chosen to give out data that presented their projects in as favourable a light as possible, etc.).

According to Flyvbjerg et al. (2004, p. 13) these are projects involving some kind of private participation, they are however, still owned by the relevant Ministry and appear in the public balance sheets.

The NPRA can, however, hire labour from the private sector.

1 USD = 6.33 NOK; 1995 prices.

Discussions with DARS started in April 2007. Cost estimates were sampled from individual project documents, while the actual cost data was received in December 2008.

The IP is a comprehensive document, which uses the findings of other partial studies to come to the final decision. A cost-benefit analysis is an integral part of the document. Cost estimates in the document are again based either on a preliminary engineering design study (draft project) or a more detailed engineering design for the construction permit acquisition (project for obtaining the construction permit).

VAT was accounted for on separate accounts, making it simple to exclude from the analysis. Sales tax deducted from the estimated and actual costs in the rate relevant to individual cost category.

E.g. m³ of specific types of concrete, tons of various types of steel, fuel etc.

A full description of the index and its methodology can be found in Pavšek and Košič (2006).

The available data only enabled the calculation of the DDC index for the period 1995–2007. Consequentially, the construction industry index was used for the years 1994 and 2008. This adjustment has no significant effect on the results, because the overwhelming majority of the cost data refer to the period, covered by the DDC index.

Rules on the methods of valuating financial obligations contractually agreed upon by public sector entities (Official Gazette of the RS, no. 01/2004).

E.g. expenditures of all phases of an individual project were sometimes booked to a single item. In this case several potential observations were reduced to one—estimates of individual phases had to be summed to be comparable to the actual cost. Additionaly, land acquisition and design cost, which are for the most part incurred before the start of construction, were sometimes accounted to the first phase of the project, causing excessive cost overrun in the first phase, and an underrun in the later phases. Construction cost, however, appeared to be booked accurately (proper start of expenditure activity and volume).

With small samples the results of independence testing with chi-square test are subject to an unacceptable level of risk for type II error (accepting a null-hypothesis when it should have been rejected).

In total 11 reasons were given for cost overruns and delays. The remaining five would fit into categories that were excluded due to the approach of our analysis (e.g. introduction of VAT).

The execution of the NPIA has a history of “shady” events, pertaining to tight connections between politics and the construction lobby and the proclaimed “national interest”.

Official Gazette of the RS, no. 24/1997.

The VIF value is well below 5. Values >5 are usually considered to be a sign of severe co-linearity.

Mail: Reply from the Slovene Ministry of Transport (09.03.2009).

Berechman, J., Wu, Q.: Cost Overruns Risk Analysis in Transportation Infrastructure Investments. UBC P3 Project. Working Paper 2006–05. Phelps Centre for the Study of Government and Business. University of British Columbia (2006)

Booz Allen Hamilton Inc.: Managing Capital Costs of Major Federally Funded Public Transportation Projects. Transportation Research Board of the National Academies: Transit Cooperative Research Program (2005)

DARS: Resolucija o nacionalnem programu izgradnje avtocest (ReNPIA) Official Gazette of the RoS, no. 50/2004 (2004)

DARS: Data from the official DARS homepage: http://www.dars.si/Dokumenti/O_avtocestah/Nacionalni_program_izgradnje_avtocest/Zgrajene_AC_in_HC_30.aspx (2009). (28th February 2009)

Flyvbjerg, B., COWI: Procedures for Dealing with Optimism Bias in Transport Planning: Guidance Document. The British Department for Transport. Dosegljivo na: www.dft.gov.uk (2004)

Flyvbjerg, B., Holm, M.S., Buhl, S.: Underestimating costs in public works projects Error or Lie? J. Am. Plann. Assoc. 68(3), 279–295 (2002)CrossRef

Flyvbjerg, B., Holm, M.S., Buhl, S.: How common and how large are cost overruns in transport infrastructure projects? Transp. Rev. 23(1), 71–88 (2003)CrossRef

Flyvbjerg, B., Holm, M.S., Buhl, S.: What causes cost overrun in transport infrastructure projects? Transp. Rev. 24(1), 3–18 (2004)CrossRef

Flyvbjerg, B., Holm, M.S., Buhl, S.L.: How (in)accurate are demand forecasts in public works projects? The case of transportation. J. Am. Plann. Assoc. 71(2), 131–146 (2005)

Guasch, L.J.: Granting and Renegotiating Infrastructure Concessions: Doing it Right. WBI Development Institute, World Bank, Washington D.C. (2004)CrossRef

Ministry of Transport: Mail: Reply from the Slovene Ministry of Transport (09.03.2009) (2009)

Odeck, J.: Cost overruns in road construction—what are the sizes and determinants? Transp. Policy 11, 43–53 (2004)CrossRef

Pavšek, A., Košič, T.: Socio-economic Justification of Motorway Construction in Slovenia, Movement of Prices and Comparison with Similar Projects Abroad. 8th Slovenian Road and Transportation Congress, Portorož. Available at: http://www.drc.si/Zaavtorje/Seznamreferatov/tabid/83/Default.aspx (2006)

Titel: A cost performance analysis of transport infrastructure construction in Slovenia
verfasst von: Dejan Makovšek
Polona Tominc
Klavdij Logožar
Publikationsdatum: 01.01.2012
Verlag: Springer US
Erschienen in: Transportation / Ausgabe 1/2012
Print ISSN: 0049-4488
Elektronische ISSN: 1572-9435
DOI: https://doi.org/10.1007/s11116-011-9319-z

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