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| Action for Public Transport (N.S.W.) Inc. |
| ATAP Steering Committee | P O Box K606 |
| Department of Infrastructure and Regional Development | Haymarket NSW 1240 |
| GPO Box 594 | 13 November 2017 |
| Canberra ACT 2601 | |
| email: ATAP@infrastructure.gov.au |
Action for Public Transport (NSW) is a transport advocacy group, which has been active in Sydney since 1974. We promote the interests of beneficiaries of public transport; both passengers, and the wider community. We make the following submission on the document M1 – public transport, released for public consultation in October 2017.
The tenor of this document is worrying It uses selective quoting from academic sources to draw unjustified conclusions. It drips with disdain for rail project proposals. It proposes the loading up of the costs of public transport projects to such an extent that it would seriously skew assessments against public transport (especially rail) and in favour of road proposals.
The document claims in four places (p.6, p.22, p.25 and p.79) that public transport projects are more prone to optimism bias than road projects, affecting demand and cost forecasts.
This is based on a selective reading of research by Bent Flyvjberg, which deals with the general class of “major projects”. Toll roads also feature in his examples of failure to accurately estimate costs and usage. Indeed, in a paper published online in 20121, Flyvjberg refers to the class action against the traffic and revenue forecaster for the Clem Jones toll road in Brisbane for producing “woefully inaccurate forecasts”.
Any infrastructure project that involves disturbance to underground services or tunneling (especially under water) is inherently complex and difficult to cost accurately before it begins. It is not a risk particular to rail, and M1 is wrong to suggest otherwise2.
Repeated warnings about the supposed perils of public transport projects are guaranteed to create a “framing effect”, biasing assessors against public transport initiatives in general, and rail in particular.
We noted in our submission on the ATAP document “Optimism Bias” http://aptnsw.org.au/documents/ATAP_optimism_bias_submission.html that current CBA assessments of road proposals rest on an uncritical acceptance of benefits stated by project proponents, notably improved travel speeds ( a proxy for reduced traffic congestion). There is a disconnect between F7 Review and post completion evaluation, T2 Cost benefit analysis, and this document M1 Public Transport.
The Westconnex New M5 Project Overview notes (p.9) that the "old" M5 East was congested within just six months of its opening in 2001, and now experiences the slowest typical travel speeds of any of Sydney's main motorways (Westconnex: New M5 Project Overview, p.9). And yet, the claim that expanding road space in highly developed urban areas will improve travel speeds continues to be built in to the assessment of projects like Westconnex as a benefit of the project.
As we have said before, something very peculiar is going on here. Whether it is “optimism bias” or “strategic misrepresentation”, or some other phenomenon, it is a source of seriously bad decision making. And yet nowhere in the ATAP guidelines are there dire warnings about the unreliability of forecasts of the benefits associated with road projects.
We noted in our submission on the ATAP guideline “Optimism Bias” http://aptnsw.org.au/documents/ATAP_optimism_bias_submission.html that removal of the $2.60 "station access fee" for passengers using Mascot and Green Square stations was expected (using conventional analyses) to increase patronage by around 15-17%. Instead, patronage jumped 70% in a year ("Ticket sales rocket on airport line as prices plunge" SMH June 9, 2011).
Even allowing for an underlying rise in patronage (around 20% in the estimation of the Airport Link company) this is stunning evidence that high fares (due to station access fees) sabotaged patronage on the T2 Airport/Macarthur line.
What is seen as “optimism bias” could in some cases be a genuine failure to understand price sensitivity (or a bit of both).
The methodology set out in Guideline M1 (at p.75) involves including in cost benefit analyses of public transport proposals the following operating costs:
The inclusion of these costs (as shown in table 32) would make it difficult if not impossible for public transport projects (especially rail projects) to survive conventional CBA. They introduce an unjustified source of inbuilt bias to the assessment process.
We note for example from p.81 that the construction cost of a single parking space is $15,000-$25,000 (at grade) or $30,000 -$40,000 (in a multi-deck car-park). Both bus lanes and carparks at stations are primarily demand management methods, aimed at relieving road congestion by encouraging transfers to public transport. It is unreasonable to add the costs of these measures to the cost of public transport projects.
Car owners and drivers are of course responsible for the direct operating costs of their own vehicles. We note that there is an indication that private vehicle operating costs might be acknowledged in future, on the basis that they are not perceived accurately by those who incur them (p.39, p.40). There is however no imposition of a profit margin for a hypothetical private operator. Nor are the “overhead” costs of keeping traffic moving safely included; traffic management, network control centres, police time, the cost of changing directional flow (crews and vehicles), RBT program, and court costs.
The M2 guidelines note that wider economic benefits are dealt with in the T2 guidelines and warn at p.48 that assessors need to be careful not to “double count” benefits covered under that heading. APT(NSW) is pleased to see attention being given to wider economic benefits, but we note that these benefits are conceived of in terms of increased tax receipts flowing from agglomeration benefits and employment benefits. There is no cause to suggest that they significantly overlap the field of alleviating “transport disadvantage and equity”.
A snapshot of the socially catastrophic outcomes of more than 50 years of underinvestment in public transport can be seen in the “effective job density” diagrams contained in the T2 guidelines.
Although the diagrams do not show it, lack of access to jobs is directly correlated with higher welfare reliance and poorer health outcomes. Access to educational opportunity is similarly uneven, and lower rates of educational attainment are a significant cause of unemployment.
In our view, the guidelines remain far too sanguine about these issues. M1 states that there has been “little analysis” of the subject (which may be true of a particular class of economic literature but not necessarily true of other research fields). Cost benefit analysis suggests that a "rapid appraisal" can ignore anything that is "hard to measure" (CBA p.7). M1 is content to suggest (at p.48) that such issues can be included in a “sensitivity analysis” and in an Appraisal Summary Table.
In practice, this consigns transport disadvantage and equity considerations to irrelevance. It is very evident that in practice the cost benefit ratio is given primacy, notwithstanding its lack of attention to such issues. A project with a BCA of less than 1 is routinely described as “uneconomic” or as one that “doesn't stack up”. Raw BCAs are used as evidence that one project is “lower priority” than another.
The “City Deals” entered into in the UK contain an idea worth considering3. They have a “lead objective” of maximising local jobs and productivity, underpinned by “programme minima” which projects must meet. In Manchester, the programme minima are:
This assessment approach treats critical environmental and social equity outcomes as “non- negotiables”. It does not attempt to price everything that counts, but nor does it consign anything that cannot be readily assigned a monetary value to practical irrelevance.
The observed reduction in the “did not travel” category in 2.2.4 p.14 (dealing with diversion rates) appear to be an indicator that the public transport projects cited have been effective in reducing transport disadvantage and locational social disadvantage.
APTNSW contends that CBA has proven to be deeply flawed as a tool for making sound decisions about transport.
We appreciate that CBA is seen by ATAP as part of step 3 in the ATAP framework (T2 Cost benefit analysis p.4). Step 3 is Options generation assessment (document F3). It is of great concern to APTNSW that NSW transport planners have been instructed not to consider rail alternatives to the F6 extension, regardless of whether prioritising rail might do more to reduce travel times than "the initiative" actually being assessed. See http://www.smh.com.au/nsw/f6-planners-told-to-ignore-public-transport-build-roads-documents-show-20170407-gvgbon.htm.
The Wider Economic Benefits document (KPMG 2017, p.8) confirms that CBA "adds together costs and benefits regardless of to whom they accrue”, to produce the single ratio known as the cost benefit ratio. Where and on whom costs fall and benefits accrue is not irrelevant to responsible decision makers, and nor should it be.
The same document notes (p.9) that most economic evaluations of transport interventions in Australia have to date assumed constant land use. This is plainly nonsense, as the impact of the North-West Metro unequivocally demonstrates.
We argue that the search for a single number pointing unerringly to the best option is fundamentally misconceived, and we are pleased to see that in Britain this is increasingly recognised.
We are also wary of the proposal to use a different BCR for proposals that make “no calls on current capital budgets” in a “capital-constrained environment” (3.3.3, p.28). At first glance this looks like an inbuilt bias towards privately proposed projects (probably tollways). Interestingly, Flyvjberg (2012, p.27) concludes (contrary to popular belief) that inaccurate forecasting is more a feature of private projects (seeking investors) than it is of public projects.
APTNSW thanks ATAP for the opportunity to comment on this document. We hope that over time the assessment of transport proposals will become more sensitive to critical issues overlooked in conventional cost-benefit analysis, and less biased against public transport investment.