Decision-Making on Mega-Projects

Decision-Making on Mega-Projects

Cost–benefit Analysis, Planning and Innovation

Transport Economics, Management and Policy series

Edited by Hugo Priemus, Bent Flyvbjerg and Bert van Wee

This book enlarges the understanding of decision-making on mega-projects and suggest recommendations for a more effective, efficient and democratic approach. Authors from different scientific disciplines address various aspects of the decision-making process, such as management characteristics and cost–benefit analysis, planning and innovation and competition and institutions. The subject matter is highly diverse, but certain questions remain at the forefront. For example, how do we deal with protracted preparation processes, how do we tackle risks and uncertainties, and how can we best divide the risks and responsibilities among the private and public players throughout the different phases of the project?

Chapter 3: Ex-ante Evaluation of Mega-Projects: Methodological Issues and Cost–Benefit Analysis

Bert van Wee and Lóránt A. Tavasszy

Subjects: business and management, operations management, development studies, development economics, economics and finance, development economics, public sector economics, regional economics, transport, environment, transport, urban and regional studies, transport


3. Ex-ante evaluation of mega-projects: methodological issues and cost–benefit analysis1 Bert van Wee and Lóránt A. Tavasszy 3.1 INTRODUCTION Mega-projects play a major role in most Western and non-Western countries, in several respects. First, they are heavily under debate at the political level, the assumed economic impacts and important budget implications being the major issues. Such projects often cost several billions of euros or dollars. Second, there is an important scientific debate about these projects, mainly because of the huge cost escalations (Flyvbjerg et al., 2003; Odeck, 2004) but also because of the uncertainty of the wider economic effects (in addition to direct user benefits). Because of the important role of megaprojects a sound ex-ante evaluation of a possible new project is crucial for the quality of decision-making. In most Western countries cost–benefit Analysis (CBA) is the method used for ex-ante evaluations of transport infrastructure projects (Hayashi and Morisugi, 2000). In literature the discussion on the CBA of infrastructure projects focuses on methodological issues, as well as on more principal items. In recent years the attention paid to non-methodological issues has gained more attention, including issues related to the position of CBA in decision-making, the complex multi-actor context of mega-projects and governance issues. The purpose of this chapter is to discuss the current state of the art with respect to CBA as well as to discuss possible improvements with respect to costs, benefits and modelling. However, we do not discuss...

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