Title

Towards an integrated approach to transport planning in Norway - the SAC report on the consistency of benefit-cost analysis between sectors

Authors

A Hervik
J Odeck

Document Type

Conference Paper

Publication Date

1-1999

Subject Area

land use - planning

Abstract

Public funds are scarce and many public projects, like roads, schools or hospitals, often compete against one another. An evaluation method commonly used for ranking of projects, particularly for determining the individual merits of public projects is the benefit-cost analysis (BCA). As in many western European countries, Norway has a long tradition in the use of BCA with regard to evaluation of road projects. However, in the last decade there has been a tremendous development in the application of BCA in other parts of the public sector such as rail and civil aviation infrastructure, schools and hospitals. Although this development has been viewed positively by the authorities, it has not solved the problems often faced by authorities concerned with giving priority to projects between sectors. One major problem has been the lack of consistency in the way BCA has been carried out between sectors. Thus, BCA has not been used for allocating funds between sectors. Another problem has been that, even within each sector, no built-in mechanisms have existed to ensure the implementation of BCA on the basis of a sound economic framework. In June 1995, the Norwegian Ministry of Finance, in art attempt to set standards for carrying out BCA, set up a Standing Advisory Committee (SAC) on benefit--cost analysis for the entire Norwegian public sector. The commission's mandate has been to advise on how BCA should be carried out in the public sector to ensure that consistency is maintained between sectors. SAC also functions as advisor to the Ministry of Finance and the Government on other matters concerning costs and benefits and is often authorised to carry out assessments of large political reforms and projects of national importance. In September 1998 SAC produced an illustrative manual for conducting benefit --cost analysis for all sectors of the economy. Both the guidelines and the manual introduce substantial changes in the way impact assessment have traditionally been carried out, especially with respect to risk assessment The SAC reports have essentially been accepted by the R&D sector, although there are a few important issues which are still being disputed. In the course of 1999, the SAC report will be handled by the Norwegian Parliament. Most probably, the main guidelines will be sanctioned. This paper presents the main SAC results and recommendations, focusing on the impact on current BCA practice within the transport sector. Specifically, it presents the SACs findings on the follo,M_ng issues relevant to transport sector: * Impacts to be included and values to be used * Methods that should be used in deriving values * Methods to be used for measuring the socio-economic merits of projects * The relevant decision criteria * How to assess risk and uncertainty * Cost of public funds Finally, the paper discusses the implications of the SACs report on the road sector.

Comments

Permission to publish abstract given by AET.