Rob
When looking at the public sector, you have to distinguish the B/C
ratios used by UK Government Departments from other BCRs and probably
also the methods used in developing countries.
The BC ratio used by the DfT for public sector transport projects in
the UK such as the High Speed Railway is, expressed simply, the ratio
between the discounted net community welfare benefits and costs and
the discounted net government finance (or subsidy).
This method arose naturally and quite rationally in the context of
allocating fixed departmental transport support funds allocated
through the higher level Government budgeting process across
competing projects, but it is not very appropriate for "new" money
and is not consistent with standard CBA. To put it in context, a
project which can be financed by the private sector has an infinite
B/C ratio as measured this way, since the denominator tends to zero
as the net public support falls. Also note that rail and road are
treated differently as Government income from road vehicle
taxation is treated as indirect tax, not transport related Government income.
The Eddington Report suggested that given the limited funds in 2007,
the threshold Government B/C for transport (the value which would
exhaust available funds) was between 4 and 5, mostly spent on small
projects solving bottlenecks or giving high local benefits relative
to cost. The figure of 2 often quoted as "good value for money" in
the HSR debate is much lower but it is favoured as giving flexibility
for including other factors, both those difficult to quantify and
political considerations. Higher figures than 2 nearly always rule
out mega-projects.
So you will need to distinguish this type of B/C from public sector
B/C following more conventional CBA practice and also the CBA methods
used on public sector aid projects in developing countries.
Trust this helps a little.
Best wishes
Robert
At 12:11 28/01/2013, Robert Bain wrote:
>Hi
>
>
>
>Does any list member know of any recent academic research or consultancy
>reports that look at BCRs in the wider context of public sector investment
>appraisal (transport). I'm particularly interested in arguments for and
>against BCRs playing a dominant (go / no-go) role.
>
>
>
>I'm also interested in list members' own views on the topic.
>
>
>
>Many thanks in advance.
>
>
>
>Rob
>
>E: [log in to unmask]
>
>
>
>Robert Bain
>
>RBconsult Ltd
>
>Investor Support Services
>
>www.robbain.com
>
>
>
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Robert A Cochrane
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