Decisions, Decisions

by | Nov 9, 2013 | Uncategorized

Summon the Economists

Usually once, perhaps twice, rarely three times in the long sequence of events that is a major infrastructure project, the readers of cost-benefit entrails are summoned.

Go/No-Go?

Sometimes the economists are summoned when a justification is needed. Support is sought for a decision that the owner knows is the right one but often she needs “independent” evidence. The go/no-go decision is a cost-benefit analysis or business case that determines whether a project should be built. The scary no-build, or business as usual, case is the comparison. The benefits of the go/build case relative to the unthinkable base case are stacked up until they exceed the projected costs.

Please excuse the cynicism that comes from years of experience.

Alternative A or B?

Sometimes, the economists may also be asked to opine on the relative merits of two alternatives (LRT vs. subway, renovate vs. new build, alignment 1 vs. alignment 2, green vs. grey stormwater management, etc.).

If the economists are really good consultants they may convince the client that they should come back for a third time to do another analysis. However economists are not cheap and their custom consulting studies are usually only requested and approved for big decisions.

And Now Give it to the Professionals

With the Go confirmed and the relative merits of Alternative B documented the project is off to the races. The economists are dismissed and the project is handed over to the engineers, architects, and construction firms to design and build.

Now, this is when decisions are made that significantly affect the way a project is built.

For large infrastructure projects decisions are made constantly. Once the economists are gone (and forgotten) there are a million decisions made that really affect what is built: whether porous pavement is used, where the detention pond goes, and how sustainable the project is.

Decisions, Decisions

My experience of being a economic consultant on large infrastructure projects is that what is built is often very different from what was analyzed using cost-benefit analysis. Some of this is because more information becomes available as the project is better defined. In other cases it is that these “smaller” decisions often compound and have the effect having big impacts.

Shouldn’t the important decisions made by the engineers and architects be subject to the same rigorous decision-making that go/no-go and alternative selections? If the cost of the economic consulting studies was low enough, economic analysis could help throughout the feasibility, planning, and design process.

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