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DfT rewrites the rulebook for transport & economy appraisals

Andrew Forster
15 May 2015
The new guidance will include advice on quality assurance for land-use/transport interaction modelling
The new guidance will include advice on quality assurance for land-use/transport interaction modelling

 

The DfT has revealed details of forthcoming revamped guidance for assessing the economic impacts of transport schemes, which will be published in draft form this autumn.

Consultants and academics were busy this week finalising their bids to advise on the new guidance, ahead of Monday’s (18th) deadline. 

With transport investment increasingly seen as an economic driver in policy circles, there has been intense discussion in the analytic community about how economic impacts should be assessed. 

The new guidance, to be published for consultation in November, will build on the recommendations of the Transport investment and economic performance: implications for project appraisal (TIEP) report commissioned by the DfT from academics Anthony Venables, James Laird, and Henry Overman. The DfT has accepted all seven of their recommendations (LTT 09 Jan). 

The economic impact guidance will have three units. An overarching unit will emphasise the need for project promoters to provide a strategic narrative of a scheme’s likely economic impacts. It will also outline the different types of economic impacts; the circumstances in which they occur; and the process for their appraisal and reporting. 

A productivity unit will build on the DfT’s existing agglomeration guidance and “clearly set out the methodologies for valuing agglomeration impacts with fixed and variable land use [assumptions]”. This unit will also advise on how to assess:

• ‘static clustering’ (proximity effects) – the ability for transport investment to increase the speed of travel connections, bringing firms and employees closer together without any change in the location of economic activity.

• ‘dynamic clustering’ (cluster effects) – the ability for transport investment to induce firms and employees to relocate, thereby bringing people closer together.

Says the DfT: “The TIEP report concluded that the existing agglomeration methodology is fundamentally sound; however, there are a number of issues that need to be addressed, such as clarification of inter-city productivity effects.”

The third unit of the new guidance will concentrate on  investment and employment effects. This will set out methods and the evidence base for valuing the impacts of transport investment on private sector decisions, and impacts on economic activity, such as the location of firms and employment.

The DfT is procuring experts to advise on the revamped guidance through two contracts. One covers the strategic narrative; investment and employment; and the reporting of impacts. The other covers analytical principles; the impacts of transport investment on economic productivity; and the ‘rule of a half’.

On investment and employment effects, the DfT says it requires advice on: the suitability of different valuation metrics such as GVA; “credible and appropriate assumptions” about the level of displacement of investment/employment brought about by transport investments, at the regional and national level; and the appropriateness of including investment and employment effects in cost-benefit analysis. 

On the reporting of impacts, the DfT says it wants all economic impacts reported in a single document “which contains all of the key results and assumptions”. 

On analytic principles, the Department proposes guidance on how to quality assure bespoke models, such as land use/transport interaction (LUTI) models and Spatial Computable General Equilibrium (SCGE) models. 

The ‘rule of a half’ is used in valuing the user benefits of transport schemes but the DfT says it is only appropriate under the assumptions that the transport investment does not affect the pattern of land use. 

“The TIEP report recommends that land use models are used in a broader range of appraisals,” the DfT notes. “The current methodology to value user benefits – the rule of a half – breaks down under variable land use. Thus if scheme promoters and sponsors are to model land use they will require a new methodology to value the user benefits.”

The two contracts to advise on the guidance are being procured to a tight timetable. Each was advertised on 7 May with a closing date of 18 May and a contract start date of 29 May. 

Although the guidance will be released for consultation in November, the contracts will run until 28 November next year, with any post-November 2015 work undertaken on a call-off contract arrangement.

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