IRELAND 23 November 2017
Value for Money Examination 29: Development of the National Roads Network Summary
The National Roads Authority (NRA) was set tip in 1994 to oversee the provision of a safe and efficient network of national roads. At the same time, a major roads investment programme also commenced, involving total expenditure of ?1.2 billion (1994 prices) in the national roads network over the six year period from 1994 to 1999.
Evaluating Programme Impacts
For the four years from 1994 to 1997, actual expenditure on national roads was ?792 million. This was in line with planned spending. Of the ?718 million spent on national primary roads, 70% was used on projects to develop and improve four strategic corridors.
The EU provided an estimated 60% of the funding for primary road projects. This was considerably less than the 71% which had been expected from EU sources and the balance has been met by the Exchequer. The original plan assumed that more Cohesion Fund resources would be available for transport projects than the EU Commission has been willing to allocate. For a number of co-financed projects, there have been considerable increases in the estimated project cost which the Commission has not agreed to co-finance.
Measurable impact targets were set for expenditure on the strategic corridors but not for spending on other primary roads or on national secondary roads. The targets for the strategic corridors are based on the level of service (a mix of the average driving speed achievable and the extent of traffic congestion) and the potential reduction in overall journey time for the corridor.
The overall objective in relation to the level of service to be provided by the national roads network is a minimum average inter-urban driving speed of 80 kilometres per hour. For the 1994-1999 programme, the target was that the corridor length capable of delivering the target level of service up to 2005 should increase from 35% in 1993 to 53% in 1999. The NRA has monitored progress in achieving this target by measuring the length of roadway which is improved. While this is relevant, it takes no account of demand in terms of the growth in traffic and as a result, the net achievement of the programme may be less than expected.
A detailed survey of the level of service provided by the national roads system in 1995 is a useful point of reference for updating the effectiveness target and measuring actual achievement. There is also a case for setting level of service targets for individual routes.
A target reduction of 204 minutes in journey times for the four strategic corridors was set but no estimate was made at the inception of the plan of the actual journey times for the corridors. This makes the significance of any claimed achievement difficult to interpret.
The NRA expect that total journey time savings in the period 1994 to 1999 will be in the region of 175 minutes, rather than the target 204 minutes.
Evaluation of Road Improvement Projects
The achievement of value for money from investment in roads requires that priority should be given to road investment proposals which are likely to deliver the greatest economic benefits. Accordingly, the effectiveness of the pre-planning, design and evaluation of projects can be an important determinant as to whether optimal value is obtained from the portfolio of projects ultimately executed. The examination noted several factors which pose a risk to value for money at the pre-planning stage.
The time taken from the original inception of a proposed project to the commencement of construction is very long, in many cases up to five years.
Decision making is fragmented across a number of organisations at central government and local level and the network of policies and procedures contribute to delays which can significantly increase the estimated costs of projects.
Up to now, there have been sufficient road improvement projects to absorb the available funding but the NRA has generally had only a few matured projects to choose between when making spending decisions. It has sharply increased the funding for planning and design work from ?9 million in 1998 to ?17 million in 1999.
The examination considered the criteria used by the NRA to evaluate potential projects. While all the criteria are relevant, no formal threshold levels for the criteria have been set and there is no ranking of their relative importance.
An economic evaluation model has been developed as part of the evaluation system. This involves computation of the internal rate of return (IRR) for proposed projects based on the forecasted costs and benefits over the expected economic life of the road. The economic model is used primarily for the initial evaluation of proposed projects. The benefits identified in the model are not used as targets for the subsequent measurement of effectiveness.
The examination compared the assumed time savings used in the calculation of IRR for ten projects with later estimates of time savings for those projects derived using a special methodology also developed by the NRA. This comparison revealed that in seven cases, the estimates used in the IRR computation were too high. Using the more reliable later estimates of journey time saving would produce a different prioritisation of road projects.
During the lengthy process of planning and design of projects, the expected costs and benefits of the project may change, thus altering the economic justification for the project. While road projects are subject to review at any time, the examination found no case where a project was stopped at planning or design stage due to negative changes in the factors supporting its economic justification.
Control of Project Costs and Duration
Since 1997, the NRA has taken steps to improve its cost control systems and J procedures, notably through the introduction of quarterly project reports and the issue of guidelines on project cost estimation to local authorities. The guidelines allow for large margins of error in the cost estimation process - up to 50% at the preliminary design stage and 25% thereafter
The plan for the roads programme comprised a number of projects already underway and a list of projects in planning but did not preclude additions to the list. Of the 41 prolects so far included in the programme, 32 were listed in the plan. These were estimated to cost ?790 million (1994 prices). By mid-1998, the estimated cost of these projects (some completed and some still ongoing) was ?971 million. The increases were significantly more than could be explained by inflation and have been attributed mainly to a combination of poor original estimates and allowing the introduction of major changes in scope and quality at the design stage.
The examination also noted a significant range in the unit construction cost of the major Improvement projects completed between 1994 and 1997. For example, the cost per kilometre of motorway was between ?3.2 million and ?6.1 million while the cost 4 for standard dual carriageways varied between ?1.6 million and ?6.8 million per kilometre.
Strategic Planning for National Roads Development
The establishment of the NRA and the experience of the current road development programme have led to a strengthening of the processes and procedures for the strategic management of roads development although the findings in this report indicate that there is room for further improvement. The continuing increase in traffic growth and the need to diversify the sources of funding and develop new models of roads provision present new challenges for the next investment programme. The availability of management information to track outputs and impacts against quantified targets is a prerequisite for measuring the achievement of future programme objectives. There is also a need for the NRA to benchmark its performance against its counterparts in other countries.