Improving value for money through better front-end management: An attempt to reduce costs and increase user benefits in the planning of a motorway project

Abstract

Low benefit-cost efficiency and cost escalation in transport projects is a challenge in many countries. If costs increase as projects are developed, and if decision-makers are unable to reject projects with a negative value for money, the result can be inefficient resource allocation and waste. In Norway, the government introduced a road reform in 2015 in which one of the key elements was the creation of a state-owned enterprise, Nye Veier AS (English trans. ‘New Roads Ltd’), with responsibility for improving parts of the trunk road network through a portfolio of projects. The enterprise’s main goal is to improve efficiency by reducing costs and increasing user benefits so that a larger proportion of the projects in its given portfolio have a positive net present value. This paper argues that project success depends heavily on choices made in the planning and design phase of the project before implementation. We use a motorway project on the southern coast of Norway as a case example of a project for which Nye Veier set out to improve efficiency through the development of a municipal sector plan that is necessary for final project approval before construction can start. Nye Veier introduced several efficiency-enhancing measures that could provide valuable lessons for other projects, but despite the use of innovative measures and systematically promoting efficiency, the motorway remains negative value for money. We conclude that it is difficult to turn an inefficient solution into an efficient project, especially if traffic levels are low, construction costs are high, and travel-time savings are limited. In this case the choice of a full-scale motorway project was already made by the government, although a ‘do minimum’ alternative would have been more efficient. The findings support the evidence that project selection is the most critical decision for benefit-cost efficiency, and that the potential for enhancing efficiency fades throughout the front-end phase.