Research 350 - NZ Transport Agency

ECONOMIC DEVELOPMENT BENEFITS OF TRANSPORT INVESTMENT
182) and argue that microeconomic analysis could identify indirect benefits which SCBA
would fail to adequately measure (BTE 1999, p. 183).
In both of these cases, however, it should be noted that logistics reorganization was only part
of the alleged reasons for the omission of benefits from SCBA. Others include expansions of
labour market catchment areas and/or greater labour force flexibility (BTE 1999, p. 183, p.
186) and agglomeration benefits, noted below. In addition, as discussed below, there has
been substantial criticism of the methodological approach and results of such work.
Responses
Responses to these criticisms include:
• Quarmby’s work, cited above, suffers from a variety of suspect methodological
assumptions. These include overestimation of inventory savings and of statutory
limitations. Similar work by Mackie and Tweedle, published in 1992, suggests indirect
benefits accounted for less than 20% of total benefits – though it is unclear how much
less (BTE 1999, pp. 166-167).
• The US studies of the Paradise Parkway, referred to above, would appear to rely, to
some extent, on undocumented hypothetical assumptions and it is unclear if logistics
arrangements were initially optimal, raising the issue of how much of the alleged
impacts were due to improved management (BTE 1999, p. 167).
• ACG’s 1995 assessment of fleet mix cost reductions for CityLink was based on
comparisons with the US experience. However, this may be flawed due to differing
route lengths in each case and lack of allowance for higher inventory costs and
inconvenience costs (both associated with larger trucks providing fewer deliveries).
The assumption that ‘off-road’ benefits would add 20% to other project benefits was
based, in part, on Quarmby’s work which is of questionable relevance to the context of
CityLink (BTE 1999, pp. 166-171).
• A 1995 analysis of the logistics effects of the Melbourne Ring Road by FDF
Management estimated the ‘off road’ impact of savings in inventory and warehousing
costs as equal to 3% of total benefits. Since the study did not allow for induced
demand impacts, this in itself may be an overestimate, as the negative effects of more
frequent deliveries were not allowed for (BTE 1999, pp. 167-168).
• SACTRA cites McKinnon’s (1995) point that enhanced reliability of journey times is
likely to be much more important to firms than logistical reorganization (though the
latter has reduced inventory levels) (para. 5.33). In general, SACTRA finds that the area
has been subject to claims based on survey evidence rather than ‘consistent and
rigorous economic analysis’ (SACTRA 1999, para. 5.37).
• Partial allowance is already made for logistical impacts in some current transport
appraisal guidelines and unit costs. For example, Austroads unit values of time (also
adopted by the NSW Road and Traffic Authority’s (RTA’s) Economic Analysis Manual
(EAM)) allow for the value of time of freight contents (from the point of view of freight
consignees) (Austroads 2004; RTA 2004, p. 8).
• To the extent that this represents a value for logistical efficiencies resulting from
speedier freight deliveries to business, this allows for such impacts to be incorporated
into a relevant transport SCBA. Such figures also allow for a comparison with the value
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