Value for money evaluation
Overview
Before construction, an economic appraisal is undertaken to assess whether a project represents value for money and to support investment decisions. The appraisal compares the estimated costs and benefits of a project over its appraisal period (60 years). These are used to calculate a Benefit-Cost Ratio (BCR), which alongside non-monetised impacts determines the project's overall Value for Money (VfM) category.
At appraisal, the A30 Temple to Higher Carblake project was forecast to achieve very high value for money. Five years after opening, the project has been evaluated using observed evidence and continues to demonstrate high value for money. Although lower than forecast, the project has delivered journey time savings, improved safety outcomes and cost significantly less to construct than originally forecast, providing a positive return on investment.
| Measure | Appraisal | Evaluation |
|---|---|---|
| Value for money | Very high | High |
| Benefits | £399.7 million | £174.9 million |
| Costs | £63.0 million | £49.9 million |
All values in 2010 prices.
Why has the value for money category changed?
The reduction in Value for Money is primarily due to lower than forecast traffic volumes. While observed journey time savings were better than forecast, they were experienced by fewer vehicles than anticipated. As a result, monetised journey time benefits reduced from £399.6 million at appraisal to £177.0 million at evaluation.
Lower traffic volumes were influenced by the COVID-19 pandemic and the construction of the nearby A30 Chiverton to Carland Cross Project between 2020 and 2024.
Evaluation of costs
The original business case estimated the project would cost £63.0 million. Updated information provided by Cornwall Council indicates an outturn cost of £49.9 million, approximately 21% lower than forecast.
The lower outturn cost has had a positive impact on the project's Value for Money and partially offsets the reduction in monetised benefits.
Evaluation of benefits
Journey time savings remain the largest contributor to benefits and account for most of the difference between forecast and outturn performance. All other monetised impacts were broadly in line with expectations and had a relatively small influence on the overall Value for Money assessment.
Total benefits reduced from £399.7 million at appraisal to £174.9 million in the five-year evaluation.
| Measure | Appraisal (£million) | Evaluation (£million) | Commentary |
|---|---|---|---|
| Journey time |
399.6 |
177.0 |
Improved journey time benefits but monetised lower due to reduced traffic volumes and methodology limitations |
| Vehicle operating costs |
-35.1 |
-31.5 |
A smaller disbenefit than anticipated due to lower traffic volumes |
| Indirect tax revenue |
22.1 |
19.8 |
A smaller disbenefit than anticipated due to lower traffic volumes |
| Safety |
18.0 |
14.5 |
Improved safety, but slightly lower than forecast |
| Construction and maintenance |
4.2 |
4.2 |
Assumed as forecast because insufficient evidence was available to re-forecast these impacts |
| Carbon |
-9.1 |
-9.1 |
Assumed as forecast because insufficient evidence was available to re-forecast these impacts |
| Noise | -0.03 | -0.03 | Assumed as forecast because insufficient evidence was available to re-forecast these impacts |
All values in 2010 prices
Other benefits
Journey reliability benefits were assessed qualitatively at appraisal and no monetised value was reported. Reliability is therefore assumed to remain as forecast.
Impacts of COVID-19 and freight journey benefits
Our analysis indicates that changes in travel patterns following the COVID-19 pandemic has delayed traffic growth on many routes. Initial analysis suggests these projects could experience around six additional years of uncongested operation compared with original forecasts. This change in demand may help explain why some projects are currently achieving lower benefits than expected, as congestion-related benefits are realised later than anticipated.
A further important consideration is the value placed on freight journey time savings. Historically, the value of time for freight was undervalued, these have recently been updated to better reflect the economic importance of freight movements. Applying these revised values alters the value benefits of projects. In most cases, earlier appraisals may have understated the economic benefits delivered to freight users.
