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 expected 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.
This page summarises the project's value for money three years after opening and explains any differences between the evaluation findings and the original appraisal forecast.
Did the project deliver value for money?
At appraisal, the A500 was expected to deliver ‘very high’ value for money, largely driven by significant forecast journey time savings and increased traffic demand. Three years after opening, the evaluation shows that the project represents ‘high’ value for money.
The project has delivered improvements to journey times, journey reliability and road safety. However, overall traffic volumes have been lower than forecast, resulting in fewer road users benefitting from these improvements and therefore lower monetised benefits than originally anticipated. Despite this, the project continues to provide a positive return on investment and delivers significant benefits to users of the strategic road network.
| Measure | Appraisal | Evaluation |
|---|---|---|
| Value for money | Very high | High |
| Benefits | £144 million | £22 million |
| Costs | £9.7 million | £11.2 million |
(All monetised values are provided as present values in 2010 discounted to a 2010 price base)
Why do the evaluation results differ from the original forecast?
The evaluation identified several factors that influenced the overall assessment.
Traffic growth along the project has been lower than forecast, meaning fewer journey time benefits have been realised. This is likely to reflect changes in travel patterns and the opening of the Etruria Valley Link Road, which has redistributed traffic across the local network.
The evaluation found journey reliability has improved for road users, although these benefits were not included in the original economic appraisal and therefore are not reflected in the value for money calculation.
Construction costs were higher than originally estimated. This reflected unforeseen pavement conditions, the decision to keep lanes open during the day to minimise disruption to road users, and additional works to improve walking connections following changes to local authority projects.
Evaluation of costs
The original business case estimated a Present Value Cost (PVC) of £9.7 million (2010 prices). The three-year evaluation identified an outturn PVC of £11.2 million, reflecting higher construction costs than originally forecast. The increase was primarily due to unforeseen pavement reconstruction, additional works to maintain traffic flow during construction, and improvements to walking connections. The higher outturn cost has contributed to the reduction in the project's overall value for money assessment.
Evaluation of benefits
Journey time savings remain the largest contributor to monetised benefits and account for most of the difference between the forecast and evaluation. Lower traffic growth than anticipated resulted in smaller journey time benefits than predicted in the original business case. However, safety benefits exceeded expectations.
Overall, the three-year evaluation assessed the Present Value of Benefits (PVB) at £22 million, compared with £144 million at appraisal. The evaluation notes that this is likely to represent a conservative estimate, as some wider network and future benefits could not be fully monetised using the available evidence.
| Measure | Appraisal (£ million) | Evaluation (£ million) | Commentary |
|---|---|---|---|
| Journey time | 135 | 10 | Benefits lower than forecast because traffic growth was lower than expected. |
| Vehicle operating costs | 16 | 16 | Retained at forecast value |
| Construction and maintenance | -5 | -5 | Retained at forecast value |
| Indirect tax revenue | -6 | -6 | Retained at forecast value |
| Safety | 0 | 4 | Benefits exceeded forecast due to greater reductions in collisions |
| Air quality | 0 | 0 | Retained at forecast value |
| Carbon | 2 | 2 | Retained at forecast value |
| Noise | 1 | 1 | Retained at forecast value |
Other benefits
Journey reliability was not monetised in the original business case, so no monetary value is reported in the evaluation. However, the three-year evaluation found that journey reliability improved in both directions across all time periods, providing an additional benefit for road users that is not reflected in the monetised value for money assessment.
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.
