This report describes a study that examined general quantitative methods of risk assessment in Road User Cost (RUC) models for application in road project evaluation. Appropriate techniques were applied to estimate the variance component of key uncertain factors that influence `summary' project evaluation measures such as Benefit Cost Ratio (BCR) and Net Present Value (NPV). A `translation' into practice of the risk analysis principles is demonstrated using a case study example. In the case study, a number of separate projects were considered for inclusion in an investment program, the budget for which was insufficient to fund them all. The example demonstrated the use of risk analysis principles to estimate the levels of risk and uncertainty within final economic decision measures such as BCR and NPV, from uncertainty in the key input variables feeding into the project evaluation process. By estimating the `riskiness' aspect of these summary measures, a more realistic comparison of project returns can be obtained. The case study described in this report indicates the additional value of including risk analysis as part of project evaluation. (Author/publisher)
Abstract