Reducing or managing the forecasting risk in privately-financed projects.

There is inevitably uncertainty surrounding forecasting demand for new infrastructure, particularly in "pay as you go" systems, and this uncertainty has long been recognized. This issue has been thrown into stark relief recently by the release of a document by Standard and Poors ("S & P"), analysing forecast and outturn traffic. This report has cast doubt on both the competence and integrity of the transportation planning profession. The report concludes that outturn traffic is nearly always lower than that forecast and often considerably so. This can have serious implications for those organisations financing the scheme. It is suggested that a proper risk (probability) assessment is a better way of producing forecasts for use in banking cases. This will produce a central forecast which is equivalent to that produced for concession companies. It will also produce a whole series of forecasts with their probability of being exceeded. The extent to which these forecasts differ from the central forecast depends on the quality of the collected data and the potential variability in forecasting assumptions. These are often scheme specific and offer a superior analytical approach than the 'stress test' values proposed by Standard and Poor. A risk assessment takes account of the potential sources of error in traffic forecasts and combines these probabilities in such a way to determine the overall distribution of the forecasts. For the covering abstract see ITRD E126595.