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Cohesion Policy

2007 - 13

Adam Abdulwahab

Evaluation network meeting

Brussels, 21 September 2009

Ex post evaluation of cohesion policy programmes 2000-2006 co-financed by

the European Fund for Regional Development (Objective 1 and 2)

Work Package 10

“Efficiency: Unit Costs of

Major Projects”

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Cohesion Policy

2007 - 13

Overview of ToR - 1• Scope: sample of ERDF major projects• Task 1: Literature review• Task 2: Infrastructure projects

– Definition of “units”– Estimated unit costs and completion times– Actual unit costs and completion times– Analysis of cost overruns and time delays– Role of ex ante risk assessment

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Cohesion Policy

2007 - 13

Overview of ToR - 2• Task 3: Productive investment projects

– Costs of job created– Comparability of different cost per job figures– Estimated costs of jobs created– Actual costs of jobs created

• Task 4: Spreadsheet– Indicative benchmark ranges– Tool for further data input

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Cohesion Policy

2007 - 13

Practical Limits• Data availability => smaller sample

(altogether 96 projects)• Data quality

– Difficulty of determining costs of components– Variations are higher than expected

• Reasons:– Modifications of projects– Projects were not necessarily monitored in same

structure as they were approved

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Cohesion Policy

2007 - 13

Results of Literature Review• No public unit cost database

– One exception: ROCKS (World Bank) only roads and very limited European relevance

• No generally agreed definitions of unit costs for infrastructure projects

• Widespread “Optimism Bias”

• Job creation costs are determined only for (active) labour policy interventions

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Cohesion Policy

2007 - 13

Sector snapshot - Rail• Cost range (literature): 2.8 to 8.6 mEUR/km• Sample

– Project length: 8.9 km to 1,435 km– Unit cost: 0.3 to 49 mEUR/km

• Main reasons for cost overruns: environmental issues, statutory authorities, work suspensions

• Main reasons for delays: funding and construction

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Cohesion Policy

2007 - 13

Sector snapshot - Roads• Cost range (literature):

– Single carriageway: 0.7 to 2.0 mEUR/km– Dual carriageway: 2.7 to 8.7 mEUR/km– Dual carriageway, 3-lane: 36.4 to 91.3 mEUR/km

• Sample– Project length: 5.3 km to 144.2 km– Unit cost: 1 to 50 mEUR/km

• Main reasons for cost overruns: design complexity, environmental issues, statutory authorities

• Main reasons for delays: site preparation and construction

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Cohesion Policy

2007 - 13

Sector snapshot – Urban transport

• Cost range (literature): – Metro: 27 to 300 mEUR/km (highest: 483 mEUR/km)– Tram: 2.5 to 64 mEUR/km

• Sample– Project length: 4 km to 22 km– Unit cost: 5 to 120 mEUR/km

• Main reasons for cost overruns: permits/consents, procurement factors

• Main reasons for delays: funding and planning

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Cohesion Policy

2007 - 13

Sector snapshot – Water & Wastewater

• Sample not comparable to literature• Cost range (literature):

– Water treatment: 100 to 3800 EUR/m3/day– Water supply: 370 to 6800 EUR/m3/day

• Sample (relative homogeneity)– Project length: 85 km to 94 km– Unit cost: 0.75 to 2.11 mEUR/km

• Main reasons for cost overruns: design changes• Main reasons for delays: site preparation, funding,

permits/consents

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Cohesion Policy

2007 - 13

Productive Investment Projects

• Difficulty to determine employment effects• Mainly determined by

– Capital/labour ratio of industry– Technological characteristics

• Decision based on CBA not on job creation

Measuring cost of jobs creation is futile and will be discontinued

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Cohesion Policy

2007 - 13

Thank you for your attention