Including negative externalities during transport infrastructure construction in assessment of investment projects

Abstract

The paper presents a method for optimizing the financing option for transport infrastructure project. The execution time for large project is substantial and the social costs generated during the construction phase are insufficient included in the assessment models. These are the main reasons for starting the research to extend the project evaluation methods with procedures that consider also social costs during the implementation of the project, besides the social costs after work completion. The proposed method aims to enhance the solution given by the current applied methods for investment assessment. Starting from the results of the present procedures of transport investment assessment, two approaches are presented. The first one assumes that the work starts at the reference year and different construction schemes can be applied. The optimal time of project implementation is determined considering the social costs during construction and after project implementation. In the second approach, the purpose is to determine the moments of the starting and the completion of the works for minimum of the losses caused by the social costs before and during the project implementation. The paper emphasizes that social cost during transport infrastructure work must be considered in investment timing. In this regard, supplementary procedures can be added to the current method used for ranking of the transport infrastructure investments. For an investment measure identified as opportune, the proposed method aim to minimize the total social cost.

Document type: Article