A27 Arundel Bypass Interim Scheme Assessment Report

A27 Arundel BypassInterim Scheme Assessment

ReportChapter 10 – Summary of Economic Appraisal

30 August 2019

Interim Scheme Assessment ReportA27 Arundel Bypass – PCF Stage 2 Further Consultation

August 2019

Table of Contents

Table of Contents 3

10 Summary of Economic appraisal 10-1

10.1 Introduction 10-110.2 Transport user benefits 10-110.3 Accident benefits 10-310.4 Summary of wider impacts 10-910.5 Scheme costs 10-1110.6 Summary of economic impacts 10-1210.7 Value for Money (VfM) 10-1310.8 Sensitivity tests 10-13

LIST OF TABLESTable 10-1 - Transport User Benefits (£m) 10-2Table 10-2 - Number of accidents/billion vehicle kilometres for the do minimum and eachoption 10-6Table 10-3 - Number of casualties/billion vehicle kilometres for the do minimum and eachoption 10-6Table 10-4 - Accident summary 10-7Table 10-5 – Causalities Saved by Scheme 10-7Table 10-6 – Total accident benefit (£m) 10-8Table 10-7 – Delays During Construction (£m) 10-8Table 10-8 - Summary of wider economic impacts (£m) 10-11Table 10-9 - Analysis of Monetised Costs and Benefits (£m) 10-12Table 10-10 – Adjusted BCR 10-13Table 10-11: Economic impacts (£m) low growth 10-14Table 10-12: Economic impacts (£m) without A27 Worthing and Lancing 10-15Table 10-13: Economic impacts (£m) without Lyminster Bypass 10-16

LIST OF FIGURES

Figure 10-1 - Option 1V5 accident difference compared with do minimum 10-3Figure 10-2 - Option 1V9 accident difference compared with do minimum 10-4Figure 10-3 - Option 3V1 accident difference compared with do minimum 10-4Figure 10-4 - Option 4/5AV1 accident difference compared with do minimum 10-4


August 2019

Figure 10-5 - Option 4/5AV2 accident difference compare with do minimum 10-4Figure 10-6 - Option 5BV1 accident difference compared with do minimum 10-5Figure 10-7 – Sections of the existing A27 and the scheme extent selected for accidentcomparison 10-5


Page 10-1 August 2019

10 Summary of Economic appraisal10.1 Introduction

The economic appraisal was undertaken in accordance with WebTAG UnitA1-1 Cost-Benefit Analysis. The economic appraisal was informed by datataken from the A27 transport model. Further detail in relation to themethodology and the results of the economic appraisal are presented in theComMA report.

The economic appraisal of the options comprises the following:

§ Transport user benefits§ Accident benefits§ Impacts during construction§ Environmental impacts (including greenhouse gases, air and noise)§ Wider economic benefits

This economic appraisal produces an ‘initial’ benefit-cost ratio (BCR) that isthen ‘adjusted’ through the inclusion of wider economic benefits, which aresummarised later in this section.

10.2 Transport user benefits

Transport User Benefit Appraisal (TUBA) version 1.9.12, with TUBAeconomics file (version 1.9.12), was used to carry out the economic appraisalof the A27 Arundel Bypass options. The appraisal of the transport userbenefits incorporates the effects relating to time savings, vehicle operatingcost savings and indirect tax revenue. The economic appraisal reflects thebenefits over a standard 60-year appraisal period, from 2026 (opening year)to 2086 informed by trip distance and journey time data by vehicle type andjourney purpose from the A27 transport model.

Travel time savings are monetised as a perceived benefit, reflecting users’willingness to pay for a quicker journey and expressed in the market priceunit of account. The value of those savings differs depending on the reasonfor the trip, of which three are defined in WebTAG: business users,commuters, and non-commuting consumers.



Vehicle operating cost savings accrue in two categories:

§ fuel costs, a function of the speed of the vehicle through the network andfuel efficiency; and

§ non-fuel costs such as oil, tyres, vehicle maintenance depreciation andbusiness vehicle capital costs, largely a function of the distance travelledby the vehicle.

WebTAG 1-11 describes indirection taxation as similar to VAT, meaning thatdifferent users perceive costs differently. For example, the price of petrol isdifferent for businesses, which can reclaim VAT, and personal travellers, whocannot. Different users are perceiving costs in different units of account.Individual consumers perceive ‘market prices’, including indirect taxation,while businesses and government perceive costs in the ‘factor (or resource)cost’ unit of account, net of indirect taxation. They are included in the publicaccounts table as ‘central government funding: non- transport’ and are notincluded in the broad transport budget.

Table 10-1 summarises the transport user benefits relating to economicefficiency. Section 3.3 of the PCF Stage 2 Further Consultation ComMA2

describes the assumptions underpinning the PCF Stage 2 FurtherConsultation A27 transport model and, by association, the limitations of theresults from the economic assessment.

Table 10-1 - Transport User Benefits (£m)TYPE 1V5 1V9 3V1 4/5AV1 4/5AV2 5BV1

Economic EfficiencyConsumer Users(Commuting)

£64.18 £58.29 £72.67 £74.61 £79.99 £76.30

Economic EfficiencyConsumer Users(Other)

£85.61 £87.32 £100.97 £104.73 £112.81 £108.37

Economic EfficiencyBusiness Users andProviders

£71.34 £70.02 £82.84 £86.30 £91.89 £85.57

Economic EfficiencyTotal

£221.13 £215.63 £256.48 £265.64 £284.69 £270.24

1 https://www.gov.uk/government/publications/webtag-tag-unit-a1-1-cost-benefit-analysis-december-20172 HE551523-WSP-GEN-SWI-RP-TR-00017-P03 – A27 Arundel Bypass, PCF Stage 2 Further Consultation

Combined Modelling and Appraisal Report (July 2019



The table shows that 4/5AV2 has the largest benefit to consumer users andbusiness users and providers. Options 3V1, 4/5AV1 and 5BV1 provide asimilar level of benefit, with approximately £40 - 50m more benefit thanOptions 1V5 and 1V9.

10.3 Accident benefits

Cost and Benefit to Accidents – Light Touch (COBALT) is a computerprogram used to undertake the analysis of the impact on accidents as part ofthe economic appraisal for a road scheme. The assessment is based on acomparison of accidents by severity and associated costs across an identifiednetwork in the do minimum and do something forecasts using details of linkand junction characteristics, relevant accident rates and cost and forecasttraffic volumes by link and junction.

The accident analysis, in COBALT, is informed by forecast traffic flows fromthe A27 transport model.

Figure 10-1 to Figure 10-6 show the difference in number of accidentsbetween do minimum and each option over the 60-year assessment period.A positive number shows that there is a decrease in the number of accidentsbetween the scheme and do minimum, whereas a negative number showsan increase in the number of accidents as a result of the scheme. Blueindicates a decrease in accidents as a result of the scheme and amber / redan increase.

Figure 10-1 - Option 1V5 accident difference compared with do minimum





Figure 10-4 - Option 4/5AV1 accident difference compared with do minimum

Figure 10-5 - Option 4/5AV2 accident difference compare with do minimum



Figure 10-6 - Option 5BV1 accident difference compared with do minimum

From the figures above, it can be seen that there are reductions in the numberof accidents on the existing A27 that is bypassed by the new sections of theA27, due to reduced traffic flows along these roads. The transfer in traffic tothe new bypass sections result in some accidents forecast on the newsections of road.

While the number of accidents presented in Figure 10-1 to Figure 10-6 servesto demonstrate the general reduction of accidents on the de-trunked sectionsof the existing A27, a comparison of the total absolute accident and casualtynumbers does not take account of the differences in length between thescheme options, thereby disguising the true savings in accident ratesbetween the options. Therefore, accidents have been represented in termsof billion vehicle kilometres in order to offer a meaningful comparison.

Table 10-2 and Table 10-3 sets out the accidents/billion vehicle kilometresand the casualties/billion vehicle kilometres, respectively, on the existing A27between Mill Road/Tye Lane and Crossbush junction and the Schemeextents. The section representing the existing A27 alignment under a dominimum scenario and also a typical section depicting the Scheme extentsare highlighted in Figure 10-7.

Figure 10-7 – Sections of the existing A27 and the scheme extent selected foraccident comparison



Table 10-2 - Number of accidents/billion vehicle kilometres for the dominimum and each option

Existingalignment

Existing + New alignments combined

A27 DM Option1V5

Option1V9

Option3V1

Option4/5AV1

Option4/5AV2

Option 5BV1

Accident rate perbillion vehiclekilometres on theexisting and thenew A27alignments

116 64 103 76 80 71 73

Table 10-3 - Number of casualties/billion vehicle kilometres for the dominimum and each option

Existingalignment

Existing + New alignments combined

A27 DM Option1V5

Option1V9

Option3V1

Option4/5AV1

Option4/5AV2

Option5BV1

Accident rateper billionvehiclekilometres onthe existingand the newA27alignments

Slight 143 93 133 96 102 91 93

Serious 16 10 15 10 11 10 10

Fatal

2 1 2 1 1 1 1

As demonstrated by Table 10-2 the predicted number of accidents/billionvehicle kilometres along the combined existing and new alignments, for allscheme options, is lower than that on the existing A27 alignment under a dominimum scenario. Option 1V5 is forecast to have the lowest accident rateand Option 1V9 the highest, in comparison to the do minimum scenario.



Table 10-4 shows the total number of accidents saved over the 60-yearappraisal period across the entire road network.

Table 10-4 - Accident summary

Period Option1V5

Option1V9

Option3V1

Option4/5AV1

Option4/5AV2

Option5BV1

TotalWithout-SchemeAccidents

55,484

Total With-SchemeAccidents

55,073 55,087 55,105 54,957 54,757 54,808

TotalAccidentsSaved byScheme

411 397 379 527 727 676

A breakdown of the casualties saved across the entire road network is shownin Table 10-5

Table 10-5 – Causalities Saved by Scheme

Option1V5

Option1V9

Option3V1

Option4/5AV1

Option4/5AV2

Option5BV1

Fatal 4 4 4 8 9 9

Serious 85 78 85 105 133 126

Slight 500 473 457 639 878 817

Total 589 555 545 751 1,019 952

The monetised accident benefits of each option which considers the impactof the schemes across the entire road network are presented in Table 10-6.

The economic benefits associated with the reduction of accidents is a resultof the provision of a higher standard of route. Users that transfer from existinglower standard strategic routes or local roads benefit from driving on a newroute with a lower accident rate.



Table 10-6 – Total accident benefit (£m)Period Option

1V5Option

1V9Option

3V1Option4/5AV1

Option4/5AV2

Option5BV1

Total Without-SchemeAccident Costs

2396.24

Total With-SchemeAccident Costs

2373.03 2374.43 2374.27 2367.22 2359.34 2361.22

Total AccidentBenefits Savedby Scheme

23.21 21.82 21.97 29.02 36.90 35.03

All options provide an overall benefit related to accident savings. Option 1V9having the lowest accident benefits even though Option 3V1 performs theworst in terms of total accidents saved and total causality saved. This isbecause Option 3V1 saves more serious causalities than Option 1V9. Option4/5BV2 having the greatest accident benefits, at around £37m.

10.3.2 Impacts during construction

The costs of delays during construction were estimated using trafficmanagement measures provided in a draft buildability report provided byMorgan Sindall (April 2019). These were coded in the A27 transport modeldo minimum forecast, and the outputs were used in TUBA (1.9.12) to assessthe economic impacts of the traffic measures.

The economic impacts during construction for each option are presented inTable 10-7.

Table 10-7 – Delays During Construction (£m)Option1V5

Option1V9

Option3V1

Option4/5AV1

Option4/5AV2

Option5BV1

User Time -£7.53 -£7.53 -£5.53 -£6.31 -£6.31 -£5.77

Vehicle OperatingCosts Fuel

-£1.12 -£1.12 -£0.84 -£0.93 -£0.93 -£0.89

Vehicle OperatingCosts Non-Fuel

-£0.96 -£0.96 -£0.75 -£0.83 -£0.83 -£0.80

Indirect TaxationRevenues

£0.65 £0.65 £0.48 £0.54 £0.54 £0.51

Total -£8.96 -£8.96 -£6.63 -£7.53 -£7.53 -£6.94



Table 10-7 shows that the A27 Arundel Bypass scheme options are forecastto result in economic dis-benefits to traffic as a result of delays associatedwith construction, with Option 1V5 and Option 1V9 having the highest delayimpact and Option 3V1 having the lowest. These results illustrate that theimpacts on vehicle delays during construction are greater with the onlineimprovement of Option 1V5 and 1V9 in comparison to the remaining fullyoffline options.

10.4 Summary of wider impacts

Assessment of the wider economic benefits of the A27 Arundel Bypassscheme options have been based on data obtained from the A27 transportmodel forecasts.

Wider impacts are specified to capture the impacts of a transport interventionwhich are additional to those experienced directly by the transport user(transport user benefits being journey time reductions and fewer accidentsetc.). On this basis, three types of wider impact have been assessed:

§ Agglomeration improvement benefits§ Labour market supply impacts§ Output change in imperfectly competitive markets

The concept of agglomeration reflects that where there is good connectivity,productivity will be higher as workers can access a far greater range of jobsat the same time as businesses and companies have a much broader poolof employees from which to draw their staff from. By effectively bringing firmsand employees closer this encourages interactions in the labour market,knowledge spill-overs and linkages which improve productivity3.

Agglomeration can be viewed as the intensity of economic activity in aparticular area and is measured by productivity, or GDP per worker in theappraisal guidance. Agglomeration improvements occur under a transportintervention – such as the Arundel Bypass – when the enhanced connectivitytranslates into productivity improvements from effectively increased densityof individuals and firms.

3 WebTAG Unit A2-4, Chapter 2, pgs 2-3.



Labour market impacts may also occur due to the expected increase in jobsfrom people entering work who would otherwise be inactive due to highcommuting costs on the basis that insufficient transport accessibility is abarrier to people entering the labour market and gaining employment4. Foremployment to increase there must be a change in demand also. A transportinvestment such as the bypass is likely to affect the local demand for andsupply of labour simultaneously as reductions in transport costs mayencourage firms to invest more and increase output which could lead toincreased demand for labour5.

The values of ‘increased output in imperfectly competitive markets’ are basedon a 10% uplift applied to business user benefits from the TUBA appraisalundertaken as part of the economic appraisal, in accordance with TAG UnitA2-2. This represents the additional consumer surplus associated withincreased output in imperfectly competitive markets.

An adjusted BCR has been calculated by including the wider economicbenefits relating to agglomeration, labour market supply and output changein imperfectly competitive markets that are forecast to occur with theintroduction of the A27 Arundel Bypass.

Table 10-8 outlines a summary of the wider impacts for the bypass options.The fully offline bypass options Option 3V1, Option 4/5AV2, Option 4/5AV1and Option 5BV1 show the highest wider impact benefits. Option 1V5 andOption 1V9, i.e. the online options, present a reduced level of benefit relativeto these options, with Option 1V9 generating the lowest wider economicbenefit.

4 WebTAG Unit A2-3, Chapter 2, pgs 2-3.5 WebTAG Unit A2-2, Chapter 4, pgs 16-17.



Table 10-8 - Summary of wider economic impacts (£m)Option

1V5Option

1V9Option

3V1Option4/5AV1

Option4/5AV2

Option5BV1

WI1:Agglomerationimpacts

Manufacturing 2.67 2.26 3.28 3.00 3.02 3.15

Construction 2.87 2.57 3.53 3.28 3.27 3.43

ConsumerServices 8.55 7.64 10.91 10.19 10.08 11.20

ProducerServices 40.08 27.76 60.39 47.79 48.91 58.30

Sub-Total 54.16 40.24 78.11 64.26 65.29 76.08

WI3: Outputchange inimperfectlycompetitivemarkets

Output changein imperfectlycompetitivemarkets

4.77 4.54 6.03 5.89 5.91 6.46

WI4: Taxrevenuesarising fromlabour marketimpacts

Labour supplyimpacts 1.43 1.12 1.79 1.67 1.64 1.86

Total Wider Impact Benefits 60.36 45.89 85.93 71.82 72.84 84.40

10.5 Scheme costs

The scheme costs for the A27 Arundel Bypass (Option 1V5, Option 1V9,Option 3V1, Option 4/5AV1, Option 4/5AV2 and Option 5BV1) are producedby Highways England’s Commercial Services Division. These prices are theninflated to outturn costs using Highways England projected constructionrelated inflation and then rebased to 2010 calendar year prices for economiccalculations using the GDP price deflator as published in the TAG data book.These costs are then input into TUBA, which calculates the present value ofcosts (PVC).



10.6 Summary of economic impacts6

A summary of the economic impacts of each option is presented in Table 10-9. An adjusted BCR has been calculated by including the wider economicimpacts. The results for all the A27 Arundel Bypass options are presented inTable 10-10.

Table 10-9 - Analysis of Monetised Costs and Benefits (£m)Type Option

1V5Option

1V9Option

3V1Option4/5AV1

Option4/5AV2

Option5BV1

Greenhouse Gases -10.72 -7.72 -13.48 -9.64 -8.11 -6.55

EconomicEfficiency:Consumer Users(Commuting)

64.18 58.29 72.67 74.61 79.99 76.30

EconomicEfficiency:Consumer Users(Other)

85.61 87.32 100.97 104.73 112.81 108.37

EconomicEfficiency: BusinessUsers

71.34 70.02 82.84 86.30 91.89 85.57

Wider PublicFinances (Indirecttaxation)

13.67 7.99 15.71 11.68 5.87 11.09

Construction delays -8.96 -8.96 -6.63 -7.53 -7.53 -6.94

Accidents 23.21 21.82 21.97 29.02 36.90 35.03

Air quality -6.85 -2.66 -7.74 -7.46 -6.63 -7.13

Noise -5.07 -5.42 -2.00 -0.88 -0.86 -1.67

Present Value ofBenefits (PVB)

226.40 220.68 264.31 280.84 304.35 294.07

Broad TransportBudget

132.99 129.65 161.61 174.82 183.06 193.97

Present Value ofCosts

132.99 129.65 161.61 174.82 183.06 193.97

Net Present Value 93.41 91.03 102.71 106.02 121.29 100.11Benefit to Cost Ratio(BCR)

1.70 1.70 1.64 1.61 1.66 1.52

6 The results set out here are based on central estimate Scheme costs



Table 10-10 – Adjusted BCRType Option

1V5Option

1V9Option

3V1Option4/5AV1

Option4/5AV2

Option5BV1

Present Value ofBenefits (excl.wider impacts)

226.40 220.68 264.31 280.84 304.35 294.07

Wider EconomicBenefits 60.36 45.89 85.93 71.82 72.84 84.40

Present Value ofBenefits(adjusted)

286.76 266.57 350.24 352.66 377.19 378.47

Present Value ofCosts (PVC) 132.99 129.65 161.61 174.82 183.06 193.97

Net PresentValue (NPV) 153.77 136.92 188.64 177.84 194.13 184.50

Adjusted Benefitto Cost Ratio(BCR)

2.16 2.06 2.17 2.02 2.06 1.95

10.7 Value for Money (VfM)7

The final VfM assessment includes more than just the BCR and also takesaccount of all expected effects, risks and uncertainty. Taking into account allimpacts, risk and uncertainty, no option significantly outperforms the otheroptions. All six options are considered to have medium VfM.

10.8 Sensitivity tests8

A range of sensitivity tests have been produced in order to understand howthe changes in modelling assumptions may affect the overall economicimpact of the A27 Arundel Bypass scheme options. The sensitivity test BCR’sare associated with a lower level of confidence than those presented for thecore scenario. Details of the sensitivity tests are presented in sections 14.10– 14.12 of the PCF Stage 2 Further Consultation ComMA.

7 The results set out here are based on central estimate Scheme costs8 The results set out here are based on central estimate Scheme costs



The following sensitivity tests were carried out:

§ Low traffic growth scenario§ Scenario excluding the A27 Worthing and Lancing junction

improvements§ Scenario excluding the Lyminster Bypass

An assessment based on optimistic assumptions about highways schemesand demand was carried out. Given that the 2041 models in all three-timeperiods failed to converge, it was considered that an economic assessmentbased on these models is likely to have a low analytical assurance. On thisbasis an economic assessment based on optimistic growth assumptions hasnot been further progressed.

The economic results for the scenario with low traffic growth are presented inTable 10-11.

Table 10-11: Economic impacts (£m) low growth

Total Benefit Option1v5

Option1v9

Option3v1

Option4/5Av1

Option4/5Av2

Option5Bv1

User Time 181.39 145.19 205.33 225.93 213.05 198.56

VOC fuel -2.27 1.91 -4.61 3.69 3.27 2.54

VOC non-fuel -17.37 -12.72 -23.98 -13.35 -12.64 -19.05

Indirect taxation 14.36 10.54 19.21 10.59 10.12 15.23

TUBA Total 176.11 144.92 195.95 226.86 213.79 197.28

Other Impacts 38.97 27.83 56.19 61.62 63.73 68.12

Estimated PVB 215.09 172.76 252.14 288.48 277.53 265.40

PVC 132.99 129.65 161.61 174.82 183.06 193.97

BCR (adjusted) 1.62 1.33 1.56 1.65 1.52 1.37

The economic results for the without A27 Worthing and Lancing scenario arepresented in Table 10-12.

The results of environmental sensitivity tests excluding Worthing and Lancingare set out in the Environmental Sensitivity Testing Technical Note. This willbe published by 13th September 2019.



Table 10-12: Economic impacts (£m) without A27 Worthing andLancing

TotalBenefit

Option1V5

Option1V9

Option3V1

Option4/5AV1

Option4/5AV2

Option5BV1

User Time 196.02 170.30 227.46 207.45 201.25 207.22

VOC fuel 2.03 6.22 0.38 7.68 7.41 7.02

VOC non-fuel

-19.03 -10.84 -22.36 -16.94 -15.61 -17.83

Indirecttaxation

14.54 8.56 17.22 13.26 12.39 13.89

TUBA Total 193.57 174.24 222.70 211.44 205.44 210.30

OtherImpacts

42.83 33.46 63.86 57.43 61.25 72.61

EstimatedPVB 236.40 207.70 286.56 268.87 266.69 282.91

PVC 132.99 129.65 161.61 174.82 183.06 193.97

BCR(adjusted) 1.78 1.60 1.77 1.54 1.46 1.46

Value forMoney Low Low Low Low Low Low



The economic results for the scenario excluding Lyminster bypass arepresented in Table 10-13.

Table 10-13: Economic impacts (£m) without Lyminster Bypass

TotalBenefit

Option1V5

Option1V9

Option3V1

Option4/5AV1

Option4/5AV2

Option5BV1

User Time 164.45 160.33 192.96 194.19 168.91 195.18

VOC fuel -0.36 4.41 -2.11 5.44 4.54 4.89

VOC non-fuel

-19.74 -11.59 -23.17 -17.53 -17.16 -18.29

Indirecttaxation

16.21 9.93 18.67 14.50 14.25 14.97

TUBATotal

160.55 163.09 186.36 196.61 170.54 196.74

OtherImpacts 35.53 31.32 53.44 53.40 50.84 67.93

EstimatedPVB

196.08 194.41 239.80 250.01 221.38 264.67

PVC 132.99 129.65 161.61 174.82 183.06 193.97

BCR(adjusted)

1.47 1.50 1.48 1.43 1.21 1.36

10.8.2 The results of the sensitivity tests illustrate a reduction in TUBA benefits, anda total reduction in PVB of 20 – 40%.

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