Improving Transport Project Appraisals
In the Islamic Countries
21
Table 1.2: Depth and cost of project appraisal
Phase or project cycle Type of appraisal Cost (% on total investment
costs)
Identification phase Opportunity study 0.2-1.0
Formulation Pre-feasibility study 0.25-1.5
Appraisal and selection Feasibility study 0.2-1.0
Source: Own processing of UNIDO, 1991
A transport project appraisal can for instance be mandatory for all financially significant public
investments (with a precise definition of the financial threshold), or requiring different depth or
type of analysis depending on the financial scale, scope or sector (e.g. for rail, road, urban
transport). The proportionality principle is also implicitly recognised by the Chilean national
system which promotes a multi-stage evaluation. A large investment project such as a bridge or
a highway is evaluated at several stages of the project cycle. Instead, smaller, non-complex
investments do not have to undergo all stages of the project cycle (Gómez-Lobo, 2012).
The definition of scope in transport project appraisal is further complicated by the network
character of this sector. Typically, a transport project has complementary infrastructures linking
it to the rest of the network. Moreover, changes in traffic flows for one transport mode generate
effects across other different modes. This poses a significant challenge to the analyst and
requires to embed individual projects into comprehensive plans and strategies.
Hence, a problem arises as to perform the appraisal on individual projects or at the strategic level
(or a combination). While individual project appraisal is a common practice, usually by means
of a CBA (see below on methodology), ranking projects in the same sector or subsector to build
a strategic project pipeline is less common.
Ad 3) Timing
The purpose and scope of project appraisal in the decision-making process has an implication
on its timing. In the same way, the phase of the project cycle at which the project appraisal is
conducted has a significant impact on its role in the public investment management system. If the
appraisal is used mainly in the preliminary phase by government to include or discard projects
from a list and eventually to prioritise them according to budget, the appraisal should be done
at a very early stage where different strategic solutions are still open to solve a given problem
(this can be referred to “strategic appraisal” or “opportunity studies”). If project appraisal is
required to assess an individual project and to eventually support its design, then the appraisal
should be “thorough appraisal” accompanying the decision-making of possible real alternatives
(Beria et al, 2012). On overview of when CBA is performed in the OECD countries is presented
i