Spending Scarce Funds More Efficiently—Including the Pattern of Interdependence in Cost-Benefit Analysis
Publication: Journal of Infrastructure Systems
Volume 18, Issue 4
Abstract
The financial crisis has substantially aggravated shortages of public funds all over the world, particularly in many developed countries. After the expiration of investments made within the framework of public economic recovery plans, the availability of public funds for infrastructure investments will be subject to severe constraints. These conditions require that scarce available funds be spent in an efficient and effective manner. Evaluation methods to select and prioritize infrastructure projects of an investment package often presuppose that infrastructure projects are independent of one another. However, it is inherent in the nature of transport networks that links are interdependent and that changes in one link will affect other parts of the network. Some infrastructure projects might be characterized by substitutive interdependence, while others might interact in a synergistic context. Thus, the cost and benefits of a project are strongly dependent on the realization of other projects. This paper confronts this issue by comprehensively addressing the nature of the problem to derive an optimal set of investment projects. The approach utilizes a dynamic mixed integer algorithm, and the complexity of the combinatorial problem is reduced by elaborating on a heuristic method. Under application of these requisites, this paper develops a framework for integrating the interdependence between infrastructure projects in cost-benefit analysis. Results obtained from an example application related to investments made in the Trans-European Network (TEN-T) emphasize the importance and relevance of considering interdependence for evaluating the investment potential of infrastructure projects.
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Published In
Journal of Infrastructure Systems
Volume 18 • Issue 4 • December 2012
Pages: 242 - 251
Copyright
© 2012 American Society of Civil Engineers.
History
Received: May 26, 2011
Accepted: Feb 13, 2012
Published online: Feb 16, 2012
Published in print: Dec 1, 2012
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