‘Optimism bias’ on toll road plan

From The Age, December 6, 2012, by Adam Carey

A Queensland company that overestimated the traffic on Brisbane’s financially failed airport toll road has been hired to predict the traffic on Melbourne’s proposed $10 billion east-west toll road.

Queensland-based Veitch Lister Consulting predicted in July that Brisbane’s Airport Link M7 would attract 120,000 vehicles a day toll-free when opened, taper off to 85,000 vehicles within six months and eventually sink to 60,000 vehicles a day.

But the road, which opened four months ago, carried just 53,000 vehicles a day last month, less than two-thirds Veitch Lister’s forecast.

Veitch Lister was not employed by the operator, BrisConnections, to do the modelling but did it independently. Its forecasts eclipsed BrisConnections’ own, which predicted that the road would gradually ramp up to 160,000 vehicles a day.

Victorian Greens leader Greg Barber said the toll road’s poor results – which last month forced BrisConnections into a trading halt on the stock exchange after its shares hit 0.04 cents – called into question the Victorian government’s assertion that the east-west link would carry up to 100,000 vehicles a day. ”The east-west tunnel will end up being a bigger white elephant than the north-south water pipeline,” he said.

The problem of so-called ”optimism bias” when modelling toll traffic has been so endemic that the federal government this year reviewed the problem.

The Bureau of Infrastructure, Transport and Regional Economics wrote in a report: ”In general, the forecasting performance for toll roads in the world has been found to be poorer than for toll-free roads. There is an asymmetrical pattern of forecasting errors, that is, consistent overestimation. Australia is no exception.”

Investors have recently sued several consultants over inflated traffic forecasts on toll roads in Brisbane and Sydney.

But Mike Veitch, the chief executive of Veitch Lister, defended the company’s modelling, saying it was free from optimism bias because it was not involved in any competitive bid to build the east-west link.

”It’s not rocket science,” he said. ”Australia has a long history of toll roads … One should be able to derive a model that fairly accurately predicts what a new toll road will carry.”

He said the modelling as part of the business case for the east-west link used 2011 census data on population, land use and employment.

The Linking Melbourne Authority, which is preparing the business case, said the modelling was also considering what effect a proposed railway line to Doncaster and the proposed Melbourne Metro tunnel would have on traffic. These figures would also help determine how the project was funded.

”Victorian government forecasts for toll road projects have proven to be extremely accurate in the past,” an authority spokeswoman said.

Brian Negus, head of public policy for the RACV, said traffic modelling should not be part of any bid to run the east-west link, to prevent optimism bias.

”A lot of forecasts of past toll road projects have been too optimistic because the winning bid is the one that forecasts the most traffic,” he said.

”There needs to be an independent approach to forecasting traffic, where a figure is provided to bidders who must finance, deliver and operate the projects off those figures.”

One thought on “‘Optimism bias’ on toll road plan”

  1. ItsMeMario says:

    Well, that makes the government a bunch of pessimists given that:
    1) they will make taxpayers pay for any wrong modelling we are not allowed to see
    2) some leaked modelling assumptions that car prices will remain the same means the Premier has no right to lobby the PM to save GMH
    3) the Premier understanding that car manufacturing is unsustainable but the Premier lobbying to the PM to save GMH

    As you can see, the Premier is trying to have it both ways shown with point 2 contradicting point 3.

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