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The paper deals with the refinement of the Cost-Benefit Analysis methodological procedure for the assessment of the economic effectiveness of large-scale transport infrastructure projects. The basic input is economic Cash Flow which consists of investment costs, operating income, operating expenses, societal benefits, and harms as well as the investment residual value. According to the methodological guidelines, the currently evaluated project period is considered to be 30 years including the investment phase starting in the first year of the construction, the relevant part of the operational phase, and the residual value of the project in the last year of the assessed period. The evaluation of the economic effectiveness of projects is largely influenced by the determination of the construction economic life. A procedure for calculating the residual value of the project while respecting the gradual implementation of partial constructions was established as part of the research. A case study based on the research sample of several investment construction projects of the highway sections in the Czech Republic demonstrates how this methodological procedure affects the economic effectiveness of the project.

The assessment of the economic effectiveness of transport infrastructure projects is carried out based on the Cost-Benefit Analysis (CBA) which is described in the Guide to CBA of Investment Projects (

The aim of the research is assessment how the methodical procedure of the residual value calculation as well as the setting of individual input variables affects the amount of the residual value and thus the overall project economic effectiveness. The authors firstly present the basic calculation formulae for determining the residual value, secondly they define the input variables and the importance of applying their values at the time of the project. The impacts of the changes in the calculation of the residual value on the assessment of the economic effectiveness of the project are demonstrated in four project case studies and the recommendations are proposed.

Assessing the socio-economic effectiveness of public investment projects is one of the key steps in the decision-making process of providing funding for their implementation. The demands on the economic effectiveness of transport infrastructure projects are high and justified due to the scope of these investments. Beysekara (

The CBA method is widely used to assess the economic effectiveness of transport infrastructure projects.

Laird et al. (

The decision on the implementation of the transport infrastructure project often has a significant political dimension.

Tomek et al. (

Another alternative approach - Multicriteria Analysis should be mentioned within the presented paper, which is focused mainly on the use of the CBA method for the evaluation of transport infrastructure investment projects.

The theory of Multicriteria Analysis is explained in more detail in the paper by

Very important, but often neglected in practice, is the ex-post evaluation of transport infrastructure projects. Welde et al. (

In addition to the basic calculation formula, the economic effectiveness of transport infrastructure projects has two other significant variables, namely the concept of the length of the evaluated period and the value of the discount rate for determining the time value of money and calculating the current values of future CF. Methodological approaches used in the Czech Republic changed over the years; until 2017, the evaluated period was considered to be 30 years consisting of the operational phase of the project, to which the investment phase lasting the expected years of construction was added (

The research question to which this answer is sought is how significantly the methodological procedures for calculating the residual value will affect its final value, which is an essential variable for calculating the economic efficiency of public investment projects. The authors focused on the analysis of the residual value determined by two methods, which have been applied in recent years in the assessment of the economic effectiveness of the transport infrastructure project in the Czech Republic. One of the above-mentioned methods is the Straight-Line Depreciation Method (

The Straight-Line Depreciation Method calculates the residual value based on the depreciation of assets (buildings and equipment) in the years of operation. The total residual value of the construction is determined by the sum of the residual values of the individual buildings and equipment. The total residual value can be determined based on the following relations

_{
total
} Total residual value of the construction in EUR.

_{
i
} Residual value of the building or equipment

_{
i
} Residual value of the building or equipment

_{
j
} Whole life

_{
i
} Undiscounted costs of the building or equipment

The Residual Performance Potential Method of the project determines the residual value based on the remaining investment performance, which represents the net present value of cash flows in the remaining years of the economic life of the construction project beyond the evaluated project period. Economic life is determined as a weighted average of the value of costs incurred for individual types of buildings and equipment and their economic life, where the weights are the total construction costs. The current methodological procedures quantify the residual life of the project as the difference between the total economic life of the project in years and the relevant length of its operational phase determined from the year of commissioning of the whole project, as stated in relation

_{
total
} Total whole life of the construction.

_{
i
} Whole life of the relevant building or equipment

_{
i
} Undiscounted costs of the building or equipment

_{
total
} Total undiscounted construction costs in EUR.

Both examples of calculation of the residual value are based on a significant technical and economic parameter, namely the length of the economic life of the project and the subsequent determination of the project residual life after the end of its evaluated period.

The authors point out that some large-scale infrastructure projects are so extensive that they are implemented gradually as partial constructions. These partial fixed assets start to be worn out prior to the completion of the investment phase of the entire project. The authors discuss how this fact affects the assessment of the economic effectiveness of the project with discounted cash flows, i.e. with respect to the money time value.

The research approach is demonstrated in four Czech large-scale road infrastructure projects.

Basic description of investment projects.

Project | Basic Project Description | Total Investment Costs EUR (mil. | Total Construction Costs EUR (mil.) | ENPV EUR (Mil.) |
---|---|---|---|---|

D/11 Jirny–Poděbrady | Construction of a 32,780 km of motorway, 6 level crossings, modifications of 25 bridges | 292.28 | 268.90 | 275.14 |

I/53 Znojmo–Pohořelice | Modernization of the class I road in the length of 32 km, 6 level crossings, 16 bridges, modification of related class II roads in the length of 11.26 km and 10 bridges | 136.40 | 120.81 | 103.27 |

D/6 Nové Strašecí–Karlovy Vary | Construction of a 97,78 km of motorway, 9 level crossings modifications of 101 bridges | 1 134.06 | 1 021.04 | 289.95 |

I/53 Opatovice–Mohelnice | Construction of a 94,21 km of motorway, 11 level crossings, modifications of 90 bridges, 2 tunnels | 1 904.91 | 1 770.07 | 3 746.26 |

Project variable values, incl. original residual values and residual life.

Project | Number of Partial Constructions | Length of the Project Implementation in years | Total Economic Life of the Project in years | Length of Residual Life in years |
---|---|---|---|---|

D/11 Jirny–Poděbrady | 4 | 4 | 38 | 10 |

I/53 Znojmo–Pohořelice | 5 | 9 | 45 | 24 |

D/6 Nové Strašecí–Karlovy Vary | 11 | 8 | 50 | 28 |

I/53 Opatovice–Mohelnice | 9 | 16 | 61 | 47 |

As mentioned above, the residual value of large-scale road infrastructure projects in the Czech Republic is addressed in two ways within the evaluation of the economic effectiveness of projects, the Straight-Line Depreciation Method and the Residual Performance Potential Method.

The innovative methodological approach is based on considering the time lag for starting to draw on the costs of depreciation of partial structures, which are put into operation before the carrying out of the whole construction is completed.

Within the Straight-Line Depreciation Method, the length of the operating phase is included in the calculation of the residual value, see relation _{
i
}. The total economic residual value is determined according to the above-stated relation

_{
i
} Residual value of the building or equipment

_{
j
} Whole life

_{
ik
} First year of operation of the building or equipment

_{
ik
} Undiscounted costs of the building or equipment

The residual value of the project is subsequently calculated using the original relations

The proposed calculation method was demonstrated in four large-scale investment projects for the construction of motorways and I class roads in the Czech Republic, whose original variables are stated in

Impact of the change in the project service life length on project effectiveness.

Project | Original Life in years | Modified Life in years | Change in the Length of the Life in years | Change in the Length of the Life in % | Original ENPV in EUR (mil) | Modified ENPV in EUR (mil) | Change in the ENPV in EUR (mil) | Change in the ENPV in % |
---|---|---|---|---|---|---|---|---|

D/11 Jirny–Poděbrady | 10 | 11 | 1 | +10.00 | 275.03 | 281.03 | −6.00 | 2.18 |

I/53 Znojmo–Pohořelice | 24 | 23 | 1 | −4.17 | 103.42 | 102.37 | 1.05 | −1.02 |

D/6 Nové Strašecí–Karlovy Vary | 28 | 27 | 1 | −3.57 | 289.87 | 284.70 | 5.17 | −1.78 |

I/53 Opatovice–Mohelnice | 47 | 41 | 6 | −12.77 | 3,746.26 | 3,719.45 | 26.81 | −0.72 |

The results presented in

This article refines the methodological procedure for calculating the residual value of a public investment project assessed by the CBA method. The authors discuss and demonstrate on a sample of investment projects the effect of the time lag for the start of drawing on the costs of depreciation of assets, which are gradually implemented before the end of the investment phase of the project, on the overall basic economic effectiveness indicator - ENPV. Although in percentage terms these are not large values, in monetary terms this shift may be significant, especially for large investment projects. A more accurate determination of the residual value also more precisely reflects the actual value of the assets at the end of the assessed period. Effectiveness in residual value is closely related to the proper quality of the services provided by the infrastructure, ensures Value for Money, and maximizes the returns on investment (

The original contributions presented in the study are included in the article/Supplementary Material, further inquiries can be directed to the corresponding author.

Conceptualization JK and VH; methodology JK and VH; validation JK and VH; formal analysis JK and VH; investigation JK and VH; resources JK, VH, and JF; data curation JK, VH, and JF; writing—original draft preparation JK and VH; writing—review and editing JK and VH; visualization JK; supervision JK; project administration. JK; funding acquisition JK All authors have read and agreed to the published version of the manuscript.

This paper has been worked out under the project of the standard specific research at Brno University of Technology no. FAST-S-22-7970 Economic and managerial processes in construction.

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

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