University of Technology Sydney

49021 Evaluation of Infrastructure Investments

Warning: The information on this page is indicative. The subject outline for a particular session, location and mode of offering is the authoritative source of all information about the subject for that offering. Required texts, recommended texts and references in particular are likely to change. Students will be provided with a subject outline once they enrol in the subject.

Subject handbook information prior to 2020 is available in the Archives.

UTS: Engineering: Information, Systems and Modelling
Credit points: 6 cp

Subject level:

Postgraduate

Result type: Grade and marks

There are course requisites for this subject. See access conditions.

Description

Policy analysis requires the evaluation of the impact of investment decisions on potential infrastructure projects (and programs) in terms of selected project viability indicators and comparison against a set of decision criteria. This subject aims to introduce the principles, concepts and methods of evaluating investments in infrastructure projects.

Subject learning objectives (SLOs)

Upon successful completion of this subject students should be able to:

1. Describe the rationale, nature, characteristics, and criticality of infrastructure project evaluation, with special regard for the inter- and intra- sectoral dimensions of infrastructure project investments;
2. Explain basic concepts, principles and frameworks for project evaluation, namely, time value of money, project viability indicators, evaluation criteria, financial, economic, and other evaluation frameworks; and
3. Analyse, evaluate, and critically appraise infrastructure projects in specific socio-economic and institutional settings.

Teaching and learning strategies

This subject is offered in block mode, involving three (two-day each) modules, spread over a 12-week session.

Each block follows a similar structure, in that students are required to access pre-class review of subject reading/viewing material on UTSOnline. The material is designed to enable students to engage in meaningful discussions in class. Communication is integral to each class and the pre-reading material informs these conversations.

In class, students will have a formal lecture to re-assess understanding of concepts and methods and their applications in real-life situations using case studies. Students engage in extensive consultations to complete set exercises. These exercises provide opportunities for developing an understanding of concepts and methods relevant to the subject. They also provide opportunities for critical evaluation of presented information. Assignments are issued in each Block and are to be handed in before the next Block so that verbal feedback and relevant examples can be provided to guide each Block. Each Block follows an assignment and feedback, hence increasing understanding and increased opportunity for feedback. The assignments are designed to test students’ ability to apply concepts and methods in specific contexts, analyse policy trade-offs and, develop constructive critique. Quizzes are designed to assess knowledge and understanding of subject content. By completing these before each Block, students will receive verbal feedback on their progress in the following Block.

Content (topics)

1. Project evaluation
• Context
• Rationale

2. Typical characteristics of infrastructure projects
• Size and life span
• Role of public and private sectors
• Risk and uncertainty
• Estimation, valuation and commensurability problems
• Intra- and inter-sectoral linkages
• Conflicting objectives
• Multiple impacted groups
• Policy connects

3. Concepts of project evaluation
• Time value of money (discounted cash flows)
• Project viability indicators
• Criteria for project evaluation
• Project evaluation frameworks

4. Financial frameworks for project evaluation
• Indicators, criteria
• Limitations

5. Economic frameworks for project evaluation (Social cost-benefit analysis)
• Externalities, quantification and valuation issues
• Shadow pricing (willingness to pay and opportunity cost principles)
• Efficiency v equity
• Environmental considerations in project evaluation
• Risk and uncertainty

6. Decision-theoretic frameworks for project evaluation
• Decision trees
• Multi attribute decision analysis

7. Other frameworks for project evaluation
• Political
• Philosophical

Assessment

Assessment task 1: Assignment 1

Type: Exercises
Groupwork: Individual
Weight: 15%

Assessment task 2: Quiz 1

Type: Quiz/test
Groupwork: Individual
Weight: 25%

Assessment task 3: Assignment 2

Type: Exercises
Groupwork: Individual
Weight: 15%

Assessment task 4: Quiz 2

Type: Quiz/test
Groupwork: Individual
Weight: 25%

Assessment task 5: Assignment 3

Type: Exercises
Groupwork: Individual
Weight: 10%

Assessment task 6: Class Participation

Groupwork: Individual
Weight: 10%

Minimum requirements

In order to pass the subject, a student must achieve an overall mark of 50% or more.

Required texts

None prescribed. Selective lecture notes, journal articles and other readings are provided below.

Recommended texts

Ali, I (1989) A Framework for Evaluating the Economic Benefits of Power Projects, Asian Development Bank Economic Staff Paper No 43, ADB, Manila.

Ali, I (1991) Economic Analysis of Investments in Power Systems, Asian Development Bank, Economic Staff Paper No 49, ADB, Manila.

Barbier, E B (1989) Economics, Natural - Resource Scarcity and Development Earthscane, London.

Barish N N and Kaplan, S (1978) Economic Analysis for Engineering and Managerial Decision Making, McGraw-Hill, Sydney.

Brealey, R A, Myers, S C and Allen, F (2014) Corporate Finance, McGraw-Hill, Sydney.

Bureau Of Industry Economics (1992) Environmental Regulation : The Economics Of Tradeable Permits - A Survey Of Theory And Practice, AGPS, Canberra.

Canada, J R and White, J A Jr (1980) Capital Investment Decision Analysis for Management and Engineering, Prentice Hall, NJ.

Crousillat, E and Martzoukos, S (1991) Decision Making under Uncertainty: An Option Valuation Approach to Power Planning, The World Bank, Washington, D.C.

Buehring, W A, Foell, W K, and Keeney, R L (1978) Examining Energy/Environment Policy using Decision Analysis, Energy Systems and Policy, vol 2, No 3, pp 341-367.

Dasgupta, A K and Pearce, D (1972) Cost Benefit Analysis: Theory and Practice, Macmillan, London.

Department of Finance (1991) Handbook of Cost-Benefit Analysis, Australian Government Publishing Services, Canberra.

Finck, H and Oelert, G (1985) A Guide to Financial Evaluation of Investment Projects in Energy Supply, Eschborn, Deutsche Gesellschaft Fur Technische Zusammenarbeit (GTZ), Gmbh.

Foell, W K and Peerenboom, J P (1985) A Decision Analysis Approach to Energy System Expansion Planning, Energy Journal, July1985, vol 6, No 3, pp21-36.

Grant, E L, Ireson, W G and Leavenworth, R S (1990) Principles of Engineering Economy, John Wiley, Brisbane.

Hirschman, Albert O and Sirkin, Gerald (1958) Investment Criteria and Capital Intensity Once Again, The Quarterly Journal of Economics, Vol. LXXII, August 1958, pp 469-471.

Howard, R A (1968) The Foundations of Decision Analysis, IEEE Transactions on System Science and Cybernatics, SSC-4, No 3, pp 211-219.

Howard, R A (1980) An Assessment of Decision Analysis, Operations Research, vol 28 No 1.

Johansson, Per-Olov (2015), Cost-benefit analysis for project appraisal, Cambridge University Press, Cambridge.

Keeney R L and Raiffa, H (1976) Decisions with Multiple Objectives: Preferences and Value Tradeoffs, John Wiley and Sons, NY.

Keeney, R L (1982) Decision Analysis: An Overview, Operations Research, vol 30, No 5, September-October 1982, pp 803-838.

Kohli K N (1993) Economic Analysis of Investment Projects: A Practical Approach, Oxford University Press, Melbourne.

Lal, D (1974) Methods of Project Analysis: A Review, The John Hopkins Press, Baltimore.

Little, I M D and Mirrlees, J A (1974) Project Appraisal and Planning for Developing Countries, Heinemann Educational Books, London.

Maass, Arthur (1966) Benefit-Cost Analysis: Its Relevance to Public Investment Decisions, The Quarterly Journal of Economics, Vol. LXXX, May 1966, pp 208-225.

Mishan, E J (2007) Cost-Benefit Analysis, George Allen and Unwin, Sydney.

New South Wales Government (1990) Economic Appraisal of Capital Works, The Premier's Department, Sydney.

Parkin, James and Sharma, Deepak (1999) Infrastructure Planning, Thomas Telford, London.

Pouliquen L Y (1975) Risk Analysis in Project Appraisal, John Hopkins, Baltimore.

Prest, A R and Turvey, R (1965) Cost-Benefit Analysis: A Survey, The Economic Journal, Vol. LXXV, December 1965, pp 683-735.

Ray A (1984) Cost-Benefit Analysis and Methodologies, The World Bank, Washington, D.C.

Reutlinger, S (1970) Techniques for Project Appraisal under Uncertainty, John Hopkins, Baltimore.

Samson, D (ed) (1989) Management for Engineers, Longman Cheshire, Melbourne.

Shaner, W W (1979) Project planning for Developing Economies, Praeger, NY.

Squire, L, Herman, G and van Der Tak (1979) Economic Analysis of Projects, John Hopkins, London.

Weiss, D (1978) Economic Evaluation of Projects: A Critical Comparison of a new World Bank Methodology with the

UNIDO and the Revised OECD Approach, Socio-economic Planning Science, vol 12, pp 347-363.