Is there a case for disinvestment business cases?

As funding becomes tighter and government priorities expand, business cases have become more important in the field of transportation planning to set out the rationale and case for investment in a project. They demonstrate that the benefits of the project outweigh its costs. However, changes in policy and demand levels mean that some existing infrastructure would not be implemented were the investment considered today. As such infrastructure becomes life expired, a business case should be developed to inform the merit of investing in its long-term maintenance and continued operation.

Business cases are typically used to justify investment in new build transportation projects to provide an improved network or user experience. With an initial focus in transportation economics, business cases have expanded to capture the whole why and how of such investments, covering the gamut of the strategic rationale of the project, the societal impact, how it will be paid for, and how it will be delivered. The business case is used to inform decision making, both as the project evolves (to optimize project definition) and then the final decision on project implementation.

The projects being evaluated are normally proposed as a way to improve the transportation system: adding capacity, serving new markets, improving the service offer, enhancing the customer experience. However, a business case is grounded in the contemporary policy and cultural context, which invariably changes over time. The immediate post-war period saw the automobile become the principal focus of transportation planning, culminating in the interstate network in the U.S., the burgeoning motorway network in the U.K., and equivalent freeway networks across much of the western world, resulting in a diminished role for transit, with many urban transit and intercity rail services hollowed out.

However, in the last decade or two, such an approach is undergoing a degree of reversal. The environmental and social impacts of focusing on roads at the detriment of transit has come under increasing scrutiny and the ongoing costs of maintaining the network are becoming increasingly problematic. The current focus has turned to improving transit, making walking and cycling more attractive, increasing land use density to reduce the need for travel, and encouraging more sustainable modes. In that light, some existing highway infrastructure does not fit into the current policy context and would likely not meet business case requirements if it were considered as a ‘new project’ today.

As much of the highway building boom occurred 40-60 years ago, the infrastructure is becoming life expired. To maintain the infrastructure, significant sums of money need to be expended, notably for bridges and elevated roadways which are both more susceptible to deterioration and more expensive to maintain and renew. For example, the 2017 Infrastructure Report Card by the American Institute of Civil Engineers report a $543 billion backlog in repairing existing U.S. highways and bridges; the Turcot Interchange in Montreal, a three-level stacked freeway interchange, is being rebuilt at a cost of $3.7 billion; and the City of Toronto will spend $3.6 billion to rehabilitate the elevated Gardiner Expressway serving downtown Toronto.

Where the cost of maintenance and renewal is particularly high, a ‘disinvestment business case’ could be warranted to demonstrate the case for continuing to maintain the asset, as well as the alternative of reducing continued investment or even removing the asset. This is essentially the opposite of a traditional business case, with cost savings set against the disbenefits of lower service levels, compared to the maintain option.

In the Gardiner Expressway example, a proposal was developed to remove the eastern part of the expressway, where traffic volumes are lower, and replace it with an at-grade boulevard, providing improved urban amenity and scope for new development. A ‘hybrid’ alternative was also developed that would rebuild the elevated expressway in a more northerly location, maintaining the road network but with reduced scope for urban amenity improvements and development. The maintain and hybrid options had comparable costs, but the remove option would have saved $450 million, but added around three minutes travel time to automobile users. The City of Toronto undertook a comprehensive evaluation of the three options, with the Council voting to pursue the hybrid option.

In summary, any material expenditure for maintaining discrete elements of the transportation system should undergo a proportionate level of alternative options development and evaluation commensurate and consistent with projects to improve the transportation system. This will ensure the transportation system remains consistent with contemporary policy and fiscal requirements.


Get our latest news and opinions

We are Steer

Yes, you are in the right place. After 40 years, we have changed our name from Steer Davies Gleave to mark our growing international footprint and our expanding portfolio into markets beyond transportation.

Explore our new website to learn more about Steer: who we are, how we work and what our future holds.