The Fairfax press claims a consulting firm hired to work on Melbourne's planned East-West Link got the traffic forecasts for Brisbane's failing Airport Link toll road wrong. Is that right and is it a bad thing?
In an article titled ‘Optimism bias’ on toll road plan published last week, The Age claimed a Qld 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.”
Like most exercises that require gazing into the future, forecasting traffic is a hard business at the best of times. There are many variables at play and ample opportunity for the real world to depart from the assumptions made before the road in question opens for public use.
So it’s unrealistic to expect any forecast to be spot-on. However the projections relied upon by investors in Brisbane’s Airport Link toll road were a long way from spot-on.
The Product Disclosure Statement prepared by the proponents of Airport Link, BrisConnections, forecast 163,269 vehicles would use the new tunnel on an average day in the first three months after opening. That forecast assumed the full toll would apply but in fact no toll applied during this period.
As it turned out, actual usage during the three month toll free period averaged just 76,935 vehicles per day, less than half the forecast. So whoever did the forecasts got the numbers spectacularly wrong.
Neither Melbourne nor any other Australian city needs a problem like that. However it wasn’t the “Qld Company” referred to by The Age – Veitch Lister Consulting (VLC) – that got the forecast for Airport Link wrong.
In fact, The Age got it wrong. VLC had nothing to do with the forecasts that investors in Airport Link relied on. The Age does note in para 4 that “VLC was not employed” by BrisConnections, but that’s to cover its arse – the implication of the headline and lead paras is that VLC is culpable for Airport Link’s debacle (read The Age’s story here).
What actually happened is VLC prepared and published its own forecast for Airport Link as an entirely independent exercise, at its own cost. The company says it was an “in-house research project”.
I expect VLC was engaging in some aggressive marketing. The company probably expected the forecasts used by the proponent would turn out to be nonsense, making its own look good in comparison.
And they do. VLC’s forecasts are much closer to actual use than the proponent’s (see exhibit).
It’s still early days, but over the initial toll-free three month period, VLC says its forecast of average daily traffic, computed on the same basis as the proponents (except VLC assumed no toll), was between 75,460 and 91,600.
That’s between -2% and +19% of actual patronage. Pretty good for any forecasting exercise and very good compared to the proponents +213%, especially considering the proponent’s forecast assumed full tolling (over the entire 15 months!).
So VLC didn’t do the hopelessly optimistic forecasts that appear to be the undoing of Airport Link. More importantly from the point of view of Melburnians, the ones they did do have proven so far to be very good!
The Age got its story from Greens State Leader, Greg Barber, who the paper says:
called into question the Victorian government’s assertion that the east-west link would carry up to 100,000 vehicles a day.
Based on the estimates in the 2008 Eddington study, Investing in Transport, the preliminary Benefit to Cost ratio for the East-West Link is in the order of 0.5 i.e. it’s negative.
Now that it’s effectively committed to the project, the Victorian Government will of course be looking for ways to get that figure into positive territory. So Mr Barber’s concern is understandable.
Pointing the finger at VLC however is wrong. In fact, Mr Barber should be comforted, as I am, that the Government is hiring a firm that makes a public virtue of the accuracy of its forecasts.
I like the idea of a transport modelling consultant whose competitive advantage lies in the superiority of its forecasting technology. Some might also be comforted to learn that VLC did the transport modelling underlying the negative BC ratio estimated in the Eddington Study.
The best-known cases of enormous gaps between forecast and actual traffic involve private proponents seeking to attract capital. However, in the case of the East-West Link, VLC’s role is as an adviser to the Government.
As an aside, I don’t know where Greg Barber got the figure of 100,000 vpd on the East-West Link from, or even what it means.