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RHD Operational Procedure Planning and Maintenance Wing
 
Economics - Feasibility Studies Division
 
OP/EC/3.1 - Preparation of Economic Feasibility Study Reports
 
Purpose and Scope :

This procedure describes the process for preparing economic feasibility study reports for Roads and Highways Department projects, and deals with the comprehensive economic appraisal of road and bridge projects with the objective of testing the viability of and justification for the projects.
 
Definitions :

Internal Rate of Return (IRR) - a measure of the benefit of the project through a procedure of discounting the future cost and benefit flows setting the NPV equal to zero. Must exceed discount rate for project to be economically viable. Referred to as Economic Internal Rate of Return (EIRR) for economic appraisals and Financial Internal Rate of Return (FIRR) for financial appraisals.

First Year Rate of Return (FYRR) the ratio of the first year of project benefits to the capital cost. Must exceed one for project to be viable.

Net Present Value (NPV) - is the difference between the discounted present value of the project cost (PVC) and discounted present value of the benefit (PVB) streams. NPV must exceed zero (ie present value benefits are greater than present value costs) for a project to be economically viable.

Benefit Cost Ratio (BCR) ratio of PVB to PVC. Must exceed one for a project to be economically viable.
 
Responsibility :

Chief Transport Economist - Economics Circle (CTE) - reviews and finalises the draft feasibility report.

Executive Transport Economist - Feasibility Studies Division (ETE-FSD) - designs the field surveys, analyses the data collected through surveys and from secondary sources, and prepares the draft economic feasibility study report.

Assistant Transport Economist - Feasibility Studies Division (ATE-FSD) - organises and monitors field surveys and collects necessary information from other agencies.
 
Method :

4.1 REQUEST RECEIVED FOR AN ECONOMIC FEASIBILITY STUDY

The process starts with a request to the CTE normally from the RHD or the Ministry of Communications. The CTE will request the necessary information to undertake the study, for example the PCP.

4.2 DATA COLLECTION

The collection of data for the study is managed by the ETE-FSD, who initially designs the questionnaires for the necessary surveys for example:

- Origin-destination survey

- Traffic count survey

- Ferry time delay survey

- Ferry system cost survey

- Socio-economic survey

The ETE-FSD hires the necessary survey personnel and ensures that they are trained to obtain accurate data.

The ATE-FSD organises the field surveys and also obtains secondary data from:

- Publications of the Bangladesh Bureau of Statistics

- Economics Circle reports and working papers

- Information provided by other RHD Circles eg. Planning and Ferry Construction Circle

4.3 COST-BENEFIT ANALYSIS AND PREPARATION OF THE DRAFT REPORT

When the information is finally received from the surveys and literature search, the ETE-FSD undertakes the cost-benefit analysis for the project. The cost-benefit analysis is a major element of the study. The estimated project costs are obtained from the Project Concept Paper, provided to the CTE. The financial costs are converted into economic costs for the purpose of the analysis and evaluation.

The ETE-FSD will then use his experience and knowledge to identify the economic benefits of the project. Every project, whether it is a road or bridge project will have some source of benefit depending on the nature of project. For example in a purely bridge construction study the savings are mainly in the ferry system costs and also in providing user cost savings in ferry crossing time and saving in time-related vehicle operating costs which are estimated both in terms of financial and economic values.

The undiscounted cashflow of the project over its life is estimated both in financial and economic terms. In order to arrive at their present value, both the cost and benefit streams are discounted. The results are given in terms of FYRR, EIRR, NPV and BCR upon which the recommendation for implementation is made.

4.4 ECONOMIC FEASIBILITY STUDY REPORT DISTRIBUTION

The ETE-FSD prepares the final draft of the Economic Feasibility Study Report and submits it to the CTE for final review. When the report is finalised, it is distributed by the CTE according to the circulation list agreed with the CE.
 
References :

Statistical Year Book of Bangladesh and other Bangladesh Bureau of Statistics publications

Annual RHD Road User Cost Report (Latest)
 
Procedure Flowchart :

The procedure flowchart for this procedure is detailed on the next page. This flowchart assumes feasibility study can be conducted within the Economics Circle budget. Otherwise it will be done by outside consultants, maintained by the Economics Circle.
 


 


 

 

For duties associated with each grade of personnel see

 

Updated on : 1/12/2003

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