Economic feasibility of the proposed Second Forth Road Bridge using Public Private Partnership procurement

Abstract

The existing Forth Road Bridge near Edinburgh in Scotland at present carries 24 million vehicles annually, which is twice its design capacity. The need for a second Forth Road Bridge is discussed in this paper. There is currently a proposal for design and construction of the second Forth Road Bridge crossing. Some organisations are in favour of the project and yet others are against it. If the project were sanctioned, it would be private sector funded under the government’s PFI/PPP programme. This paper provides an economic evaluation of the proposed second Forth Road Bridge crossing. Firstly, a review of studies carried out on the traffic characteristics across the Forth is provided. Secondly, a critical analysis of the economic tools and techniques available for cost‐benefit analysis is given. The concept of cost of capital for government projects is also discussed and distinguished from cost of borrowing. The paper then provides present values of expected revenues from toll charges supported by extensive sensitivity studies for various assumptions regarding changes in toll levels, concession periods, future traffic growth levels and cost of capital. The main conclusions of the study are that the scheme is economically viable subject to the following limitations. If only Northbound traffic is tolled, this would require quadrupling of the current toll levels for the expected revenues to be adequate to fund design, construction and maintenance costs of a second standard bridge crossing and approach roads over a 30‐year concession period. If both Northbound and Southbound traffic were tolled, the present toll levels would need to be doubled on award of the concession contract and increased annually by the Retail Price Index (RPI) for the scheme to be economically viable. If the new crossing is to include the possibility of a heavy rail link under the dual carriage way, the expected present values of toll revenues provided they are increased as suggested above would be adequate only to fund design and construction costs of the new crossing and maintenance of both bridges. The project as whole would only be economically viable if the public sector funded the design, construction and maintenance costs of the required tunnels and approach roads.

Citation

Wamuziri, S.C. and Clearie, A.G.F. (2005), "Economic feasibility of the proposed Second Forth Road Bridge using Public Private Partnership procurement", Journal of Financial Management of Property and Construction, Vol. 10 No. 2, pp. 95-106. https://doi.org/10.1108/13664380580001067