Tag: infrastructure decisions

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Infrastructure

Improving Your Chances of Winning a Luxury Car

In helping people and organisations figure out the odds and make smarter infrastructure decisions, sometimes the right course of action may actually seem counterintuitive.

An example of this is the Monty Hall Paradox.

Suppose you are participating in a game show where the prize – say a luxury car – is behind one of three closed doors.  Can you improve your odds of winning the car by switching doors after the host shows you what is behind one of the other doors?

Of course you can.

I have attached a little PowerPoint that explains why and in what context.  See:

20150701-monty-hall-paradox-lytton-advisory

It can be hard to recognise when additional, relevant information should prompt us to change course.

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Lytton Advisory

Quarterly Newsletter – June 2015

Now available at:

Media

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Infrastructure

A Bridge to Sell

Unknown Recently at the Warren Centre (http://thewarrencentre.org.au/ip30-panel-investigates-the-infrastructure-governance-opportunity/) there was some commentary around the cost of duplicating Brisbane’s Gateway Motorway Bridge.  Namely, between the original and the duplicate, costs increased fivefold.  On the surface that would be a stunning thing.  However, when we consider 24 intervening years (1986-2010) between the costings for the two projects, we are looking at an annualised increase in costs of 6.9%.  This is still significant when inflation only increased 3.4%p.a. over the same period.  I know there are construction price indices around as well.  However, I wonder whether design and materials were significantly different, and the connecting road infrastructure was more challenging. That might explain some of the residual increase.  Also, the duplicate would have been constructed in a much tighter market for engineering and construction services.  Should we have bought the extra lanes way back in 1986 or would the opportunity cost have been too large?

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Infrastructure

Accuracy and precision are different things, especially for infrastructure

The effort invested in ‘getting it right’ should be commensurate with the importance of the decision – Daniel Kahneman

Accuracy is the absence of error; precision is the level of detail. Often in infrastructure planning and analysis we see an unnecessary need for precision in the early stages with not much emphasis on accuracy.

Effective problem solving requires always being accurate but only being as precise as is helpful at any given stage of problem solving. This is about delivering analysis that is sufficient to proceed to the next stage in developing an infrastructure project. Many project approval gateway processes recognize this, but it is often poorly implemented.

Early in the problem solving process, accurate but imprecise methods, rather than very exact methods, will allow consideration of all reasonable approaches and minimize the tracking of needlessly detailed data. In this way, less apparent but potentially higher value options and scenarios can be considered and compared with the standard approaches.

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Cost Benefit Analysis Transport

How Would We Know?

The absence of a publicly available cost benefit analysis for the proposed Bus and Train (BAT) Tunnel project in Brisbane raises a couple of obvious questions.  The first is the simplest.

The previous Cross River Rail (CRR) proposal was expected to cost around $6.4 billion to construct.  At this stage the BAT Tunnel is expected to cost around $5 billion.  Queenslanders save $1.4 billion right?

Financially they do.  But without a full CBA we cannot know what benefits are being left on the table.  If more than $1.4 billion in benefits under CRR are not realised in the BAT Tunnel we are actually reducing the net economic benefit of getting a decent public transport solution.

How would we know?

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Lytton Advisory

Welcome

Welcome to Lytton Advisory. We help organisations make good infrastructure decisions using economic and financial analysis. Some of our thoughts on these issues are posted here.