Transport Project Appraisal in Israel

Major investments in transport projects currently under way in Israel account for 1.2% of gross domestic product. The government is allocating budgets for new roads, intercity rail lines, and mass transit systems in all major metropolitan areas, with a growing share of private financing of public infrastructure. The government issued a new guide for transport project appraisal in 2006 to improve the decision-making process and the efficient allocation of funds. The guide is a result of substantial research and comprehensive review of worldwide developments, positioning project appraisal technique in line with best practices and state-of-the-art transport economics. The paper focuses on the main methodologies and changes in the new guide. The 2006 guide broadens the project impacts taking into account cost–benefit analysis (CBA) and thus reduces potential bias among different types of projects. New safety and environmental impact analysis are now part of CBA. Other impacts include equity analysis and accessibility and level-of-service indices. Special attention was given to improve the interaction between the transportation model and the economic model, integrating the various project impacts under a broad systematic analysis. Benefits are calculated based on welfare theory, and a special procedure is introduced to evaluate the potential bias under fixed demand travel demand models. It was shown that benefits are usually overestimated by use of the fixed demand assumption. These overestimates are negligible under normal flow conditions, but the bias is high under congestion conditions and elastic demand.