Understanding transport project appraisal in its institutional dimension

Despite extensive convergence on the methodologies for transport project appraisal, the actual performance of transport infrastructures frequently differs from ex-ante forecasts. Among the possible reasons for this discrepancy, there are technical and institutional aspects. Technical reasons point to lacking data, failure to identify effects generated by the project, impossibility to include certain effects in the analysis. Institutional ones include strategic misrepresentations by project promoters, absence of incentives for the private and public sector to avoid optimism bias and reveal true information about the project, path dependency. This paper adopts a conceptual framework for the analysis of transport project appraisal systems, based on relevant literature and illustrated through good practices from different countries and international organisations. The framework’s illustration highlights how an appropriate institutional setting is instrumental for the proper use of transport project appraisal and its performance. The paper argues that embedding transport project appraisal in a formalised institutional setting is important to ensuring more transparency in public investment decision making and reducing uncertainties stemming from arbitrary or biased decision processes. Further, a robust institutional setting can increase the solidity and comparability of appraisal results, as well as ensure that these results feed into the decision-making process.