Incorporating risk in the economic evaluation of road infrastructure projects

Abstract

Decisions involving road infrastructure investment inevitably are based on various assumptions. This means that risk is inherent in these decisions. It is essential that this risk should be incorporated in the evalution process. This will add credibility to the process and ensure strategic decisions that are more defendable. In this study, a prosedure for incorporating risk is suggested. It involves the identification of inputs critical to the economic success of the project, the quantification of project risk and the use of a risk-adjusted discount rate.