Its here! After weeks and weeks of prodding, the business case for the Cycle Hire Scheme landed in my inbox from TfL this morning. Its a weighty document and will take some time to analyse and cross check with other sources, but here’s my first thoughts that on the document.
From previous posts you’ll know I have been at TfL to release the business case for the cycle hire scheme. Its arrived this morning. Its probably going to take a little while to analyse over the weekend (yes, that’s how sad my life is), but here are a few thoughts after a quick speed read of the document:
1. It looks out of date.
If things change on your project, you should update the business case. After all if your costs rise, for example, the project you are sponsoring may well end up not being worth doing and at that point you should at least consider cutting your losses and stopping the it altogether. Unless the revision history on the document I have is wrong, the last time this was updated was January 2009 and there has been a lot of water under the bridge since then.
For example, it indicates that the requested project authority is £54.1m, whereas the TfL Finance and Policy Committee minutes already show a PA of £81.7M. It’s possible that’s due to an extension of the scheme, however it currently means its impossible to determine whether the scheme is good value or not without knowing if there’s a component of overspend in that £81.7M or its all overspend. This is important when calculating the cost-benefit ratio and I will go into more detail on that later.
2. Its been subject to a substantial amount of redaction.
To an extent I expected this as there is a third part contractor involved and naturally TfL will need to consider their tendering position. However there are areas where I think it is unjustified. In particular there is a table that has been removed wholesale that models the overall expenditure of the scheme over the period of the business case. For a scheme such as this, given there is a substantial amount of public money at stake I think this is unjustified. I will be lodging an appeal on that specific redaction plus others.
3. Modal shift
A very interesting section is on the assumed modal shift from various transport form. They are in broad alignment with the number in the mayoral direction that Helen highlighted at Boriswatch. This means that the Mayor’s trumpeting of the scheme as a way of getting people out of their cars is nonsense. Most shift is assumed to come from walking with bus and tube coming after that, however there has been no allowance made for a loss in tube/bus fares as a result of this. I’m not sure I believe this to be correct.
4. Rail after-market
Given the problems at mainline stations a great deal of the use in the scheme is anecdotally in servicing the rail after market. Unfortunately that has not been accounted for in the business case and in particular any bike re-circulation costs will not be included. Its possible therefore that the operating costs are now higher than in the business case both for staff costs and for the provision of vehicles. The BC asserts that it would take 50,000 bikes to properly service this market, a truly staggering figure.
5. Operating costs
TfL assume that the scheme is broadly self-financing for operating costs over the 7 period of the contract let. Indeed the BC claims a small operating surplus. This was a real surprise to me as I had expected to see at least some on-going requirement for subsidy to operate the scheme. The BC assumes £119M in fares over the 7 years. Whether this is right or not will depend crucially on how long the cycle journeys are of course. The shorter they are (i.e. in the 30 min free period) the less the fare revenue. Again a detailed breakdown of the fare revenue has been redacted. Also if costs rise (because of additional re-circulation for example) then this could change.
These are divided into infrastructure, journey time and health benefits. These total £84.6M, of which the health benefits comprise £31M. Whether you believe that health benefits should be recognised when determining if the scheme is good value I guess depends on whether you think TfL are providing just a transport service or a wider community service. I tend to favour the former, but I can see some logic in the latter. This is a key point however because if you have been following the numbers up until now you’ll have seen that whether you include the health benefits or not is key to whether the scheme is good value for money or not.
7. Cost benefit ratio
The BC offers two ways of looking at the cost:benefit ratio. Without the health benefits, dividing the costs by the benefits gives you a ratio of 1.36:1, including the health benefits give you a ratio of 2.14:1. So both positive – but there’s a problem. As indicated at the top I think its possible that the business case may not accurately reflect the cost of the scheme as the current authority is £81.7M not £54.1M. If we were to assume that original scheme will now cost £81.7M and no change in benefits (which I think is correct) then a different picture will emerge. It is going to be difficult to work out a specific CBR under these circumstances as there has been a conversion applied to the operating costs to bring them to present day values. Process-wise this is correct, and given the long term operating costs are neutral and project costs are all near term the effect of this should be minor. However without a detailed breakdown of costs over time (which remember has been redacted) I can’t measure with any precision what the effect would be. However I think I am on solid ground in say that with a project cost of £81.7M then the CBR would be significantly less than 1:1 without health benefits and possibly only marginally positive with them accounted for.
So blog readers I need help if anyone can find the info. Can anybody help me with what the current project authority in this document actually pays for?