Risk analysis within feasibility studies: an application to cost-benefit analysis for the construction of a new road

The present paper aims at testing new techniques of Quantitative Risk Analysis (QRA), based on a Monte Carlo Simulation (MCS), to Cost-Benefit evaluation of transportation projects. Cost-Benefit analysis have been widely used for the evaluation of projects, especially in the phase of "feasibility study" in order to support decision makers in the choice between design alternatives compared to financial and socio economic performance indicators. However, the empirical experience has shown that investment appraisal can be affected by many elements of risk, due to system's uncertainty and the multiplicity of interests involved [1,2] especially in a field such as the construction of a new road that will affect a community [3]. Actually, the input and output variables of the model, can not always be determined with certainty by the analyst, but are influenced by elements of uncertainty due to numerous biases that "normally" connote a decision-making process in which multiple variables contribute to the formulation of the choice. QRA and MCS aims at quantify the uncertainty embedded in the appraisal model through a probabilistic approach, effectively accounts for every possible value that each variable within the model can take by use of various Probability Distribution Function (PDF). The resulting point estimate is then transformed into an interval estimate illustrated in terms of PDF. The proposed approach will be tested on an interesting case study regarding the economic evaluation of a new connection road in the Latium region of Italy. The results obtained shown that QRA and MCS can helps decision makers in taking more transparent and responsible behaviors in the decision making process.