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The Project background
The New Zealand Government, Te K?wanatanga o Aotearoa (NZG),�considers constructing additional lanes on a two-lane single carriageway for a motorway network of 2,033 kilometres. The motorway links the North Island and South Island, and the project delivery consists of two stages. Stage �1 �will complete the South Island section (952 km), constructed between �2021 and 2024. Stage 2 will begin in 2024 and complete the �North �Island section�(1,081�km�Km)�by�2026.�Figure�1 illustrates�the route.
Figure 1: Map Showing Route of the Planned Motorway
Motorway construction is not the core business of the government, and NZG and a private company (PC) share the project service delivery. The PC will operate the Project under Build-Operate-Transfer (BOT) contracting strategy. Table 1 shows the PC service delivery, Table 2 depicts the private company service delivery durations, while Table 3 presents the NZG service delivery and durations.
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��Table 1: Private Company Service�Delivery |
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Service |
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1 |
Capital investment (motorway and toll) including Equity |
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2 |
Operation of toll and motorway within concession period |
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3 |
Maintenance of toll and motorway within concession period |
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4 |
Loan servicing |
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��5 |
Loan�repay |
�
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��Table 2: Private Company Service Delivery�Durations |
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Service Schedule |
Duration |
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1 |
Stage 1 construction |
2021-2024 |
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2 |
Stage 1 construction |
2024-2026 |
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3 |
Concession period |
15 years |
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��Table 3: NZG Service Delivery and�Durations |
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NZG Service Delivery and Durations |
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1 |
Land investment |
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2 |
Capital investment |
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3 |
Capital investment (motorway and toll) including Equity |
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4 |
Operation of toll and motorway after concession period for 25 years |
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� 5 |
Maintenance of toll and motorway after concession period for 25 years |
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6 |
Loan servicing |
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7 |
Loan repay |
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8 |
Project end life of 40 years |
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This�report�money�cost,�expendicture�and�revenue�are�in
$NZD million
1.1�Investment cost breakdown for motorway�construction�
1.1.1�Motorway Construction At market�price�Table 4 is the investment cost breakdown. It shows the year-by-year breakdown, the allocation between the private and public sectors, and inputs� composition. The public share and private share for the capital cost is 50% for all years except in 2026, where NZG provides the capital share.
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Table 4: Composition of Construction Costs ($NZD million) |
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Labour |
� |
Materials |
� |
Equipment |
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Local |
Foreign |
Local |
Foreign |
Local |
Foreign |
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2021 |
160.00 |
320.00 |
240.00 |
480.00 |
160.00 |
880.00 |
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2022 |
480.00 |
560.00 |
400.00 |
1,120.00 |
320.00 |
1,120.00 |
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2023 |
480.00 |
560.00 |
400.00 |
1,120.00 |
320.00 |
1,120.00 |
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2024 |
1,000.00 |
400.00 |
400.00 |
1,600.00 |
600.00 |
800.00 |
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2025 |
2,000.00 |
1,000.00 |
400.00 |
2,400.00 |
800.00 |
1,400.00 |
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2026 |
2,400.00 |
400.00 |
1,200.00 |
1,200.00 |
400.00 |
400.00 |
The government purchased the land at the start of each stage of construction and part of NZG capital cost at the market price.
Assume that the land cost at stage 1and stage 2 is NZD 800 million�each.
1.1.2�Motorway construction at an efficiency�price
1.2�Investment cost breakdown for toll plaza�construction
The concessionaire means of recouping its investment is by the benefits from the toll during the concession.
1.2.1�Toll Plaza Construction At market�price
The Project has two toll plazas one constructed in 2024 and the remaining in 2026. Each toll plaza costs NZD 75 million. The construction cost composition includes 30% imported materials, 40% local materials, 10% skilled labour, and 20% unskilled labour.
1.2.2�Toll Plaza Construction At market�price�
The shadow price of the two tolls are:
1.3�Motorway�and�Toll�Operation�and�Maintenance�and�Salvage cost�
1.3.1�Motorway�
The�operation�and�maintenance�cost�of�the�motorway�is�NZD150�million�per�annum. The cost composition is the same as the composition of its capital construction at market�price.
1.3.1.2�Motorway operation and maintenance cost at efficiency�price
The operation and maintenance efficiency cost of the motorway is the same for its capital construction.
1.3.2�Toll
The toll requires regular maintenance and periodic rehabilitation that amounts to 5% of the cost of the toll construction. The operation of the toll begins from 2024 for the first toll and 2026 for the second toll.
1.3.2.2�Toll operation and maintenance cost at efficiency�price
The operation and maintenance efficiency cost of the toll plazas is the same for its capital construction.
1.3.3�Salvage�Value
The motorway and toll plazas salvage value at market price is 50% of their initial cost at the end of the concession, accrued to NZG.
1.3.3.2�Salvage value at efficiency�price
The motorway and toll plazas salvage value at efficiency price is 50% of their initial cost at the end of the concession, accrued to NZG.
1.4�Benefits of the Motorway�Construction
1.5�Road Usage Data from Transport�Agency
1.5.1�Road usage forecast per annum in�2021
Table 5 is the total forecast traffic volume on the new road network, including vehicles travelling in both directions on existing and new highways combined.
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Table 5: Road usage forecast |
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Sections |
Km |
Million vehicle s |
Stage |
Year open for operation |
% of highway completed == usage of the highway |
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North Island |
� 1,081 |
� 4 |
Stage 1 |
� 2024 |
� 36% |
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South Island |
� 952 |
� 3 |
Stage 2 |
� 2027 |
� 100% |
The increased volume per year starting 2026 to the end of project life is 4%, the usage of the new motorway is 60%, and an additional highway usage with no toll of 30%
Table 7: Purpose of highway usage
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Purpose of highway usage (%) |
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Passenger vehicles |
Truck |
OC on existing roads |
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Work |
15% |
100% |
NZD 6.00 |
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Commute |
52% |
� |
NZD 5.00 |
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Leisure |
33% |
� |
NZD 4.00 |
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Passengers/ Vehicle |
12 |
2 |
� |
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Time Saved % |
70% |
45% |
� |
OC = time opportunity cost per person kilometer on the existing road $NZD million
1.5.3�Toll�Revenue�
Table 8: Toll charges/vehicle km (NZD) in 2021 indexed for inflation
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Passenger |
NZD 10 |
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Truck |
NZD 20 |
1.5.4�Tax and financing�arrangement�
Table 9: Tax and Financing Arrangements ($NZD�million)
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Loans |
Year |
Amount |
Rate |
Term (Years) |
Company tax |
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� |
2016 |
200.00 |
3% |
� |
� |
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Concessionaire |
� |
� |
� |
15 |
28% |
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GOJ |
2016 |
� |
� |
� |
� |
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� |
� |
600.00 |
5% |
40 |
0% |
�
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� |
No1 |
No2 |
No3 |
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Discount Rates |
6% |
9% |
12% |
Undertake a comprehensive cost-benefit analysis�using the data included in this assignment. All calculations should be done in millions of NZ dollars, and rounded to two�decimal�places�and�expressed�in�constant�2021�prices.�must�submit�the excel native file used for the�calculation along with all tables,and graphs..etc.
Develop a unique cover page for the report
Complete the assigned tasks in the given order: Task 1 -Task 2- Task 3 �
Task 4 � Task 5 � Task 6 � Task 7 -Task 8 � Task9 as per report format mentioned below (task 10).
Use an excel spreadsheet to complete task 2 to task 9 in Table 10.
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Table 10: Assignment Task |
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Task Number |
Question |
Requirement |
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Task 1 |
What is the type of procurement method used for this Project? |
State the procurement system (name only.) |
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Task 2 |
What are components? |
the |
cost |
Create a table to list all the cost components (4-5 cost at least .�see excel support file.cost componenets) |
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From Table 5, determine the Millions of vehicle km |
Calculated as the Millions of vehicle km |
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Task 3 |
Use Table 5, Table 6 and Table 7 to forecast the traffic for passenger vehicles and trucks (millions of km) starting from the toll usage start to the motorway and toll end�life. |
Hint: 1)�Create a�table 2)�Forecast for the passenger in one row (purpose of motorway usage X % of motorway completed X usage of new highway X Share of highway passenger vehicle usage�(%)) |
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3) Forecast for the truck in another row |
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(purpose of highway usage X % of motorway completed X usage of new highway�X�Share�of�motorway�truck�usage (%)) |
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4) �Sum 2) and 3) |
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Task 4 |
Determine the toll revenue ($NZD) for the passenger vehicles and trucks |
Hint: 1)�Create a�table 2)�Calculate passenger vehicles��revenue in one row (millions of km for passengers�X passenger vehicle�revenue) |
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3)�Calculate trucks� revenue in another row (millions of km for passengers X truck revenue) 4)��Sum 2) and�3) |
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Task 5 |
Calculate the time saving for passenger vehicles and trucks from the new motorway usage. |
Hint: 1)�Create a�table 2)�Calculate time-saving for passenger vehicles in one row (millions of km for passengers X Time saved % X Passenger/vehicle X work purpose of motorway usage % X operating cost of using motorway for�work) |
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3) Calculate time-saving for the truck in another row (millions of km for�passengers X Time saved % X Passenger/vehicle X work purpose of motorway usage % X operating cost of using motorway for work) |
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4) Sum 2) and 3) |
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Task 6 |
Critically Analyse and Establish the Project BCA |
Hint: 1) Create a table |
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2) Determine project BCA from project start to motorway and toll end life to determine the total cost, gross benefit and net benefit |
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3) Use in-built excel formula to calculate NPVs for each discount rate(6%,9%,12%) for project BCA =NPV(Discount rate, $Year 1$: $Project end$)+ net benefit starting from year zero (i.e year 2021-2040) |
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4) Use the in-built excel formula to determine the IRR for Project BCA = IRR (Year 0: Year-End, DR). DR = discount�rate |
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Task 7 |
Critically Analyse and Establish the Private BCA |
Hint: 1) Create a table |
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2) Determine Private BCA from project start to motorway and toll end life to determine the total cost, gross benefit and net benefit |
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3) Use in-built excel formula to calculate NPVs for each discount rate (6%,9%,12%) �for private BCA=NPV(Discount rate, $Year 1$:$Project end$)+ net benefit starting from year zero (i.e year 2021-2040) |
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4) Use the in-built excel formula to determine the IRR for private BCA = IRR (Year 0: Year-End, DR). DR = discount�rate |
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Task 8 |
Critically Analyse and Establish the Efficiency BCA |
Hint: 1)�Create a�table 2)�Determine Efficiency BCA from project start to motorway and toll end life to determine the total cost, gross benefit and net�benefit |
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3) Use in-built excel formula to calculate NPVs for each discount rate(6%,9%,12%) ��for Efficiency BCA=NPV(Discount rate, $Year 1$:$Project end$)+ net benefit starting from year zero (i.e year 2021-2040) |
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4) Use the in-built excel formula to determine the IRR for Efficiency BCA = IRR (Year 0: Year-End, DR). DR = discount rate |
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Task 9 |
Establish the NPV Risk Analysis for each BCA at the Discounted rate and IRR Note : this risk analysis should cover Discrete risk,�Continuous risk,�Sensitivity risk) for more see excel support file. |
1) Perfom NPV risk analysis of the project BCA (use built in excel formula) |
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2) Perform NPV risk analysis of the private BCA |
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3) Perform NPV risk analysis of Eficiency analysis |
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Task 10 |
Report Format |
Develop a unique cover page for the report Include a concise executive summary for this report : ��Purpose ��Stakeholders ��Decision�required ��Forms of�analysis ��Findings ��Recommendation Word limit only for the executive summary, not more than one page. |
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Sections numbered correctly. Tables and Figures are labelled correctly. Include title page. All excel calculatins along with tables, figures�etc to be included in this report. |
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Proper font (Times New Roman) and font size (12). If required any citations use APA 7th�style and google scholar search engine. |
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