Investment appraisal

by Gordon on Monday 2nd July, 2012

Highland Council is evaluating the estimated costs of a number of different projects in order to provide a long-term solution to the problems experienced on the A890 Stromeferry bypass in Wester Ross. The latest in a number of landslides to affect the route closed it from 22 December 2011 to 23 April this year.  This caused drivers to take a 140-mile diversion and cost the council £2.8m to deal with.

Options include a £60m bridge, 1.2 mile (2km) tunnel costing £94m and a new, longer bypass running to about £23m. The tunnel is one of six ideas for improving the existing stretch of road. (BBC, 23rd June 2012)

Making sure a project delivers the best return on investment is a major exercise for many organisations and there are several methods of assessing and comparing investments.  Global agribusiness Syngenta was faced with the difficult decision of whether to extend its manufacturing capacity to meet worldwide demand for one of its best-selling fungicide products.

Syngenta’s decision to expand took into account not just the costs of the project but also other non-financial factors, such as potential impact by other competitor products and global economic changes.

Highland Council is considering five other options to improve the Stromeferry by-pass.  These include stabilising the rock face next to the bypass (cost £69m; a £109m project involving cutting rock from the hillside and widening the road; extending an avalanche shelter on the road at a cost of up to £104m; or dumping tonnes of rock into Loch Carron to give enough space for a new stretch of road next to the nearby railway line has been estimated at £115m.  The final option suggested will be to carry out repairs when needed. Highland Council has calculated that could cost £10m over 20 years.

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