BCPM0052 PROJECTS ECONOMICS AND BEHAVIOUR
BCPM0052 PROJECTS ECONOMICS AND BEHAVIOUR
BCPM0052 PROJECTS, ECONOMICS AND BEHAVIOUR
Assessment Brief
Suppose the UK government wants to build High-Speed Railway 3 (HS3) from Edinburgh to Leeds starting as soon as possible from the
Edinburgh end.
Please answer three questions about what you have learned from the module with regard to:
A) Project appraisal methods,
B) The effects of megaprojects on construction, material markets and
technology and,
C) The effects of megaprojects on the macroeconomy and fiscal policy.
A) Project Appraisal
The government has said that any project evaluation must include a financial evaluation, a social cost-benefit analysis and a major risk
evaluation.
i) What method would you use to carry out a financial evaluation of the project and to which results would you give the greatest importance?
ii) In extending the financial evaluation to a Social Cost Benefit Analysis what types of external costs and benefits do you consider ought to be
included?
iii) What types of economic and financial risks do you consider pose the greatest threat to the project?
B) Effect on Construction Material Markets and Technology
The government is concerned about the effect of the project on local factor markets, the levels of embedded carbon in the materials used and
the opportunities presented by the project to demonstrate the use of new technology.
A project of this size is going to have considerable impact on local material markets in the case of products like ready-mix concrete (RMX) and
is likely to cause local material prices to rise. Look at Figure 1.
a. Suppose the period demand for RMX rises from Q to Q’ as a result of the project going ahead. The project is a price-taker and has a fixed
demand for the period. Using the diagram draw in a new demand curve and show the new market-clearing price.
1
b. As a result of the government’s concern about energy consumption it proposes a fixed sum tax of T per cubic metre on RMX because of its
high energy consumption and high embedded carbon content. Show the new supply curve and the new market-clearing price. Define and show
the following on the diagram: i) Producers’ Surplus and ii) Deadweight Loss. What is the relationship between Producers’ Surplus and the
Elasticity of Supply?
c. The government is also concerned about the effect of the project on the demand for skilled labour. They are also concerned about increasing
labour productivity. Accordingly it is a condition for those invited to bid for the project that they must demonstrate the use of a significant level of
labour-saving technology in delivering the project. Assume that those bidding for the project use Modern Methods of Construction (off-site
manufacturing) to reduce the level of skilled labour required for the whole project. What additional economic (NOT technical) risks might have to
be faced in changing the technology when delivering this project?
d. The government is also going to use the project (under a separate cost- reimbursable contract) as a testing ground for the use of robotics in
large infrastructure projects. What longer-term economic effects do you think the introduction of robotics will have on construction and civil
engineering labour markets (as substitutes or complements).
C) Effect on the Macroeconomy Fiscal Policy
i) A project of this size is going to have potential impacts on the macroeconomy. What effects do you think that the additional project will
2
have on overall consumption and investment during the delivery of the project? Use a diagram to show the multiplier effect of these impacts.
ii) Given the effect on the whole economy discuss the economic effects of funding this project through some combination of the following
means:
a. Increasing the government deficit
b. Increasing general income taxation
c. Increasing local business taxation in the areas in which HS3 is built
d. Buying additional land adjacent to HS3 in order to reap increases in land
prices as a result of the project? (Land Value Capture)
e. Auctioning the operating franchise to a Train Operation Company.
REQUIRED PRESENTATION
You should refer to your Programme Handbook to ensure that you comply with relevant requirements including File Format, Word Count,
Timeliness of Submission, Plagiarism and Originality of Text. The Term Paper will be marked electronically and therefore you only need to
submit a file to MOODLE. No hard copies of your text are required. The word count should not exceed 3,000 words in accordance with the
principles set out in your Programme Handbook.
MARKING SCHEME
The usual marking scheme shown for Term Papers in your Programme Handbook will NOT apply and the allocation of marks between sections
a), b) and c) will be 25%, 35% and 30% respectively with an additional 10% for presentation.
GUIDANCE ON WORD ALLOCATION
A guideline for the allocation of words would be up to 1,000 words per question. Your total answers should not exceed 3,000 words in total.
ADDITIONAL GUIDANCE
Part A – Sections i) and ii) can each be answered with a short narrative to show you understand the basic principles. Section iii) requires some
deeper thought and more extended discussion.
Part B – Sections a. and b. can each be answered with a single diagram without further narrative (provided your diagrams are properly labelled).
Section c. will require deeper thought and discussion. In section d. be careful. We do NOT want a general discussion about robotics but rather a
clear understanding of the effect of labour-saving robotic technology on skilled and unskilled labour markets. Diagrams should be used in
answering this section.
Part C – Section i) should be basic using a diagram and a short narrative. Section ii) is more complex requiring consideration of different
aspects of fiscal policy.
*****(I failed this assignment last time, and I am only allowed one resit. So it is very important for me. Need to be very professional.)
