Public project appraisal: A risk-based decision making approach

Public assets such as roads, utility networks and the like play a notable role in the economic development of countries. Public project evaluation/appraisal typically considers not only the tangible monetary benefits but other benefits to the public and economy as well. In developing countries, decision-makers in the public sector are often faced with the dilemma of choosing between several developmental projects while accounting for the limited resources and future uncertainties. The paper introduces an integrated risk-based approach for feasibility appraisal and budget allocation of public construction projects. This approach has been tailored to suit the Egyptian context; however the concepts are also applicable to other developing countries. The approach attempts to optimize a set of conflicting national goals, deal with project externalities and intangibles, and further account for the minimum necessary conditions for sustainability. Goal programming (GP) is utilized for solving the multiple criteria decision making (MCDM) problem. A linearized-chance- constrained formulation is further used for modelling the uncertainty inherent in different domain parameters and under different confidence levels. An academic illustration of the approach's use is demonstrated via a set of transportation projects.