Evaluating the usefulness of including flexibility in public transport network design and planning

Investing in urban transit is necessary to fuel urban growth and sustainable mobility. Decision making for public transport projects usually involves long term forecasts of travel demand. Future development of factors that influence those forecasts and hence the expected net societal benefits of the investments are uncertain. Decision makers may want to account for uncertainty by incorporating flexibility in project designs, which makes it possible to adapt the project to developments of uncertain factors. Real options theory offers a method to assess the flexibility. While real options analysis is proven to be useful in many sectors involving irreversible, high investments, it has not been applied to the development of urban public transport networks. In this study, the usefulness of real options analysis in the design and evaluation of tram and BRT systems in combination with bike sharing systems is investigated. One of the options to include flexibility is decision tree analysis. This approach, in combination with societal cost benefit analysis, is used in a case study. It was found that flexible investment strategies perform better compared to inflexible ones in every tested scenario, resulting in improved net present values of up to 70 million euros. Nevertheless, both flexible and inflexible investment strategies were economically inefficient in the case studies. The clear difference in outcomes for flexible and non-flexible options that the case showed still indicate that the real options approach results in useful information for decision-making. Recommendations for further research to include flexibility even better are to test the method for cases in which the quality of the current public transport system is lower, include other real options such as delay, include cheaper direct investment options, include more welfare effects, and include other uncertain factors, such as shared mobility and technological development.Transport, Infrastructure and Logistic