ECO5EPC-Economics Of Property And Construction

Assignment

Scenario

You are a member of a small specialised economics consultancy, ECO5 Ltd. Most of your clients are in the construction and built environment sectors of industry in your country. The client base is interested in the economic rationale behind the decisions being made by competitors and government bodies. ECO5 Ltd has regular briefing sessions with clients to advise them accordingly.

ECO5 Ltd have been contacted by APCO PLC, a large construction firm. APCO PLC is hoping to secure public sector contracts with governments around the world. They are also a major investor in urban areas. 

The CEO of APCO PLC has requested that ECO5 Ltd put together a report that will help their managers understand the welfare effects and processes involved in project appraisal of large-scale infrastructure schemes. 

Specifically, APCO PLC are interested in how government economists advise their stakeholders about such schemes, what factors they take into account, what their approach might be and crucially why they take these views. APCO PLC have asked you to use examples to focus attention on this area of public investment.

Task

Write a report to APCO PLC that focuses on one major government construction project (e.g. air, road, rail construction, metro, housing, regeneration etc.) that explains the way that economists would approach the investment decision and their reasoning behind this. 

The report should cover the following issues:

• the rationale for a welfare approach and the way in which costs and benefits are viewed;

• how externalities are treated;

• the process by which externalities are assessed;

• the discussion around the discount rate;

• how the investment chosen might fit into an urban growth model (e.g. Hoyt);

• what the urban growth model forecasts about the consequences for the urban area concerned.