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# **1. Introduction:**

While public-private partnerships in the delivery of transport infrastructures and services is expanding, there is also growing evidence of the lack of appreciation of the importance of demand forecasting in preparing and monitoring these partnerships. This often gives an opportunity to the private operators of transport services to complain, soon after taking over a business, about overestimates or underestimates of demand based on the initial information provided by governments. It tends to result in an excuse for the private operators to try to renegotiate the contract to improve its terms.' The most common case finds a concessionaire arguing that the "overselling' of the potential business by a government eager to maximize fiscal gains, generated unjustified high expectations. And nevertheless it is quite common that both regulators and concessionaires or bidders devote much more money to the construction costs studies than to the demand analysis--the average ratio quoted among expetrs is one to five.

The lack of focus on good demand forecasting in the context of an increased role of private operators and investors in the transport sector may be somewhat counterintuitive. Transport planners have a long tradition of concern for demand. The analysis of demand has been at the core of the assessment of national or sectoral policy options, including the introduction of new transport modes. But these concerns have generally been addressed through more "macro" oriented modeling exercises focusing on identifying broad support for, or rejection of, policy alternatives.

In the context of more specific evaluations of projects--such as high speed trains, subways or new airports-or in the context of important policy decision regarding modal choices--, many planners have also developed disaggregated demand models capable of generating the kind of information much closer to what is needed to meet the forecasting requirements of a project financier, a privatization commission or a transport economic regulator. There are a few very good recent surveys of these models (see for instance Small and Winston (1999) in English, Quinet (1998) in French) and several comprehensive textbooks on the subject (Ortuzar and Willumsen in (1994) in English or Ortuzar (2000) in Spanish). They reveal impressive improvements over the years to model demand and increased accuracy in identifying and assessing the relative importance of the various factors explaining demand, including modal shifts resulting from policy changes. Although there is a lot we still don't know, many countries can now count on useful results on the value of time and the willingness to pay for various types of transport service users. These are relevant indications when pricing new services to be provided by private operators.<sup>2</sup> It makes sense to compare the tolls or tariffs calculated from the cost side with these rough estimates of the willingness to pay for some services or with the value of time revealed by the post-mortem analysis of comparable projects increasingly found in the literature (see Quinet on Marseille (1998), Small and Winston (1999) on the Dutch data base).

Unfortunately, this improved knowledge does not seem to be spreading to the toolkits used by transport planners or privatization teams in developing countries--and for that matter... in many developed countries-because few are willing to invest in the data needed to make the IThis "overselling" and the common resulting renegotiation of the terms of the contract typically allows th eprivate operator's to obtain extensions of contract duration, new or larger subsidies and/or lower investment requirements. All these changes alter the fundamental financial terms of the contracts which often end up being significantly less attractive than anticipated from the viewpoint of the government--and often also from the view point of the users. On the other hand, new fact sometime do arise and renegotitiation is not necessarily a bad thing, as long as it follows fair and transparent rules.

> 2For a useful overview of how to value time and to relate this to willingness to pay, see Jara-Diaz, S.R. (2000) or Galvez, T.E. and S.R. JaraDiaz (1998)