Having worked actively in the identification, development and implementation of projects for clients over nearly 15 years, one obviously utilises and develops some “tools of the trade” to assist in these processes.  The same applies to me and I find that three key tools that I use extensively in any project development and preparation function as well as strategic infrastructure planning are:

  • Stochastic modelling
  • Growth and Spatial Development modelling
  • Demand modelling

Stochastic modelling

There are two basic modelling techniques employed to develop financial and other models: the stochastic approach and the deterministic approach.  The latter technique has historically been used when models are developed on spreadsheets but new, modern tools available to us have initiated a strong trend towards stochastic modelling.  Read further….

Implementing stochastic modelling techniques

To implement stochastic modelling techniques on a spreadsheet can be quite cumbersome.  Luckily there are 3rd party software vendors who have developed the necessary routines to automate and considerably ease this process.  Since around 1995, I have been using the @Risk add-in for Excel for this purpose.  Over the years @Risk has been refined and extended many times and the functionality and analysis it offers is staggering.  Visit the developer of @Risk at www.palisade.com for more details.   

Stochastic modelling is a powerful and indispensable tool to be utilised in the analysis, preparation and development of every infrastructure project.  

Growth and spatial development modelling

Recently, while watching TV, I saw an advert floated by Liberty Life.  This advert reflected on the vision of the original Sandton City development and showed the developers standing in a large open veld area where they intended to do their development and with no other developments in view (click on the video below to see it).  We all know what the surrounding area looks like today!  The question is: could one have predicted and modelled how this development would take place over the years?

Before answering this question, it is apt to explain why this question is pertinent.  In spite of the incredible commercial success story that the development of Sandton represents it also represents a significant failure in the planning and development of infrastructure.  Anyone who has spent hours snarled-up in the traffic in Sandton will attest to that!  It is obvious that the city fathers never in their wildest dreams foresaw the growth in the area and the demands it would put on the infrastructure.  As a consequence the road network that links Sandton to other commercial and residential nodes such as the Jo’burg city centre, Randburg and Roodepoort are woefully undersized.  To make matters worse, there is not much that can be done about it, as there is simply not the required physical space.  So, success yes, but it could have been so much better!

So, back to the original question - could it have been predicted and modelled and (by implication) better planned?  The answer is yes!  Read further …..

More detail on our spatial development - and demand modelling technique

The modelling tools for spatial development - and demand modelling developed by Jon Lijnes and myself have been applied and tested on a number of infrastructure projects.  We are constantly refining, updating and evolving these tools and have packaged them as a single instrument: the Claassens-Lijnes Demand Estimation Instrument with a dedicated website (www.claassens-lijnes.co.za) where more information is available.

Demand Modelling

The main reason why my associate Jon Lijnes and I set out to develop the Claassens-Lijnes Demand Estimation Instrument (www.claassens-lijnes.co.za) was to obtain a tool through which demand for (municipal) services could be accurately derived from our spatial development model.  This also enables us to estimate demand for services from a zero base (i.e. it is not reliant on a measure of current demand) and to project our estimate into the future.  A secondary requirement was to estimate ‘Demand Risk’ and to develop mechanisms through which Demand Risk can be adequately mitigated through engineering design and adequately priced through tariff policies.  Read further…..

Insight into other risks and risk management

The Claassens-Lijnes Demand Estimation Instrument is not only utilised to mitigate Demand Risk but also provides valuable insight into and analysis of various other risks that impact directly on some of the secondary analysis that we often conduct.  These risks are:

  • Development risk: what is the likelihood that once the bulk infrastructure to service a development area is installed the area will be fully developed (and the infrastructure utilised) within a specified period of time?  It is critical to consider (and price!) this risk when determining development levies or bulk services contributions.
  • Revenue risk: what is the likely income that will be generated from the delivery of a specific service in a specific geographic focus area given the tariff structure? It is critical that revenue risk must be considered when the tariff policies of a municipality or utility are formulated.
  • Cost recovery risk: what is the likelihood that a certain cost-recovery-rate will be achieved in a given area?  If the area consists of more than one Demand Zone, the different demographic – and development profiles of the Demand Zones will have a significant impact on this risk.

tian.claassens@gmail.com © Tian Claassens 2015