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entitled 'Corps Of Engineers: Improved Analysis of Costs and Benefits 
Needed for Sacramento Flood Protection Project' which was released on 
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Report to Congressional Requesters:

October 2003:

CORPS OF ENGINEERS:

Improved Analysis of Costs and Benefits Needed for Sacramento Flood 
Protection Project:

GAO-04-30:

GAO Highlights:

Highlights of GAO-04-30, a report to congressional requesters 

Why GAO Did This Study:

In 1996 and 1999, Congress authorized the U.S. Army Corps of Engineers 
(the Corps) to strengthen sections of the American River and Natomas 
Basin levees that provide flood protection for Sacramento, California. 
In 2002, the Corps reported that the cost of this work, known as the 
Common Features Project, had increased significantly. GAO was asked to 
determine why costs increased, the extent to which the Corps analyzed 
and reported the potential cost increases to Congress in a timely 
manner, and whether the Corps correctly estimated economic benefits.  

What GAO Found:

Estimated costs for the Common Features Project rose from $57 million 
in 1996 to between $270 million and $370 million in 2002—primarily 
because of design changes. For the American River, costs more than 
tripled from $44 million to $158 million in 2002, primarily due to 
changes such as deepening the walls built in the levees (cut-off 
walls) to prevent seepage and closing gaps in the walls at bridge 
crossings. Cost estimates for the Natomas Basin—still in planning—
increased from $13 million in 1996 to between $112 million and $212 
million in 2002. The Corps has yet to analyze alternative flood 
protection approaches for the Natomas Basin that might be more cost-
effective. Furthermore, it has not analyzed its exposure to 
potentially significant cost increases for the Natomas Basin work. 

The Corps did not fully analyze, or report to Congress in a timely 
manner, the potential for significant cost increases for the American 
River levee improvements authorized in 1996. Specifically, a severe 
storm in the Sacramento area in January 1997 indicated some cut-off 
walls would need to be much deeper and therefore would be more costly. 
Corps guidance generally directs the Corps to seek new spending 
authority from Congress if it determines, before issuing the first 
contract, that it cannot complete the project without exceeding its 
spending limit. However, the Corps began construction in 1998 without 
analyzing or reporting potential cost increases. By 2003, it had 
committed most of the funding authorized for the entire Common 
Features Project to the 1996 American River work, leaving the 
additional 1999 work and the Natomas Basin improvements without 
funding. 

In 1996, the Corps incorrectly estimated the economic benefits for the 
American River levee improvements by overcounting the residential 
properties to be protected. In 2002, it incorrectly estimated benefits 
for the 1999 improvements by, among other things, miscalculating the 
size of the area that the improvements would protect. The Corps’ 
quality control process was ineffective in identifying and correcting 
these mistakes. 

What GAO Recommends:

To better inform Congress about the costs and benefits of flood 
protection for Sacramento, GAO recommends, among other things, that 
the Secretary of the Army

* improve the accuracy of the cost-benefit analysis for the not yet 
constructed American River levee improvements; 
* improve the reporting of costs and benefits and analyze alternative 
flood protection measures for the Natomas Basin improvements; and
* arrange for a credible, independent review of the completeness and 
accuracy of the revised analyses. 

The Army concurred with GAO’s recommendations but took issue with the 
presentation of some information.

www.gao.gov/cgi-bin/getrpt?GAO-04-30.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact Anu Mittal at (202) 
512-3841 or mittala@gao.gov.

[End of section]

Contents:

Letter: 

Results in Brief: 

Background: 

Design Modifications Have Greatly Raised Costs for the Common Features 
Project: 

The Corps Did Not Adequately Analyze Likely Cost Increases for the 
Common Features Project or Communicate Them to Congress in a Timely 
Manner: 

Corps' Benefit Estimates for the American River Levee Improvements Are 
Incorrect: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes:

Appendix I: Scope and Methodology: 

Appendix II: Conversion of Costs to Constant Dollars: 

Appendix III: Comments from the Department of the Army: 

GAO Comments: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Staff Acknowledgments: 

Tables: 

Table 1: The Corps' Original 1996 Cost Estimate and Estimated Cost 
Increases for the American River Levee Improvements Authorized in 1996: 

Table 2: The Corps' Original 1996 Cost Estimate and Potential Cost 
Increases for the Natomas Basin Component: 

Table 3:  Common Features Project's Cost Estimates in Original 1996 
Dollars and in Adjusted 2002 Dollars: 

Figures: 

Figure 1: Location of the Common Features Project: 

Figure 2: Seepage under and through Levees and a Cut-off Wall to Prevent 
Seepage: 

Figure 3: Location of the Fremont Weir and the Yolo Bypass: 

Letter October 27, 2003:

The Honorable Don Young: 
Chairman, Committee on Transportation and Infrastructure: 
House of Representatives:

The Honorable John T. Doolittle: 
House of Representatives:

The Honorable Richard Pombo: 
House of Representatives:

The city of Sacramento, California, located where the American and 
Sacramento Rivers meet, has faced significant risks of major flooding 
since its founding in the 1840s. A major flood in the Sacramento area 
could cause loss of lives; toxic and hazardous waste contamination; 
disruptions to the city's downtown business and government areas, 
including the state capitol; and billions of dollars in property 
damage. To help protect against these risks, in 1991 and again in 1996, 
the U.S. Army Corps of Engineers (the Corps) identified several 
alternatives for long-term flood protection. On both occasions, the 
Corps recommended building a new dam on the American River near Auburn, 
California. Concerns were raised about the proposed dam's high cost and 
environmental impacts, and Congress did not authorize its construction.

In light of the decision not to proceed with the new dam, the Corps 
recommended improving the existing levees on the American and 
Sacramento Rivers to increase the level of flood protection for the 
greater Sacramento area. Levees provide flood protection by raising the 
height of river banks, which helps prevent rivers from overflowing 
during storms. The Corps primarily proposed constructing "cut-off" 
walls in the center of the existing levees. These walls, composed 
primarily of soil, cement, and clay, become impermeable when they 
harden and prevent water from passing through the levees. These levee 
improvements were common to all of the alternatives that the Corps had 
considered for Sacramento flood protection in 1996 and became known as 
the Common Features Project.

The Water Resources Development Act (WRDA) of 1996 authorized $57 
million for the project.[Footnote 1]

The Common Features Project consists of two related but separate 
components--the American River levee improvements and the Natomas Basin 
levee improvements. The levees on the American River protect downtown 
Sacramento, while the levees on the Sacramento River protect the 
Natomas Basin, a largely agricultural area just north of downtown 
Sacramento where new development is occurring at a rapid rate. Figure 1 
shows the greater Sacramento area and the location of the Common 
Features Project.

Figure 1: Location of the Common Features Project:

[See PDF for image]

[End of figure]

The WRDA of 1999 authorized additional work for the Common Features 
Project, directing the Corps to raise or strengthen some American River 
levee sections and raise some levees in the Natomas Basin; it also 
increased project authorization to $92 million. Several years after 
this authorization, however, the Corps stated that project costs would 
go significantly higher.

In the context of these issues, in response to your request, this 
report addresses (1) why the costs have increased for the Common 
Features Project, (2) the extent to which the Corps analyzed the 
likelihood of significant cost increases for the project and reported 
this information to Congress in a timely manner, and (3) whether the 
Corps correctly estimated the economic benefits of the American River 
levee improvements. Our scope and methodology in addressing these 
questions can be found in appendix I.

Results in Brief:

The estimated costs for all components of the Common Features Project 
have risen from $57 million in 1996 to between $270 million and $370 
million in 2002, primarily because of design modifications. With 
respect to the American River component, estimated costs for the levee 
improvements authorized in 1996 have more than tripled, from $44 
million in 1996 to $143 million in 2002. This increase occurred 
primarily because the Corps modified the original design of the cut-off 
walls to close gaps at bridge crossings and other areas and to greatly 
increase the depth of the walls to prevent water from seeping under the 
levees. In addition to the cost increases related to the 1996 
authorized work, new flood protection measures authorized in 1999 added 
about $15 million in costs to the American River component of the 
project. For the Natomas Basin component--which is still in the early 
planning stage--the Corps' cost estimates increased from $13 million in 
1996 to between $112 million and $212 million in 2002. These projected 
cost increases are largely due to design changes in the planned 
improvements to the Sacramento River levees and additional work that 
the Corps has proposed for this part of the project.

The Corps did not fully analyze likely cost increases for the Common 
Features Project or report them to Congress in a timely manner. Corps 
guidance generally directs the Corps to seek new spending authority 
from Congress if it determines, before issuing the first construction 
contract, that it cannot complete the project without exceeding its 
spending limit. A severe storm in January 1997 demonstrated 
vulnerabilities in the American River levees and alerted the Corps of 
the need to do additional work to close the gaps in the cut-off walls 
at bridges and other areas and extend the depth of some cut-off walls 
from about 20 feet to about 60 feet. Although these design changes were 
likely to increase project costs significantly, the Corps did not use 
cost risk analysis, or any other analysis, to determine the potential 
extent of the increases. The Corps then began constructing the 
redesigned American River levee improvements without communicating to 
Congress the project's potential exposure to substantial cost overruns. 
In 2002, when the Corps finally updated project costs, it had already 
completed or contracted at a much higher cost for most of the American 
River levee improvements that were authorized in 1996. Because of the 
reporting delay, Congress did not have the opportunity to determine 
whether, at these higher costs, building these levee improvements was 
an efficient and effective use of public funds. By 2003, the Corps had 
committed most of the funding authorized for the entire Common Features 
Project to the 1996 American River work, thereby leaving the 1999 work 
and the Natomas Basin improvements without funding.

The Corps made several mistakes in estimating the economic benefits for 
the American River levee improvements. First, in 1996, the Corps 
incorrectly calculated the economic benefits by overcounting the 
residential properties that the levees would protect. The actual number 
of protected residential properties was about 20 percent less than the 
number that the Corps estimated. Although the Corps updated its benefit 
estimate in 2002, it again made mistakes in estimating benefits because 
it incorrectly determined that the levee improvements authorized in 
1999 would protect a larger area from flooding than they will and used 
an inappropriate methodology to determine the amount of flood damages 
the levee improvements would prevent. However, it is also important to 
recognize that the levee improvements may reduce the loss of human 
lives in the event of a flood, which is a benefit that is not included 
in the Corps' analysis. Second, although the Corps' policy calls for 
reporting a range of benefits from the levee improvements and the 
likelihood of realizing them, in 2002 the Corps reported only a single 
estimate of benefits. The Corps did not provide a range of benefits to 
Congress because it did not use the most current version available of 
its computer software, which could have performed the analysis. 
Finally, although the Corps has a three-tiered quality control process 
to ensure that it prepares economic analyses accurately and 
appropriately, this process did not identify the mistakes we found, 
which raises questions about the effectiveness of the Corps' quality 
control process.

In light of the concerns we identified with the Common Features Project 
and to better inform Congress about its costs and benefits, we are 
making several recommendations to the Secretary of the Army regarding 
the need for the Corps to (1) improve the accuracy of its cost-benefit 
analysis of the American River levee improvements that it has not yet 
constructed and (2) improve its reporting of the costs and benefits of 
the planned work as well as analyze alternative flood protection 
measures for the Natomas Basin. In commenting on a draft of this 
report, the Department of the Army concurred with our recommendations, 
but took issue with our presentation of some information. Specifically, 
the Army believes that this report does not recognize the significant 
role Congress played in 1999 when it added additional work to the 
project and authorized funds for construction before the Corps had 
developed reliable cost estimates. In addition, the Army states that 
the consistent provision of funds to the Corps by Congress, at or 
exceeding the Corps' budget request, created the situation of which our 
report is critical. We have considered the Army's comments; however, we 
believe that our report is factually accurate and that our findings are 
presented in their proper context.

Background:

Sacramento, California, was established at the confluence of the 
American and Sacramento Rivers shortly after gold was discovered 
upstream at Sutter's Mill in 1848. Frequent flooding has been a problem 
in Sacramento since its founding. To help reduce flooding, over time a 
complex system of levees, dams, and other related facilities were 
built. Levees line both sides of the American River from where it meets 
the Sacramento River upstream for a distance of about 17 miles, and the 
Natomas Basin is completely surrounded by levees. In addition, the 
Folsom Dam, completed in 1956 and located upstream from Sacramento on 
the American River, uses a portion of its storage capacity for flood 
protection.

The Sacramento area flood protection system was designed on the basis 
of records of rainfall during the first half of the 20TH century. 
However, since 1950, the American River watershed has experienced five 
floods that were larger than any recorded in the pre-1950 period, 
although downtown Sacramento was not flooded during any of these 
events. Nonetheless, the Sacramento area has less protection than the 
designers of the original flood protection system realized. In fact, 
much of urbanized Sacramento is located in areas where a flood has a 1 
percent chance of occurring every year--known as the 100-year 
floodplain. Because of this limited level of protection, the Corps 
estimates that a very large flood--one with a 0.25 percent chance of 
occurring every year--would flood the 400-year floodplain, resulting in 
residential, commercial, industrial, and public property damage of 
about $15.5 billion as well as loss of lives. According to the Corps, 
about 305,000 people live in more than 100,000 residential properties 
located within the American River floodplain. A major flood also would 
cause toxic and hazardous waste contamination; disrupt the city's 
downtown business and government areas, including the state:

capitol; and interfere with the transportation system, including two 
interstate highways.

A major flood in 1986, the largest one ever recorded on the American 
and Sacramento Rivers, severely strained the levee system protecting 
Sacramento. Although the levees held and downtown Sacramento was not 
flooded, the event spurred efforts by federal, state, and local 
entities to identify measures to increase Sacramento's level of flood 
protection. In 1987, the Corps began work on a comprehensive study of 
flood protection alternatives for Sacramento. In its 1991 
report,[Footnote 2] the Corps' Sacramento district office considered 
six flood protection options and recommended building a new dam on the 
American River at Auburn, California, but Congress did not approve the 
dam's construction.[Footnote 3] Subsequently, in response to the 
Department of Defense Appropriations Act of 1993, the Corps reevaluated 
three alternatives for increasing flood protection. In its 1996 
report,[Footnote 4] the Corps examined (1) building a new dam near 
Auburn, California; (2) modifying the existing Folsom Dam; and (3) 
increasing the amount of water released from Folsom Dam during a flood, 
coupled with other flood protection measures. The Corps again 
recommended building a dam at Auburn, but, again, Congress did not 
approve its construction.

Recognizing the magnitude of the opposition to the proposed Auburn Dam, 
in June 1996, the Corps recommended the Common Features Project, which 
included improving sections of the American and Sacramento Rivers' 
levees, primarily by constructing cut-off walls, to provide small-scale 
improvements to flood protection for the Sacramento area while the 
options for more extensive improvements continued to be considered. The 
WRDA of 1996 authorized $57 million for the Common Features Project, 
which included 24 miles of levee improvements on the American River and 
12 miles on the Sacramento River along the western border of the 
Natomas Basin. Subsequently, the Corps concluded that it could provide 
the same level of flood protection on the American River by modifying 
only about 21 miles of levees. Figure 2 shows how a cut-off wall, which 
is composed primarily of a soil, cement, and clay mixture that forms an 
impermeable barrier when it hardens, can prevent water from seeping 
under or through a levee.

Figure 2: Seepage under and through Levees and a Cut-off Wall to 
Prevent Seepage:

[See PDF for image]

[End of figure]

In January 1997, numerous rivers in northern California flooded causing 
extensive damages, although not in the Natomas Basin or downtown 
Sacramento. This flood, which was nearly as large as the 1986 flood, 
highlighted the continuing vulnerabilities of the existing flood 
protection system. In response, the WRDA of 1999 (1) modified the 
Common Features Project by adding about 3.8 miles of additional levee 
modifications along the American River and 10 miles on the Natomas 
Cross Canal, located on the northern border of the Natomas Basin, and 
(2) increased the project's authorization from $57 million to $92 
million.

When Congress approves a flood protection project, it authorizes a 
specific amount of money for the project, which provides the basis for 
the maximum project cost. According to section 902 of the Water 
Resources Development Act of 1986, as amended, the maximum project cost 
is the sum of (1) the original authorized amount, with the costs of 
unconstructed project features adjusted for inflation; (2) the costs of 
modifications that do not materially alter the scope of the project, up 
to 20 percent of the original authorized amount (without adjustment for 
inflation); and (3) the cost of additional studies, modifications, and 
actions authorized by the 1986 Act or any later law. As a result of 
these provisions, the $92 million that Congress authorized for the 
Common Features Project in 1999 translates to an allowable maximum 
project cost of about $120 million in 2003.

When Congress authorized the Common Features Project in 1996, federal 
law required that nonfederal partners pay 25 percent of the cost of 
flood protection projects.[Footnote 5] For the Common Features Project, 
these partners are the State of California Reclamation Board and the 
Sacramento Area Flood Control Agency. In this report, when we refer to 
project costs, including the maximum allowable project cost, we are 
referring to the combined federal and nonfederal expenditures.

Design Modifications Have Greatly Raised Costs for the Common Features 
Project:

Estimated costs for the Common Features Project grew from $57 million 
in 1996, when the project was first authorized, to between $270 million 
and $370 million in 2002, primarily because the Corps changed the 
design of the levee improvements.[Footnote 6] For the American River 
levee improvements authorized in 1996, estimated costs more than 
tripled, due largely to changes in the design of the cut-off walls. New 
work authorized in 1999 added another $15 million to the cost increase. 
The Corps has completed much of the American River work authorized in 
1996, but it has not begun construction on the work authorized in 1999. 
Regarding the Natomas Basin component, estimated costs increased from 
$13 million to between $112 million and $212 million. Costs rose 
primarily because the Corps changed the design of the levee 
improvements and proposed adding other improvements to this component. 
The Natomas Basin work is in the early planning stages, and the Corps 
has not begun construction. As of July 2003, the Corps had spent or 
made plans to spend nearly all of the money authorized for the Common 
Features Project. It therefore will not be able to finish constructing 
the American River work authorized in 1996, begin constructing the 
American River work authorized in 1999, or complete planning for the 
Natomas Basin work unless Congress increases the project's authorized 
funding.

Estimated Costs for the American River Levee Improvements Authorized in 
1996 Have More Than Tripled Because of Design Changes:

The Corps' cost estimate for the American River levee improvements 
authorized in 1996 has more than tripled, from $44 million in 1996 to 
about $143 million in July 2002, as shown in table 1.

Table 1: The Corps' Original 1996 Cost Estimate and Estimated Cost 
Increases for the American River Levee Improvements Authorized in 1996:

[See PDF for image]

Source: GAO analysis of U.S. Army Corps of Engineers data.

[A] In 2002 dollars.

[B] Does not sum to the total due to rounding.

[End of table]

As table 1 shows, costs rose primarily because of the increased costs 
of the cut-off walls. The Corps' original design called for building 
cut-off walls to a depth of between 20 and 30 feet to prevent water 
from seeping through the levees and for allowing gaps in the cut-off 
walls at bridge and utility crossings. However, after the 1997 flood, 
the Corps realized it also needed to address the problem of water 
seeping under levees. It therefore increased the depth of the cut-off 
walls to between 60 and 80 feet and closed the gaps in the cut-off 
walls at bridge and utility crossings. For some sections of the levees, 
the Corps could not close the gaps using its standard approach for cut-
off walls because of problems accessing the sites. As a result, the 
Corps employed a new and more expensive approach--known as jet 
grouting--to build cut-off walls by drilling and injecting concrete 
material into areas that were difficult to access. Closing the gaps in 
the cut-off walls by jet grouting raised estimated costs by $52 million 
and increasing their depth raised costs by $24 million, according to 
the Corps' July 2002 cost estimate. However, in September 2002, the 
Corps determined that fewer gaps needed to be closed using jet 
grouting, which should reduce costs to some extent. As of June 2003, 
however, the Corps had not incorporated these potential cost reductions 
into an official project cost update.

As table 1 also shows, the Corps' response to accidents that occurred 
during construction of the 1996 authorized work added $11 million to 
project costs. On three occasions, liquid material from the cut-off 
walls accidentally leaked into either the American River or the 
backyards of homes that are built against the levees. As a result, the 
Corps incurred costs cleaning up these spills and responding to new 
work requirements mandated by the Environmental Protection Agency to 
help prevent future leaks.

Lastly, in addition to the cost increases related to the 1996 
authorized work, new flood protection measures authorized in 1999 added 
about $15 million in costs to the American River component of the 
project.[Footnote 7] These measures include raising levee banks at two 
locations, installing gates and pumps at an existing drain, and 
installing cut-off walls in two additional levee segments.

Of the American River work authorized in 1996, the Corps has completed 
about 90 percent and must still close gaps in the cut-off walls at some 
remaining bridge and utility crossings to complete this work. For the 
levee improvements authorized in 1999, the Corps has done some planning 
but has not begun any construction. However, as of July 2003, the Corps 
had spent or had plans to spend $116 million of the $120 million 
authorized for the entire Common Features Project. The Corps could not 
give an exact accounting of how much of the $116 million it had spent 
on the 1996 American River work. However, on the basis of the 
information that the Corps provided, we estimate the Corps has spent, 
or made plans to spend, at least $103 million for planning and 
constructing the 1996 American River work. Because the Corps has spent 
or made plans to spend most of the project's authorized funds, it will 
not be able to complete the 1996 and 1999 work on the American River 
unless Congress increases the project's authorized funding.

Natomas Basin Costs Are Expected to Increase Significantly, and Lack of 
Funds Has Halted Planning and Cost Estimating Efforts:

The Corps' preliminary cost estimates for the Natomas Basin component 
of the project increased from $13 million in 1996 to between $112 
million and $212 million in 2002, as shown in table 2.

Table 2: The Corps' Original 1996 Cost Estimate and Potential Cost 
Increases for the Natomas Basin Component:

[See PDF for image]

Source: GAO analysis of U.S. Army Corps of Engineers data.

[A] In 2002 dollars.

[B] Does not sum to the total due to rounding.

[End of table]

As table 2 shows, the Corps estimates that the costs for the original 
levee improvements will increase by between $47 million and $88 million 
due to design changes to add cut-off walls or provide other methods of 
flood protection to control seepage under levees. The Corps proposed 
new work in 2002 that will increase costs by between $37 million and 
$84 million. This work is located in an area of the levee where the 
Corps previously had constructed a cut-off wall to stop water from 
seeping through the levee. However, the Corps later determined that the 
cut-off wall was not deep enough to prevent water from seeping under 
the levee, and the proposed new work will address this problem. 
Finally, the Corps estimates that the additional work authorized in 
1999 to modify levees along the Natomas Cross Canal, which empties into 
the Sacramento River at the north end of the Natomas Basin, will add 
between $14 million and $26 million to the cost of this component of 
the project.

:

The Natomas Basin work--authorized in 1996 and 1999 and the additional 
work the Corps identified--is in the planning stages and no 
construction has yet begun. The Corps has been updating information on 
the extent of the levee problems and the costs of the improvements 
identified in the original plan and intends to submit a more precise 
cost estimate to Congress when it completes its planning. However, the 
Corps halted its Natomas Basin planning work in June 2003 because it 
had spent or made plans to spend nearly all of the money authorized for 
the entire Common Features Project.

Given that the Natomas Basin levee improvements will cost significantly 
more than originally estimated and no construction has yet begun, 
identifying and evaluating alternative flood protection measures could 
result in cost savings. For example, one possible alternative method 
for flood protection identified by the Sacramento Area Flood Control 
Agency,[Footnote 8] as well as the Corps, involves lowering the water 
level in the Sacramento River during floods by diverting water through 
the Fremont Weir and into the Yolo Bypass, which is located at a point 
just before where the Sacramento River flows past the Natomas 
Basin.[Footnote 9] The Fremont Weir is a low dam that controls the 
movement of large volumes of floodwater from the Sacramento River by 
diverting it into the Yolo Bypass. The Yolo Bypass is a continuous, 40-
mile open space corridor that is protected from urban development 
pressure by flood easements. (See fig. 3.):

Figure 3: Location of the Fremont Weir and the Yolo Bypass:

[See PDF for image]

[End of figure]

Lowering the water level in the Sacramento River as it passes the 
Natomas Basin could, among other things, improve the reliability of the 
Natomas Basin levees and may provide more cost-effective flood 
protection than the current Natomas Basin levee improvement plan. 
However, as of June 2003, the Corps had not yet analyzed the costs and 
benefits of modifying the weir and the bypass or any other alternative 
method for Natomas Basin flood protection.

The Corps Did Not Adequately Analyze Likely Cost Increases for the 
Common Features Project or Communicate Them to Congress in a Timely 
Manner:

After the 1997 storm demonstrated vulnerabilities in the American River 
levees, the Corps significantly changed the design of the levee 
improvements but did not analyze the likelihood of cost increases for 
the Common Features Project. The Corps then began constructing the 
American River levee improvements without informing Congress that the 
changes could greatly increase the overall costs of the project. By the 
time that the Corps reported the significant cost increases in 2002, it 
had already spent or made plans to spend more than double its original 
estimate for the American River levee improvements authorized in 1996. 
Furthermore, as previously discussed, the Corps estimates that it will 
spend more than three times its original estimate by the time it 
completes this work. The Corps has been able to pay for these levee 
improvements by spending funds originally planned for the Natomas Basin 
and the additional American River improvements authorized in 1999.

The Corps Did Not Adequately Analyze Likely Cost Increases for the 
American River Levee Improvements:

The Corps did not analyze the risk of cost increases after changing the 
design of the American River levee improvements in 1997 and, therefore, 
did not provide Congress with information on the project's exposure to 
significant cost increases. A storm in January 1997 demonstrated that 
the American River levees were vulnerable to floodwaters seeping under 
them, which could cause them to fail. On the basis of this information, 
the Corps significantly changed the design of the levee improvements 
but did not conduct a cost risk analysis, or any other type of 
analysis, to determine the extent to which these changes would increase 
the costs for the Common Features Project.

According to the Corps' policy, project management teams should 
consider conducting a cost risk analysis when developing cost estimates 
for projects with considerable uncertainties.[Footnote 10] A cost risk 
analysis identifies the areas of a project that are subject to 
significant uncertainty about costs and provides decision makers with a 
range of potential costs for a project and the probability that these 
costs will be exceeded. For example, a cost risk analysis might 
determine that there is a 50 percent chance that costs for a particular 
project will exceed $5 million but only a 20 percent chance that costs 
will exceed $8 million. According to a report from the Corps' Institute 
for Water Resources, this type of estimate is more accurate than a 
single point cost estimate and provides decision makers with better and 
more complete information.[Footnote 11]

However, the Corps did not analyze the risk of cost increases after 
changing the design of the American River levee improvements even 
though it had identified several factors that could lead to significant 
cost increases. For example, by July 1997 the Corps recognized that it 
had to close the gaps in the cut-off walls at bridges and other areas 
and extend the depth of some walls from about 20 to about 60 feet, 
although the Corps had not developed a final design for these 
improvements. By identifying a project element with significant cost 
uncertainty--the design and depth of the cut-off walls--the Corps 
essentially performed the first step of cost risk analysis. However, 
the Corps did not follow through by quantifying this uncertainty and 
determining a range of potential costs for the cut-off walls or the 
likelihood that the potential costs within that range would be 
exceeded--the second and third steps of the cost risk analysis. Given 
that the Corps' original cost estimate for the American River work was 
nearly equal to its estimates of the benefits, if the Corps had 
conducted a cost risk analysis, it would have shown whether there was a 
significant likelihood that project costs would be greater than the 
economic benefits.

Furthermore, despite experiencing significant cost increases for the 
1996 work, the Corps did not conduct a cost risk analysis to determine 
its exposure to potentially significant cost increases for the 1999 
work. In addition, the Corps is not planning to conduct a cost risk 
analysis for the Natomas Basin improvements. According to Sacramento 
district officials, the Corps did not conduct a cost risk analysis 
because it did not believe such an analysis was necessary to account 
for uncertainties in the project.

The Corps Did Not Provide Congress with Timely Information about 
Significant Potential Cost Increases for the American River Levee 
Improvements:

The Corps' planning guidance generally directs the Corps to seek new 
spending authority from Congress if it determines that a project's 
estimated costs exceed the maximum project cost before it has awarded a 
project's initial contract.[Footnote 12] However, after making 
significant changes to the project's design in 1997, the Corps did not 
reevaluate its cost estimate to determine if it could still implement 
the project without exceeding the maximum project cost. For example, 
the Corps did not estimate the potential for cost increases due to 
tripling the depth of some cut-off walls, which eventually added $24 
million in estimated costs to the project. In addition, the Corps did 
not estimate the potential for cost increases due to closing the gaps 
in the cut-off walls at bridges and other areas. This expense was not 
considered in the Corps' original 1996 cost estimate and potentially 
involved the use of jet grouting--a technology the Corps had not 
previously used to construct cut-off walls. Closing the gaps in the 
cut-off walls eventually added $52 million in estimated costs to the 
project.

In spite of significantly changing the project's design, the Corps 
awarded the project's first contract without updating its cost estimate 
to determine whether it would need additional spending authority to 
complete the project. In June 1998, the Corps issued the first Common 
Features Project solicitation for bids to construct about 1.6 miles of 
the redesigned cut-off wall on the north bank of the American River. 
These levee improvements represented only about 8 percent of the total 
miles of planned American River levee improvements, but the bid that 
the Corps selected amounted to 24 percent of the estimated cost for all 
of the American River levee work. We believe that this difference 
should have (1) alerted the Corps to the possibility that costs were 
likely to be much higher than it had originally estimated and (2) 
warranted an update of the Corps' cost estimate before it awarded the 
initial contract.

According to a headquarters official, the Corps issued the first 
contract without updating its total project cost estimate because it 
would have been impractical to delay the project while the agency 
revisited cost estimates. Furthermore, according to the Corps, the 
first contract was expected to be more costly than future contracts 
because, among other reasons, it involved work on only a small stretch 
of the levee, which limited possible cost efficiencies. However, 
because the Corps did not analyze the potential for cost increases for 
the remainder of the American River levee improvements, it did not 
determine the likelihood that it would need additional spending 
authority to complete the project before it awarded the first contract.

The Corps has paid for the significantly increased costs of the 
American River levee improvements by using funds planned for the 
Natomas Basin and for the additional American River work authorized in 
1999. Although the Common Features Project has two separate components, 
and Congress approved parts of the project in 2 different years, the 
project is subject to a single maximum project cost. The Corps has the 
flexibility to spend Common Features Project funds as it sees fit and 
is not required to allocate funds in proportion to its original cost 
estimates for each component.

Following project authorization in 1996, the Corps began to construct 
the American River levee improvements before the Natomas Basin 
improvements. Although the Corps exhausted the funds it had originally 
estimated that it would need to construct the American River levee 
improvements, it was able to continue implementing the American River 
work by spending funds it had originally planned to use for the Natomas 
Basin work. With the authorization of additional work in 1999, 
effectively raising the project's maximum cost to about $120 million, 
the Corps also was able to use funds planned for this work to pay for 
the increased costs of the American River work authorized in 1996.

After it awarded the first Common Features Project contract, the Corps 
was not required to inform Congress of project cost increases until it 
could not contract for additional work without exceeding the maximum 
project cost. According to the Corps, in March 2001 it briefed a number 
of Members of Congress on its intention to prepare a report that would 
evaluate the potential for the cost of the Common Features Project to 
exceed the project's maximum cost. However, it was not until February 
2002, more than 4 years after it significantly modified the design of 
the American River levee improvements, that the Corps reported to 
Congress for the first time that due to significant cost increases, it 
could not complete the project without exceeding the maximum project 
cost. By this time, the Corps had spent or awarded contracts for more 
than twice the amount it originally planned to spend on the American 
River levee improvements authorized in 1996 and had completed about 90 
percent of the work. Furthermore, the Corps estimates that it will 
spend more than three times its original estimate by the time it 
completes this work. Because the Corps did not update its cost estimate 
or report the significant cost increases to Congress until most of the 
1996 American River work was complete, Congress did not have the 
opportunity to determine whether the significantly more expensive levee 
improvements were still the most appropriate means of providing flood 
protection for Sacramento.

Corps' Benefit Estimates for the American River Levee Improvements Are 
Incorrect:

The Corps made mistakes in estimating the benefits for the American 
River levee improvements because it incorrectly counted and valued the 
properties that the levee improvements would protect and used an 
inappropriate methodology to determine the amount of flood damages they 
would prevent. Seven years after Congress authorized the project, the 
Corps has not yet prepared an accurate assessment of the benefits of 
the American River levee improvements. In addition, contrary to its 
guidance, the benefit estimate the Corps prepared in 2002 did not 
describe the range of possible benefits and the likelihood that the 
values in this range would be realized. This additional information, 
describing the uncertainty of the benefit estimate, would have provided 
decision makers with information on the likelihood that the project's 
benefits would be greater than its costs. Furthermore, the Corps' 
three-tiered quality control process did not identify the mistakes that 
we found during the course of our review.

The Corps Made Mistakes in Counting and Valuing Properties and 
Determining Flood Damages When Estimating Project Benefits:

In its original 1996 analysis of the benefits and costs of the American 
River levee improvements, the Corps incorrectly counted the residential 
properties that the proposed levee improvements would protect. As a 
result, the Corps incorrectly calculated the benefits that these 
improvements would provide. According to the Corps, the methodology it 
used to count the number of residential properties in 1996 was 
"accepted practice and consistent with Corps guidance and technology 
applicable at the time." In 2002, the Corps used a different 
methodology that incorporated new technologies and provided a more 
precise estimate of the number of properties protected. Using this new 
approach, the Corps determined that the actual number of residential 
properties protected by the levee improvements is about 20 percent less 
than its original estimate. The Corps did not calculate the amount that 
benefits would decrease due to this change. However, given the small 
difference between the original estimated annual benefits ($5.6 
million) and the annual costs ($5.5 million) of the American River 
levee improvements, if the Corps had incorporated a more accurate 
estimate of the property inventory in its 1996 analysis, the benefits 
of these improvements may have been less than the costs.

For flood protection projects, such as the Common Features Project, the 
Corps calculates benefits as the dollar value of the physical damages 
to residential, commercial, industrial, and public properties and 
infrastructure that the levee improvements prevent. To calculate the 
reduction in flood damage to properties, the Corps counts the number of 
properties located in the potential flood area--known as the 
floodplain--and then assesses the monetary value of the structures and 
their contents. The Corps uses this information to determine the 
property damage that would result from floods of various depths and to 
estimate the impact that the levee improvements would have in 
preventing this damage.

It is important to remember that, in addition to the economic benefits 
from preventing property damage, levee improvements may reduce the risk 
of loss of human lives, which is a benefit that is not included in the 
Corps' calculations.[Footnote 13] According to the Corps, about 305,000 
people live within the American River floodplain and the number of 
lives lost because of levee failure would depend on a variety of 
factors, such as the size of the flood, warning time, time of day, and 
availability of evacuation routes. Because of the many factors involved 
and the lack of historical data, the Corps was not able to estimate the 
number of lives that would be lost as a result of levee failure and 
flooding in the Sacramento area.

Although the Corps updated its benefit estimate in 2002 to incorporate 
the benefits from the new levee improvements authorized in 1999, a 
Sacramento district official acknowledged that the Corps again made 
mistakes in estimating the number of properties the levee improvements 
would protect. For the American River levee improvements authorized in 
1999, the Corps identified an area that was larger than the area the 
levee improvements would actually protect. As a result, the Corps 
overestimated the number of properties protected and the benefits 
provided by the work authorized in 1999. According to a Sacramento 
district official, the Corps currently does not have the information it 
needs to determine the correct area the levee improvements would 
protect and therefore is unable, at this time, to provide a reliable 
estimate of the benefits from the 1999 work.

In addition, the Corps made mistakes in its 2002 analysis in estimating 
the value of the residential properties the American River levee 
improvements would protect. The Corps' policy calls for calculating a 
property's value as the cost of replacing the structure less any 
depreciation, which accounts for a reduction in a structure's value due 
to deterioration prior to flooding.[Footnote 14] Because the Corps had 
more than 100,000 residential properties to assess and a limited amount 
of time and resources, it determined depreciated replacement values for 
a small sample of 365 properties and then used the results to estimate 
the depreciated replacement values for all properties. However, the 
Corps did not correctly select the sample of properties. According to 
members of both the Appraisal Institute and The Appraisal Foundation, 
to accurately appraise a large number of properties by sampling 
requires a separate sample for each residential property type, such as 
single-family homes, condominiums, and apartment buildings.[Footnote 
15] Instead of conducting a separate sample for each type of property, 
the Corps sampled all property types together and calculated an average 
depreciated replacement value for all property types. As a result, it 
is unclear whether the Corps accurately calculated depreciation, which 
in turn raises questions about its estimates of the value of the 
residential properties the American River levee improvements would 
protect.

Moreover, the Corps did not use a consistent, objective appraisal 
methodology to calculate depreciation for the properties in the sample. 
Instead, the Corps subjectively determined depreciation. For example, 
if the Corps determined a structure was in "very good" condition it was 
assigned a zero percent, 5 percent, or 10 percent level of 
depreciation. However, the Corps could not provide us with its criteria 
for assigning the level of depreciation. Furthermore, the Corps' 
economists who made these subjective decisions did not consult with the 
professional appraisers in the Corps' Sacramento district office to 
identify alternative appraisal methodologies that may have been more 
appropriate. According to the Corps, the methods it used to determine 
depreciation are "standard practice at the Corps and are consistent 
with prior and existing guidance." Nonetheless, we believe that the 
shortcomings identified above raise questions about the accuracy of the 
Corps' property value estimates and, in turn, the project benefit 
estimates that are, in part, based on them. The Corps said it 
recognizes the need to strengthen its methodologies and is currently 
developing a new tool to estimate property values.

Finally, the Corps' 2002 analysis did not use the methodology described 
in Corps guidance to determine the number of properties that are 
located in the 100-year floodplain and the damages they would sustain 
in a 100-year flood.[Footnote 16] The 100-year floodplain is the land 
area that may be affected during a flood that has a 1 percent chance of 
occurring every year. Instead of following Corps guidance by directly 
counting the properties located in the 100-year floodplain and 
calculating the damages they would sustain in a 100-year flood, the 
Corps estimated the damages using a methodology that relied on the 
results from its incorrect 1996 count of properties. The Corps' use of 
this alternative methodology further calls into question the accuracy 
of its benefit estimate for the American River levee improvements 
authorized in both 1996 and 1999, which is based in part on this flood 
damage assessment. The Corps told us that it could have directly 
counted the properties in the 100-year floodplain but the necessary 
information was not available in a "user friendly" format, and that the 
additional effort needed to collect more accurate information was not 
expected to change the results. As a result, the Corps did not believe 
this was an effective use of resources. However, the Corps did not 
provide us with any evidence to support the validity of calculating the 
100-year flood damages as it did or to validate its contention that the 
results would not change if it had used the methodology prescribed in 
its guidance.

The Corps Has Not Provided Congress with Information on the Range of 
Possible Benefits from the Levee Improvement Work or the Likelihood 
They Will Be Realized:

The Corps has not followed its policy to provide Congress with an 
estimate of the range of possible benefits from the American River and 
Natomas Basin levee improvements and the likelihood that these benefits 
will actually be realized. In 1996, the Corps established a policy 
calling for benefit estimates and benefit-cost comparisons for flood 
protection projects to be reported with their associated 
probabilities.[Footnote 17] For example, rather than reporting that the 
benefits for a particular project are exactly $1.5 million, the Corps 
could report that it is 80 percent confident that project benefits will 
be at least $1 million but it is only 30 percent confident that 
benefits will reach $2 million. The Corps recognizes that this 
information can assist Congress in understanding the uncertainty 
involved in achieving various levels of benefits and in determining 
whether those risks justify funding the project. According to the 
Corps, it did not estimate a range of benefits for the Common Features 
Project in 1996 because the computer software used to assess the 
project's benefits and costs was developed prior to the 1996 guidance 
and did not have the capability to calculate a range of values.

However, in its 2002 reanalysis of project benefits, when a new version 
of the software capable of calculating benefit ranges and probabilities 
was available and costs for the American River work had significantly 
increased, the Corps chose not to calculate a range of benefits and 
instead continued to report a single estimate. Because the Corps' 2002 
estimates of benefits and costs for the American River work were so 
close in value (1.1 to 1), an analysis of the potential range of 
benefits would have revealed whether there was a significant 
probability that project benefits could be lower than the single 
estimate the Corps reported and perhaps lower than project 
costs.[Footnote 18] According to a Sacramento district official, the 
Corps did not use the new version of its software that could have 
calculated the range of benefits to maintain consistency with 
information on flood protection it had previously released to the 
public. For example, the Corps has reported to the public that the 
American River levees have about a 1 percent chance of being breached 
by floodwaters in any given year. This estimate of flood protection 
could be different if calculated using the newer version of the 
software. The Corps was concerned that using the newer software would 
require it to report a different, and perhaps slightly lower, level of 
flood protection, which would confuse the public. However, by taking 
this approach, the Corps did not provide Congress with important 
information about the uncertainty surrounding the amount of benefits 
the project would provide.

The Corps' Quality Control Process Did Not Identify Flaws in Its 
Benefit Analyses:

Three organizational levels within the Corps--district, division, and 
headquarters--reviewed and approved the 1996 and 2002 benefit analyses 
for the American River component of the Common Features Project, but 
these reviews did not identify the mistakes that we found. This issue 
raises questions about the adequacy and effectiveness of the Corps' 
review process. We raised similar concerns about the Corps' review 
process in our report on the Delaware River Deepening Project, which 
found significant miscalculations and invalid assumptions in the 
project's economic analysis that the Corps did not find during its 
reviews.[Footnote 19]

For the Common Features Project, the Corps' Sacramento district office 
conducted the 1996 study that analyzed the technical and economic 
aspects of the proposed project and the 2002 report updating that 
information. The Corps' Los Angeles district office reviewed the 2002 
economic analysis for technical accuracy. Next, the Corps' South 
Pacific division reviewed the analysis; although, following the Corps' 
policy, it did not review the district's work for technical accuracy or 
verify the underlying analysis. Rather, the division checked that the 
district's reports had undergone a technical review, and that the 
district had issued a quality control certification report with the 
necessary district office-level approvals. The division then forwarded 
the project to headquarters. Corps headquarters also did not conduct a 
technical review of the analysis. Rather, headquarters checked that the 
district's report adhered to Corps policies for conducting a benefit-
cost analysis and addressed any concerns headquarters had raised.

These review processes, however, were ineffective in detecting and 
correcting the mistakes in the benefit analyses we identified. For 
example, for the 2002 study, we found no indication that the mistakes 
made in calculating the number and the value of residential properties 
or the mistake made in calculating flood damages were detected during 
the Corps' review process. For the 2002 analysis of the American River 
levee improvements, a Corps economist from another district 
independently reviewed the benefits analysis. However, the review was 
not comprehensive enough to sufficiently identify methodological 
problems. The review primarily focused on process-oriented issues, such 
as assessing whether the Sacramento district conducted certain 
analyses, rather than examining the technical aspects of how the 
analyses should have been and were conducted.

Conclusions:

It is critical that decision making and priority setting be informed by 
accurate information and credible analysis. Reliable information from 
the Corps about the costs and benefits for the American River component 
of the Common Features Project has not been present to this point. The 
analysis on which Congress has relied contained significant mistakes. 
And of most relevance today, the analyses for the remaining work do not 
provide a reliable economic basis upon which to make decisions 
concerning the American River levee improvements authorized in the WRDA 
of 1999. To provide a reliable economic basis for determining whether 
these improvements are a sound investment, the Corps' analysis needs to 
adequately account for the risk that project costs could increase 
substantially, correctly count and value the properties the project 
would protect, and include information on the range of potential 
project costs and benefits.

Moreover, because the Corps has not made some critical decisions 
regarding the Natomas Basin work, it is not yet known whether the Corps 
will be able to identify cost-effective flood protection options for 
this area. Specifically, the Corps has not determined whether it will 
(1) conduct a cost risk analysis of its current plan to identify its 
exposure to potentially significant cost increases or (2) evaluate the 
costs and benefits of alternatives to the current levee improvement 
plan to identify the most cost-effective flood protection option. In 
addition, identifying cost-effective flood protection involves 
reporting the range of potential project benefits and the probability 
of achieving them, which the Corps has not done for the Natomas Basin 
work. If the Corps begins implementing the authorized Natomas Basin 
work before it completes a comprehensive, accurate cost-benefit 
analysis, significant unanticipated cost increases could materialize, 
as they did with the American River work. Finally, for Congress to have 
confidence that the Corps' economic analyses have been prepared 
accurately, the Corps' quality control process would need to be 
sufficiently independent and detailed to identify the types of mistakes 
that our review revealed.

Recommendations for Executive Action:

For the American River levee improvements authorized in 1999 and for 
the planned Natomas Basin work, we recommend that the Secretary of the 
Army direct the Corps of Engineers to:

* determine whether it is appropriate to conduct risk analyses of 
project costs and document the basis for that decision in its project 
files;

* report information to Congress on the range of potential project 
benefits and the probability of achieving those benefits, as called for 
in the Corps' guidance, in future benefit-cost analyses; and:

* arrange for a credible, independent review of the completeness and 
accuracy of the revised benefit-cost analyses.

For the American River project component, we also recommend that the 
Secretary of the Army direct the Corps of Engineers to reanalyze the 
benefits of the improvements authorized in the WRDA of 1999, correcting 
for the mistakes made in counting and valuing properties and the 
inappropriate methodology used to calculate flood damages.

Additionally, for the Natomas Basin project component, we recommend 
that the Secretary of the Army direct the Corps of Engineers to:

* analyze the costs and benefits of alternatives to the current levee 
improvement plan and identify the flood protection plan that provides 
the greatest net benefits and:

* submit a report to Congress that includes a cost estimate for all of 
the planned Natomas Basin work, and wait until Congress authorizes 
funding that is based on the report before beginning construction of 
any Natomas Basin levee improvements.

Agency Comments and Our Evaluation:

We provided a draft of this report to the Secretary of the Army for 
review and comment. In commenting on the draft report, the Army 
concurred with all of our recommendations. Perhaps most significantly, 
the Army acknowledged that on the basis of the Corps' experience in 
constructing the American River levee improvements, there is a 
potential for substantial cost increases for the Natomas Basin levee 
improvements, and therefore the Corps needs to investigate a wider 
array of alternatives for providing flood protection for the Natomas 
Basin. In addition, although the Army concurred with our recommendation 
to reanalyze the benefits of the improvements added to the American 
River component of the project in 1999, it contended that the Corps has 
already completed the reanalysis. We disagree. In 2002, the Corps 
prepared an analysis of the economic benefits for the work added to the 
project in 1999. However, our review found several mistakes in this 
analysis, including mistakes in counting and valuing properties and 
using an inappropriate methodology to calculate flood damages. We 
continue to believe that before the Corps begins construction of the 
work added to the American River project component in 1999, it should 
reanalyze this work to ensure it is cost beneficial.

The Army stated that the report does not recognize the significant role 
Congress played in 1999 by adding additional work to the project and 
providing funds for construction before the Corps had developed 
reliable cost estimates, which created the situation of which our 
report is critical. By focusing its comment on the relatively small 
amount of work added in 1999, the Army avoided the main issues 
regarding the American River levee improvements discussed in our 
report. Specifically, that (1) the costs for the American River 
component of the project approved in 1996 are more than triple the 
original estimate; (2) the Corps had information, before construction 
began, that should have alerted it that costs would likely increase 
greatly; and (3) the Corps should have communicated this information to 
Congress at that time, but it did not. Furthermore, the additional 
funding provided by Congress for the work authorized in 1999 has not 
been used for that purpose, but rather has been used to fund the cost 
overruns for the work authorized in 1996. The full text of the Army's 
comments, and our responses to them, are presented in appendix III.

:

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the date of this letter. At that time, we will send copies of this 
report to the appropriate congressional committees, other interested 
Members of Congress, and the Secretary of the Army. We also will make 
copies available to others upon request. In addition, the report will 
be available at no charge on the GAO Web site at [Hyperlink, http://
www.gao.gov.] h [Hyperlink, http://www.gao.gov] ttp://www.gao.gov.

If you, or your staff, have any questions about this report, please 
contact me at (202) 512-3841. Key contributors to this report are 
listed in appendix IV.

Anu Mittal: 
Director, Natural Resources and Environment:

Signed by Anu Mittal:

[End of section]

Appendixes: 

Appendix I: Scope and Methodology:

To determine the reasons for the cost increases for the Common Features 
Project, we obtained the key cost estimation documents prepared by the 
U.S. Army Corps of Engineers' (the Corps) Sacramento district office. 
Specifically, we obtained the Corps' 1996 Supplemental Information 
Report, American River Watershed Project; the 1997 Addendum to the 
Supplemental Information Report; the 2002 Second Addendum to the 
Supplemental Information Report; and other related documents. We 
reviewed the Supplemental Information Report, which examined a number 
of different flood protection alternatives, because it provided the 
foundation, including cost estimates, for the project elements that the 
Corps later grouped together as the Common Features Project. The 
Addendum to this report documented the Corps' first cost estimate that 
specifically and exclusively addressed the Common Features Project and 
included separate costs for both the American River component and the 
Natomas Basin component of the project. We reviewed the Second 
Addendum, the Corps' most current official cost estimate, to establish 
the amount of and the reasons for the increased costs. We also analyzed 
construction contracts to determine the cost of responding to accidents 
constructing the levee improvements authorized in 1996. We calculated 
the extent of inflation for both components of the project, using the 
Corps' Civil Works Construction Cost Index System and a cost index from 
the Office of Management and Budget. Finally, we discussed the reasons 
for the cost increases with economists, cost estimators, project 
managers, engineers, and other staff from the engineering, 
constructions operations, and planning divisions of the Corps' 
Sacramento district office.

To determine whether the Corps analyzed the likelihood of significant 
cost increases for the project and reported them to Congress in a 
timely manner, we reviewed the Corps' (1) policy regarding the use of 
cost risk analysis in estimating costs for civil works projects 
(Engineer Regulation 1110-2-1302) and (2) requirements for updating 
project cost estimates and informing Congress of cost increases 
(Engineer Regulation 1105-2-100). We also reviewed a document from the 
Corps' Institute for Water Resources on incorporating risk and 
uncertainty into cost estimation. We examined the American River levee 
improvement construction contracts to determine when the Corps became 
aware of cost increases for this component of the project. In addition, 
we reviewed the Corps' annual budget documents related to the Common 
Features Project, which contained information on the project's status 
and any changes or cost increases. We examined the Corps' cost 
estimates from 1996, 1997, and 2002 for compliance with relevant Corps 
cost estimating guidance and to determine if the Corps provided 
Congress with accurate information about significant expected cost 
increases. Finally, we discussed the Corps' cost estimating procedures 
and awareness of likely cost increases with cost estimators, project 
managers, and other staff from Corps headquarters and the Sacramento 
district office.

To determine whether the Corps correctly estimated the economic 
benefits of the American River levee improvements, we reviewed the 
extent to which the Corps followed accepted economics practices and 
whether the major assumptions used in the analysis were reasonable and 
well supported. We obtained the Corps' 1996, 1997, and 2002 economic 
analyses for the Common Features Project and discussed the sources of 
these data and conduct of the analyses with the Corps economists 
responsible for preparing them. We also discussed the basis for the 
hydrologic and engineering assumptions used in the economic analysis 
with the Corps specialists who provided this information. In addition, 
we obtained the Corps' guidance (Engineer Regulations 1105-2-100 and 
1105-2-101 and Engineer Manual 1110-2-1619) on the accepted economic 
and engineering methodologies for incorporating risk and uncertainty 
into benefit estimation. To verify and supplement the information we 
received from officials in the Corps' Sacramento district office, we 
spoke with, among others, Corps officials at the Hydrologic Engineering 
Center and the Institute for Water Resources and experts in real estate 
appraisal from the Appraisal Foundation and the The Appraisal 
Institute. Where we identified problems that affected the accuracy of 
the benefit analysis, we discussed them with the responsible Corps 
staff and considered any new data or revisions that they provided. 
Finally, we identified the roles and responsibilities of the Sacramento 
district office, South Pacific division, and headquarters in the Corps' 
internal quality control process for the Common Features Project. We 
also obtained copies of the quality control reviews and the reviewers' 
comments on the economic analysis and discussed the comments and their 
resolution with Corps officials.

We conducted our review from September 2002 through September 2003 in 
accordance with generally accepted government auditing standards.

[End of section]

Appendix II: Conversion of Costs to Constant Dollars:

In this report, unless otherwise noted, we present costs in the dollar 
values for the years in which they were estimated, not in constant 
dollars. For example, the Corps estimated the original cost of the 
project as $57 million in 1996, and that is how we present it in this 
report. We did not adjust the costs to constant dollars to account for 
inflation to maintain consistency with the figures in published Corps 
reports on the Common Features Project. However, table 3 shows the 
Corps' 1996 cost estimates for key components of the Common Features 
Project and also shows the same estimates adjusted to 2002 constant 
dollars to account for inflation.

Table 3: Common Features Project's Cost Estimates in Original 1996 
Dollars and in Adjusted 2002 Dollars:

[See PDF For image]

Source: GAO analysis of U.S. Army Corps of Engineers data.

[End of table]

[End of section]

Appendix III: Comments from the Department of the Army:

REPLY TO ATTENTION OF:

DEPARTMENT OF THE ARMY OFFICE OF THE ASSISTANT SECRETARY CIVIL WORKS 
108 ARMY PENTAGON WASHINGTON DC 20310-0108:

22 SEP 2003:


Ms. Anu Mittal 
Acting Director 
Natural Resources and Environment 
U.S. General Accounting Office:

441 G Street, NW Washington, D.C. 20548:

Dear Ms. Mittal:

This is the Department of Defense (DOD) response to the General 
Accounting Office (GAO) draft report, "`CORPS OF ENGINEERS: Improved 
Analysis of Costs and Benefits Needed for Sacramento Flood Protection 
Project,' dated August 19, 2003 (GAO Code 360273/GAO-03-1055).":

We appreciate the opportunity to comment on GAO's draft report and its 
recommendations. The report provides a current look at the American 
River Common Features project, which is currently under construction.

Enclosed are our comments on the report.

Sincerely,

John Paul Woodley, Jr.: 
Assistant Secretary of the Army (Civil Works):

Enclosure:

GAO DRAFT REPORT - DATED AUGUST 19, 2003 GAO CODE 360273/GAO-03-1055:

"CORPS OF ENGINEERS: IMPROVED ANALYSIS OF COSTS AND BENEFITS NEEDED FOR 
SACRAMENTO FLOOD PROTECTION PROJECT:

DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:

Overall Corns of Engineers Evaluation of the Report: The Corps of 
Engineers has reviewed the General Accounting Office's (GAO) draft 
report entitled "CORPS OF ENGINEERS, Improved Analysis of Costs and 
Benefits Needed for Sacramento Flood Protection Project." The report is 
focused on improving the analysis of cost and benefits for the American 
River Common Elements Projects, and communication with Congress on cost 
increases associated with the project. Based on the findings of its 
review, the GAO makes six recommendations on the American River levee 
and/or Natomas basin portions of the project. The Corps response to 
those recommendations is contained in a separate section. Even though 
the Corps believes that the GAO has made some factual errors, and has 
taken some data out of context, it concurs with the recommendations of 
the report. The Corps' concerns are outlined, as appropriate, in the 
responses to the specific GAO recommendation in the section.

An overarching concern is the failure of the GAO report to recognize 
the significant role Congress has played in the authorization and 
construction funding of the American River levee portion of the 
project. In the Water Resources Development Act (WRDA) of 1999, the 
Congress added features without a Corps report. Even while the Corps 
was still in the process of completing studies and developing reliable 
cost estimates, the Congress was directing that the project be 
implemented by providing funds for construction. The GAO report should 
acknowledge that this has taken place and is not the standard business 
practice of the Corps. The Corps seeks authorization of projects, based 
on completed, reviewed and approved decision documents. These decision 
documents describe the project features, benefits and costs in detail, 
and are intended to serve as the basis for Administration decisions and 
for Congressional authorizations and funding. In 1999, Congress 
exercised its discretion and authorized the additional project features 
without the usual decision document and Administration endorsement. 
Further, the consistent provision of funds by Congress at or exceeding 
budget request created the situation of which the GAO report is so 
critical.

The GAO report also does not acknowledge Corps standard practice for 
continually communicating project specific information both formally 
and informally to Congress. Once a project is authorized, as was the 
American River Common Features Project in WRDA 1996, the Corps, through 
the yearly appropriations process, informs Congress of potential cost 
and schedule changes, and on any related need to prepare supplemental 
decision documents. The Corps identified the need to prepare a new 
decision document to incorporate changes authorized by the WRDA of 1999 
into the overall project in the FY 02 budget submission, and identified 
the need for reauthorization to increase the total authorized project 
costs in the FY 03 budget submission. In addition, in March 2001, 
briefings were held in which Members of Congress were informed of the 
need to prepare a decision document to include an evaluation of the 
potential for the total project costs to exceed the cost limits allowed 
by Section 902 of the WRDA 1986. A number of Congressmen and Senators 
were briefed at this time, including Robert Matsui, John Doolittle, 
Harry Reid, and Richard Pombo.

It is also important to note that in order to formally inform Congress 
of the project cost increases, recommend reauthorization if cost exceed 
the Section 902 limit required by Congress, and for increased funding 
that reflects cost increases to be included in the President's budget, 
the decision document (which includes a detailed project cost 
estimate), must be approved by the Secretary of the Army, delegated to 
the Assistant Secretary of the Army (Civil Works) (ASA(CW)). Currently, 
ASA(CW) is reviewing the Corps decision document for the American River 
Common Features.

The GAO report does not recognize the dynamic environment in which 
water resources projects are developed. Data availability, 
methodologies and technologies change as projects are developed. The 
Corps continually assesses the need to obtain new data and employ new 
techniques in analyses of ongoing projects. As an example, it was the 
flood of January 1997 that showed that the existing levees were not 
adequately designed to withstand the destructive effect of seepage. It 
was not an error, but an unknown condition for which the Corps had to 
revise its design and this resulted in the cost increases noted in the 
GAO report. This shows that the Corps employs new data, methodologies 
and techniques in decision documents to accurately inform decision 
makers of changes and of cost increases.

Finally, GAO seems to consider separable elements of the Common 
Features as separate projects. The American River Common Features 
project includes multiple elements, such as the Natomas basin work, but 
in fact is considered one project.

Corps Response to GAO Recommendations: The GAO report has a total of 
six recommendations. However, the recommendations are grouped into 
three classifications dealing with recommdations for (1) American River 
levee and Natomas basin components, (2) American River levee component 
only, and (3) Natomas basin component only. The responses are presented 
in a similar fashion.

RECOMMENDATION 1: For the American River levee improvements authorized 
in 1999 and for the planned Natomas basin work, we recommend that the 
Secretary of the Army direct the Corps of Engineers to:

* determine whether it is appropriate to conduct risk analyses of 
project costs and document the basis for that decision in its project 
files;

* report information to Congress on the range of potential project 
benefits and the probability of achieving those benefits, as called for 
in the Corps' guidance, in future benefit-cost analyses; and:

* arrange for a credible, independent review of the completeness and 
accuracy of the revised benefit-cost analyses.

DOD RESPONSE: CONCUR. Regarding the risk analysis of project costs, as 
outlined in an Engineering Regulation on Civil Works Cost Engineering 
(ER 1110-2-1302) dated 31 March 1994, the intent of cost risk analysis 
is to identify and measure the impact of design level uncertainties or 
unknowns in certain features on the estimated total project cost. Cost 
risk analysis is intended to aid in the identification of the amount of 
contingency that should be added to a cost estimate to account for 
uncertainties although it is acknowledged that such analyses "will not 
reduce the uncertainties associated with the project costs estimate or 
solve problems of cost variance due to insufficient information." 1:

With regard to the American River levee improvement features, the Corps 
did review the need for project cost risk analysis in support of the 
1996 project report and determined that more detailed analyses were not 
required, although this decision was not explicitly documented in the 
project files. Project cost estimates developed for this initial 1996 
feasibility report, were based upon relevant actual design and 
construction experience, and the most recent project specific data that 
was available, and followed Corps policy in accordance with ER 1110-2-
1302, by incorporating a reasonable contingency to account for 
potential unknowns. At that time, no one was aware of any areas of 
significant uncertainty necessitating more detailed examinations. It 
was only the flood in January 1997 that showed the design should be 
changed to account for significantly greater under seepage than what 
was already included in the Corps' design.

Project specific design and construction information was used to form 
the basis of cost estimates developed for the March 2002 American River 
Watershed Project (Common Features) Second Addendum to the Supplemental 
Information Report. The Corps agrees with the GAO that the use of the 
cost risk analysis should be considered. An evaluation of the need to 
perform more detailed cost risk analysis was made and it was determined 
that potential uncertainties were appropriately accounted for in the 
project cost estimate contingencies. However, as pointed out in the GAO 
report, this decision was not explicitly documented in the project 
files. The Corps will document the basis for past cost risk decisions 
in the project files.

The Corps will continue to evaluate the need for cost risk analysis for 
any future work associated with the American River levee improvements. 
For the planned Natomas basin work, the Corps will, as recommended, 
determine whether it is appropriate to conduct risk analyses of project 
costs and document the basis for that decision in its project files.

Regarding the GAO recommendation to inform Congress on the range of 
potential project benefits and the probability of achieving those 
benefits, the economic model and related benefit estimates used for the 
1996 feasibility report were prepared using the most advanced 
evaluation techniques and data available at the time the studies were 
conducted. The economic model was developed specifically to support the 
evaluation of American River project impacts. The Corps recognizes the 
need to use new technologies as they become available, and the Corps 
will, as recommended by GAO, provide Congress information on the range 
of potential project benefits and the probability of achieving those 
benefits in future benefit-cost analyses for the American River levee 
improvements, if warranted, and for the planned investigations for the 
Natomas basin features.

Regarding the GAO recommendation that any revised benefit-cost analysis 
that might result from the recommendations noted above, be subject to a 
credible, independent review, the Corps conducts both a technical and 
policy review as part of the decision documents approval process. The 
Corps believes that its review process results in decision documents 
that form the basis of sound recommendations. Additional independent 
reviews of the completeness and accuracy of benefit-cost analyses for 
the American River levee improvement work would likely be of little 
value, given that construction of the features authorized in both WRDA 
1996 are nearly complete and over $110 million in Congressional 
appropriations have been obligated to date. For the planned Natomas 
basin investigations, the Corps will arrange for a credible, 
independent review of the completeness and accuracy of benefit-cost 
analysis.

RECOMMENDATION 2: For the American River project component, we also 
recommend that the Secretary of the Army direct the Corps of Engineers 
to:

* reanalyze the benefits of improvements authorized in the 1999 WRDA, 
correcting for the mistakes made in counting and valuing properties and 
the inappropriate methodology used to calculate flood damages.

DOD RESPONSE: CONCUR. The GAO report raised questions with the 
methodology used in the 1996 feasibility study to estimate the number 
of residential development effected by flooding and benefiting by levee 
improvements. This methodology was accepted practice and consistent 
with Corps policy at the time the work was done. New technologies 
(i.e., Geographic Information System analysis which included tax record 
database integration) and information which allowed for a more accurate 
estimate of effected properties was available for the March 2002 
American:

River Watershed Project (Common Features) Second Addendum to the 
Supplemental Information Report and allowed the Corps to refine the 
original estimate of residential structures.

The Corps already has completed the reanalysis recommended by the GAO. 
The overestimation of residential structures that appeared in the 1996 
feasibility report was accounted for in the benefit estimates included 
in the March 2002 American River Watershed Project (Common Features) 
Second Addendum to the Supplemental Information Report. The reported 
1.1 to 1.0 benefit-cost ratio for the American River levee improvements 
is based on the lower estimate of structures. In keeping with Corps 
practice to provide the most recent and reliable data, other changes 
also were accounted for in the March 2002 American River Watershed 
Project (Common Features) Second Addendum to the Supplemental 
Information Report analysis, including the value of residential 
structures and hydrological changes.

In terms of valuing properties, the GAO report did not acknowledge or 
explain the difference between economic and real estate evaluations. 
The Corps, during the feasibility study phase, does not develop real 
estate appraisals of the value for individual property acquisition. 
Such an analysis requires a separate individual appraisal for each 
property. There are approximately 169,000 structures, including roughly 
163,000 residential structures, in the 400-year floodplain. During the 
study phase, the Corps develops estimates of structure values for 
determining aggregate economic damages. The cost of preparing detailed 
real estate appraisals during the study phase, when the engineering 
feasibility, economic justification, and environmentally acceptability 
of project have not been determined, is not warranted and would be 
prohibitively costly. The methods used in this economic evaluation 
continue to be standard practice today.

RECOMMENDATION 3: Additionally, for the Natomas basin project 
component, we recommend that the Secretary of the Army direct the Corps 
of Engineers to:

* analyze the costs and benefits of alternatives to the current levee 
improvement plan and identify the flood protection plan that provides 
the greatest net benefits; and:

* submit a report to Congress that includes a cost estimate for all the 
planned Natomas basin work and wait until Congress authorizes funding 
based on the report before beginning construction of any Natomas basin 
levee improvements.

DOD RESPONSE: CONCUR. The Corps acknowledges that in light of the 
potential for substantial increases in project costs, based on 
construction experience with the American River levee improvements, 
there is a need to investigate a wider array of alternatives for 
providing flood protection for the Natomas basin. Corps policy requires 
a reformulation of the authorized project. The ability of the 
authorized engineering features to provide outputs intended by Congress 
will be evaluated, as will all other reasonable alternatives.

GAO Comments:

The following are GAO's comments on the Department of the Army's letter 
dated September 22, 2003.

1.Although the Army asserted that we made some factual errors, its 
subsequent comments failed to identify any specific factual errors.

2. The Army believes that the report does not recognize the significant 
role Congress played in 1999 when it added additional work to the 
project and authorized funds for construction before the Corps had 
developed reliable cost estimates. While the Congress did add work to 
the Common Features Project in the Water Resources Development Act 
(WRDA) of 1999 without a Corps report, the cost of this work is 
relatively small in comparison to the work authorized in 1996. We 
believe the Army's comment is not relevant to the main focus of our 
report, which is the significant cost increases for the work the Corps 
recommended and the Congress authorized in 1996. For example, the costs 
for the work the Corps recommended on the American River more than 
tripled from $44 million in 1996 to $143 million in 2002. In contrast, 
the estimated cost for the work on the American River levees the 
Congress added in 1999 is about $15 million. We believe our report 
accurately reflects the limited impact the addition of work in 1999 had 
on the American River component of the project's overall cost. 
Furthermore, the additional funding provided by Congress for the work 
authorized in 1999 has not been used for that purpose, but rather has 
been used to fund the cost overruns for the work authorized in 1996.

3. The Army stated that the consistent provision of funds to the Corps 
by Congress, at or exceeding the Corps' budget request, created the 
situation of which our report is critical. We do not agree. Two of the 
main issues in our report are that the costs of the American River 
component of the project nearly tripled due to design changes, and that 
the Corps began construction of the American River levee improvements 
without analyzing the likelihood of these cost increases or reporting 
the potential cost increases to Congress. The fact that Congress 
provided funding for the project does not absolve the Corps of its 
responsibility to communicate project cost increases in a timely 
manner.

4. The Army implied that Congress was informed of potential cost 
increases for the Common Features Project during the yearly 
appropriations process. This is not the case on the basis of our review 
of all of the Corps' submissions for the annual appropriations process 
from 1997 through 2001. As our report states, it was not until February 
2002, more than 4 years after it had significantly modified the design 
of the American River levee improvements, that the Corps informed 
Congress for the first time of the significant cost increases for the 
American River component of the project.

5. The Army stated that the levee improvements were not originally 
designed to withstand the destructive effect of seepage and that this 
design was not an error. Rather, an unknown condition (i.e., the 
potential for destructive seepage under the levees) resulted in design 
changes and increased costs. Our report does not criticize the Corps 
for not anticipating the need for a levee improvement design that would 
stop seepage under the levees. We acknowledge that the flood of January 
1997 caused the Corps to change the design of its levee improvements. 
However, as our report notes, the Corps did not develop new cost 
estimates after making these design changes and did not communicate the 
resulting significant cost increases to Congress in a timely manner.

6. We do not consider the separable elements of the Common Features 
Project as separate projects. This report makes clear that there is one 
Common Features Project comprised of an American River component and a 
Natomas Basin component.

7. We agree with the Army that, in 1996, the Corps was not aware of any 
significant areas of cost uncertainty for the proposed American River 
levee improvements. However, as the Army recognizes, the flood of 
January 1997 showed that the Corps' design for the levee improvements 
should be significantly modified. After making these design changes, 
though, the Corps did not estimate the potential for cost increases due 
to tripling the depth of some cut-off walls or closing the gaps in cut-
off walls at bridges and other areas. These design changes eventually 
added $76 million to the cost of the project.

8. The Army stated that the Corps believes that its review process 
results in decision documents that form the basis for sound 
recommendations. However, in two recent cases, we found that the 
process did not serve its intended purpose. As this report documents, 
the Corps' review process was ineffective in detecting and correcting 
the mistakes in the benefit analyses we identified. We raised similar 
concerns about the review process in our June 2002 report on the 
Delaware River Deepening Project.

9. We did not recommend that the Corps reanalyze the costs and benefits 
of the work authorized in 1996. We agree that a reanalysis of this 
work, which is nearly complete, would be of little value. However, we 
continue to believe that a reanalysis of the economic benefits from the 
work authorized in 1999 is necessary because the Corps' initial 
analysis contained significant mistakes and construction of the work 
has not yet begun. Before beginning construction of this work, the 
Corps should verify that the work is in fact cost beneficial. In 
addition, the Corps should arrange for a credible, independent review 
of the completeness and accuracy of its reanalysis.

10. The Army contends that the Corps has already completed the 
reanalysis we recommended of the work added to the American River 
component of the project in 1999. We disagree. The Corps analyzed the 
economic benefits for the 1999 work added to the project for the first 
and only time in 2002. Our review found several problems with the 
Corps' 2002 analysis of the benefits from this work. For example, we 
found that the Corps had made mistakes in how it counted and valued 
properties and had used an inappropriate methodology to calculate flood 
damages. As a result, the Corps has not yet prepared an accurate 
assessment of the benefits resulting from the 1999 work. The Corps has 
not begun any construction for the work authorized in 1999, and it is 
not currently known if the benefits provided by this work are greater 
than the costs. Consequently, we recommend a reanalysis of these 
benefits in order to correct the mistakes that we identified.

11. The Army stated that the Corps does not conduct individual real 
estate appraisals to determine the value of each property that could be 
damaged in a flood. Our report does not suggest that the Corps should 
conduct such appraisals. Rather, we identified weaknesses in the sample 
the Corps used to estimate property values and its methodology for 
calculating depreciation for the properties in the sample. For example, 
to accurately appraise a large number of properties by sampling 
requires a separate sample for each residential property type, such as 
single-family homes and apartment buildings. However, the Corps sampled 
all property types together. In addition, the Corps did not use a 
consistent objective appraisal methodology to calculate depreciation 
for the properties in the sample. These weaknesses raise questions 
about the accuracy of the Corps' property value estimates and the 
project benefit estimates that are, in part, based on them.

12. The Army claims that there are approximately 163,000 residential 
structures in the 400-year floodplain. This is not correct on the basis 
of the Corps' most current analysis. The estimate of 163,000 
residential structures comes from the Corps' 1996 economic analysis. 
However, in 2002, the Corps updated its analysis and found that it had 
overestimated the number of residential structures in 1996. The Corps' 
2002 analysis estimated that there were 115,347 residential structures 
in the 400-year floodplain.

[End of section]

Appendix IV: GAO Contact and Staff Acknowledgments:

GAO Contact	: 

Anu Mittal, (202) 512-3841:

Staff Acknowledgments: 

In addition to the individual above, Jeff Arkin, Chuck Barchok, Judy 
Hoovler, Richard Johnson, Mark Metcalfe, Ryan Petitte, and Stephen 
Secrist made key contributions to this report.

:

(360273):

:

:

FOOTNOTES

[1] In this report, costs and benefits are presented in the dollar 
values for the years in which they were estimated, not in constant 
dollars, except for the work authorized in 1999, which is presented in 
2002 dollars. We did not adjust cost and benefit figures to constant 
dollars to account for inflation in order to maintain consistency with 
the figures in published Corps reports on the Common Features Project. 
However, when discussing changes in project cost, we do report cost 
increases due to inflation. In addition, appendix II shows 1996 project 
costs converted to 2002 dollars. 

[2] See U.S. Army Corps of Engineers and the State of California 
Reclamation Board, Feasibility Report, American River Watershed 
Investigation, California (Sacramento, Calif.: December 1991). 

[3] Constructing a dam near Auburn is not a new idea. In 1965, the U.S. 
Bureau of Reclamation was authorized to construct a dam near Auburn for 
increasing water supply, providing hydropower, controlling floods, and 
other purposes. Construction at the site was halted in 1975 because of 
concerns over the proposed dam's ability to withstand earthquakes, and 
was never resumed.

[4] See U.S. Army Corps of Engineers, State of California Reclamation 
Board, and the Sacramento Area Flood Control Agency, Supplemental 
Information Report, American River Watershed Project, California 
(Sacramento, Calif.: March 1996).

[5] Current law requires the nonfederal partner to pay a minimum of 35 
percent of the costs of flood protection projects. This increased cost 
share requirement only applies to projects authorized after the WRDA of 
1996 and therefore does not apply to the Common Features Project. 

[6] About 3 percent ($9 million) of this increase is the result of 
price inflation between 1996 and 2002. 

[7] These costs are in 2002 dollars.

[8] The California state legislature established the Sacramento Area 
Flood Control Agency to coordinate flood protection efforts for the 
Sacramento area on a regional basis.

[9] See U.S. Army Corps of Engineers and the State of California 
Reclamation Board, Sacramento and San Joaquin River Basins, California, 
Comprehensive Study, Interim Report (Sacramento, Ca.: Dec. 20, 2002). 

[10] See U.S. Army Corps of Engineers, Engineer Regulation 1110-2-1302.

[11] Charles Yoe, Risk Analysis Framework for Cost Estimation, a report 
prepared for the U.S. Army Corps of Engineers, Institute for Water 
Resources, December 2000.

[12] See U.S. Army Corps of Engineers, Engineer Regulation 1105-2-100.

[13] The Corps' guidance (Engineer Regulation 1105-2-100) directs the 
Corps to address the issue of prevention of loss of life when 
evaluating alternative plans--which the Corps did. However, the Corps 
is not required to formally estimate the number of lives saved or lost 
as a potential effect of a project. In situations where historical data 
exist, the Corps has the option to estimate the number of persons 
potentially affected by a project, and include this number as an 
additional factor for the consideration of decision makers.

[14] See U.S. Army Corps of Engineers, Engineer Regulation 1105-2-100.

[15] The Appraisal Institute is an international membership association 
of professional real estate appraisers whose mission is, in part, to 
uphold professional credentials and standards of professional practice 
and ethics consistent with the public good. The Appraisal Foundation is 
a nonprofit education organization that, among other things, develops 
and promulgates professional appraisal standards and appraiser 
qualifications.

[16] See U.S. Army Corps of Engineers, Engineer Manual 1110-2-1619.

[17] See U.S. Army Corps of Engineers, Engineer Regulation 1105-2-101.

[18] The Corps' 2002 estimate includes the benefits of both the 
expanded 1996 work and the additional 1999 levee improvement work. 

[19] See U.S. General Accounting Office, Delaware River Deepening 
Project: Comprehensive Reanalysis Needed, GAO-02-604 (Washington, 
D.C.: June 7, 2002).

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