An Overview of Benefit-Cost Analysis for Water Resources Projects:
Improvements Still Needed
CED-78-127: Published: Aug 7, 1978. Publicly Released: Aug 7, 1978.
- Full Report:
Federal water resources projects are seldom authorized unless their estimated benefits exceed their estimated costs. The Water Resources Council (WRC) established principles and standards for planning water resources projects which were to help establish uniform procedures for more accurate benefit-cost analysis.
In spite of the importance of cost-benefit analyses, federal water resources agencies have had a continuing problem preparing accurate, uniform, logically developed benefit-cost ratios. Present standards and criteria are not specific enough to provide guidance for developing procedures for benefit-cost analysis. Lack of uniformity in methods of computing benefits has resulted in inconsistent and questionable computations, especially in areas such as recreation, area redevelopment, and navigation benefits. In some instances, agency regulations were not being followed, and questionable assumptions and inaccurate computations were made. Also, objective analysis is hampered by agency self-interest and outside influence. Alternatives for achieving more objective and reliable analyses would be to establish a focal point within the existing organizational structure or to establish an independent group to either prepare or review benefit-cost analysis.
Recommendation for Executive Action
Comments: Please call 202/512-6100 for additional information.
Recommendation: WRC should: (1) review principles and standards and provide specific guidance and criteria to insure uniform benefit computations; (2) request the agencies, if they have not done so, to submit their procedures for implementing the principles and standards for approval; and (3) review implementing procedures which have been approved for uniformity. The Secretaries of Agriculture, the Army, and the Interior should agree upon uniform methods and revise implementing procedures to ensure consistency. These Secretaries should ensure that internal regulations for benefit computations are specific enough to ensure logical and consistent development and that they are developed for all authorized benefits used in agency calculations. They should also have their agencies strengthen their internal management review procedures for benefit-cost analyses to prevent mathematical errors, resolve inappropriate assumptions, and ensure that adequate studies and supporting documentation are provided.