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.

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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.

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