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Cost Effectiveness and Incremental Cost Analyses Using IWR Planning Suite

Planning Principles & Procedures – FY11. Cost Effectiveness and Incremental Cost Analyses Using IWR Planning Suite. Learning Objectives. To explain what are Cost Effectiveness & Incremental Cost Analyses (CE/ICA)

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Cost Effectiveness and Incremental Cost Analyses Using IWR Planning Suite

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  1. Planning Principles & Procedures – FY11 Cost Effectiveness and Incremental Cost Analyses Using IWR Planning Suite

  2. Learning Objectives • To explain what are Cost Effectiveness & Incremental Cost Analyses (CE/ICA) • To explain why CE/ICA are conducted in evaluating ecosystem restoration alternatives • How can procedures be used in decision-making? • To explain how IWR Planning Suite software can be used to perform CE/ICA procedures • To demonstrate examples of CE/ICA from ecosystem restoration projects

  3. References • Planning Guidance (ER 1105-2-100) (www.usace.army.mil/inet/functions/cw/cecwp/) • Chapters 2 & 3 • Appendix E, Civil Works Missions & Evaluation Procedures • “Procedures Manual: Cost Effectiveness and Incremental Cost Analyses” • (IWR Report 95-R-1) (www.iwr.usace.army.mil/) • “Lessons Learned from CE/ICA” • IWR Report 02-R-5 (www.iwr.usace.army. mil/) • “IWR Planning Suite User’s Guide” • Draft IWR Report, Nov 2006 (www.iwr.usace.army. mil/)

  4. References (cont’d) • Indian River Lagoon – South Project Implementation Report • Section 6 • (Jacksonville District, March 2004) (www.evergladesplan.org) • Elizabeth River, Virginia Ecosystem Restoration Project Feasibility Report • (Norfolk District, 2000) (www.cenao.usace.army.mil)

  5. What are CEA/ICA? Why do CEA/ICA?

  6. Why do CE/ICA? TRADITIONAL OUTPUTS • Compare costs and benefits • Traditional benefits measured in $ BC Ratio = $ Benefits/$ Costs Net Benefits = $ Benefits - $ Costs ENVIRONMENTAL OUTPUTS • Environmental benefits not in $ • Therefore no B/C • Can still compare costs and benefits $ OUTPUT

  7. Increased Information for Decision Making Cost Oblivious Decision Making Benefit Cost Analysis Cost Effectiveness Analysis Incremental Cost Analysis

  8. What are CE/ICA?

  9. Plan Comparison: CEA

  10. Plan Comparison: CEA

  11. Plan Comparison: ICA

  12. Results of Incremental Cost Analysis

  13. Why do CEA/ICA? To make more informed decisions… about good financial investments.

  14. CEA/ICA are NOT…

  15. CEA/ICA are NOT... • NOT (a substitute for the) planning process • NOT measurement technique • NOT way to minimize requirements • NOT in addition to, but instead of... • NO single right way • NO single right answer

  16. CEA/ICA are ... • Tools to inform environmental investment decision-making.

  17. Who does CEA/ICA?

  18. Interdisciplinary • Plan formulator • Biologist • Economist • Cost estimator • Real estate specialist • Decision maker • Other disciplines

  19. Multi-Stakeholder • Corps • Local sponsor • Local, State, and other Federal agencies • Interest groups • Others

  20. How do you do CEA/ICA?

  21. Before you start, you need: • Solutions • Costs • Outputs

  22. Solutions =

  23. Solutions • Management measures • Examples: dredging, planting, harvesting, aerating, substrate improvement, fencing • Alternative plans • Fully-formulated alternatives • Different sites • Programs • Examples: Louisiana coastal wetlands, Upper Mississippi River Env. Mgt. Plan

  24. A1 D2 H0 S1 Plan Alternative Example “Perform aeration, dredge 185,000 cubic yards of sediment, do no aquatic plant harvesting, and improve the substrate.” Aeration = A Perform Aeration = A1 Plan alternative broken down: Perform Aeration is A1 Dredge 185,000 Cubic Yards is D2 Do not harvest (No Action) is H0 Improve Substrate is S1 Dredging = D (Cubic Yards) 140,000 = D1 185,000 = D2 220,000 = D3 Aquatic Plant Harvesting = H No Action = H0 21 Acres = H1 42 Acres = H2 63 Acres = H3 Substrate Improvement = S Improve Substrate = S1 No Action No Aeration = A0 No Dredging = D0 No Harvesting = H0 No Substrate = S0

  25. Solutions Incur Costs

  26. Cost Components • Implementation costs • construction • operation & maintenance • monitoring • LERRD

  27. Solutions Produce Output

  28. Environmental Outputs • No universal environmental output • Increases in ecosystem value & productivity, quantity & quality • Traditional outputs • physical dimensions (acres of spawning habitat, stream miles restored) • population counts (number of breeding birds, increases in target species) • “habitat units” • diversity indices • Annualized

  29. Environmental Outputs • Make the connection between planning objectives & outputs • Ex: Conceptual ecological models: sources -> stressors -> effects - > attributes - > HSI’s -> habitat units • Example: CEM for “St. Lucie Estuary” Source (agric runoff) -> Stressor (elevated phosphorus levels) -> Effect (increased algal blooms) -> Attribute (decreased estuarine WQ levels) -> Performance Measure (phosphorus load) -> HSI (oyster) -> HU’s (acres x oyster HSI)

  30. Sample Results: Average Annual Wetlands HU’s

  31. Solutions, Costs and Outputs COST EFFECTIVENESS ANALYSIS INCREMENTAL COST ANALYSIS CEA/ICA … Bringing it all together

  32. Cost Effective Plans: • No other plan produces same output for less cost • No other plan produces more output for same or less cost

  33. Best Buy Plans: • Subset of cost effective plans • Most efficient in production • Greatest increases in output for least increases in cost • Lowest incremental costs per unit of output

  34. Step-by-step process: • Plan formulation • Cost effectiveness analysis • Incremental cost analysis • Decision making

  35. VERSION 3.33

  36. IWR-Planning Suite • Software version of CE/ICA procedures • Automates tedious math • Allows you to do more complicated analyses • Tables & graphs as record of analyses

  37. IWR-Planning Suite • Available on web • Website: www.pmcl.com/iwrplan • Instructions • Student tutorial • User’s Guide • For on-line help, click on “?”

  38. IWR Planning Suite Basics • Assists in plan formulation • Builds “all plan combinations” • 52 solutions, 20 scales each • Also, fully formulated alternatives • Dependency & combinability relationships • No limit on number of variables, including: • Costs • 1 or more outputs • Other “effects” • “Derived” outputs (formulaic combinations of other variables) • Performs CE/ICA • CEA: Cost effective plans • ICA: Best buy plans

  39. IWR Planning Suite Features • Analytical • Multiple planning sets • Constraints • Sensitivity – variable & solution • Automated Editing – non-additive effects • Exclude solutions • Multi-planning set comparisons • “Plans of Interest” • Reporting • Multiple display/ report options • Import/ Export options

  40. IWR Planning Suite Features • Comprised of modules: • Plan Editor • also “framework” for other modules • Plan Generator • builds combinations • Plan Analysis • performs CE/ICA • Multi-criteria Decision Analysis (forthcoming) • scores & ranks alternatives

  41. CE/ICA Applied to Elizabeth River Ecosystem Restoration Project

  42. CE/ICA Applied to Elizabeth River Ecosystem Restoration Project

  43. Elizabeth River Ecosystem Restoration • Planning objectives: • Overall, restoration of the Elizabeth River’s aquatic & wetlands ecosystems • Specifically: • Wetlands restoration • Sediment quality restoration

  44. Elizabeth River Looking North

  45. Wetlands Loss: Since 1944

  46. Wetlands & Sediments Sites Somme Avenue Sugar Hill Crawford Bay

  47. Scuffletown Creek Future Without

  48. Scuffletown Creek Future With Restoration

  49. Woodstock Park Future Without

  50. Woodstock Park Future With Restoration

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