Trade-Off Analysis

1. Trade-Off Analysis Roles of Economists and New Analytical Requirements

2. Planning in a Collaborative Environment • Enhance collaborative approach to water resources management • Watershed/system vs. site specific • Multiple purposes / multiple partnerships • Fully utilize flexibility and authority of P&G • Evaluate, display and compare the full range of alternative plans effects across all 4 P&G accounts. • May select any candidate plan with net beneficial effects (based on 4 accounts) with ASA exemption. • Must identify NED Plan.

3. In formulating Collaborative Plans, we face inherent conflicts: • Multiple collaborators with varied interests • Need to determine “net beneficial effects” considering multiple variables for which performance is measured using different metrics (quantity and quality) and which have different degrees of importance for the collaborators/stakeholders/public. • Trade-off analysis required to identify optimum solution.

4. Combined Plans • Modern day multipurpose planning - strive to achieve environmental sustainability (EOPs) • “Seek balance and synergy among human development activities and natural systems by designing economic and environmental solutions that support and reinforce one another.”, Environmental Operating Principles, March 2002 • Contribute to environmental sustainability as defined in EOP’s by formulating Combined NED/NER plans • Combined NED/NER Plan = Combined Plan

5. In formulating Combined Plans, we face an inherent conflict: • Most “commercial” (NED) water resource development derives benefit by reducing hydrologic variability • Most ecosystem restoration (NER) derives benefit by restoring hydrologic variability • Trade-off analyses required to identify optimum solution

6. Trade-off “Balancing Act” Economic Efficiency Trade-off Group Process Decision Algorithms

7. Trade-off Analysis • Fundamentally a political process • It is not science • Rarely, if ever, objective • However, it can be approached in a structured and systematic way to improve reliability and validity of the process

8. Trade-off analysis The purpose of multicriteria trade-off methods is to improve the quality of decisions by making the decision making process more explicit, rational, and efficient. Example: Buying a car.

9. Choosing a car: Organizing the decision

10. Choosing a car: Choice will differ based on perspective • Buying for your self • Buying for your family • Someone buying for you as a gift • Buying for a rental car firm • Buying for GSA • Analogous to different perspectives of various partners in Corps trade-off situations

11. PLANNING Navigation Flood damage reduction Ecosystem restoration Watershed studies Project EIS OPERATIONS Reservoir reallocation Major rehabilitation Changes to operating plans Regulatory permit decisions / EIS We make trade-offs in many situations in the Corps

12. What kinds of things do we trade off? NED versus NED NED versus RED NED versus EQ EQ versus EQ

13. Trade-offs require consideration of: • Variables or “indicators” important to the decision • Yardsticks to measure performance against the indicators – quantity AND quality • Relative importance across indicators (preferences, weights)

14. Combined Plans Evaluation:Example Procedure • Trade-off Analysis: • Identify criteria (variables or indicators) • Total Annual NED Benefits • Total Annual Ecosystem Restoration Outputs • Total Annual Cost • Yardsticks • NED Benefits - $$$ • Ecosystem Restoration Outputs – Hus, acres of wetlands, etc. • Cost - $$$

15. Combined Plans Evaluation (Continued) • Identify Not-dominated (cost effective plans) • Use multiple criteria: • Total Annual NED Benefits • Total Annual Ecosystem Restoration Outputs • Total Annual Cost

16. Not Dominated Plans(Cost Effective)

17. Does choice of multicriteria trade-off method matter? Which multicriteria method is adopted can make a significant difference in the decision, in that choice of a method can affect the results as much or more than which person applies the method.

18. Popular Trade-off Analysis Methods • Weighting Methods • Non-Normalized • Normalized • Effects Matrix • Ranking Index • Commensurable Metric, Ordinal Data, Direct Weights • Ordinal Ranking • Borda’s Simple Method • Unequal Weights • Outranking Methods • Analytical Hierarchy Process

19. Popular Trade-off Analysis Methods For more information, go to: Trade Off Analysis Planning and Procedures Guidebook, IWR Pub 02-R-2, April 2002

20. Output of Trade-Off Analysis Ranking of Plans, best to worst, that meets the outcome defined for each criterion considering the preferences (ako, weights) assigned to each criterion by PDT. Is the highest ranking plan the one to recommend? Maybe.

21. Combined Plans: Comparison and Selection • Comparison • Compare highest ranked justified plan to NED or NER Plan. • Consider benefits foregone, benefits gained, differences in cost and other decision criteria. • Document rationale for selecting Combined Plan over NED or NER Plan.

22. Where are we on development of final Guidance? • Developing multipurpose formulation and evaluation manual to include: • Fully worked example to illustrate various trade-off approaches (index, distance functions, ect.). • Revisiting decisions on criteria, justification, incremental analysis • IWR-PLAN updated for trade-off analysis. • New OSE/RED Handbooks