Plan Formulation: General

1. Plan Formulation: General Module G-4: NED Plan, NER Plan, Combined Plan, Other Plans

2. Student Learning Objectives Student will be able to: • Define NED and NER Principles • Plan with Environmental Operating Principles • Recognize the linkage between single purpose and multi-purpose strategies

3. Evaluation Concepts NED NER Methods of Comparison Annual Benefits and Costs Optimization/Incremental Analysis

4. NED and NER NED – National Economic Development – Increases in the net value of the national output of goods and services expressed in monetary units. NER – National Ecosystem Restoration – Increases in the net quantity and/or quality of desired ecosystem resources.

5. Methods of Comparison • Before and After • With and Without • Gap Analysis

6. 20- 10- 0- NOW TIME +20 YEARS

7. 20- 10- Existing 0- NOW TIME +20 YEARS

8. Target 20- 10- Existing 0- NOW TIME +20 YEARS

9. Target 20- 10- Future Without Existing 0- NOW TIME +20 YEARS

10. Target 20- Future with Plan A 10- Future Without Existing 0- NOW TIME +20 YEARS

11. Target 20- Future with Plan A 10- Future Without Existing 0- NOW TIME +20 YEARS

12. Target 20- Future with Plan A B&A 10- Future Without Existing 0- NOW TIME +20 YEARS

13. Target 20- Future with Plan A B&A 10- W & WO Future Without Existing 0- NOW TIME +20 YEARS

14. Target 20- Gap Future with Plan A B&A 10- W & WO Future Without Existing 0- NOW TIME +20 YEARS

15. Target 20- Gap Future with Plan A B&A 10- W & WO Future Without Existing 0- NOW TIME +20 YEARS

16. NED Analysis • Definitions • What’s in and What’s Out • Maximization of Net Benefits

17. Average Annual Benefits and Costs • All measurable NED benefits and costs must be included in the average annual benefits and costs of a project. • Average annual benefits and costs are the present worth (in project year one, the base year) of the dollar streams, amortized over the period of economic evaluation. • More important for this course, than the techniques and formulas for annualizing benefits and costs is: what benefits and costs are included and excluded.

18. All opportunity costs (not just out of pocket costs) e.g., interest during construction Future costs (and benefits), including any projected increase in OM&R All the resource costs needed to make the project complete Mitigation costs are included and allocated to the appropriate purpose. Benefits which are regional in nature (taken from another part of the country) Transfers from one group to another (income redistribution) Dollar costs which are not opportunity costs: recoverable business losses Costs associated with indirect project effects. What’s In What’s Out

19. Maximization of Net Benefits:An Example

20. Net Benefits: A Concept

21. Net Benefits: A Concept Combination with the greatest net benefit = 53

22. Scale Net Benefits Size 1 40 Size 2 50 Size 3 35 Net Benefits: For DifferentScales of Measure B (prior slide)

23. Net Benefits: Changing ScaleCan Change Incremental Analysis

24. Total Benefits Maximum Benefits $ Total Cost Maximum Cost Output* Output Maximum of net benefits achieved at Output* Maximization of Net Benefits

25. NER Analysis • Traditional B/C Analysis not possible with non-monetary benefits • Cost-Effectiveness/Incremental Cost Analysis (CE/ICA) • offers “next-best’ approach • bridges the decision-making gap • “getting the most for our money”

26. Cost-Effectiveness/Incremental Cost Analysis Definitions • Cost-Effectiveness • Conducted to ensure that the least cost alternative is identified for each possible level of output • Incremental Cost Analysis • Reveals changes in costs as output levels increase, • Allows an assessment of whether the increase in output is worth the additional cost

27. Cost EffectivenessIncremental Cost Analysis • Comparison of costs/outputs across differing units of measurement • Does not identify unique optimal solution • Can identify the least-cost alternative for producing every attainable level of output

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

29. NER Plan – Selection Considerations • Planning Objectives and constraints • Significance of output • Reasonably maximizes environmental benefits • Pass tests of CE/ICA • Four formulation criteria

30. EC 1105-2-404 PLANNING CIVIL WORKS PROJECTS UNDER THE ENVIRONMENTAL OPERATING PRINCIPLES

31. EC 1105-2-409 Planning in a Collaborative Environment (24 June 2005)

32. Planning in a Collaborative EnvironmentEC 1105-2-409 Purpose • Provide revised procedures for the conduct of Corps water resources planning and the preparation of feasibility (decision) reports • Moves Corps towards developing more comprehensive solutions to water resources problems while maintaining existing, effective processes – becoming more relevant to today’s National needs and priorities

33. OVERVIEW • Strive to achieve environmental sustainability • “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

34. Basic Principles • Operationalize EOP’s • Comply with P&G principles and requirements • Incorporate existing procedures and tools • Benefit/Cost analysis • Cost effectiveness/Incremental cost analyses (IWR-PLAN) • Optimization procedures

35. Environmental Sustainability • Results when economic and environmental considerations are effectively balanced through the life cycle of project planning, design, construction, operations and maintenance to improve the quality of the natural and human environment for present and future generations. • The Corps will achieve a better balance between economic and environmental benefits through the formulation of alternative plans that integrate both National Economic Development (NED) outputs and National Environmental Restoration (NER) outputs in accordance with existing planning regulations.

36. STEPS 1 AND 2 : DEFINE PROBLEMS AND OPPORTUNITIES; INVENTORY AND FORECAST • Include both economic development and ecosystem restoration problems and opportunities. • Define planning objectives and constraints. • Output: Clear definition of future without project condition.

37. STEP 3: FORMULATE PLANS • Consider all reasonable measures and plans. • Structural • Non-structural • Dependent or not dependent on other measures • All practicable measures to avoid or minimize adverse environmental impacts. Look for synergies!

38. STEP 3: FORMULATE PLANS • As one strategy, start with a primary purpose: NED or NER • Formulate plans to address primary purpose • Identify NED or NER Plan • Required for comparison/cost allocation purposes • Develop additional strategies: • To formulate combined plans to take advantage of synergies created by NED or NER Plan • To formulate other combined plans to address multiple purposes

39. STEP 4: EVALUATION • Assess benefits across purposes. • Conduct trade-off analysis: • Identify cost effective plans using both NED and NER outputs • Identify decision criteria: • National economic development benefits • National ecosystem restoration outputs • Total project cost • Determine if plans are justified

40. STEPS 5 AND 6 : COMPARISON AND SELECTION • Comparison • Rank Plans • Compare highest ranked 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. However, other considerations may also apply

41. SUMMARY POINTS • Intended to encourage broader plan formulation consistent with EOP’s • Allows consideration of all criteria in the evaluation process regardless of the unit of measurement • Justified Combined Plan must be identified • Must document trade-offs between NED or NER Plan and Combined Plan and the rationale for plan selection

42. Comparison/Selection Concepts • NED Plan • NER Plan • Combined Plan • Locally Preferred Plans • Other named plans

43. At the 6th step of the planning process, you will be asked to identify: An NED plan An NER plan A Combined plan A LPP plan Other plans The NED Plan reasonably maximizes net benefits The NER Plan reasonably maximizes environmental net benefits (not in dollars, of course) The Combined Plan is one which provides the optimal mix of monetary and non-monetary benefits The LPP is the locally preferred plan, which may be smaller, larger or otherwise different than the Federal plan Sometimes, It Helps to Know Where You Are Going, Before You Decide How to Get There So Let’s Look Way Ahead:

44. NED Plan (National Economic Development Plan) (P&G) NER Plan (National Ecosystem Restoration Plan) Combined Plan LPP (Locally Preferred Plan) LEDPA: Least Environmentally Damaging Practicable Alternative (CWA) Nonstructural Plan (WRDA 86) Reasonable & Prudent Alternative (ESA) Environmentally Preferred Plan (NEPA) No Action Plan (NEPA) Plan Designations

45. Plan Selection - EC 1105-2-409 • All planning studies will evaluate, display and compare the full range of alternative plans’ effects across all four Principles and Guidelines’ accounts. • NED, RED, EQ, and Social Effects • A plan may be a candidate for selection if it has, on balance, net beneficial effects. • May select and recommend any one of the candidate plans – (ASA(CW) exception needed if not NED or NER plan) • The basis for selection will consider the beneficial and adverse effects in all four accounts • Must identify an NED plan (for comparison) and establishing Corps financial participation in the recommended plan.

46. Take Away Points • Often we don’t get the fundamentals right -- According to Washington level reviewers, the three most common formulation errors are without project conditions, without project conditions, and without project conditions. • There is a lot of terminology to keep straight • The default choice for plan selection is the no action • While the normal choice for plan selection is the NED, NER, or Combined Plan, a LPP is an option

47. Where are we going next? • Question: What are some recent projects you have worked on that included both NED and NER outputs? How were these projects formulated?