| OCR Text |
Show Establishment of need for a project.-A project can have value only to the extent that it can be shown that there will be a need or demand for the service to be ren- dered by the project. Although the need or demand may be obvious in the case of many purposes for which water resource projects are built, the nature of need or demand may give rise to limitations on the type or scope of project. For flood control, a "standard project flood" should be established as the maximum flood against which protection need be provided. The demand to be expected for hydro- electric power depends on future economic developments in the market area, on the price at which power from the project or from other sources will be offered for sale, and on similar factors. Similarly, possible limitations of need or demand should be considered in project formula- tion for all purposes to be served by the project. Selection of type of project.-A study of each site for possible river basin development being considered to meet any specific purpose or purposes should also take into ac- count other established justifiable needs or purposes. All physically possible methods of meeting each of the needed purposes which could be served by river basin development should be analyzed and compared to permit formulation of the most effective plan for meeting all needs from the standpoint of engineering, economic, and other pertinent considerations. The numerous combinations of methods and projects which require analysis under this criteria can be reduced to practicable limits by a process of approxi- mate comparisons and proceeding successively through comparative analyses of increasing detail until a reason- able number of combinations remains for detailed analyses. Establishme tit of scope or scale of development.-In the final stages of formulation of the plan, the scope (i. e., scale of development) of each project and of the plan as a whole should be established at the point where the excess of benefits over costs is at the maximum. This is the point at which the last increment of scale of develop- ment will add benefits equal to the cost of that increment. Further increments would add more cost than benefits. Extension of the project beyond this point is not econom- ically justifieol. If the development is stopped short of this point, the over-all benefit-cost ratio may be higher but the full potentiality of the project would not be utilized. Application of the foregoing principles would result in selection of trme most effective scale of development if all factors could be completely taken into account in the estimates of benefits and costs. There may be, however, intangibles that cannot be readily evaluated in monetary terms. The significance of these intangibles must be considered to determine if departure is warranted from the results indicated by analysis of monetary values. For example, in flood control there are a number of factors which may prove important enough to warrant extending the scope of a project beyond the point where the excess of tangible benefits over costs is at the maximum. When- ever establishment of that point results in a project of lesser scope than that required to provide protection against the "standard project flood," consideration should be given to si»ch intangibles as the reduction of hazard to life and health and the improvement of general welfare and security of the area involved. These factors and the value of avoiding creation of a false sense of security through providing only partial flood protection may war- rant extending the scope of the project to a reasonably high degree of protection. The fullest cooperation should be practiced between Federal agencies and State and local agencies, as well as with private concerns and interests, preferably at the field level. Economic factors in project design.-At several stages in the analysis and design of a project it will be necessary to make a choice between alternative methods of accom- plishing a given purpose. For example, the choice of type of dam, i. e., earth, concrete-gravity, concrete-arch, etc., are the choice of materials for a part of the project such as roofing materials for a powerhouse. For the most part, such questions are resolved on the basis of physical and engineering factors, but where a choice remains after those considerations are satisfied, the relative costs of other- wise equally satisfactory alternatives may govern. Also, it may be necessary to consider which of two or more equally satisfactory alternatives at the same cost will give the greatest benefits. In any event, the selected project and each of its components should be the most economical type or method of accomplishing the desired purpose. 2. Project justification-Justification of individual projects.-Among the principles for project formulation outlined in preceding paragraphs are the following criteria: (a) A project as well as its components should be the most economical available method of accomplish- ing the specific purpose being served. (b) The scale of development of a project should be established at the point where the excess of benefits over costs is at the maximum. If these criteria are met, the total project benefits will necessarily exceed total project costs, and the project will be economically justified. The amount by which benefits exceed costs can be conveniently indicated by the ratio of benefits to costs. This ratio is also useful for comparing the relative desirability of a number of justified projects as outlined below. Comparison of several justified projects.-The rela- tive economic desirability of a number of justified projects is directly proportional to their ratios of benefits to costs. If economic considerations alone were involved, it would be proper to undertake projects with the highest benefit- cost ratios first. There are, however, other pertinent fac- tors to be considered. For example, funds available may be so limited that a large project with a high ratio cannot be initiated until it can be foreseen that the total funds required can be obtained on a definite schedule. Mean- while there may be funds available for smaller projects with lesser benefit-cost ratios. Regional needs must also be taken into account in de- termining the order of construction of projects in a basin plan. Also, physical factors such as the interrelation of projects from an operational standpoint may dictate the order of priority of construction. For example, a down- stream reservoir may be designed with a capacity for flood control such that prior completion of another reservoir upstream is required before the downstream project can fulfill the purposes for which designed. Similarly, there may be governmental policy considerations of intangible factors of sufficient importance to warrant undertaking 410 |
