What Is “National Economic Development” Benefits

When the Corps of Engineers considers a navigation project, the focus is on improving the net benefit to the nation that this project may generate.  As such, the Corps will develop a without project condition, which serves as a baseline for additional comparisons.  Once traffic flows, cargo, and costs are a developed, the Corps will begin estimating the benefit of various projects, including both their related costs and benefits, including changing traffic volumes and costs.  In this context, the Corps, with a focus on the net benefit to the nation, constructs estimates of the National Economic Development benefits from a project.   (For example, putting in a project in one location that will influence an existing Corps project would be seen as simply a transfer between regions, and not necessarily a net benefit to the nation if the Corps now must build, operate and maintain two projects were the one existing project was sufficient.)  

The use of the Benefit Cost Ratio is to demonstrate if there is actually a net benefit for doing a project, namely that the benefits being considered are better than the costs. (Basically, for every dollar invested in a project, the project will return an anticipated return, such as a BC ratio of 2 suggests that for every one dollar invested, the nation would receive two dollars in benefits.) However, the evaluation of Benefit Cost ratios alone may not necessarily result in the best project being built from a national perspective.   Based on the following figure from IWR Report 09-R 3 three projects are considered.  Most people would say that Project A, with the higher Benefit Cost Ratio, should be selected.  However, the Alternative A has both a relatively lower Benefits than the other alternatives, despite its lower cost.  Alternative C, with its higher benefits than either Alternative A or B, generates the largest net economic return, and would be selected by the Corps of Engineers.

  

In many ways, the Corps includes many of the same elements used in highway and other infrastructure projects, with the basic steps of estimating costs and benefits.  The differences center upon: the focus on national, rather than regional, benefits, managing not only the determination of what project is needed but the construction of that project at the same time, and the inability to consider as wide a range of benefits as is traditionally done in other infrastructure BC analysis.  In sum, the Corps studies tend to be more broad and complex than other infrastructure investments, especially given that the project estimates are used throughout the entire review process and once approved, determine the project’s scope and budget.

 

 

2 Responses to “What Is “National Economic Development” Benefits”

  1. frank says:

    i disagree with the Corps selection of Alt C.
    A correct decision is to take A and find another B/C of 3 or 4 or higher for the $500K that is saved.

    • brucelambert says:

      Frank

      Thanks for the comment. I put this out there are people are starting to discuss can we develop BC analysis across transportation projects. There are some limitations, as the Corps must strive to meet the Principle and Guidelines that determine how the water resources are invested in the country. No one will argue that the Corps budget could be better aligned with getting projects done faster, but that’s the process that has been developed over time.