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PAD-78-67 1 (1978-06-02)

handle is hein.gao/gaobaaxfz0001 and id is 1 raw text is: DOCUMENT RESUME 090- [B15665931 Ret(4JCb 4/f/7-0 Better Analysis of Uncertainty Needed for Water Resource Projects. PAD-78-67; B-167941. June 2, 1978. Released June 9, 1978. 28 pp. + 2 appendices (5 pp.) Report to Sen. Edmund S. Muskie, Chairman, Senate Committee on Budget; Sen. Henry Bellmon, Ranking Minority Renter; by Elmer B. Staats, Comptroller General.. Issue Area: Water and Water Related Programs (25C0). Contact, Program Analysis Div. Budget Function: Natural Resources, Environment, and Energy: Water Resources and Power (301). Organization acerned: Department of the Army: Corps of Engineers. Congressional Relevance: Senate Committee on Budget. Sen. Edmund S. Ruskie; Sen. Henry Dellmon. When the Corps of Enginsers estimates ccsts and benefits of proposed water resource projects, it encountezs uncertainty. The two basic probability approaches to analyzing uncertainty are the relative frequency approach which relies on past evects and the subjective interpretation apprcac which depends on whether an event will occur at all. Findinga/Conclusions: The Corps is more successftil in &na.Lyses of costs and benefits which depend op tie relative frequency approach. For example, if floods have occurred at a certain frequency in the past, they can be expected to occur at similar freqgencies in the future. However, predicticns Cf events such as future development in a flood-prone area are af'tbjective. The Corpsl treatment of this type of uncertainty could be improved. Foz example, when an estimate of future events is based on the judgment of a panel of experts, it shoulE reflect the degree of agreement in the panel, not just the average opinion. Recommendations: The Corps should: r.xplicitly recognize inangible benefits and costs and show what efect they have un judgments about a project, indicate the level cf confidence surrounding estimates shich involve uncertainty, make increased use of sensitivity analysis tc show the pctential impact of uncertainty on expected costs and benefits, adjust estimates to account for uncertainty, incorporate an option value in its analysis to reflect the fact that an irreversitle action may preclude seme other action whose future value could be greater than expected, and consider devoting more analysis to factors that are the greate.ht sources of uncertainty. (H2W)

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