Guidance on cost benefit analysis

Guidance on cost benefits analysis

There are two main elements when assessing benefits and costs: the tangible and the intangible. It is possible to define some benefits and costs in monetary terms, such as capital outlay. Others, such as the attractiveness of new green areas are less straightforward.

Ideas as to how to assign monetary values are only now emerging, such as landscape/visual amenity as part of green infrastructure and ecosystem services and other approaches (e.g. categorised as contributing to ‘place and communities’. Intangible benefits (such as those associated with green infrastructure) may be important to stakeholders and a community, and are increasingly essential in proving the overall societal value of any scheme. However, evaluating intangible benefits can be challenging as many of these are subjective.

It is likely that the available information and approaches to evaluation will develop rapidly in the future. For the time being it is wise to be conscious of the current level of confidence for some of the data. Table 1 provides examples of the UK guidance that is available to assess benefits and costs.

Table 1 UK sources of guidance for benefit cost assessment

Name of guidance	What it includes	Other comments
Surface Water Management Plan guidance (Defra, 2010)	Guidance on the monetisation of costs and benefits and uncosted benefits and costs. Provides information on NPV and BCR assessments and dealing with uncertainty	Straightforward introduction to benefit-cost assessment. Limited actual data for value and cost of SuDS
Understanding the risks, empowering communities, building resilience. The national flood and coastal erosion risk management strategy for England. (Defra/EA, 2011)	The strategy and principles that underpin the above and the delivery of many aspects of the Flood and Water Management Act 2010	As above
Preliminary Framework to assist the development of the Local Strategy for Flood Risk Management (Local Government Group, 2011)	Guidance and information about engaging communities and in assisting them to contribute directly to managing their local flood risk. Stresses the multi-benefit approach and provides information about alternative sources of funding	A living document.
Delivering biodiversity benefits through green infrastructure (Dale et al, 2011)	Provides guidance on assessing and including biodiversity benefits in schemes at the design, construction and operational stages.	Adaptive management linked to the construction cycle. Outlines the ‘accessible natural greenspace standard (ANGSt)
The Green Book (HM Treasury, 2003) and supplementary guidance Accounting for the effects of climate change (Defra, 2009)	The primary guidance for many assessments including the economic assessment for flood and coastal erosion risk investment (EA, 2010). The supplement explains how to evaluate benefits and costs for adaptation and flexibility. These are usually applied to larger schemes	Useful where there are significant flood risk reduction benefits
The benefits of flood and coastal risk management: a handbook of assessment techniques – 2010 (Penning-Rowsell et al, 2010)	Provides guidance on assessing the benefits of flood risk management options and the impacts resulting from flooding. It enables the practitioner to assess the relationship between costs and benefits	The handbook is appropriate for most schemes. However, where the scheme is complex, use the more extensive Multi-coloured manual (Penning-Rowsell et al, 2010)
Exploring the cost benefit of separating surface water from combined sewers (UKWIR, 2009)	Guidance for benefit-cost of separating stormwater from combined sewers to reduce overflows. Asset based investment water industry criteria are used in the assessments, which are from a sewerage undertakers’ perspective	Applicable mainly to sewerage undertakers and does not include many of the wider benefits potentially accruing to other stakeholders
Sewer flood risk asset investment (UKWIR, 2007a and UKWIR 2007b)	Methodology for benefit-cost analysis for sewer flood risk asset investment. Complemented by Ofwat (2009), which deals with the use of NPV in asset investments	Applicable mainly to sewerage undertakers
Cost-benefit of SuDS retrofit (Gordon-Walker et al, 2007) Carbon related aspects of source control and related costs and benefits (EA, 2009)	Benefit-cost assessment information for a reduced range of SuDS measures. Includes only a limited range of non-monetised benefits. Relates costs to carbon abatement and sequestration for green SuDS	The benefit-cost assessment boundaries are limited in the analysis
The SuDS manual (Woods-Ballard et al, 2007a)	Provides guidance on SuDS design, and whole life costing	The primary source for SuDS related cost data in the UK but would benefit from more recent data
Guide to assess the whole life costs of SuDS (UKWIR/WERF, 2005) Decentralized stormwater controls for urban retrofit and combined sewer overflow reduction: Phase II (WERF, 2009) Urban stormwater management in the United States (National Research Council, 2008)	Guidance developed jointly between UK and US providing a whole life costing methodology and data to assess the overall costs of SuDS. The database is recurrently updated by HR Wallingford as part of a whole life costing tool	With the above, the primary source for SuDS related cost data in the UK
Cost-benefit of SuDS retrofit (Environment Agency, 2007) Carbon related aspects of source control & related costs and benefits (Environment Agency, 2009). Rainwater harvesting (RWH) and SuDS – Carbon Implications for Wales (Environment Agency Wales and Arup, 2011).	2007 report has benefit-cost assessment information for a reduced range of SuDS measures. Includes only a limited range of non-monetisable benefits. Relates costs to carbon abatement and sequestration for green SuDS. The 2011 report updates this assessment and shows when and where retrofit RWH can be beneficial in terms of both carbon and downstream flood risk reduction	The benefit-cost assessment boundaries are limited in the analysis in the 2009 report. The 2011 report links the analysis to the DCWW’ surface water management strategy and the use of small scale (200litre) RWH.
Scottish water retrofit SuDS project (Atkins, 2004)	Provides a discussion of benefits to be considered and costed examples	Current thinking has advanced but still a useful source of information
Sustainable drainage. Cambridge design and adoption guide (Wilson et al, 2009)	Data on the maintenance costs of SuDS. Although set up for new build it may also be applicable to retrofit	A typical example of local authority guidance for developers

The primary sources of guidance in Table 1 do not include the assessment of the full range of potential benefits of using SuDS, nor how best to include future change, such as climate change.

These more intangible aspects of benefits and costs are very important to consider when undertaking comparisons of traditional and sustainable drainage systems. It is often shown that considering multiple benefits, especially with regard to green infrastructure, make the use of SuDS more attractive.

Table 2 provides further sources of guidance that can help to quantify the more intangible benefits when using SuDS.

Table 2 Guidance to help assess intangible benefits

Name of guidance	What it includes	Other comments
Building natural value for sustainable economic development – the green infrastructure valuation toolkit user guide (Green Infrastructure North West, 2011)	A simple framework that can help identify and broadly assess the benefits of proposed green investments and existing green assets – whether those benefits directly contribute to a local economy, or provide wider non-market returns for society and the environment Spreadsheet based tool	The only publicly available GI valuation toolkit in the UK that also includes SWM. Focus is mainly, however, on GI rather than surface water
Guidance for risk management authorities on sustainable development in relation to their flood and coastal erosion risk management functions (Defra, 2011)	Guidance on how to ensure that schemes include sustainable development in their outcomes and the value derived from this	Simple in concept and useful lists of examples of measures. Will evolve over time as experience is gained.
Flood and Coastal Erosion Risk Management: Economic Valuation of Environmental Effects Handbook for the Environment Agency for England and Wales (Eftec, 2010)	Guidance and many examples on including the economic value of ecosystem services in flood and coastal erosion risk management	Many useful examples included. Likely to continue to be updated.
The value of green infrastructure. A guide to recognizing its economic, environmental and social benefits (Center for Neighborhood Technology, 2010)	This US-based guidance and tool has been in use since 2006 and recently updated. It has been used extensively to evaluate the benefits of retrofitting SWMM for CSO control in the US	The main emphasis is on managing surface water using GI

Often a combination of ‘grey’ (piped) and green infrastructure approaches are the most beneficial as found in the plans for Combined Sewer Overflow control in many parts of America.

It is therefore important to find consensus between potential partners about the range of benefits to assess as well as the range of measures to practicably utilise. Table 3 outlines guidance that is currently available that include the wider benefits which is very new and, in some cases, incomplete when considering application to retrofit surface water management. This guidance is likely to evolve quickly over time.

As yet, none of the tools shown is readily applicable to the range and scale of SuDS. However, they do provide comprehensive details explaining the categories, criteria, assumptions and procedures to use to evaluate the wide range of benefits from using green infrastructure in conjunction with surface water management measures.

Table 3 Guidance for assessing multi benefits from SuDS

Name of guidance	What it includes	Other comments
Green Infrastructure North West (2011)	A simple framework that can help identify and broadly assess the benefits of proposed green investments and existing green assets – whether those benefits directly contribute to a local economy, or provide wider non-market returns for society and the environment. Spreadsheet based tool provided for this.	The only publicly available green infrastructure valuation toolkit in the UK that also includes surface water management. Focus is mainly, however, on GI rather than surface water.
Center for Neighborhood Technology (2010)	As above, this US based guidance and tool has been in use since 2006 and recently updated.	The main emphasis is on managing surface water using green infrastructure.