Interest rates used in project evaluation should command the attention of anyone interested in water projects. The lower (or higher) the interest rate used in project evaluation, the more (less) likely a given project will be judged economically viable. The interest rate issue should NOT be viewed as an issue in the exclusive domain of economists and financiers. Otherwise, project evaluation will be co-opted by “off-line” discussions among economists and financiers selecting the interest rate. Continue reading
Category Archives: Project Evaluation
Market Mechanisms Address Controversy in Member Agency Decision-Making
Water agencies face decisions about significant investments in water resources. Some projects enhance the reliability of existing service. Others expand the ability to meet new demands. Do project benefits justify project costs? Member agencies with different goals or opportunities may come to different conclusions. Investment decisions become controversial. What can be done? Continue reading
Project Evaluation I: Don’t Underestimate Capital Investment
The year 2013 will be busy with project evaluation. In California, the Bay Delta Conservation Program (“BDCP”) will roll out an economic cost/benefit study. In Texas, the Legislature will engage in its biennial exercise of trying to fund the Texas Water Plan. Any state funding plan must evaluate projects. Local agencies and the private sector throughout the west are developing and accessing their next water investments.
In my more than three decades of experience, I have seen many project evaluations. Many miss the mark. Starting with this post and continuing every Friday through February 8th, I share my views on issues that are sometimes handled properly, but often not or incompletely. Continue reading