Urgent Request for Insights on Benefit-Cost Ratios and New Models for Project Delivery

Question

"BCR" - Benefit-Cost or Cost-Benefit Analysis, Return on Investment, Performance-Based Outcomes...please share your insights on how new models for BCR, CBA, ROI, PBC are being used in your community and projects.
Simply put from the US Army Corp of Engineers to States and Counties, is there a best practice that is unleashing new resources and unlocking innovations for risk mitigation. Your idea?

Tony Jones · Answer

@Richard Seline  We have been exploring a shared savings model, where the utility can achieve substantive reductions in operating expense by optimization of water and wastewater treatment assets and processes.   The benefit to the operator is reduced technology risk. The benefit to the technology provider is a long tail of residuals.  A cost-benefit analysis is included after a conversation with operational managers.   Once uptake of smart contracts is more mainstream, the shared savings business model rewards the innovators.

AK Shyam · Answer

Each of them is specific to certain objective and therefore, one has to be clear on what the objective it.  Not that they together don't mean anything.  Depending upon the nature of project, one of them could be critical and therefore, it is ideal to evaluate all of them and determine the limiting factor for future correction and positive results.

Brad Rodgers · Answer

Richard Seline  It would seem, from a practitioners perspective, that there are two individual questions being asked.  The first would be "what best practices unlock new resources and innovations?"  The answer to this would be more "structure" oriented - ie. joint ventures, public-private partnerships, pure privatization, and/or payments for environmental services (PES). 
The second question (in your question) is more related to how would the COE evaluate potential structures, or the success or failure of those structures.  That's where I would see a BCR, CBA, ROI, etc. type analysis being appropriate.
So, my question back to you is which one (or both) are you trying to figure out?  How to structure projects, or how to evaluate the success of those innovative structures?
Best,
Brad

Steven Cooke · Answer

The most relevant and useful ‘new’ approach for any project analysis is the full “Lifecycle Cost Analysis”, including the full impact on resources and other activities. This primarily discloses hidden costs, effects, or detriments that are overlooked in many simple financial projections. It can be a mechanism for more innovation as well as directly affecting risk mitigation.
 
Wherever resources come from, whether “new” or existing, “unleashing” them efficiently is the key to better results. If “new” resources are wasted in the same way that past or current ones are, due to a lack of sufficient scope in the analysis, then we will just waste them faster instead of making any improvements. A key part of the new LCA models is the inclusion of specific land use and ecological impact effects. Sustainable economics includes much more than a simple balance sheet of money.

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