Corps Of Engineers
Improved Analysis of Costs and Benefits Needed for Sacramento Flood Protection Project Gao ID: GAO-04-30 October 27, 2003In 1996 and 1999, Congress authorized the U.S. Army Corps of Engineers (the Corps) to strengthen sections of the American River and Natomas Basin levees that provide flood protection for Sacramento, California. In 2002, the Corps reported that the cost of this work, known as the Common Features Project, had increased significantly. GAO was asked to determine why costs increased, the extent to which the Corps analyzed and reported the potential cost increases to Congress in a timely manner, and whether the Corps correctly estimated economic benefits.
Estimated costs for the Common Features Project rose from $57 million in 1996 to between $270 million and $370 million in 2002--primarily because of design changes. For the American River, costs more than tripled from $44 million to $158 million in 2002, primarily due to changes such as deepening the walls built in the levees (cut-off walls) to prevent seepage and closing gaps in the walls at bridge crossings. Cost estimates for the Natomas Basin--still in planning--increased from $13 million in 1996 to between $112 million and $212 million in 2002. The Corps has yet to analyze alternative flood protection approaches for the Natomas Basin that might be more cost-effective. Furthermore, it has not analyzed its exposure to potentially significant cost increases for the Natomas Basin work. The Corps did not fully analyze, or report to Congress in a timely manner, the potential for significant cost increases for the American River levee improvements authorized in 1996. Specifically, a severe storm in the Sacramento area in January 1997 indicated some cut-off walls would need to be much deeper and therefore would be more costly. Corps guidance generally directs the Corps to seek new spending authority from Congress if it determines, before issuing the first contract, that it cannot complete the project without exceeding its spending limit. However, the Corps began construction in 1998 without analyzing or reporting potential cost increases. By 2003, it had committed most of the funding authorized for the entire Common Features Project to the 1996 American River work, leaving the additional 1999 work and the Natomas Basin improvements without funding. In 1996, the Corps incorrectly estimated the economic benefits for the American River levee improvements by overcounting the residential properties to be protected. In 2002, it incorrectly estimated benefits for the 1999 improvements by, among other things, miscalculating the size of the area that the improvements would protect. The Corps' quality control process was ineffective in identifying and correcting these mistakes.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-30, Corps Of Engineers: Improved Analysis of Costs and Benefits Needed for Sacramento Flood Protection Project
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Report to Congressional Requesters:
October 2003:
CORPS OF ENGINEERS:
Improved Analysis of Costs and Benefits Needed for Sacramento Flood
Protection Project:
GAO-04-30:
GAO Highlights:
Highlights of GAO-04-30, a report to congressional requesters
Why GAO Did This Study:
In 1996 and 1999, Congress authorized the U.S. Army Corps of Engineers
(the Corps) to strengthen sections of the American River and Natomas
Basin levees that provide flood protection for Sacramento, California.
In 2002, the Corps reported that the cost of this work, known as the
Common Features Project, had increased significantly. GAO was asked to
determine why costs increased, the extent to which the Corps analyzed
and reported the potential cost increases to Congress in a timely
manner, and whether the Corps correctly estimated economic benefits.
What GAO Found:
Estimated costs for the Common Features Project rose from $57 million
in 1996 to between $270 million and $370 million in 2002”primarily
because of design changes. For the American River, costs more than
tripled from $44 million to $158 million in 2002, primarily due to
changes such as deepening the walls built in the levees (cut-off
walls) to prevent seepage and closing gaps in the walls at bridge
crossings. Cost estimates for the Natomas Basin”still in planning”
increased from $13 million in 1996 to between $112 million and $212
million in 2002. The Corps has yet to analyze alternative flood
protection approaches for the Natomas Basin that might be more cost-
effective. Furthermore, it has not analyzed its exposure to
potentially significant cost increases for the Natomas Basin work.
The Corps did not fully analyze, or report to Congress in a timely
manner, the potential for significant cost increases for the American
River levee improvements authorized in 1996. Specifically, a severe
storm in the Sacramento area in January 1997 indicated some cut-off
walls would need to be much deeper and therefore would be more costly.
Corps guidance generally directs the Corps to seek new spending
authority from Congress if it determines, before issuing the first
contract, that it cannot complete the project without exceeding its
spending limit. However, the Corps began construction in 1998 without
analyzing or reporting potential cost increases. By 2003, it had
committed most of the funding authorized for the entire Common
Features Project to the 1996 American River work, leaving the
additional 1999 work and the Natomas Basin improvements without
funding.
In 1996, the Corps incorrectly estimated the economic benefits for the
American River levee improvements by overcounting the residential
properties to be protected. In 2002, it incorrectly estimated benefits
for the 1999 improvements by, among other things, miscalculating the
size of the area that the improvements would protect. The Corps‘
quality control process was ineffective in identifying and correcting
these mistakes.
What GAO Recommends:
To better inform Congress about the costs and benefits of flood
protection for Sacramento, GAO recommends, among other things, that
the Secretary of the Army
* improve the accuracy of the cost-benefit analysis for the not yet
constructed American River levee improvements;
* improve the reporting of costs and benefits and analyze alternative
flood protection measures for the Natomas Basin improvements; and
* arrange for a credible, independent review of the completeness and
accuracy of the revised analyses.
The Army concurred with GAO‘s recommendations but took issue with the
presentation of some information.
www.gao.gov/cgi-bin/getrpt?GAO-04-30.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact Anu Mittal at (202)
512-3841 or mittala@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Design Modifications Have Greatly Raised Costs for the Common Features
Project:
The Corps Did Not Adequately Analyze Likely Cost Increases for the
Common Features Project or Communicate Them to Congress in a Timely
Manner:
Corps' Benefit Estimates for the American River Levee Improvements Are
Incorrect:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Scope and Methodology:
Appendix II: Conversion of Costs to Constant Dollars:
Appendix III: Comments from the Department of the Army:
GAO Comments:
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Staff Acknowledgments:
Tables:
Table 1: The Corps' Original 1996 Cost Estimate and Estimated Cost
Increases for the American River Levee Improvements Authorized in 1996:
Table 2: The Corps' Original 1996 Cost Estimate and Potential Cost
Increases for the Natomas Basin Component:
Table 3: Common Features Project's Cost Estimates in Original 1996
Dollars and in Adjusted 2002 Dollars:
Figures:
Figure 1: Location of the Common Features Project:
Figure 2: Seepage under and through Levees and a Cut-off Wall to Prevent
Seepage:
Figure 3: Location of the Fremont Weir and the Yolo Bypass:
Letter October 27, 2003:
The Honorable Don Young:
Chairman, Committee on Transportation and Infrastructure:
House of Representatives:
The Honorable John T. Doolittle:
House of Representatives:
The Honorable Richard Pombo:
House of Representatives:
The city of Sacramento, California, located where the American and
Sacramento Rivers meet, has faced significant risks of major flooding
since its founding in the 1840s. A major flood in the Sacramento area
could cause loss of lives; toxic and hazardous waste contamination;
disruptions to the city's downtown business and government areas,
including the state capitol; and billions of dollars in property
damage. To help protect against these risks, in 1991 and again in 1996,
the U.S. Army Corps of Engineers (the Corps) identified several
alternatives for long-term flood protection. On both occasions, the
Corps recommended building a new dam on the American River near Auburn,
California. Concerns were raised about the proposed dam's high cost and
environmental impacts, and Congress did not authorize its construction.
In light of the decision not to proceed with the new dam, the Corps
recommended improving the existing levees on the American and
Sacramento Rivers to increase the level of flood protection for the
greater Sacramento area. Levees provide flood protection by raising the
height of river banks, which helps prevent rivers from overflowing
during storms. The Corps primarily proposed constructing "cut-off"
walls in the center of the existing levees. These walls, composed
primarily of soil, cement, and clay, become impermeable when they
harden and prevent water from passing through the levees. These levee
improvements were common to all of the alternatives that the Corps had
considered for Sacramento flood protection in 1996 and became known as
the Common Features Project.
The Water Resources Development Act (WRDA) of 1996 authorized $57
million for the project.[Footnote 1]
The Common Features Project consists of two related but separate
components--the American River levee improvements and the Natomas Basin
levee improvements. The levees on the American River protect downtown
Sacramento, while the levees on the Sacramento River protect the
Natomas Basin, a largely agricultural area just north of downtown
Sacramento where new development is occurring at a rapid rate. Figure 1
shows the greater Sacramento area and the location of the Common
Features Project.
Figure 1: Location of the Common Features Project:
[See PDF for image]
[End of figure]
The WRDA of 1999 authorized additional work for the Common Features
Project, directing the Corps to raise or strengthen some American River
levee sections and raise some levees in the Natomas Basin; it also
increased project authorization to $92 million. Several years after
this authorization, however, the Corps stated that project costs would
go significantly higher.
In the context of these issues, in response to your request, this
report addresses (1) why the costs have increased for the Common
Features Project, (2) the extent to which the Corps analyzed the
likelihood of significant cost increases for the project and reported
this information to Congress in a timely manner, and (3) whether the
Corps correctly estimated the economic benefits of the American River
levee improvements. Our scope and methodology in addressing these
questions can be found in appendix I.
Results in Brief:
The estimated costs for all components of the Common Features Project
have risen from $57 million in 1996 to between $270 million and $370
million in 2002, primarily because of design modifications. With
respect to the American River component, estimated costs for the levee
improvements authorized in 1996 have more than tripled, from $44
million in 1996 to $143 million in 2002. This increase occurred
primarily because the Corps modified the original design of the cut-off
walls to close gaps at bridge crossings and other areas and to greatly
increase the depth of the walls to prevent water from seeping under the
levees. In addition to the cost increases related to the 1996
authorized work, new flood protection measures authorized in 1999 added
about $15 million in costs to the American River component of the
project. For the Natomas Basin component--which is still in the early
planning stage--the Corps' cost estimates increased from $13 million in
1996 to between $112 million and $212 million in 2002. These projected
cost increases are largely due to design changes in the planned
improvements to the Sacramento River levees and additional work that
the Corps has proposed for this part of the project.
The Corps did not fully analyze likely cost increases for the Common
Features Project or report them to Congress in a timely manner. Corps
guidance generally directs the Corps to seek new spending authority
from Congress if it determines, before issuing the first construction
contract, that it cannot complete the project without exceeding its
spending limit. A severe storm in January 1997 demonstrated
vulnerabilities in the American River levees and alerted the Corps of
the need to do additional work to close the gaps in the cut-off walls
at bridges and other areas and extend the depth of some cut-off walls
from about 20 feet to about 60 feet. Although these design changes were
likely to increase project costs significantly, the Corps did not use
cost risk analysis, or any other analysis, to determine the potential
extent of the increases. The Corps then began constructing the
redesigned American River levee improvements without communicating to
Congress the project's potential exposure to substantial cost overruns.
In 2002, when the Corps finally updated project costs, it had already
completed or contracted at a much higher cost for most of the American
River levee improvements that were authorized in 1996. Because of the
reporting delay, Congress did not have the opportunity to determine
whether, at these higher costs, building these levee improvements was
an efficient and effective use of public funds. By 2003, the Corps had
committed most of the funding authorized for the entire Common Features
Project to the 1996 American River work, thereby leaving the 1999 work
and the Natomas Basin improvements without funding.
The Corps made several mistakes in estimating the economic benefits for
the American River levee improvements. First, in 1996, the Corps
incorrectly calculated the economic benefits by overcounting the
residential properties that the levees would protect. The actual number
of protected residential properties was about 20 percent less than the
number that the Corps estimated. Although the Corps updated its benefit
estimate in 2002, it again made mistakes in estimating benefits because
it incorrectly determined that the levee improvements authorized in
1999 would protect a larger area from flooding than they will and used
an inappropriate methodology to determine the amount of flood damages
the levee improvements would prevent. However, it is also important to
recognize that the levee improvements may reduce the loss of human
lives in the event of a flood, which is a benefit that is not included
in the Corps' analysis. Second, although the Corps' policy calls for
reporting a range of benefits from the levee improvements and the
likelihood of realizing them, in 2002 the Corps reported only a single
estimate of benefits. The Corps did not provide a range of benefits to
Congress because it did not use the most current version available of
its computer software, which could have performed the analysis.
Finally, although the Corps has a three-tiered quality control process
to ensure that it prepares economic analyses accurately and
appropriately, this process did not identify the mistakes we found,
which raises questions about the effectiveness of the Corps' quality
control process.
In light of the concerns we identified with the Common Features Project
and to better inform Congress about its costs and benefits, we are
making several recommendations to the Secretary of the Army regarding
the need for the Corps to (1) improve the accuracy of its cost-benefit
analysis of the American River levee improvements that it has not yet
constructed and (2) improve its reporting of the costs and benefits of
the planned work as well as analyze alternative flood protection
measures for the Natomas Basin. In commenting on a draft of this
report, the Department of the Army concurred with our recommendations,
but took issue with our presentation of some information. Specifically,
the Army believes that this report does not recognize the significant
role Congress played in 1999 when it added additional work to the
project and authorized funds for construction before the Corps had
developed reliable cost estimates. In addition, the Army states that
the consistent provision of funds to the Corps by Congress, at or
exceeding the Corps' budget request, created the situation of which our
report is critical. We have considered the Army's comments; however, we
believe that our report is factually accurate and that our findings are
presented in their proper context.
Background:
Sacramento, California, was established at the confluence of the
American and Sacramento Rivers shortly after gold was discovered
upstream at Sutter's Mill in 1848. Frequent flooding has been a problem
in Sacramento since its founding. To help reduce flooding, over time a
complex system of levees, dams, and other related facilities were
built. Levees line both sides of the American River from where it meets
the Sacramento River upstream for a distance of about 17 miles, and the
Natomas Basin is completely surrounded by levees. In addition, the
Folsom Dam, completed in 1956 and located upstream from Sacramento on
the American River, uses a portion of its storage capacity for flood
protection.
The Sacramento area flood protection system was designed on the basis
of records of rainfall during the first half of the 20TH century.
However, since 1950, the American River watershed has experienced five
floods that were larger than any recorded in the pre-1950 period,
although downtown Sacramento was not flooded during any of these
events. Nonetheless, the Sacramento area has less protection than the
designers of the original flood protection system realized. In fact,
much of urbanized Sacramento is located in areas where a flood has a 1
percent chance of occurring every year--known as the 100-year
floodplain. Because of this limited level of protection, the Corps
estimates that a very large flood--one with a 0.25 percent chance of
occurring every year--would flood the 400-year floodplain, resulting in
residential, commercial, industrial, and public property damage of
about $15.5 billion as well as loss of lives. According to the Corps,
about 305,000 people live in more than 100,000 residential properties
located within the American River floodplain. A major flood also would
cause toxic and hazardous waste contamination; disrupt the city's
downtown business and government areas, including the state:
capitol; and interfere with the transportation system, including two
interstate highways.
A major flood in 1986, the largest one ever recorded on the American
and Sacramento Rivers, severely strained the levee system protecting
Sacramento. Although the levees held and downtown Sacramento was not
flooded, the event spurred efforts by federal, state, and local
entities to identify measures to increase Sacramento's level of flood
protection. In 1987, the Corps began work on a comprehensive study of
flood protection alternatives for Sacramento. In its 1991
report,[Footnote 2] the Corps' Sacramento district office considered
six flood protection options and recommended building a new dam on the
American River at Auburn, California, but Congress did not approve the
dam's construction.[Footnote 3] Subsequently, in response to the
Department of Defense Appropriations Act of 1993, the Corps reevaluated
three alternatives for increasing flood protection. In its 1996
report,[Footnote 4] the Corps examined (1) building a new dam near
Auburn, California; (2) modifying the existing Folsom Dam; and (3)
increasing the amount of water released from Folsom Dam during a flood,
coupled with other flood protection measures. The Corps again
recommended building a dam at Auburn, but, again, Congress did not
approve its construction.
Recognizing the magnitude of the opposition to the proposed Auburn Dam,
in June 1996, the Corps recommended the Common Features Project, which
included improving sections of the American and Sacramento Rivers'
levees, primarily by constructing cut-off walls, to provide small-scale
improvements to flood protection for the Sacramento area while the
options for more extensive improvements continued to be considered. The
WRDA of 1996 authorized $57 million for the Common Features Project,
which included 24 miles of levee improvements on the American River and
12 miles on the Sacramento River along the western border of the
Natomas Basin. Subsequently, the Corps concluded that it could provide
the same level of flood protection on the American River by modifying
only about 21 miles of levees. Figure 2 shows how a cut-off wall, which
is composed primarily of a soil, cement, and clay mixture that forms an
impermeable barrier when it hardens, can prevent water from seeping
under or through a levee.
Figure 2: Seepage under and through Levees and a Cut-off Wall to
Prevent Seepage:
[See PDF for image]
[End of figure]
In January 1997, numerous rivers in northern California flooded causing
extensive damages, although not in the Natomas Basin or downtown
Sacramento. This flood, which was nearly as large as the 1986 flood,
highlighted the continuing vulnerabilities of the existing flood
protection system. In response, the WRDA of 1999 (1) modified the
Common Features Project by adding about 3.8 miles of additional levee
modifications along the American River and 10 miles on the Natomas
Cross Canal, located on the northern border of the Natomas Basin, and
(2) increased the project's authorization from $57 million to $92
million.
When Congress approves a flood protection project, it authorizes a
specific amount of money for the project, which provides the basis for
the maximum project cost. According to section 902 of the Water
Resources Development Act of 1986, as amended, the maximum project cost
is the sum of (1) the original authorized amount, with the costs of
unconstructed project features adjusted for inflation; (2) the costs of
modifications that do not materially alter the scope of the project, up
to 20 percent of the original authorized amount (without adjustment for
inflation); and (3) the cost of additional studies, modifications, and
actions authorized by the 1986 Act or any later law. As a result of
these provisions, the $92 million that Congress authorized for the
Common Features Project in 1999 translates to an allowable maximum
project cost of about $120 million in 2003.
When Congress authorized the Common Features Project in 1996, federal
law required that nonfederal partners pay 25 percent of the cost of
flood protection projects.[Footnote 5] For the Common Features Project,
these partners are the State of California Reclamation Board and the
Sacramento Area Flood Control Agency. In this report, when we refer to
project costs, including the maximum allowable project cost, we are
referring to the combined federal and nonfederal expenditures.
Design Modifications Have Greatly Raised Costs for the Common Features
Project:
Estimated costs for the Common Features Project grew from $57 million
in 1996, when the project was first authorized, to between $270 million
and $370 million in 2002, primarily because the Corps changed the
design of the levee improvements.[Footnote 6] For the American River
levee improvements authorized in 1996, estimated costs more than
tripled, due largely to changes in the design of the cut-off walls. New
work authorized in 1999 added another $15 million to the cost increase.
The Corps has completed much of the American River work authorized in
1996, but it has not begun construction on the work authorized in 1999.
Regarding the Natomas Basin component, estimated costs increased from
$13 million to between $112 million and $212 million. Costs rose
primarily because the Corps changed the design of the levee
improvements and proposed adding other improvements to this component.
The Natomas Basin work is in the early planning stages, and the Corps
has not begun construction. As of July 2003, the Corps had spent or
made plans to spend nearly all of the money authorized for the Common
Features Project. It therefore will not be able to finish constructing
the American River work authorized in 1996, begin constructing the
American River work authorized in 1999, or complete planning for the
Natomas Basin work unless Congress increases the project's authorized
funding.
Estimated Costs for the American River Levee Improvements Authorized in
1996 Have More Than Tripled Because of Design Changes:
The Corps' cost estimate for the American River levee improvements
authorized in 1996 has more than tripled, from $44 million in 1996 to
about $143 million in July 2002, as shown in table 1.
Table 1: The Corps' Original 1996 Cost Estimate and Estimated Cost
Increases for the American River Levee Improvements Authorized in 1996:
[See PDF for image]
Source: GAO analysis of U.S. Army Corps of Engineers data.
[A] In 2002 dollars.
[B] Does not sum to the total due to rounding.
[End of table]
As table 1 shows, costs rose primarily because of the increased costs
of the cut-off walls. The Corps' original design called for building
cut-off walls to a depth of between 20 and 30 feet to prevent water
from seeping through the levees and for allowing gaps in the cut-off
walls at bridge and utility crossings. However, after the 1997 flood,
the Corps realized it also needed to address the problem of water
seeping under levees. It therefore increased the depth of the cut-off
walls to between 60 and 80 feet and closed the gaps in the cut-off
walls at bridge and utility crossings. For some sections of the levees,
the Corps could not close the gaps using its standard approach for cut-
off walls because of problems accessing the sites. As a result, the
Corps employed a new and more expensive approach--known as jet
grouting--to build cut-off walls by drilling and injecting concrete
material into areas that were difficult to access. Closing the gaps in
the cut-off walls by jet grouting raised estimated costs by $52 million
and increasing their depth raised costs by $24 million, according to
the Corps' July 2002 cost estimate. However, in September 2002, the
Corps determined that fewer gaps needed to be closed using jet
grouting, which should reduce costs to some extent. As of June 2003,
however, the Corps had not incorporated these potential cost reductions
into an official project cost update.
As table 1 also shows, the Corps' response to accidents that occurred
during construction of the 1996 authorized work added $11 million to
project costs. On three occasions, liquid material from the cut-off
walls accidentally leaked into either the American River or the
backyards of homes that are built against the levees. As a result, the
Corps incurred costs cleaning up these spills and responding to new
work requirements mandated by the Environmental Protection Agency to
help prevent future leaks.
Lastly, in addition to the cost increases related to the 1996
authorized work, new flood protection measures authorized in 1999 added
about $15 million in costs to the American River component of the
project.[Footnote 7] These measures include raising levee banks at two
locations, installing gates and pumps at an existing drain, and
installing cut-off walls in two additional levee segments.
Of the American River work authorized in 1996, the Corps has completed
about 90 percent and must still close gaps in the cut-off walls at some
remaining bridge and utility crossings to complete this work. For the
levee improvements authorized in 1999, the Corps has done some planning
but has not begun any construction. However, as of July 2003, the Corps
had spent or had plans to spend $116 million of the $120 million
authorized for the entire Common Features Project. The Corps could not
give an exact accounting of how much of the $116 million it had spent
on the 1996 American River work. However, on the basis of the
information that the Corps provided, we estimate the Corps has spent,
or made plans to spend, at least $103 million for planning and
constructing the 1996 American River work. Because the Corps has spent
or made plans to spend most of the project's authorized funds, it will
not be able to complete the 1996 and 1999 work on the American River
unless Congress increases the project's authorized funding.
Natomas Basin Costs Are Expected to Increase Significantly, and Lack of
Funds Has Halted Planning and Cost Estimating Efforts:
The Corps' preliminary cost estimates for the Natomas Basin component
of the project increased from $13 million in 1996 to between $112
million and $212 million in 2002, as shown in table 2.
Table 2: The Corps' Original 1996 Cost Estimate and Potential Cost
Increases for the Natomas Basin Component:
[See PDF for image]
Source: GAO analysis of U.S. Army Corps of Engineers data.
[A] In 2002 dollars.
[B] Does not sum to the total due to rounding.
[End of table]
As table 2 shows, the Corps estimates that the costs for the original
levee improvements will increase by between $47 million and $88 million
due to design changes to add cut-off walls or provide other methods of
flood protection to control seepage under levees. The Corps proposed
new work in 2002 that will increase costs by between $37 million and
$84 million. This work is located in an area of the levee where the
Corps previously had constructed a cut-off wall to stop water from
seeping through the levee. However, the Corps later determined that the
cut-off wall was not deep enough to prevent water from seeping under
the levee, and the proposed new work will address this problem.
Finally, the Corps estimates that the additional work authorized in
1999 to modify levees along the Natomas Cross Canal, which empties into
the Sacramento River at the north end of the Natomas Basin, will add
between $14 million and $26 million to the cost of this component of
the project.
:
The Natomas Basin work--authorized in 1996 and 1999 and the additional
work the Corps identified--is in the planning stages and no
construction has yet begun. The Corps has been updating information on
the extent of the levee problems and the costs of the improvements
identified in the original plan and intends to submit a more precise
cost estimate to Congress when it completes its planning. However, the
Corps halted its Natomas Basin planning work in June 2003 because it
had spent or made plans to spend nearly all of the money authorized for
the entire Common Features Project.
Given that the Natomas Basin levee improvements will cost significantly
more than originally estimated and no construction has yet begun,
identifying and evaluating alternative flood protection measures could
result in cost savings. For example, one possible alternative method
for flood protection identified by the Sacramento Area Flood Control
Agency,[Footnote 8] as well as the Corps, involves lowering the water
level in the Sacramento River during floods by diverting water through
the Fremont Weir and into the Yolo Bypass, which is located at a point
just before where the Sacramento River flows past the Natomas
Basin.[Footnote 9] The Fremont Weir is a low dam that controls the
movement of large volumes of floodwater from the Sacramento River by
diverting it into the Yolo Bypass. The Yolo Bypass is a continuous, 40-
mile open space corridor that is protected from urban development
pressure by flood easements. (See fig. 3.):
Figure 3: Location of the Fremont Weir and the Yolo Bypass:
[See PDF for image]
[End of figure]
Lowering the water level in the Sacramento River as it passes the
Natomas Basin could, among other things, improve the reliability of the
Natomas Basin levees and may provide more cost-effective flood
protection than the current Natomas Basin levee improvement plan.
However, as of June 2003, the Corps had not yet analyzed the costs and
benefits of modifying the weir and the bypass or any other alternative
method for Natomas Basin flood protection.
The Corps Did Not Adequately Analyze Likely Cost Increases for the
Common Features Project or Communicate Them to Congress in a Timely
Manner:
After the 1997 storm demonstrated vulnerabilities in the American River
levees, the Corps significantly changed the design of the levee
improvements but did not analyze the likelihood of cost increases for
the Common Features Project. The Corps then began constructing the
American River levee improvements without informing Congress that the
changes could greatly increase the overall costs of the project. By the
time that the Corps reported the significant cost increases in 2002, it
had already spent or made plans to spend more than double its original
estimate for the American River levee improvements authorized in 1996.
Furthermore, as previously discussed, the Corps estimates that it will
spend more than three times its original estimate by the time it
completes this work. The Corps has been able to pay for these levee
improvements by spending funds originally planned for the Natomas Basin
and the additional American River improvements authorized in 1999.
The Corps Did Not Adequately Analyze Likely Cost Increases for the
American River Levee Improvements:
The Corps did not analyze the risk of cost increases after changing the
design of the American River levee improvements in 1997 and, therefore,
did not provide Congress with information on the project's exposure to
significant cost increases. A storm in January 1997 demonstrated that
the American River levees were vulnerable to floodwaters seeping under
them, which could cause them to fail. On the basis of this information,
the Corps significantly changed the design of the levee improvements
but did not conduct a cost risk analysis, or any other type of
analysis, to determine the extent to which these changes would increase
the costs for the Common Features Project.
According to the Corps' policy, project management teams should
consider conducting a cost risk analysis when developing cost estimates
for projects with considerable uncertainties.[Footnote 10] A cost risk
analysis identifies the areas of a project that are subject to
significant uncertainty about costs and provides decision makers with a
range of potential costs for a project and the probability that these
costs will be exceeded. For example, a cost risk analysis might
determine that there is a 50 percent chance that costs for a particular
project will exceed $5 million but only a 20 percent chance that costs
will exceed $8 million. According to a report from the Corps' Institute
for Water Resources, this type of estimate is more accurate than a
single point cost estimate and provides decision makers with better and
more complete information.[Footnote 11]
However, the Corps did not analyze the risk of cost increases after
changing the design of the American River levee improvements even
though it had identified several factors that could lead to significant
cost increases. For example, by July 1997 the Corps recognized that it
had to close the gaps in the cut-off walls at bridges and other areas
and extend the depth of some walls from about 20 to about 60 feet,
although the Corps had not developed a final design for these
improvements. By identifying a project element with significant cost
uncertainty--the design and depth of the cut-off walls--the Corps
essentially performed the first step of cost risk analysis. However,
the Corps did not follow through by quantifying this uncertainty and
determining a range of potential costs for the cut-off walls or the
likelihood that the potential costs within that range would be
exceeded--the second and third steps of the cost risk analysis. Given
that the Corps' original cost estimate for the American River work was
nearly equal to its estimates of the benefits, if the Corps had
conducted a cost risk analysis, it would have shown whether there was a
significant likelihood that project costs would be greater than the
economic benefits.
Furthermore, despite experiencing significant cost increases for the
1996 work, the Corps did not conduct a cost risk analysis to determine
its exposure to potentially significant cost increases for the 1999
work. In addition, the Corps is not planning to conduct a cost risk
analysis for the Natomas Basin improvements. According to Sacramento
district officials, the Corps did not conduct a cost risk analysis
because it did not believe such an analysis was necessary to account
for uncertainties in the project.
The Corps Did Not Provide Congress with Timely Information about
Significant Potential Cost Increases for the American River Levee
Improvements:
The Corps' planning guidance generally directs the Corps to seek new
spending authority from Congress if it determines that a project's
estimated costs exceed the maximum project cost before it has awarded a
project's initial contract.[Footnote 12] However, after making
significant changes to the project's design in 1997, the Corps did not
reevaluate its cost estimate to determine if it could still implement
the project without exceeding the maximum project cost. For example,
the Corps did not estimate the potential for cost increases due to
tripling the depth of some cut-off walls, which eventually added $24
million in estimated costs to the project. In addition, the Corps did
not estimate the potential for cost increases due to closing the gaps
in the cut-off walls at bridges and other areas. This expense was not
considered in the Corps' original 1996 cost estimate and potentially
involved the use of jet grouting--a technology the Corps had not
previously used to construct cut-off walls. Closing the gaps in the
cut-off walls eventually added $52 million in estimated costs to the
project.
In spite of significantly changing the project's design, the Corps
awarded the project's first contract without updating its cost estimate
to determine whether it would need additional spending authority to
complete the project. In June 1998, the Corps issued the first Common
Features Project solicitation for bids to construct about 1.6 miles of
the redesigned cut-off wall on the north bank of the American River.
These levee improvements represented only about 8 percent of the total
miles of planned American River levee improvements, but the bid that
the Corps selected amounted to 24 percent of the estimated cost for all
of the American River levee work. We believe that this difference
should have (1) alerted the Corps to the possibility that costs were
likely to be much higher than it had originally estimated and (2)
warranted an update of the Corps' cost estimate before it awarded the
initial contract.
According to a headquarters official, the Corps issued the first
contract without updating its total project cost estimate because it
would have been impractical to delay the project while the agency
revisited cost estimates. Furthermore, according to the Corps, the
first contract was expected to be more costly than future contracts
because, among other reasons, it involved work on only a small stretch
of the levee, which limited possible cost efficiencies. However,
because the Corps did not analyze the potential for cost increases for
the remainder of the American River levee improvements, it did not
determine the likelihood that it would need additional spending
authority to complete the project before it awarded the first contract.
The Corps has paid for the significantly increased costs of the
American River levee improvements by using funds planned for the
Natomas Basin and for the additional American River work authorized in
1999. Although the Common Features Project has two separate components,
and Congress approved parts of the project in 2 different years, the
project is subject to a single maximum project cost. The Corps has the
flexibility to spend Common Features Project funds as it sees fit and
is not required to allocate funds in proportion to its original cost
estimates for each component.
Following project authorization in 1996, the Corps began to construct
the American River levee improvements before the Natomas Basin
improvements. Although the Corps exhausted the funds it had originally
estimated that it would need to construct the American River levee
improvements, it was able to continue implementing the American River
work by spending funds it had originally planned to use for the Natomas
Basin work. With the authorization of additional work in 1999,
effectively raising the project's maximum cost to about $120 million,
the Corps also was able to use funds planned for this work to pay for
the increased costs of the American River work authorized in 1996.
After it awarded the first Common Features Project contract, the Corps
was not required to inform Congress of project cost increases until it
could not contract for additional work without exceeding the maximum
project cost. According to the Corps, in March 2001 it briefed a number
of Members of Congress on its intention to prepare a report that would
evaluate the potential for the cost of the Common Features Project to
exceed the project's maximum cost. However, it was not until February
2002, more than 4 years after it significantly modified the design of
the American River levee improvements, that the Corps reported to
Congress for the first time that due to significant cost increases, it
could not complete the project without exceeding the maximum project
cost. By this time, the Corps had spent or awarded contracts for more
than twice the amount it originally planned to spend on the American
River levee improvements authorized in 1996 and had completed about 90
percent of the work. Furthermore, the Corps estimates that it will
spend more than three times its original estimate by the time it
completes this work. Because the Corps did not update its cost estimate
or report the significant cost increases to Congress until most of the
1996 American River work was complete, Congress did not have the
opportunity to determine whether the significantly more expensive levee
improvements were still the most appropriate means of providing flood
protection for Sacramento.
Corps' Benefit Estimates for the American River Levee Improvements Are
Incorrect:
The Corps made mistakes in estimating the benefits for the American
River levee improvements because it incorrectly counted and valued the
properties that the levee improvements would protect and used an
inappropriate methodology to determine the amount of flood damages they
would prevent. Seven years after Congress authorized the project, the
Corps has not yet prepared an accurate assessment of the benefits of
the American River levee improvements. In addition, contrary to its
guidance, the benefit estimate the Corps prepared in 2002 did not
describe the range of possible benefits and the likelihood that the
values in this range would be realized. This additional information,
describing the uncertainty of the benefit estimate, would have provided
decision makers with information on the likelihood that the project's
benefits would be greater than its costs. Furthermore, the Corps'
three-tiered quality control process did not identify the mistakes that
we found during the course of our review.
The Corps Made Mistakes in Counting and Valuing Properties and
Determining Flood Damages When Estimating Project Benefits:
In its original 1996 analysis of the benefits and costs of the American
River levee improvements, the Corps incorrectly counted the residential
properties that the proposed levee improvements would protect. As a
result, the Corps incorrectly calculated the benefits that these
improvements would provide. According to the Corps, the methodology it
used to count the number of residential properties in 1996 was
"accepted practice and consistent with Corps guidance and technology
applicable at the time." In 2002, the Corps used a different
methodology that incorporated new technologies and provided a more
precise estimate of the number of properties protected. Using this new
approach, the Corps determined that the actual number of residential
properties protected by the levee improvements is about 20 percent less
than its original estimate. The Corps did not calculate the amount that
benefits would decrease due to this change. However, given the small
difference between the original estimated annual benefits ($5.6
million) and the annual costs ($5.5 million) of the American River
levee improvements, if the Corps had incorporated a more accurate
estimate of the property inventory in its 1996 analysis, the benefits
of these improvements may have been less than the costs.
For flood protection projects, such as the Common Features Project, the
Corps calculates benefits as the dollar value of the physical damages
to residential, commercial, industrial, and public properties and
infrastructure that the levee improvements prevent. To calculate the
reduction in flood damage to properties, the Corps counts the number of
properties located in the potential flood area--known as the
floodplain--and then assesses the monetary value of the structures and
their contents. The Corps uses this information to determine the
property damage that would result from floods of various depths and to
estimate the impact that the levee improvements would have in
preventing this damage.
It is important to remember that, in addition to the economic benefits
from preventing property damage, levee improvements may reduce the risk
of loss of human lives, which is a benefit that is not included in the
Corps' calculations.[Footnote 13] According to the Corps, about 305,000
people live within the American River floodplain and the number of
lives lost because of levee failure would depend on a variety of
factors, such as the size of the flood, warning time, time of day, and
availability of evacuation routes. Because of the many factors involved
and the lack of historical data, the Corps was not able to estimate the
number of lives that would be lost as a result of levee failure and
flooding in the Sacramento area.
Although the Corps updated its benefit estimate in 2002 to incorporate
the benefits from the new levee improvements authorized in 1999, a
Sacramento district official acknowledged that the Corps again made
mistakes in estimating the number of properties the levee improvements
would protect. For the American River levee improvements authorized in
1999, the Corps identified an area that was larger than the area the
levee improvements would actually protect. As a result, the Corps
overestimated the number of properties protected and the benefits
provided by the work authorized in 1999. According to a Sacramento
district official, the Corps currently does not have the information it
needs to determine the correct area the levee improvements would
protect and therefore is unable, at this time, to provide a reliable
estimate of the benefits from the 1999 work.
In addition, the Corps made mistakes in its 2002 analysis in estimating
the value of the residential properties the American River levee
improvements would protect. The Corps' policy calls for calculating a
property's value as the cost of replacing the structure less any
depreciation, which accounts for a reduction in a structure's value due
to deterioration prior to flooding.[Footnote 14] Because the Corps had
more than 100,000 residential properties to assess and a limited amount
of time and resources, it determined depreciated replacement values for
a small sample of 365 properties and then used the results to estimate
the depreciated replacement values for all properties. However, the
Corps did not correctly select the sample of properties. According to
members of both the Appraisal Institute and The Appraisal Foundation,
to accurately appraise a large number of properties by sampling
requires a separate sample for each residential property type, such as
single-family homes, condominiums, and apartment buildings.[Footnote
15] Instead of conducting a separate sample for each type of property,
the Corps sampled all property types together and calculated an average
depreciated replacement value for all property types. As a result, it
is unclear whether the Corps accurately calculated depreciation, which
in turn raises questions about its estimates of the value of the
residential properties the American River levee improvements would
protect.
Moreover, the Corps did not use a consistent, objective appraisal
methodology to calculate depreciation for the properties in the sample.
Instead, the Corps subjectively determined depreciation. For example,
if the Corps determined a structure was in "very good" condition it was
assigned a zero percent, 5 percent, or 10 percent level of
depreciation. However, the Corps could not provide us with its criteria
for assigning the level of depreciation. Furthermore, the Corps'
economists who made these subjective decisions did not consult with the
professional appraisers in the Corps' Sacramento district office to
identify alternative appraisal methodologies that may have been more
appropriate. According to the Corps, the methods it used to determine
depreciation are "standard practice at the Corps and are consistent
with prior and existing guidance." Nonetheless, we believe that the
shortcomings identified above raise questions about the accuracy of the
Corps' property value estimates and, in turn, the project benefit
estimates that are, in part, based on them. The Corps said it
recognizes the need to strengthen its methodologies and is currently
developing a new tool to estimate property values.
Finally, the Corps' 2002 analysis did not use the methodology described
in Corps guidance to determine the number of properties that are
located in the 100-year floodplain and the damages they would sustain
in a 100-year flood.[Footnote 16] The 100-year floodplain is the land
area that may be affected during a flood that has a 1 percent chance of
occurring every year. Instead of following Corps guidance by directly
counting the properties located in the 100-year floodplain and
calculating the damages they would sustain in a 100-year flood, the
Corps estimated the damages using a methodology that relied on the
results from its incorrect 1996 count of properties. The Corps' use of
this alternative methodology further calls into question the accuracy
of its benefit estimate for the American River levee improvements
authorized in both 1996 and 1999, which is based in part on this flood
damage assessment. The Corps told us that it could have directly
counted the properties in the 100-year floodplain but the necessary
information was not available in a "user friendly" format, and that the
additional effort needed to collect more accurate information was not
expected to change the results. As a result, the Corps did not believe
this was an effective use of resources. However, the Corps did not
provide us with any evidence to support the validity of calculating the
100-year flood damages as it did or to validate its contention that the
results would not change if it had used the methodology prescribed in
its guidance.
The Corps Has Not Provided Congress with Information on the Range of
Possible Benefits from the Levee Improvement Work or the Likelihood
They Will Be Realized:
The Corps has not followed its policy to provide Congress with an
estimate of the range of possible benefits from the American River and
Natomas Basin levee improvements and the likelihood that these benefits
will actually be realized. In 1996, the Corps established a policy
calling for benefit estimates and benefit-cost comparisons for flood
protection projects to be reported with their associated
probabilities.[Footnote 17] For example, rather than reporting that the
benefits for a particular project are exactly $1.5 million, the Corps
could report that it is 80 percent confident that project benefits will
be at least $1 million but it is only 30 percent confident that
benefits will reach $2 million. The Corps recognizes that this
information can assist Congress in understanding the uncertainty
involved in achieving various levels of benefits and in determining
whether those risks justify funding the project. According to the
Corps, it did not estimate a range of benefits for the Common Features
Project in 1996 because the computer software used to assess the
project's benefits and costs was developed prior to the 1996 guidance
and did not have the capability to calculate a range of values.
However, in its 2002 reanalysis of project benefits, when a new version
of the software capable of calculating benefit ranges and probabilities
was available and costs for the American River work had significantly
increased, the Corps chose not to calculate a range of benefits and
instead continued to report a single estimate. Because the Corps' 2002
estimates of benefits and costs for the American River work were so
close in value (1.1 to 1), an analysis of the potential range of
benefits would have revealed whether there was a significant
probability that project benefits could be lower than the single
estimate the Corps reported and perhaps lower than project
costs.[Footnote 18] According to a Sacramento district official, the
Corps did not use the new version of its software that could have
calculated the range of benefits to maintain consistency with
information on flood protection it had previously released to the
public. For example, the Corps has reported to the public that the
American River levees have about a 1 percent chance of being breached
by floodwaters in any given year. This estimate of flood protection
could be different if calculated using the newer version of the
software. The Corps was concerned that using the newer software would
require it to report a different, and perhaps slightly lower, level of
flood protection, which would confuse the public. However, by taking
this approach, the Corps did not provide Congress with important
information about the uncertainty surrounding the amount of benefits
the project would provide.
The Corps' Quality Control Process Did Not Identify Flaws in Its
Benefit Analyses:
Three organizational levels within the Corps--district, division, and
headquarters--reviewed and approved the 1996 and 2002 benefit analyses
for the American River component of the Common Features Project, but
these reviews did not identify the mistakes that we found. This issue
raises questions about the adequacy and effectiveness of the Corps'
review process. We raised similar concerns about the Corps' review
process in our report on the Delaware River Deepening Project, which
found significant miscalculations and invalid assumptions in the
project's economic analysis that the Corps did not find during its
reviews.[Footnote 19]
For the Common Features Project, the Corps' Sacramento district office
conducted the 1996 study that analyzed the technical and economic
aspects of the proposed project and the 2002 report updating that
information. The Corps' Los Angeles district office reviewed the 2002
economic analysis for technical accuracy. Next, the Corps' South
Pacific division reviewed the analysis; although, following the Corps'
policy, it did not review the district's work for technical accuracy or
verify the underlying analysis. Rather, the division checked that the
district's reports had undergone a technical review, and that the
district had issued a quality control certification report with the
necessary district office-level approvals. The division then forwarded
the project to headquarters. Corps headquarters also did not conduct a
technical review of the analysis. Rather, headquarters checked that the
district's report adhered to Corps policies for conducting a benefit-
cost analysis and addressed any concerns headquarters had raised.
These review processes, however, were ineffective in detecting and
correcting the mistakes in the benefit analyses we identified. For
example, for the 2002 study, we found no indication that the mistakes
made in calculating the number and the value of residential properties
or the mistake made in calculating flood damages were detected during
the Corps' review process. For the 2002 analysis of the American River
levee improvements, a Corps economist from another district
independently reviewed the benefits analysis. However, the review was
not comprehensive enough to sufficiently identify methodological
problems. The review primarily focused on process-oriented issues, such
as assessing whether the Sacramento district conducted certain
analyses, rather than examining the technical aspects of how the
analyses should have been and were conducted.
Conclusions:
It is critical that decision making and priority setting be informed by
accurate information and credible analysis. Reliable information from
the Corps about the costs and benefits for the American River component
of the Common Features Project has not been present to this point. The
analysis on which Congress has relied contained significant mistakes.
And of most relevance today, the analyses for the remaining work do not
provide a reliable economic basis upon which to make decisions
concerning the American River levee improvements authorized in the WRDA
of 1999. To provide a reliable economic basis for determining whether
these improvements are a sound investment, the Corps' analysis needs to
adequately account for the risk that project costs could increase
substantially, correctly count and value the properties the project
would protect, and include information on the range of potential
project costs and benefits.
Moreover, because the Corps has not made some critical decisions
regarding the Natomas Basin work, it is not yet known whether the Corps
will be able to identify cost-effective flood protection options for
this area. Specifically, the Corps has not determined whether it will
(1) conduct a cost risk analysis of its current plan to identify its
exposure to potentially significant cost increases or (2) evaluate the
costs and benefits of alternatives to the current levee improvement
plan to identify the most cost-effective flood protection option. In
addition, identifying cost-effective flood protection involves
reporting the range of potential project benefits and the probability
of achieving them, which the Corps has not done for the Natomas Basin
work. If the Corps begins implementing the authorized Natomas Basin
work before it completes a comprehensive, accurate cost-benefit
analysis, significant unanticipated cost increases could materialize,
as they did with the American River work. Finally, for Congress to have
confidence that the Corps' economic analyses have been prepared
accurately, the Corps' quality control process would need to be
sufficiently independent and detailed to identify the types of mistakes
that our review revealed.
Recommendations for Executive Action:
For the American River levee improvements authorized in 1999 and for
the planned Natomas Basin work, we recommend that the Secretary of the
Army direct the Corps of Engineers to:
* determine whether it is appropriate to conduct risk analyses of
project costs and document the basis for that decision in its project
files;
* report information to Congress on the range of potential project
benefits and the probability of achieving those benefits, as called for
in the Corps' guidance, in future benefit-cost analyses; and:
* arrange for a credible, independent review of the completeness and
accuracy of the revised benefit-cost analyses.
For the American River project component, we also recommend that the
Secretary of the Army direct the Corps of Engineers to reanalyze the
benefits of the improvements authorized in the WRDA of 1999, correcting
for the mistakes made in counting and valuing properties and the
inappropriate methodology used to calculate flood damages.
Additionally, for the Natomas Basin project component, we recommend
that the Secretary of the Army direct the Corps of Engineers to:
* analyze the costs and benefits of alternatives to the current levee
improvement plan and identify the flood protection plan that provides
the greatest net benefits and:
* submit a report to Congress that includes a cost estimate for all of
the planned Natomas Basin work, and wait until Congress authorizes
funding that is based on the report before beginning construction of
any Natomas Basin levee improvements.
Agency Comments and Our Evaluation:
We provided a draft of this report to the Secretary of the Army for
review and comment. In commenting on the draft report, the Army
concurred with all of our recommendations. Perhaps most significantly,
the Army acknowledged that on the basis of the Corps' experience in
constructing the American River levee improvements, there is a
potential for substantial cost increases for the Natomas Basin levee
improvements, and therefore the Corps needs to investigate a wider
array of alternatives for providing flood protection for the Natomas
Basin. In addition, although the Army concurred with our recommendation
to reanalyze the benefits of the improvements added to the American
River component of the project in 1999, it contended that the Corps has
already completed the reanalysis. We disagree. In 2002, the Corps
prepared an analysis of the economic benefits for the work added to the
project in 1999. However, our review found several mistakes in this
analysis, including mistakes in counting and valuing properties and
using an inappropriate methodology to calculate flood damages. We
continue to believe that before the Corps begins construction of the
work added to the American River project component in 1999, it should
reanalyze this work to ensure it is cost beneficial.
The Army stated that the report does not recognize the significant role
Congress played in 1999 by adding additional work to the project and
providing funds for construction before the Corps had developed
reliable cost estimates, which created the situation of which our
report is critical. By focusing its comment on the relatively small
amount of work added in 1999, the Army avoided the main issues
regarding the American River levee improvements discussed in our
report. Specifically, that (1) the costs for the American River
component of the project approved in 1996 are more than triple the
original estimate; (2) the Corps had information, before construction
began, that should have alerted it that costs would likely increase
greatly; and (3) the Corps should have communicated this information to
Congress at that time, but it did not. Furthermore, the additional
funding provided by Congress for the work authorized in 1999 has not
been used for that purpose, but rather has been used to fund the cost
overruns for the work authorized in 1996. The full text of the Army's
comments, and our responses to them, are presented in appendix III.
:
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the date of this letter. At that time, we will send copies of this
report to the appropriate congressional committees, other interested
Members of Congress, and the Secretary of the Army. We also will make
copies available to others upon request. In addition, the report will
be available at no charge on the GAO Web site at [Hyperlink, http://
www.gao.gov.] h [Hyperlink, http://www.gao.gov] ttp://www.gao.gov.
If you, or your staff, have any questions about this report, please
contact me at (202) 512-3841. Key contributors to this report are
listed in appendix IV.
Anu Mittal:
Director, Natural Resources and Environment:
Signed by Anu Mittal:
[End of section]
Appendixes:
Appendix I: Scope and Methodology:
To determine the reasons for the cost increases for the Common Features
Project, we obtained the key cost estimation documents prepared by the
U.S. Army Corps of Engineers' (the Corps) Sacramento district office.
Specifically, we obtained the Corps' 1996 Supplemental Information
Report, American River Watershed Project; the 1997 Addendum to the
Supplemental Information Report; the 2002 Second Addendum to the
Supplemental Information Report; and other related documents. We
reviewed the Supplemental Information Report, which examined a number
of different flood protection alternatives, because it provided the
foundation, including cost estimates, for the project elements that the
Corps later grouped together as the Common Features Project. The
Addendum to this report documented the Corps' first cost estimate that
specifically and exclusively addressed the Common Features Project and
included separate costs for both the American River component and the
Natomas Basin component of the project. We reviewed the Second
Addendum, the Corps' most current official cost estimate, to establish
the amount of and the reasons for the increased costs. We also analyzed
construction contracts to determine the cost of responding to accidents
constructing the levee improvements authorized in 1996. We calculated
the extent of inflation for both components of the project, using the
Corps' Civil Works Construction Cost Index System and a cost index from
the Office of Management and Budget. Finally, we discussed the reasons
for the cost increases with economists, cost estimators, project
managers, engineers, and other staff from the engineering,
constructions operations, and planning divisions of the Corps'
Sacramento district office.
To determine whether the Corps analyzed the likelihood of significant
cost increases for the project and reported them to Congress in a
timely manner, we reviewed the Corps' (1) policy regarding the use of
cost risk analysis in estimating costs for civil works projects
(Engineer Regulation 1110-2-1302) and (2) requirements for updating
project cost estimates and informing Congress of cost increases
(Engineer Regulation 1105-2-100). We also reviewed a document from the
Corps' Institute for Water Resources on incorporating risk and
uncertainty into cost estimation. We examined the American River levee
improvement construction contracts to determine when the Corps became
aware of cost increases for this component of the project. In addition,
we reviewed the Corps' annual budget documents related to the Common
Features Project, which contained information on the project's status
and any changes or cost increases. We examined the Corps' cost
estimates from 1996, 1997, and 2002 for compliance with relevant Corps
cost estimating guidance and to determine if the Corps provided
Congress with accurate information about significant expected cost
increases. Finally, we discussed the Corps' cost estimating procedures
and awareness of likely cost increases with cost estimators, project
managers, and other staff from Corps headquarters and the Sacramento
district office.
To determine whether the Corps correctly estimated the economic
benefits of the American River levee improvements, we reviewed the
extent to which the Corps followed accepted economics practices and
whether the major assumptions used in the analysis were reasonable and
well supported. We obtained the Corps' 1996, 1997, and 2002 economic
analyses for the Common Features Project and discussed the sources of
these data and conduct of the analyses with the Corps economists
responsible for preparing them. We also discussed the basis for the
hydrologic and engineering assumptions used in the economic analysis
with the Corps specialists who provided this information. In addition,
we obtained the Corps' guidance (Engineer Regulations 1105-2-100 and
1105-2-101 and Engineer Manual 1110-2-1619) on the accepted economic
and engineering methodologies for incorporating risk and uncertainty
into benefit estimation. To verify and supplement the information we
received from officials in the Corps' Sacramento district office, we
spoke with, among others, Corps officials at the Hydrologic Engineering
Center and the Institute for Water Resources and experts in real estate
appraisal from the Appraisal Foundation and the The Appraisal
Institute. Where we identified problems that affected the accuracy of
the benefit analysis, we discussed them with the responsible Corps
staff and considered any new data or revisions that they provided.
Finally, we identified the roles and responsibilities of the Sacramento
district office, South Pacific division, and headquarters in the Corps'
internal quality control process for the Common Features Project. We
also obtained copies of the quality control reviews and the reviewers'
comments on the economic analysis and discussed the comments and their
resolution with Corps officials.
We conducted our review from September 2002 through September 2003 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: Conversion of Costs to Constant Dollars:
In this report, unless otherwise noted, we present costs in the dollar
values for the years in which they were estimated, not in constant
dollars. For example, the Corps estimated the original cost of the
project as $57 million in 1996, and that is how we present it in this
report. We did not adjust the costs to constant dollars to account for
inflation to maintain consistency with the figures in published Corps
reports on the Common Features Project. However, table 3 shows the
Corps' 1996 cost estimates for key components of the Common Features
Project and also shows the same estimates adjusted to 2002 constant
dollars to account for inflation.
Table 3: Common Features Project's Cost Estimates in Original 1996
Dollars and in Adjusted 2002 Dollars:
[See PDF For image]
Source: GAO analysis of U.S. Army Corps of Engineers data.
[End of table]
[End of section]
Appendix III: Comments from the Department of the Army:
REPLY TO ATTENTION OF:
DEPARTMENT OF THE ARMY OFFICE OF THE ASSISTANT SECRETARY CIVIL WORKS
108 ARMY PENTAGON WASHINGTON DC 20310-0108:
22 SEP 2003:
Ms. Anu Mittal
Acting Director
Natural Resources and Environment
U.S. General Accounting Office:
441 G Street, NW Washington, D.C. 20548:
Dear Ms. Mittal:
This is the Department of Defense (DOD) response to the General
Accounting Office (GAO) draft report, "`CORPS OF ENGINEERS: Improved
Analysis of Costs and Benefits Needed for Sacramento Flood Protection
Project,' dated August 19, 2003 (GAO Code 360273/GAO-03-1055).":
We appreciate the opportunity to comment on GAO's draft report and its
recommendations. The report provides a current look at the American
River Common Features project, which is currently under construction.
Enclosed are our comments on the report.
Sincerely,
John Paul Woodley, Jr.:
Assistant Secretary of the Army (Civil Works):
Enclosure:
GAO DRAFT REPORT - DATED AUGUST 19, 2003 GAO CODE 360273/GAO-03-1055:
"CORPS OF ENGINEERS: IMPROVED ANALYSIS OF COSTS AND BENEFITS NEEDED FOR
SACRAMENTO FLOOD PROTECTION PROJECT:
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
Overall Corns of Engineers Evaluation of the Report: The Corps of
Engineers has reviewed the General Accounting Office's (GAO) draft
report entitled "CORPS OF ENGINEERS, Improved Analysis of Costs and
Benefits Needed for Sacramento Flood Protection Project." The report is
focused on improving the analysis of cost and benefits for the American
River Common Elements Projects, and communication with Congress on cost
increases associated with the project. Based on the findings of its
review, the GAO makes six recommendations on the American River levee
and/or Natomas basin portions of the project. The Corps response to
those recommendations is contained in a separate section. Even though
the Corps believes that the GAO has made some factual errors, and has
taken some data out of context, it concurs with the recommendations of
the report. The Corps' concerns are outlined, as appropriate, in the
responses to the specific GAO recommendation in the section.
An overarching concern is the failure of the GAO report to recognize
the significant role Congress has played in the authorization and
construction funding of the American River levee portion of the
project. In the Water Resources Development Act (WRDA) of 1999, the
Congress added features without a Corps report. Even while the Corps
was still in the process of completing studies and developing reliable
cost estimates, the Congress was directing that the project be
implemented by providing funds for construction. The GAO report should
acknowledge that this has taken place and is not the standard business
practice of the Corps. The Corps seeks authorization of projects, based
on completed, reviewed and approved decision documents. These decision
documents describe the project features, benefits and costs in detail,
and are intended to serve as the basis for Administration decisions and
for Congressional authorizations and funding. In 1999, Congress
exercised its discretion and authorized the additional project features
without the usual decision document and Administration endorsement.
Further, the consistent provision of funds by Congress at or exceeding
budget request created the situation of which the GAO report is so
critical.
The GAO report also does not acknowledge Corps standard practice for
continually communicating project specific information both formally
and informally to Congress. Once a project is authorized, as was the
American River Common Features Project in WRDA 1996, the Corps, through
the yearly appropriations process, informs Congress of potential cost
and schedule changes, and on any related need to prepare supplemental
decision documents. The Corps identified the need to prepare a new
decision document to incorporate changes authorized by the WRDA of 1999
into the overall project in the FY 02 budget submission, and identified
the need for reauthorization to increase the total authorized project
costs in the FY 03 budget submission. In addition, in March 2001,
briefings were held in which Members of Congress were informed of the
need to prepare a decision document to include an evaluation of the
potential for the total project costs to exceed the cost limits allowed
by Section 902 of the WRDA 1986. A number of Congressmen and Senators
were briefed at this time, including Robert Matsui, John Doolittle,
Harry Reid, and Richard Pombo.
It is also important to note that in order to formally inform Congress
of the project cost increases, recommend reauthorization if cost exceed
the Section 902 limit required by Congress, and for increased funding
that reflects cost increases to be included in the President's budget,
the decision document (which includes a detailed project cost
estimate), must be approved by the Secretary of the Army, delegated to
the Assistant Secretary of the Army (Civil Works) (ASA(CW)). Currently,
ASA(CW) is reviewing the Corps decision document for the American River
Common Features.
The GAO report does not recognize the dynamic environment in which
water resources projects are developed. Data availability,
methodologies and technologies change as projects are developed. The
Corps continually assesses the need to obtain new data and employ new
techniques in analyses of ongoing projects. As an example, it was the
flood of January 1997 that showed that the existing levees were not
adequately designed to withstand the destructive effect of seepage. It
was not an error, but an unknown condition for which the Corps had to
revise its design and this resulted in the cost increases noted in the
GAO report. This shows that the Corps employs new data, methodologies
and techniques in decision documents to accurately inform decision
makers of changes and of cost increases.
Finally, GAO seems to consider separable elements of the Common
Features as separate projects. The American River Common Features
project includes multiple elements, such as the Natomas basin work, but
in fact is considered one project.
Corps Response to GAO Recommendations: The GAO report has a total of
six recommendations. However, the recommendations are grouped into
three classifications dealing with recommdations for (1) American River
levee and Natomas basin components, (2) American River levee component
only, and (3) Natomas basin component only. The responses are presented
in a similar fashion.
RECOMMENDATION 1: For the American River levee improvements authorized
in 1999 and for the planned Natomas basin work, we recommend that the
Secretary of the Army direct the Corps of Engineers to:
* determine whether it is appropriate to conduct risk analyses of
project costs and document the basis for that decision in its project
files;
* report information to Congress on the range of potential project
benefits and the probability of achieving those benefits, as called for
in the Corps' guidance, in future benefit-cost analyses; and:
* arrange for a credible, independent review of the completeness and
accuracy of the revised benefit-cost analyses.
DOD RESPONSE: CONCUR. Regarding the risk analysis of project costs, as
outlined in an Engineering Regulation on Civil Works Cost Engineering
(ER 1110-2-1302) dated 31 March 1994, the intent of cost risk analysis
is to identify and measure the impact of design level uncertainties or
unknowns in certain features on the estimated total project cost. Cost
risk analysis is intended to aid in the identification of the amount of
contingency that should be added to a cost estimate to account for
uncertainties although it is acknowledged that such analyses "will not
reduce the uncertainties associated with the project costs estimate or
solve problems of cost variance due to insufficient information." 1:
With regard to the American River levee improvement features, the Corps
did review the need for project cost risk analysis in support of the
1996 project report and determined that more detailed analyses were not
required, although this decision was not explicitly documented in the
project files. Project cost estimates developed for this initial 1996
feasibility report, were based upon relevant actual design and
construction experience, and the most recent project specific data that
was available, and followed Corps policy in accordance with ER 1110-2-
1302, by incorporating a reasonable contingency to account for
potential unknowns. At that time, no one was aware of any areas of
significant uncertainty necessitating more detailed examinations. It
was only the flood in January 1997 that showed the design should be
changed to account for significantly greater under seepage than what
was already included in the Corps' design.
Project specific design and construction information was used to form
the basis of cost estimates developed for the March 2002 American River
Watershed Project (Common Features) Second Addendum to the Supplemental
Information Report. The Corps agrees with the GAO that the use of the
cost risk analysis should be considered. An evaluation of the need to
perform more detailed cost risk analysis was made and it was determined
that potential uncertainties were appropriately accounted for in the
project cost estimate contingencies. However, as pointed out in the GAO
report, this decision was not explicitly documented in the project
files. The Corps will document the basis for past cost risk decisions
in the project files.
The Corps will continue to evaluate the need for cost risk analysis for
any future work associated with the American River levee improvements.
For the planned Natomas basin work, the Corps will, as recommended,
determine whether it is appropriate to conduct risk analyses of project
costs and document the basis for that decision in its project files.
Regarding the GAO recommendation to inform Congress on the range of
potential project benefits and the probability of achieving those
benefits, the economic model and related benefit estimates used for the
1996 feasibility report were prepared using the most advanced
evaluation techniques and data available at the time the studies were
conducted. The economic model was developed specifically to support the
evaluation of American River project impacts. The Corps recognizes the
need to use new technologies as they become available, and the Corps
will, as recommended by GAO, provide Congress information on the range
of potential project benefits and the probability of achieving those
benefits in future benefit-cost analyses for the American River levee
improvements, if warranted, and for the planned investigations for the
Natomas basin features.
Regarding the GAO recommendation that any revised benefit-cost analysis
that might result from the recommendations noted above, be subject to a
credible, independent review, the Corps conducts both a technical and
policy review as part of the decision documents approval process. The
Corps believes that its review process results in decision documents
that form the basis of sound recommendations. Additional independent
reviews of the completeness and accuracy of benefit-cost analyses for
the American River levee improvement work would likely be of little
value, given that construction of the features authorized in both WRDA
1996 are nearly complete and over $110 million in Congressional
appropriations have been obligated to date. For the planned Natomas
basin investigations, the Corps will arrange for a credible,
independent review of the completeness and accuracy of benefit-cost
analysis.
RECOMMENDATION 2: For the American River project component, we also
recommend that the Secretary of the Army direct the Corps of Engineers
to:
* reanalyze the benefits of improvements authorized in the 1999 WRDA,
correcting for the mistakes made in counting and valuing properties and
the inappropriate methodology used to calculate flood damages.
DOD RESPONSE: CONCUR. The GAO report raised questions with the
methodology used in the 1996 feasibility study to estimate the number
of residential development effected by flooding and benefiting by levee
improvements. This methodology was accepted practice and consistent
with Corps policy at the time the work was done. New technologies
(i.e., Geographic Information System analysis which included tax record
database integration) and information which allowed for a more accurate
estimate of effected properties was available for the March 2002
American:
River Watershed Project (Common Features) Second Addendum to the
Supplemental Information Report and allowed the Corps to refine the
original estimate of residential structures.
The Corps already has completed the reanalysis recommended by the GAO.
The overestimation of residential structures that appeared in the 1996
feasibility report was accounted for in the benefit estimates included
in the March 2002 American River Watershed Project (Common Features)
Second Addendum to the Supplemental Information Report. The reported
1.1 to 1.0 benefit-cost ratio for the American River levee improvements
is based on the lower estimate of structures. In keeping with Corps
practice to provide the most recent and reliable data, other changes
also were accounted for in the March 2002 American River Watershed
Project (Common Features) Second Addendum to the Supplemental
Information Report analysis, including the value of residential
structures and hydrological changes.
In terms of valuing properties, the GAO report did not acknowledge or
explain the difference between economic and real estate evaluations.
The Corps, during the feasibility study phase, does not develop real
estate appraisals of the value for individual property acquisition.
Such an analysis requires a separate individual appraisal for each
property. There are approximately 169,000 structures, including roughly
163,000 residential structures, in the 400-year floodplain. During the
study phase, the Corps develops estimates of structure values for
determining aggregate economic damages. The cost of preparing detailed
real estate appraisals during the study phase, when the engineering
feasibility, economic justification, and environmentally acceptability
of project have not been determined, is not warranted and would be
prohibitively costly. The methods used in this economic evaluation
continue to be standard practice today.
RECOMMENDATION 3: Additionally, for the Natomas basin project
component, we recommend that the Secretary of the Army direct the Corps
of Engineers to:
* analyze the costs and benefits of alternatives to the current levee
improvement plan and identify the flood protection plan that provides
the greatest net benefits; and:
* submit a report to Congress that includes a cost estimate for all the
planned Natomas basin work and wait until Congress authorizes funding
based on the report before beginning construction of any Natomas basin
levee improvements.
DOD RESPONSE: CONCUR. The Corps acknowledges that in light of the
potential for substantial increases in project costs, based on
construction experience with the American River levee improvements,
there is a need to investigate a wider array of alternatives for
providing flood protection for the Natomas basin. Corps policy requires
a reformulation of the authorized project. The ability of the
authorized engineering features to provide outputs intended by Congress
will be evaluated, as will all other reasonable alternatives.
GAO Comments:
The following are GAO's comments on the Department of the Army's letter
dated September 22, 2003.
1.Although the Army asserted that we made some factual errors, its
subsequent comments failed to identify any specific factual errors.
2. The Army believes that the report does not recognize the significant
role Congress played in 1999 when it added additional work to the
project and authorized funds for construction before the Corps had
developed reliable cost estimates. While the Congress did add work to
the Common Features Project in the Water Resources Development Act
(WRDA) of 1999 without a Corps report, the cost of this work is
relatively small in comparison to the work authorized in 1996. We
believe the Army's comment is not relevant to the main focus of our
report, which is the significant cost increases for the work the Corps
recommended and the Congress authorized in 1996. For example, the costs
for the work the Corps recommended on the American River more than
tripled from $44 million in 1996 to $143 million in 2002. In contrast,
the estimated cost for the work on the American River levees the
Congress added in 1999 is about $15 million. We believe our report
accurately reflects the limited impact the addition of work in 1999 had
on the American River component of the project's overall cost.
Furthermore, the additional funding provided by Congress for the work
authorized in 1999 has not been used for that purpose, but rather has
been used to fund the cost overruns for the work authorized in 1996.
3. The Army stated that the consistent provision of funds to the Corps
by Congress, at or exceeding the Corps' budget request, created the
situation of which our report is critical. We do not agree. Two of the
main issues in our report are that the costs of the American River
component of the project nearly tripled due to design changes, and that
the Corps began construction of the American River levee improvements
without analyzing the likelihood of these cost increases or reporting
the potential cost increases to Congress. The fact that Congress
provided funding for the project does not absolve the Corps of its
responsibility to communicate project cost increases in a timely
manner.
4. The Army implied that Congress was informed of potential cost
increases for the Common Features Project during the yearly
appropriations process. This is not the case on the basis of our review
of all of the Corps' submissions for the annual appropriations process
from 1997 through 2001. As our report states, it was not until February
2002, more than 4 years after it had significantly modified the design
of the American River levee improvements, that the Corps informed
Congress for the first time of the significant cost increases for the
American River component of the project.
5. The Army stated that the levee improvements were not originally
designed to withstand the destructive effect of seepage and that this
design was not an error. Rather, an unknown condition (i.e., the
potential for destructive seepage under the levees) resulted in design
changes and increased costs. Our report does not criticize the Corps
for not anticipating the need for a levee improvement design that would
stop seepage under the levees. We acknowledge that the flood of January
1997 caused the Corps to change the design of its levee improvements.
However, as our report notes, the Corps did not develop new cost
estimates after making these design changes and did not communicate the
resulting significant cost increases to Congress in a timely manner.
6. We do not consider the separable elements of the Common Features
Project as separate projects. This report makes clear that there is one
Common Features Project comprised of an American River component and a
Natomas Basin component.
7. We agree with the Army that, in 1996, the Corps was not aware of any
significant areas of cost uncertainty for the proposed American River
levee improvements. However, as the Army recognizes, the flood of
January 1997 showed that the Corps' design for the levee improvements
should be significantly modified. After making these design changes,
though, the Corps did not estimate the potential for cost increases due
to tripling the depth of some cut-off walls or closing the gaps in cut-
off walls at bridges and other areas. These design changes eventually
added $76 million to the cost of the project.
8. The Army stated that the Corps believes that its review process
results in decision documents that form the basis for sound
recommendations. However, in two recent cases, we found that the
process did not serve its intended purpose. As this report documents,
the Corps' review process was ineffective in detecting and correcting
the mistakes in the benefit analyses we identified. We raised similar
concerns about the review process in our June 2002 report on the
Delaware River Deepening Project.
9. We did not recommend that the Corps reanalyze the costs and benefits
of the work authorized in 1996. We agree that a reanalysis of this
work, which is nearly complete, would be of little value. However, we
continue to believe that a reanalysis of the economic benefits from the
work authorized in 1999 is necessary because the Corps' initial
analysis contained significant mistakes and construction of the work
has not yet begun. Before beginning construction of this work, the
Corps should verify that the work is in fact cost beneficial. In
addition, the Corps should arrange for a credible, independent review
of the completeness and accuracy of its reanalysis.
10. The Army contends that the Corps has already completed the
reanalysis we recommended of the work added to the American River
component of the project in 1999. We disagree. The Corps analyzed the
economic benefits for the 1999 work added to the project for the first
and only time in 2002. Our review found several problems with the
Corps' 2002 analysis of the benefits from this work. For example, we
found that the Corps had made mistakes in how it counted and valued
properties and had used an inappropriate methodology to calculate flood
damages. As a result, the Corps has not yet prepared an accurate
assessment of the benefits resulting from the 1999 work. The Corps has
not begun any construction for the work authorized in 1999, and it is
not currently known if the benefits provided by this work are greater
than the costs. Consequently, we recommend a reanalysis of these
benefits in order to correct the mistakes that we identified.
11. The Army stated that the Corps does not conduct individual real
estate appraisals to determine the value of each property that could be
damaged in a flood. Our report does not suggest that the Corps should
conduct such appraisals. Rather, we identified weaknesses in the sample
the Corps used to estimate property values and its methodology for
calculating depreciation for the properties in the sample. For example,
to accurately appraise a large number of properties by sampling
requires a separate sample for each residential property type, such as
single-family homes and apartment buildings. However, the Corps sampled
all property types together. In addition, the Corps did not use a
consistent objective appraisal methodology to calculate depreciation
for the properties in the sample. These weaknesses raise questions
about the accuracy of the Corps' property value estimates and the
project benefit estimates that are, in part, based on them.
12. The Army claims that there are approximately 163,000 residential
structures in the 400-year floodplain. This is not correct on the basis
of the Corps' most current analysis. The estimate of 163,000
residential structures comes from the Corps' 1996 economic analysis.
However, in 2002, the Corps updated its analysis and found that it had
overestimated the number of residential structures in 1996. The Corps'
2002 analysis estimated that there were 115,347 residential structures
in the 400-year floodplain.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact :
Anu Mittal, (202) 512-3841:
Staff Acknowledgments:
In addition to the individual above, Jeff Arkin, Chuck Barchok, Judy
Hoovler, Richard Johnson, Mark Metcalfe, Ryan Petitte, and Stephen
Secrist made key contributions to this report.
:
(360273):
:
:
FOOTNOTES
[1] In this report, costs and benefits are presented in the dollar
values for the years in which they were estimated, not in constant
dollars, except for the work authorized in 1999, which is presented in
2002 dollars. We did not adjust cost and benefit figures to constant
dollars to account for inflation in order to maintain consistency with
the figures in published Corps reports on the Common Features Project.
However, when discussing changes in project cost, we do report cost
increases due to inflation. In addition, appendix II shows 1996 project
costs converted to 2002 dollars.
[2] See U.S. Army Corps of Engineers and the State of California
Reclamation Board, Feasibility Report, American River Watershed
Investigation, California (Sacramento, Calif.: December 1991).
[3] Constructing a dam near Auburn is not a new idea. In 1965, the U.S.
Bureau of Reclamation was authorized to construct a dam near Auburn for
increasing water supply, providing hydropower, controlling floods, and
other purposes. Construction at the site was halted in 1975 because of
concerns over the proposed dam's ability to withstand earthquakes, and
was never resumed.
[4] See U.S. Army Corps of Engineers, State of California Reclamation
Board, and the Sacramento Area Flood Control Agency, Supplemental
Information Report, American River Watershed Project, California
(Sacramento, Calif.: March 1996).
[5] Current law requires the nonfederal partner to pay a minimum of 35
percent of the costs of flood protection projects. This increased cost
share requirement only applies to projects authorized after the WRDA of
1996 and therefore does not apply to the Common Features Project.
[6] About 3 percent ($9 million) of this increase is the result of
price inflation between 1996 and 2002.
[7] These costs are in 2002 dollars.
[8] The California state legislature established the Sacramento Area
Flood Control Agency to coordinate flood protection efforts for the
Sacramento area on a regional basis.
[9] See U.S. Army Corps of Engineers and the State of California
Reclamation Board, Sacramento and San Joaquin River Basins, California,
Comprehensive Study, Interim Report (Sacramento, Ca.: Dec. 20, 2002).
[10] See U.S. Army Corps of Engineers, Engineer Regulation 1110-2-1302.
[11] Charles Yoe, Risk Analysis Framework for Cost Estimation, a report
prepared for the U.S. Army Corps of Engineers, Institute for Water
Resources, December 2000.
[12] See U.S. Army Corps of Engineers, Engineer Regulation 1105-2-100.
[13] The Corps' guidance (Engineer Regulation 1105-2-100) directs the
Corps to address the issue of prevention of loss of life when
evaluating alternative plans--which the Corps did. However, the Corps
is not required to formally estimate the number of lives saved or lost
as a potential effect of a project. In situations where historical data
exist, the Corps has the option to estimate the number of persons
potentially affected by a project, and include this number as an
additional factor for the consideration of decision makers.
[14] See U.S. Army Corps of Engineers, Engineer Regulation 1105-2-100.
[15] The Appraisal Institute is an international membership association
of professional real estate appraisers whose mission is, in part, to
uphold professional credentials and standards of professional practice
and ethics consistent with the public good. The Appraisal Foundation is
a nonprofit education organization that, among other things, develops
and promulgates professional appraisal standards and appraiser
qualifications.
[16] See U.S. Army Corps of Engineers, Engineer Manual 1110-2-1619.
[17] See U.S. Army Corps of Engineers, Engineer Regulation 1105-2-101.
[18] The Corps' 2002 estimate includes the benefits of both the
expanded 1996 work and the additional 1999 levee improvement work.
[19] See U.S. General Accounting Office, Delaware River Deepening
Project: Comprehensive Reanalysis Needed, GAO-02-604 (Washington,
D.C.: June 7, 2002).
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