Roles of Economists and New Analytical Requirements Trade-Off Analysis Roles of Economists and New Analytical Requirements

Planning in a Collaborative Environment Enhance collaborative approach to water resources management Watershed/system vs. site specific Multiple purposes / multiple partnerships Fully utilize flexibility and authority of P&G Evaluate, display and compare the full range of alternative plans effects across all 4 P&G accounts. May select any candidate plan with net beneficial effects (based on 4 accounts) with ASA exemption. Must identify NED Plan.

In formulating Collaborative Plans, we face inherent conflicts: Multiple collaborators with varied interests Need to determine “net beneficial effects” considering multiple variables for which performance is measured using different metrics (quantity and quality) and which have different degrees of importance for the collaborators/stakeholders/public. Trade-off analysis required to identify optimum solution.

Combined Plans Modern day multipurpose planning - strive to achieve environmental sustainability (EOPs) “Seek balance and synergy among human development activities and natural systems by designing economic and environmental solutions that support and reinforce one another.”, Environmental Operating Principles, March 2002 Contribute to environmental sustainability as defined in EOP’s by formulating Combined NED/NER plans Combined NED/NER Plan = Combined Plan First bullet and sub-bullet pulled directly from Environmental Operating Principles. We’re trying to tie the EOP’s into the Corps’ business processes. Environmental sustainability is our over-arching goal. We formulate the combined NED/NER plan to contribute to environmental sustainability, not as our only means of achieving it. Lots of definitions of “sustainability” – and disagreement. We’re using the “official” definition as defined by the Corps in the EOP’s.

In formulating Combined Plans, we face an inherent conflict: Most “commercial” (NED) water resource development derives benefit by reducing hydrologic variability Most ecosystem restoration (NER) derives benefit by restoring hydrologic variability Trade-off analyses required to identify optimum solution

Trade-off “Balancing Act” Economic Efficiency   Trade-off Group Process – feel good group decision Decision Algorithms – math decides Economic efficiency – select only from the efficient set. Group Process Decision Algorithms

Trade-off Analysis Fundamentally a political process It is not science Rarely, if ever, objective However, it can be approached in a structured and systematic way to improve reliability and validity of the process Not science, but can be done in a structured way to make it more reliable and valid

Trade-off analysis The purpose of multicriteria trade-off methods is to improve the quality of decisions by making the decision making process more explicit, rational, and efficient. Example: Buying a car.

Choosing a car: Organizing the decision If weights and scores can be defined, spreadsheet or matrix Also, pair wise comparisons for AHP (?)

Choosing a car: Choice will differ based on perspective Buying for your self Buying for your family Someone buying for you as a gift Buying for a rental car firm Buying for GSA Analogous to different perspectives of various partners in Corps trade-off situations

We make trade-offs in many situations in the Corps PLANNING Navigation Flood damage reduction Ecosystem restoration Watershed studies Project EIS OPERATIONS Reservoir reallocation Major rehabilitation Changes to operating plans Regulatory permit decisions / EIS

What kinds of things do we trade off? NED versus NED NED versus RED NED versus EQ EQ versus EQ

Trade-offs require consideration of: Variables or “indicators” important to the decision Yardsticks to measure performance against the indicators – quantity AND quality Relative importance across indicators (preferences, weights) Variables or indicators must be related to planning objectives.

Combined Plans Evaluation: Example Procedure Trade-off Analysis: Identify criteria (variables or indicators) Total Annual NED Benefits Total Annual Ecosystem Restoration Outputs Total Annual Cost Yardsticks NED Benefits - $$$ Ecosystem Restoration Outputs – Hus, acres of wetlands, etc. Cost - $$$

Combined Plans Evaluation (Continued) Identify Not-dominated (cost effective plans) Use multiple criteria: Total Annual NED Benefits Total Annual Ecosystem Restoration Outputs Total Annual Cost

Not Dominated Plans (Cost Effective) Sample from 149 plans in EP Example of CE plans from example HQ is working on. Plans from IWR-PLAN (The plans were formulated with IWR-PLAN but the CE ones were identified using Dick Males algorythm). Called “Decision Matrix”. TAC = total annual cost. AAO ER = avg annual output. AAB FDR = avg annual benefits. WU = wetlands upstream 30 ac. SR = stream restoration. REF = reforestation. WIF = wetlands in floodplain. R = relocation. L = levee. SL = setback levee.

Does choice of multicriteria trade-off method matter? Which multicriteria method is adopted can make a significant difference in the decision, in that choice of a method can affect the results as much or more than which person applies the method. Lifted from Hobbs et al. 1992 within Corps By no means a comprehensive study, but results of things to be cautious about Bullet 1: more than a few hours needed to develop familiarity and build confidence in worth of the procedures Bullet 2: “Careful tutoring and close collaboration between analysis and decision makers are more important to an applications success than which method is accepted” Bullet 3: “Rating weights may have little to do with the trade-offs users are actually willing to make among criteria” Consistency checks are needed to have confidence that the numbers mean anything. (Within method consistency, not across methods). Bullet 4:

Popular Trade-off Analysis Methods Weighting Methods Non-Normalized Normalized Effects Matrix Ranking Index Commensurable Metric, Ordinal Data, Direct Weights Ordinal Ranking Borda’s Simple Method Unequal Weights Outranking Methods Analytical Hierarchy Process

Popular Trade-off Analysis Methods For more information, go to: Trade Off Analysis Planning and Procedures Guidebook, IWR Pub 02-R-2, April 2002

Output of Trade-Off Analysis Ranking of Plans, best to worst, that meets the outcome defined for each criterion considering the preferences (ako, weights) assigned to each criterion by PDT. Is the highest ranking plan the one to recommend? Maybe.

Combined Plans: Comparison and Selection Compare highest ranked justified plan to NED or NER Plan. Consider benefits foregone, benefits gained, differences in cost and other decision criteria. Document rationale for selecting Combined Plan over NED or NER Plan. Different from single purpose plan comparison. The NED or NER plan is the benchmark. Now we can consider all our other decision criteria – not just NED, NER, & costs. Document: “build your case” for selecting combined plan over NED or NER plan. Example – we are foregoing these NED benefits by not selecting the NED plan, but we are gaining these significant NER outputs. cost of ecosystem restoration is within 5% of total project cost or $1 M maximum (why do you have this here? This is not in the guidance anymore, we were zapped by ASA.)

Where are we on development of final Guidance? Developing multipurpose formulation and evaluation manual to include: Fully worked example to illustrate various trade-off approaches (index, distance functions, ect.). Revisiting decisions on criteria, justification, incremental analysis IWR-PLAN updated for trade-off analysis. New OSE/RED Handbooks IWR PLAN ALREADY EQUIPPED TO DISPLAY OUTPUTS ACROSS MULTIPLE VARIABLES, AND TO ACCEPT WEIGHTS FOR A COMMON UNIT IF DESIRED.