19.3 Basic Definitions Relating to Cost Allocation
It is judicious to define several commonly used terms before describing the different
methods.
19.3.1 Project
A multipurpose project is an integral physical unit of several components or features
undertaken to provide different functions or purposes which can be used independently, or as an addition to an existing project. It is a separable entity for evaluation
purposes.
19.3.2 Function/Purpose
An important service(s) performed by a multi-purpose project, e.g. potable water,
hydroelectricity.
19.3.3 Cost
Total Project costs (T) include the initial investment in land, labour and materials
and subsequent costs for replacements and for operation and maintenance of the
facilities. Costs of post-authorization investigations, interest during construction,
engineering, inspection, administration, and overhead in general should be included.
Also included are costs induced by the project even when actual compensation is not
involved. Project costs should be evaluated in terms of prices expected to be
applicable at the time costs are incurred.
19.3.4 Benefits
The different facilities in the multipurpose project will produce quantifiable gains,
often monetary. Monetary values are assigned to the beneficial effects of a project by
directly applying projected market prices or derived prices based on projected costs
of production by alternative means. Project benefits, just as costs, should be evaluated in terms of prices expected to be applicable at the time the benefits are obtained
and suitably converted by appropriate discounting methods.
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19 Cost Allocation for Infrastructure Implementation
It is judicious to define several commonly used terms before describing the different
methods.
19.3.1 Project
A multipurpose project is an integral physical unit of several components or features
undertaken to provide different functions or purposes which can be used independently, or as an addition to an existing project. It is a separable entity for evaluation
purposes.
19.3.2 Function/Purpose
An important service(s) performed by a multi-purpose project, e.g. potable water,
hydroelectricity.
19.3.3 Cost
Total Project costs (T) include the initial investment in land, labour and materials
and subsequent costs for replacements and for operation and maintenance of the
facilities. Costs of post-authorization investigations, interest during construction,
engineering, inspection, administration, and overhead in general should be included.
Also included are costs induced by the project even when actual compensation is not
involved. Project costs should be evaluated in terms of prices expected to be
applicable at the time costs are incurred.
19.3.4 Benefits
The different facilities in the multipurpose project will produce quantifiable gains,
often monetary. Monetary values are assigned to the beneficial effects of a project by
directly applying projected market prices or derived prices based on projected costs
of production by alternative means. Project benefits, just as costs, should be evaluated in terms of prices expected to be applicable at the time the benefits are obtained
and suitably converted by appropriate discounting methods.
540
19 Cost Allocation for Infrastructure Implementation