19.3.13 Remaining Benefit
This is the difference between the justifiable expenditure and the separable cost. The
remaining benefits will usually be smaller than the remaining alternative cost.
19.3.14 Vendibility
The value in the market of the services provided by a project function, expressed as
an annuity.
19.4 Basic Principles for Allocation of Cost
19.4.1 Basic Components
The multi-purpose project cost comprises:
(1) the specific (separable) cost of individual components serving only a single
purpose and
(2) the joint cost of the components serving several purposes.
In cost allocation,
(a) the total separable or specific cost should be attributed to the respective
purpose and,
(b) the joint (total remaining) project cost should be distributed among the different
purposes served so that each will share equitably in the savings or economics
resulting from the joint cost.
Equitable cost sharing is carried out by limiting any allocated cost for any purpose
to the corresponding benefits. Thus, each purpose is required to support at least its
separable cost. Within these maximum (maximum benefits) and minimum (allocated
cost) limits, there is proportional allotment of the savings arising from the multipurpose project. The division of the joint cost for all different features producing
various services is important. The difficulty of this division may be minimized by
obtaining the smallest possible value of the joint cost.
19.4.2 Basic Principle of Cost Allocation
The basic principle, therefore, to ensure equitable cost allocation to the various
purposes is that the purpose allocated cost should be:
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19 Cost Allocation for Infrastructure Implementation
This is the difference between the justifiable expenditure and the separable cost. The
remaining benefits will usually be smaller than the remaining alternative cost.
19.3.14 Vendibility
The value in the market of the services provided by a project function, expressed as
an annuity.
19.4 Basic Principles for Allocation of Cost
19.4.1 Basic Components
The multi-purpose project cost comprises:
(1) the specific (separable) cost of individual components serving only a single
purpose and
(2) the joint cost of the components serving several purposes.
In cost allocation,
(a) the total separable or specific cost should be attributed to the respective
purpose and,
(b) the joint (total remaining) project cost should be distributed among the different
purposes served so that each will share equitably in the savings or economics
resulting from the joint cost.
Equitable cost sharing is carried out by limiting any allocated cost for any purpose
to the corresponding benefits. Thus, each purpose is required to support at least its
separable cost. Within these maximum (maximum benefits) and minimum (allocated
cost) limits, there is proportional allotment of the savings arising from the multipurpose project. The division of the joint cost for all different features producing
various services is important. The difficulty of this division may be minimized by
obtaining the smallest possible value of the joint cost.
19.4.2 Basic Principle of Cost Allocation
The basic principle, therefore, to ensure equitable cost allocation to the various
purposes is that the purpose allocated cost should be:
544
19 Cost Allocation for Infrastructure Implementation