implemented a single purpose project, the cost would be $300 million, $90 million
and $150 million respectively. If the project was implemented without user A, the
cost would be $110 million; without user B, $80 million; and without user C, $80
million. The separable cost for each user and the total of joint costs to be allocated
are presented in Tables 19.3a and 19.3b.
Example 19.2 A recycled water project costing $250 million is being considered by
two water users. If user A does not participate in the project, the cost would be $180
million; if user B does not participate in the project, the cost would amount $120
million. The water wholesaler obtains benefits of $20 million, representing the
separable cost for the water wholesaler. It is inserted directly into the table, instead
of being calculated as in Tables 19.3a and 19.3b. (Note the grey shading in
Tables 19.4a and 19.4b). The economic analysis has established the benefits to
user A and user B and to the regional water wholesaler to be $500 million, $1000
million and $700 million respectively. The alternative cost to yield the same benefit
respectively to each user would be $130 million, $280 million, and $30 million
respectively.
Example 19.3 as explained with Tables 19.5 and 19.6.
There are 3 users in a multipurpose project: user A, user B, and user C. The total
cost of the multipurpose project will amount to $130 million over 20 years. The
economic analysis shows the benefits for each user as follows: $1310 million to
user A, $500 million to user B, and $100 million to user C. If each user implemented
a single purpose project, the cost would be $300 million, $90 million and $150
million respectively. If the project was implemented without user A, the cost would
be $110 million; without user B, $80 million; and without user C, $80 million. The
separable cost for each user and the total of joint costs to be allocated are presented in
Tables 19.3a.
19.8 Precautions – Problems
Applying the Beneficiary Pays Analysis, to determine project costs allocation, presents some challenges:
(1) users with more benefits should have a higher contribution,
(2) these users will therefore tend to announce lower benefits in order to contribute
fewer funds,
(3) there are thus information asymmetries when project benefits and costs are
estimated, particularly if they are not easy to quantify,
(4) the consideration of operations and maintenance (O&M) costs, as well as
non-monetary costs and,
(5) classifying costs and benefits as public or private.
554
19 Cost Allocation for Infrastructure Implementation
and $150 million respectively. If the project was implemented without user A, the
cost would be $110 million; without user B, $80 million; and without user C, $80
million. The separable cost for each user and the total of joint costs to be allocated
are presented in Tables 19.3a and 19.3b.
Example 19.2 A recycled water project costing $250 million is being considered by
two water users. If user A does not participate in the project, the cost would be $180
million; if user B does not participate in the project, the cost would amount $120
million. The water wholesaler obtains benefits of $20 million, representing the
separable cost for the water wholesaler. It is inserted directly into the table, instead
of being calculated as in Tables 19.3a and 19.3b. (Note the grey shading in
Tables 19.4a and 19.4b). The economic analysis has established the benefits to
user A and user B and to the regional water wholesaler to be $500 million, $1000
million and $700 million respectively. The alternative cost to yield the same benefit
respectively to each user would be $130 million, $280 million, and $30 million
respectively.
Example 19.3 as explained with Tables 19.5 and 19.6.
There are 3 users in a multipurpose project: user A, user B, and user C. The total
cost of the multipurpose project will amount to $130 million over 20 years. The
economic analysis shows the benefits for each user as follows: $1310 million to
user A, $500 million to user B, and $100 million to user C. If each user implemented
a single purpose project, the cost would be $300 million, $90 million and $150
million respectively. If the project was implemented without user A, the cost would
be $110 million; without user B, $80 million; and without user C, $80 million. The
separable cost for each user and the total of joint costs to be allocated are presented in
Tables 19.3a.
19.8 Precautions – Problems
Applying the Beneficiary Pays Analysis, to determine project costs allocation, presents some challenges:
(1) users with more benefits should have a higher contribution,
(2) these users will therefore tend to announce lower benefits in order to contribute
fewer funds,
(3) there are thus information asymmetries when project benefits and costs are
estimated, particularly if they are not easy to quantify,
(4) the consideration of operations and maintenance (O&M) costs, as well as
non-monetary costs and,
(5) classifying costs and benefits as public or private.
554
19 Cost Allocation for Infrastructure Implementation