Report of Panel of Consultants on Secondary or Indirect Benefits of Water-Use Projects, Part IA

A. Instructions of Michael W. Straus, Commissioner, Bureau of Reclamation, to Panel of Consultants on Secondary or Indirect Benefits

The Panel of Consultants will have as its goal the preparation of a report which (1) will indicate its views on the adequacy of Bureau of Reclamation procedures for recognizing and evaluating secondary or indirect benefits and costs, and (2) will set forth a recommended basis for the evaluation of secondary or indirect benefits and costs. The Panel will study carefully the Bureau of Reclamation's principles and procedures for the identification and measurement of benefits and costs of water resource development projects, and will consider related materials such as reports to the Federal Inter-Agency River Basin Committee by its Subcommittee on Benefits and Costs and reports on the accomplishments of operating Reclamation projects. The Panel should indicate the secondary benefits and costs which it feels should be taken into monetary account and should propose methods of measuring them, particularly for irrigation, hydroelectric power, and municipal and industrial water supply. The report of the Panel should be submitted by July 1, l952.

Some of the more important questions to be resolved by the Panel are as follows:

1. Are the basic assumptions and procedures contained in the Bureau of Reclamation Manual for the determination of secondary or indirect benefits and costs sound and defensible? If not, where, to what extent, and in what way should they be modified?


2. Should it be assumed that needs met by a project would be met if the project were not constructed? By what procedure should the analysis account for stimulating expansion of the Nation’s productive capacity?


3. Can the procedures for primary benefits and the general principles of the Subcommittee’s May 1950 report be logically expanded to provide adequate evaluation of secondary benefits? If so, what procedures and assumptions should be used?


4. Should project costs, associated costs, and secondary costs, of market value, be considered an adequate measure of benefits foregone from alternative uses? If not, how should such costs be measured? Should the effects of alternative uses be compared with or deducted from the benefits of project uses?


5. Should the same basic assumptions govern the analysis of primary and secondary benefits?


6. Federal expenditures are required for water development projects, and therefore it is believed that all benefits should be evaluated from a national public viewpoint. How can measurements of benefits from a local viewpoint be converted to represent the national public viewpoint? If direct irrigation benefits (increases in net farm income) represent a national as well as a local viewpoint, should increases in net income in secondary activities represent both viewpoints?


7. Do secondary benefits vary substantially for different types of commodities and different projects? If so, how can the analysis take account of such variations?


8. Can an identical procedure be used to evaluate secondary benefits from irrigation, power, municipal and industrial water supply, and other purposes? If so, what procedure should be used? If not, what procedure should be used for each purpose? Should savings to power consumers from lower power rates be considered a primary or secondary power benefit?