442 



Chairman Buchanan of FPC sought to have his agency relieved 

 from responsibility for the determination of rates of power produced 

 at Government dams, and recommended "That the Congress be more 

 definite in laying down the standards, particularly with respect to 

 cost-allocation procedures and periods for amortization of invest- 

 ments * * *." ^^ 



A review of water project cost/benefit allocation policies was con- 

 ducted in 1952 by a subcommittee to study civil works of the House 

 Committee on Public Works. This subcommittee obtained the views of 

 all the agencies interested in water projects, and was critical of what it 

 found. It declared that "the approach to the problem differs with nearly 

 every agency and the agencies themseh^es do not approach each exam- 

 ple consistently." Moreover — "The absence of clearly enunciated ele- 

 ments of policy is a major contributing factor to interagency conflicts 

 and to many of the demands for executive reorganization and for the 

 establishment of an additional board for coordination and re\aew." 



The Subcommittee identified and described the various methods of 

 cost allocation, such as : 



Benefit method. 



Alternative justifiable expenditure method. 



Separable costs-remaining benefits method. 



Use of facilities method. 



Separate projects method. 



Equal apportionment method. 



Priority-of-use method. 



Incremental method. 



Direct-costs method.^" 

 It examined the various ways in which projects had been analyzed 

 according to some of these approaches. It then recommended — 



1. That all costs of a water resource development project be allocated so that 

 each authorized purpose of the project will bear its own fair share of these costs 

 and share equitably in economies or savings resulting from the use of a multiple- 

 purpose development. 



2. That the proposed allocation of costs for a project to the various purposes of 

 water resource development be initiated by the pertinent construction agency and 

 that the comments of agencies properly concerned with the allocation or the proj- 

 ect be made on such proposed allocation. 



3. That the Bureau of the Budget, Executive OflSce of the President, be desig- 

 nated as the agency of the executive branch to approve both tentative and final 

 allocations of costs to the various purposes of water resource development 

 projects. 



4. That hereafter all reports to Congress recommending the authorization or 

 adoption of a water resource development project or in view of an authorized 

 project include an allocation of all estimated costs together with an explanation 

 and justification of the method of allocation proposed by the principal reporting 

 agency and a statement of views thereon of each agency properly concerned with 

 the allocation or the project. 



5. That in the event a change in the method of allocation or the purposes of 

 allocation is considered desirable subsequent to a report such as contemplated in 

 paragraph No. 3, supplemental report thereon be submitted to Congress for con- 

 sideration by the committees responsible for oversight of the project prior to any 

 firm commitments by the executive agencies on behalf of the Government based 

 on the revised allocation, such report to be included as a part of any more com- 

 prehensive report required to be made on the project. 



6. That final allocations of capital cost be made only after completion of con- 

 struction when all investment costs are known.'" 



3« Honse. Committee Print No. 23. (1952, op. eit, pp. 9-11). 

 s^Ihld., pp. 1-4. 

 »« Ibid., pp. 30-3?. 



