nents being analyzed. The steps abbreviated and 

 the reason for abbreviation should be documented. 



(Hi) Proposals for additions to or changes in the 

 procedures in Chapter II may be made when an 

 agency head determines that the new technique 

 will improve plan formulation and evaluation. These 

 proposals are to be submitted to the Water Re- 

 sources Council for review and approval for inclu- 

 sion in Chapter II. Procedures which represent 

 changes in established policy are to be referred to 

 the Cabinet Council on Natural Resources and En- 

 vironment for its considreation. 



(b) Goods and services: General measurement 

 standard. The general measurement standard of 

 the value of goods and services is defined as the 

 willingness of users to pay for each increment of 

 output from a plan. Such a value would be obtained 

 if the "seller" of the output were able to apply a 

 variable unit price and charge each user an individ- 

 ual price to capture the full value of the output to 

 the user. Since it is not possible in most instances 

 for the planner to measure the actual demand situ- 

 ation, four alternative techniques can be used to 

 obtain an estimate of the total value of the output 

 of a plan; Willingness to pay based on actual or 

 simulated market price; change in net income; cost 

 of the most likely alternative; and administratively 

 established values. 



(1) Actual or simulated market price. If the addi- 

 tional output from a plan is too small to have a sig- 

 nificant effect on price, acuta! or simulated market 

 price will closely approximate the total value of the 

 output and may be used to estimate willingness to 

 pay. If the additional output is expected to have a 

 significant effect on market price and if the price 

 cannot be estimated for each increment of the 

 change in output, a price midway between the price 

 expected with and without the plan may be used to 

 estimate the total value. 



(2) Change in net income. The value of the 

 change in output of intermediate goods and serv- 

 ices from a plan is measured by their total value as 

 inputs to producers. The total value of intermediate 

 goods or services to producers is properly meas- 

 ured as the net income received by producers with 

 a plan compared to net income received without a 

 plan. Net income is defined as the market value of 

 producers' outputs less the market value of produc- 

 ers' inputs exclusive of the cost of the intermediate 

 goods or services from a plan. Increased net 

 income from reduced cost of maintaining a given 

 level of output is considered a benefit since re- 

 leased resources will be available for production of 

 other goods and services. 



(3) Cost of the most likely alternative. The cost of 

 the most likely alternative may be used to estimate 

 NED benefits for a particular output if non-Federal 



entities are likely to provide a similar output in the 

 absence of any of the alternative plans under con- 

 sideration and if NED benefits cannot be estimated 

 from market price or change in net income. This 

 assumes, of course, that society would in fact un- 

 dertake the alternative means. Estimates of benefit 

 should be based on the cost of the most likely al- 

 ternative only if there is evidence that the alterna- 

 tive would be implemented. In determining the most 

 likely alternative, the planner should give adequate 

 consideration to nonstructural and demand man- 

 agement measures as well as structural measures. 



(4) Administratively established values. Adminis- 

 tratively established values are proxy values for 

 specific goods and services cooperatively estab- 

 lished by the water resources agencies. An exam- 

 ple of administratively established values is the 

 range of unit-day values for recreation. 



(c) Goods and services: Categories. The NED 

 account includes goods and services in the follow- 

 ing categories: 



(1) Municipal and industrial (M&l) water supply 



(2) Agricultural floodwater, erosion and sedimen- 

 tation reduction 



(3) Agricultural drainage 



(4) Agricultural irrigation 



(5) Urban flood damage reduction 



(6) Power (hydropower) 



(7) Transportation (inland navigation) 



(8) Transportation (deep draft navigation) 



(9) Recreation 



(10) Commercial fishing 



(11) Other categories of benefits for which proce- 

 dures are documented in the planning report and 

 which are in accordance with the general measure- 

 ment star-jards in paragraph (b) of this section. 



(d) Other direct benefits. The other direct benefits 

 in the NED benefit evaluation are the incidental 

 direct effects of a project that increase economic 

 efficiency and are not otherwise accounted for in 

 the evaluation of the plan or project. They are inci- 

 dental to the purposes for which the water re- 

 sources plan is being formulated. They include inci- 

 dental increases in output of goods and services 

 and incidental reductions in production costs. For 

 example, a project planned only for flood damage 

 reduction and hydropower purposes might reduce 

 downstream water treatment costs; this reduction in 

 costs would be shown as another direct benefit in 

 the NED account. 



(e) Use of otherwise unemployed or underem- 

 ployed labor resources. 



