1.10.2 Selection. 



(a) The alternative plan with the greatest net eco- 

 nomic benefit consistent with protecting the Na- 

 tion's environment (the NED plan) is to be selected 

 unless the Secretary of a department or head of an 

 independent agency grants an exception when 

 there is some overriding reason for selecting an- 

 other plan, based upon other Federal, State, local, 

 and international concerns. 



(b) The alternative of taking no action, i.e., se- 

 lecting none of the alternative plans, should be fully 

 considered. 



(c) Plan selection is made by the agency deci- 

 sionmaker for Federal and Federally-assisted plans. 

 Agency officials and State and local sponsors may 

 recommend selection of a plan other than the NED 

 plan. The agency decisionmaker (the Secretary of a 

 department or the head of an independent agency) 

 will determine whether the reasons for selecting a 

 plan other than the NED plan merit the granting of 

 an exception. 



(d) The basis for selection of the recommended 

 plan should be fully reported, including consider- 

 ations used in the selection process. 



(e) Plans should not be recommended for Feder- 

 al development if they would physically or economi- 

 cally preclude non-Federal plans that would likely 

 be undertaken in the absence of the Federal plan 

 and that would more effectively contribute to the 

 Federal objective when comparably evaluated. 



Supplement I 



Risk and uncertainty— Sensitivity analysis 



Uncertainty and variability are inherent in water 

 resources planning. For example, there is uncer- 

 tainty in projecting such factors as stream flows, 

 population growth, and the demand for water. 

 Therefore, the consideration of hsk and uncertainty 

 is important in water resources planning. 



This supplement provides guidance for the evalu- 

 ation of risk and uncertainty in the formulation of 

 water resources management and development 

 plans. 



S1 Concepts. 



(a) Risk. Situations of risk are conventionally de- 

 fined as those in which the potential outcomes can 

 be described in reasonably well known probability 

 distributions. For example, if it is known that a river 

 will flood to a specific level on the average of once 



in 20 years, a situation of risk, rather than uncer- 

 tainty, exists. 



(b) Uncertainty. In situations of uncertainty, po- 

 tential outcomes cannot be described in objectively 

 known probability distributions. Uncertainty is char- 

 acteristic of many aspects of water resources plan- 

 ning. Because there are no known probability distri- 

 butions to describe uncertain outcomes, uncertainty 

 is substantially more difficult to analyze than risk. 



(c) Sources of risk and uncertainty. (1) Risk and 

 uncertainty arise from measurement errors and 

 from the underlying variability of complex natural, 

 social, and economic situations. If the analyst is un- 

 certain because the data are imperfect or the ana- 

 lytical tools crude, the plan is subject to measure- 

 ment errors. Improved data and refined analytic 

 techniques will obviously help minimize measure- 

 ment errors. 



(2) Some future demographic, economic, hydrolo- 

 gic, and meteorological events are essentially un- 

 predictable because they are subject to random in- 

 fluences. The question for the analyst is whether 

 the randomness can be described by some prob- 

 ability distribution. If there is an historical data base 

 that is applicable to the future, distributions can be 

 described or approximated by objective techniques. 



(3) If there is no such historical data base, the 

 probability distribution of random future events can 

 be described subjectively, based upon the best 

 available insight and judgment. 



(d) Degrees of risk and uncertainty. The degree 

 of risk and uncertainty generally differs among var- 

 ious aspects of a project. It also differs over time, 

 because benefits from a particular purpose or costs 

 in a particular category may be relatively certain 

 during one time period and uncertain during an- 

 other. Finally, the degree of uncertainty differs at 

 different stages of the analysis— for example, be- 

 tween rough screening and final detailed design, 

 when more precise analytic methods can be ap- 

 plied. 



(e) Attitudes. The attitudes of decisionmakers 

 toward risk and uncertainty will govern the final se- 

 lection of projects and of adjustments in design to 

 accommodate risk and uncertainty. In principle, the 

 government can be neutral toward risk and uncer- 

 tainty, but the private sector may not be. These dif- 

 ferences in attitudes should be taken into account 

 in estimating the potential success of projects. 



S2 Application. 



(a) Thie role of the planner (1) The planner's pri- 

 mary role in dealing with risk and uncertainty is to 

 characterize to the extent possible the different de- 



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