PART V: COST-EFFECTIVE OPTIMIZATION 

 The Principle of Optimization 



79. Optimization is referred to as "trade-off analysis" in some Corps 

 of Engineers planning guidance (Board of Engineers for Rivers and Harbors 

 1985) in the sense that identification of an optimum plan usually requires one 

 desirable goal to be compromised or "traded off" against one or more other de- 

 sirable goals. The basic trade-off in public works economics can be stated as 

 a contest between minimum costs versus maximum benefits. The desired effect, 

 such as elimination of damages by wave attack, must be balanced against the 

 desired goal of no cost. To eliminate the remotest likelihood of damages, a 

 structure might be astronomically expensive to build and maintain. A struc- 

 ture in which all but some very remote likelihood of damages is eliminated 

 might be much more affordable. The damages or other economic losses and inef- 

 ficiencies which are undesirable in their unmitigated state can be associated 

 with a level of cost to those who are suffering the losses. The tangible ben- 

 efits realized by a public works project are the sum of the incremental reduc- 

 tions in that level of costs directly attributable to the functional perform- 

 ance of the project. The construction and maintenance costs of the project 

 are added costs to the beneficiaries, however. These project costs can be 

 considered as negative benefits, thus the optimum plan is the combination of 

 features which achieves the maximum net benefits. These maximum net benefits 

 must be positive; that is, the benefits must exceed the project costs for fed- 

 eral participation to be possible. 



An Idealized Approach 



80. Figure 15 illustrates the principles discussed above in an ideal- 

 ized arrangement. The horizontal line labeled "user (total) cost without 

 structure" refers to the expected annual economic losses that exist without 

 any mitigation. This cost may increase over time due to population increase, 

 inflation, or other factors, but it can be represented by an equivalent annual 

 amount for the sake of evaluating project alternatives. The representative 

 amount of economic losses without the project will be the same for each alter- 

 native. The ensemble of alternatives will individually reduce these 



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