Cost-benefit analysis (CBA) means you weigh up the “pros and cons” of different ways of reducing flood risk.
But you should see CBA as a “thinking and learning” process, not a set of calculations leading to a ‘solution’.
One challenge is that the CBA of flood risk reduction measures concerns thinking about the future.
Therefore uncertainty and unknowns are part of this process, so you must proceed with caution.
You also need to remember that cost-benefit analysis uses value for money (or economic efficiency) as the main criterion for guiding decision making.
Economic efficiency is measured as the balance of outcomes (benefits) versus inputs (costs), and only when that is at maximum (i.e. the best value for money) is economic efficiency to be found.
Have I got the right data?
Good flood data may be lacking for the application of CBA. But this should not be the reason for you not proceeding to do some form of economic analysis.
At least start by using the best available data. Educated guesses and professional judgment are often good starting points!
At least this will begin the ‘thinking process’ that you should use, and is actually one of CBA’s main objectives.
Be careful: many so-called “intangible” effects are missed in Cost-Benefit Analysis (health effects; loss of life, etc), but you can take these into consideration using a multi-criteria approach.
Effective and thorough discussions with all parties will be an important way you can ensure that these and other issues are looked at.
Start thinking about flood damage and benefits
You need to be clear about the different types of flood damage and flood loss.
The benefits (the ‘pros’) of reducing flood risk are the flood damage avoided in the future as a result of schemes of all types to reduce the frequency and impact of flooding.
Direct damages result from the physical contact of flood water with a damageable property and its contents.
Floods also disrupt networks and social activities, causing indirect losses (see the ‘other’ losses section in Step 2 for more on this).
We normally assess only the national economic losses caused by floods and coastal erosion, and their indirect consequences, rather than the financial losses to individuals and organisations (What is the difference?)
You need to assess the impact of all floods in the future at any one site, not just a single event.
This means calculating what are called the ‘annual average damages’ (i.e. the average of all floods that can occur there in the future).
You need to think about the official ‘decision rules’
In England and Wales the Environment Agency appraisal guidance provides a logical decision making approach to guide you about the ‘standards of flood protection’ to plan for (i.e. a big scheme or a small one).
The options open to you should be appraised against these rules, so as to seek the best value for public money.
Who else do you need to think about?
You should not assume that everyone necessarily wants the same scheme you identify as ‘the best’ in benefit-cost terms
It’s good to talk to all parties to understand whether all ‘stakeholders’ agree with both the flood protection standards and the measures that are being proposed.
Draft collaboration agreements are important early.
There is a need to approach the Environment Agency for main rivers and local authorities for ordinary watercourses to seek application for funding and advice.
ent ways of reducing flood risk.
