5.6 How to prioritise measures?

As funding and other resources for flood risk management are scarce, strategies and measures need to be prioritised. Common methods to compare measures are multi criteria analysis and cost-benefit analysis. Both methods compare costs, positive effects and negative effects of potential measures. Multi criteria analysis is often applied in a more qualitative way, whereas cost-benefit analysis is more quantitative, trying to express all costs and benefits in monetary terms.

Each methods has its strengths and limitations. For example, in cost-benefit analysis, expressing potential loss of lives or negative impacts on ecological or cultural and historical values in monetary terms often leads to difficult (ethical) discussions. And, it is often difficult to estimate indirect damages of floods. Similarly, multi criteria analysis raises questions regarding the relative weight of aspects in the assessment. For all methods the question needs to be raised of if the outcomes can directly lead to a decision or if they only form the basis for further discussion and decision-making.

In Belgium, England and Sweden cost-benefit analysis plays a crucial role in allocating budgets for defence and mitigation measures, and determining levels of protection. The available budget is distributed only over the measures with highest rate of return. In the Netherlands, where legally-established safety standards exist, the level of safety to be achieved is fixed (although for setting these standards cost and benefits have been assessed as well). Still, prioritisation tools are used to appraise alternative measures that can be used to achieve the standards.

5.6.1 Cost-Benefit Analysis and whole life costing: England

Strategies

Governance

Aims

Although there are no fixed standards of protection in England the principle of efficiency is clearly embedded within the governance process. This includes the allocation of funding for flood defence and mitigation as well as the resulting standards of protection provided across the country. National policy encourages a portfolio of measures to be considered, including measures with direct benefits as well as indirect benefits from ‘enabling activities’ such as flood warning. (see the Benefits Assessment Framework outlined by the Environment Agency, 2015a).

To determine the allocation of Flood and Coastal Erosion Risk Management (FCERM) Grant-in-Aid, Cost-Benefit Analysis is used to ensure the greatest value for money. To give an impression, in the recent past this decision was based on an 8:1 ratio; with £8 (€10.8) benefit achieved by every £1 (€1.35) of Government spend. According to the National Audit Office, as of March 2014 the Environment Agency had achieved a 9.5:1 cost-benefit ratio. Benefits are determined in terms of: i) benefits for the householder; ii) benefits for business, agricultural productivity and protection of national and local infrastructure; and iii) benefits for the environment (Defra, 2011a,b). This is widely regarded as a robust and appropriate means of allocating funding.

Moreover, the appraisal process is also informed by whole-life costing to determine the most cost-effective approach: by taking into account the benefits of alternatives, routine maintenance as well as capital replacement and improvement for the life of the asset (Environment Agency, 2015a; Defra, 2014b). A range of assessment tools exist to support these processes, including the Multi-Coloured Manual (Penning-Rowsell et al., 2013) and FCERM-Appraisal Guidance (Environment Agency, 2010a).

The National Investment Plan (Defra, 2014b) enables medium-term planning and opportunities for Risk Management Authorities to ‘package’ projects and source competitive prices from suppliers (ASC, 2014; HM Treasury, 2014). In turn, it is estimated that efficiency savings will be made (ca. 10%) that can be reinvested in defence and mitigation projects (Defra, 2014b), thus providing a positive feedback into efforts to enhance the capacity to resist flooding (STAR-FLOOD Deliverable 3.3, see §8.2.1).

5.6.2 Cost-Benefit Analysis for flood risk management plans in Flanders: Belgium

Strategies

Governance

Aims

To increase economic efficiency and societal equity, the Flemish Government has become an ardent user of cost-benefit analyses. By calculating the societally optimal resource allocation, the intention is to raise the efficiency and legitimacy of flood risk governance.

Cost-benefit analysis has been used for the development of the Sigma Plan (see also §4.3.4) and the flood risk management plans of Flanders. With the use of cost-benefit analysis in the designing of the Sigma plan, several options per location have been considered and based on this the most ideal and feasible solutions have been chosen.

Although cost-benefit analysis is an often used method, it is not always a very transparent one. Local governments stress that the method is a simplification and the results should not be used in a rigid way. They emphasise that cost-benefit analysis should remain a supportive tool instead of a decisive one. This way cost-benefit analysis can inform the competent authorities, and those authorities remain responsible and accountable for the decisions made. Furthermore, cost-benefit analysis should not hamper citizen participation. Examples of participatory cost-benefit analyses can be found in the BASE project[1] (STAR-FLOOD Deliverable 3.4, see §8.2.1).

[1] Bottom-up climate adaptation strategies towards a sustainable Europe: http://base-adaptation.eu/