Calculating the cost of flood
The economic assessment of flood defence schemes is growing in importance as flood risk increases. Carolann Simmonds of WS Atkins sets out the formula for prioritising projects.You may not expect to find economists working side by side with river and coastal engineers but this has been happening on the quiet for the last eight years and their role is increasing. Since the Ministry of Agriculture, Fisheries and Food (MAFF, now Department of the Environment, Food and Rural Affairs, DEFRA) published its project appraisal guidance note in 1993, economics has been part of the decision and justification process for government grant funding of flood and coastal defence schemes. A new series of guidelines was published last year, including requirements for environmental and risk assessments to be incorporated into the strategic economic valuations.
Current projects include a strategic assessment for the Fossdyke Canal in the Anglian region, a project appraisal for Shepperton Weir on the Thames, and Spaldwick and Ellington, also in the Anglian region. We are currently working on the ongoing coastal appraisal of the Caldicot Levels for the Environment Agency (EA) Wales, and have recently completed a revision of the Deal to Kingsdown coastal strategy in Kent.
In many cases our client is the EA, which manages flood and coastal defences on behalf of DEFRA. We have also completed or reviewed assessments on behalf of district councils and conglomerates of landowners. Much of our current work is through the five-year National Engineering and Environmental Consultancy Agreement framework contract with the EA, which was awarded to us in 2000.
The importance of the economic assessment, and the time it may take, should not be underestimated. Calculations are rigorously checked by DEFRA and their approval is required for government grant funding. Most assessments will start by looking at the properties which are at risk. If the threat comes from flooding then the depth of flooding in each property needs to be calculated for a range of storm severities. From this, standard depth damage data can then be used to produce a Present Value damage. This process needs to be repeated for a range of options including the baseline case: walk away or do nothing. If the risk comes from erosion, then a year of loss needs to be assigned to each property and its current market value estimated. For each option, the benefits are the reduction in damages compared with the do nothing scenario. These present value benefits are then compared to the present value of the scheme costs over 50 years to produce a benefit cost ratio. This ratio needs to be at least equal to one before inclusion in the prioritisation scoring process required for project approval.
The profile of this type of work has risen sharply since the autumn 2000 floods, with government funding issues being discussed in parliament and the press. It is the role of the economists to work with the design engineers and hydrologists to derive the most appropriate and economically efficient scheme for each area at risk.
WS Atkins has developed centres of economic experience across the UK. Our expertise
does not stop at property damages either. Projects have required detailed assessments
of golf courses, irrigation systems, agriculture, beaches for recreation, special
sites of scientific interest and angling. Our talents have also been applied
to valuations of first time sewerage and water resource issues.