Flood prevention schemes: guidance for local authorities

Above-design-standard benefits

The benefits from reductions in flood losses from events which exceed the design standard of protection, expressed as an annual average benefit.

Appraisal

The process of defining objectives, examining options and weighing up the costs, benefits, risks and uncertainties before a decision is made.

Benefits

Those positive quantifiable and unquantifiable changes that a project will produce.

Benefit-cost ratio

The ratio of the present value of benefits to the present value of the costs.

Contingent valuation method

A valuation methodology which uses questionnaire techniques to elicit valuations using respondents' willingness to pay for an environmental improvement.

Discounting

The procedure used to arrive at the sum of either costs or benefits over the lifetime of a project using a discount rate to scale down future benefits and costs. The effect of using a discount rate is to reduce the value of projected future costs or benefits to their values as seen from the present day.

Economic appraisal

An appraisal that takes into account a wide range of costs and benefits, generally those which can be valued in money terms.

Incremental benefit-cost ratio

The ratio of the additional benefit to the additional cost, when 2 options are compared.

Intangibles

Those costs, benefits and risks that are difficult to quantify but which are nevertheless relevant for the decision making process. Usually applied to non-monetary impacts.

Market price

The price for which a good is bought and sold in a market. If restrictive conditions are satisfied, this price may be used to estimate the economic value of the good. Otherwise, the market price may need to be corrected, and a 'shadow price' derived, in order to estimate the economic value of the good.

Net present value ( NPV)

The stream of all benefits net of all costs for each year of the project's life discounted back to the present date.

Non-monetary impacts

Used to describe those impacts of flooding on households which do not have direct financial impacts.

Non-use value

The value that people hold for an environmental resource which is not attributable to their direct use of the resource for commercial or recreational purposes. Otherwise known as intrinsic value.

Post project evaluation

A procedure to review the performance of a project with respect to its original objectives and the manner in which the project was carried out.

Present value

The value of a stream of benefits or costs when discounted back to the present time.

Ramsar site

Internationally important wetland, designated under the Convention on Wetlands of International Importance (Ramsar, Iran, 1971).

Return period

The average length of time separating flood events of a similar magnitude: a 100-year flood will occur on average once in every 100 years.

Risk assessment

Consideration of the risks inherent in a project, leading to the development of actions to control them (see Chapter 6).

Special Area of Conservation

An internationally important habitat or species

( SAC)

designated under the EC Habitats Directive.

Sensitivity analysis

Analysis of the effects on an appraisal of varying the projected values of important variables.

Special Protection Area ( SPA)

Internationally important site designated under the EC Wild Birds Directive.

Sunk costs

A cost incurred in the past and which cannot be recovered whatever decision is taken now. Consequently, sunk costs are omitted in benefit-cost analyses.

Sustainability

The degree to which flood defence solutions avoid tying future generations into inflexible and/or expensive or environmentally damaging options for defence. This will usually include consideration of interrelationships with other defences and likely developments and processes within a catchment. It will also take account of long-term demands for non-renewable materials.

Transfer payment

A payment which has no impact in terms of an economic analysis (see Annex A for a full definition). Examples are most tax payments and general subsidies.

Whole-life costs

The total costs associated with a scheme for its full design and potential residual life span, taking proper account of all aspects of design, construction, maintenance and external impacts. A particularly useful approach in helping to determine economic sustainability when used to compare the relative costs of long-life schemes such as flood defences, and where decisions need to be made between short-term capital costs and long-term maintenance costs.

Willingness to pay

The amount an individual is prepared to pay in order to obtain a given improvement in utility, expressed through the contingent valuation method.