ABSTRACTThe estimation and accounting of direct financial costs of environmental

restoration is challenging. In addition to the general lack of accurate cost account-ing, recent experience has shown that the task of estimating costs for aquaticecosystem restoration projects is subject to considerable uncertainty. This uncer-tainty often manifests itself in a significant difference between projected and actualcosts of restoration projects. This presentation outline describes an analysis ofavailable direct cost information for several aquatic habitat restoration projects andattempts to explain the uncertainty in the cost information that exists.

INTRODUCTIONThis presentation outline briefly highlights results from an analysis of habitat

restoration project costs and reviews findings of preliminary efforts to examine thefactors that contribute to differences between projected costs and actual expendi-tures or the uncertainty factors in estimating costs. This work is based on researchconducted by the Battelle Seattle Research Center as a part of two larger researchand development programs of the Institute for Water Resources (IWR), U.S. ArmyCorps of Engineers (USACE):

1. The Evaluation of Environmental Investments Program which was designedto compile and compare management measures, engineering features, monitoringtechniques, and detailed costs for a representative sample of “non” USACE environ-mental projects, and

2. The Risk Analysis of Water Resources Investments which was designed todevelop approaches to issues of risk and uncertainty that arise in water resourceplanning, engineering, and design.

Conceptual framework(s) for cost analysis

Understanding the Estimation and Uncertainty in the Costs ofEcosystem Restoration

KATHARINE WELLMAN, Ph.D.Battelle Seattle Research CenterP.O. Box 5395,Seattle, WA 98105-5428kfwellman@attbi.org

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Session O

ne

1- This cost data is reported in 1995 dollars.

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DIRECT COST ANALYSIS OF NON-USACE RESTORATION PROJECTS

Approach A number of attempts have been made in

the past to analyze restoration costs. Some ofthe primary studies we examined as part ofour literature search are listed in Table 1.Notice the significant variation in total peracre costs (reported in nominal terms) acrossthe studies. Given the former, we worked toovercome some of the past limitations ofrestoration costs estimation efforts andderive unit costs estimates for each compo-nent of a project from a representativesample of wetland and habitat restorationprojects across the U.S. In particular, wewere interested in examining the unit-costestimates for each component of eachrestoration project, in hopes of getting trulyspecific information on the financial costs ofhabitat restoration.

In this first study we reviewed over 90non-USACE habitat restoration projectsacross the U.S. The data for our final analy-sis was derived from 39 of the most compre-hensive of these projects. Table 2 lists rangesof costs of components that appeared morethan once in our sample for which total andper unit costs were reported.1

FindingsWe found that because the elements asso-

ciated with the restoration projects analyzedvary across projects, and costs are allocatedin different ways across the entire sample, itwas impossible to make any statisticallysignificant comparisons of the costs ofspecific components across projects.

We did find, however through a qualita-tive review that there are several factorsthat affect restoration project costs (Table 3).Factors like economies of scale have a signifi-cant impact on costs, as does the type ofrestoration. Design, initial site quality andadjacent site quality also affect costs, as doesthe baseline condition from which the projectbegins. If the project involves something thathas already been restored, the costs willdiffer from a site that has not been touchedyet. Appropriate technology, simultaneousconstruction or use at the site, and projectmanagement will also impact costs.

ANALYSIS OF UNCERTAINTY INRESTORATION COST ACCOUNTING

ApproachIn our second project, we attempted to

analyze the uncertainty in restoration costaccounting or the basic systematic factors

Understanding the Estimation and Uncertainty in the Costs of Ecosystem Restoration

| KATHARINE WELLMAN, Ph.D.S1 |

Table 1. Non-USACE restoration cost studies

STUDY PROJECT TYPES COST RANGES

King and Bohlen (1994) Wetland mitigation $5 to $1.5 million per acre

Guinon (1989) Wetland restoration $1,626 to $240,000 per acre

NOAA (1992) Wetland creation $485 to $70,000 per hectare

DOI (1991) Wetland restoration, $2,000 to $50,000 per acrecreation, mitigation

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that contribute to the difference betweenestimated and actual project costs. Wewanted to determine whether cost differ-ences was driven by errors in estimating thecosts of labor and/or materials, or whetherfactors such as design difficulties and unan-ticipated site conditions were most directlyresponsible. Ultimately we hoped to identifyprocedural improvements for estimating andtracking project costs.

Data on estimated costs and actualexpenditures were gathered for this study

through several databases and paper files. Inaddition, a telephone survey targeted atproject managers was developed and imple-mented. At their request, USACE projects —including Section 1135, their upperMississippi program, and the Breaux Bill(Coastal Wetlands Planning, Protection, andRestoration Act) program — were the focusof our analysis. Data gathered from previousIWR studies were also used.

In the end, information on 47 projectswas collected nationwide. A significantnumber were Midwest projects, as that iswhere many restoration efforts have beencarried out. Some of the projects were fromthe West Coast and some were South CentralLouisiana Corps projects. Data were catego-rized in terms of project types, separatingthe projects into river/lake, wetlands, andother general habitat restoration projects.Several of these included a salmon habitatrestoration component. Data were also cate-gorized in terms of management measuresand whether the project involved a watercontrol structure, re-vegetation, or what we

Understanding the Estimation and Uncertainty in the Costs of Ecosystem Restoration

| KATHARINE WELLMAN, Ph.D.S1 |

Table 2. Comparable construction costs

Table 3. Primary factors affectingrestoration costs

ACTIVITY TYPE COST RANGES

Gravel removal $3.27 to $3,239 per ton

Rip rap installation $5.00 to $19.00 per ton

Culvert installation $150 (for 48” diameter culvert) to $1,103.85 per ft.

Channel cleaning $4.00 to $8.00 per m3.

Erosion control $1.40 to $4.00 per ft2.

Dike removal $1.92 to $2.67 per linear ft.

Dike/dam/levees construction $5.00 to $20.00 per linear ft.

•Economies of scale•Type of restoration•Restoration design•Restoration site quality•Adjacent site quality•Appropriate technology•Simultaneous construction/multiple use•Project management

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called an “integrated ecosystem” restoration(e.g., removing a culvert and doing somereplanting — anything that included morethan one component).

The area of habitat restoration is a rela-tively new and evolving area of emphasis.Therefore, we focused on relatively recentprojects that reflect the practical knowledgegained from past restoration efforts. Mostprojects included in the final sample werecompleted some time within the last tenyears.

Our fundamental approach was tocompare estimated costs to actual expendi-tures. We started by collecting our cost infor-mation at a very detailed level, looking againat materials, labor, monitoring, and mainte-nance. However we ultimately focused onthree broad categories: planning and design,construction and construction management,and maintenance and monitoring costs. Wehad to aggregate back up again because ofinconsistencies in the reporting and becausewe did not find the refined level of informa-tion we were seeking. Our final analysisfocused on those projects with a “significant”difference between estimated and actual cost.“Significant” we arbitrarily defined as costoverruns or underruns of at least $100,000 or20% of the original estimate.

Findings

Cost DiscrepanciesThe projects analyzed reflected a wide

range of costs, as expected from past experi-ence. We discovered that the wetland proj-ects were less costly than most of the riverand lake projects. We also discovered manyof the least costly projects focused on re-vege-tation or small drainage kinds of projects.The larger, integrated multi-dimensionalprojects were the most costly.

Approximately 30% of the sampleinvolved some kind of cost overrun. A compa-rable percentage of projects were signifi-

cantly under budget. Overruns varied fromless than $100,000 to more than $2 million.The majority of cost overruns were related toconstruction rather than additional planning.On average, 95% of added cost went intoconstruction. (Note, however, that thisdoesn’t eliminate planning and design asimportant to cost uncertainty.) We discoveredin talking to project managers and plannersthat the central problem lies in lack of thor-ough planning. Managers often reported theyfelt pushed to move in and implement beforethey were comfortable with their site prepa-ration, site analysis, or planning activity.This approach has led to project changeorders, delays, etc.

Further, it was learned that cost discrep-ancies decrease with cumulative experience,as only four of the projects completed since1997 had major overruns. Learning thereforeappears to be significantly related to uncer-tainty.

Cost overruns were more common inriver and lake projects than in wetlandcreation and restoration projects (9 of 14).Some further analysis into the data andinterview information indicated two reasonsfor this. First, the river/lake categoryincluded a number of larger projects where ageneral lack of experience could have playeda part. Second, a number of the contractorswere apparently less familiar with some ofthese types of larger river/lake projects. Thatunfamiliarity, combined with lack of cumula-tive experience, may have led to greater costoverruns.

Critical Factors in Restoration CostUncertainty

In the project-manager survey mentionedearlier, we asked a number of specific ques-tions. Interestingly, across all the differenttypes of projects, the same kinds of responsescame up again and again. In talking to theseindividuals the uncertainty (discrepancies)that we had expected was not necessarily

Understanding the Estimation and Uncertainty in the Costs of Ecosystem Restoration

| KATHARINE WELLMAN, Ph.D.S1 |

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linked to cost reporting or cost accounting, butto a wider variety of factors as outlined below:

Incomplete site surveys: Unexpectedlydifficult working conditions can always leadto cost overrun. Planners understand that amore detailed survey of a site may beimportant, but it clearly costs more money.There exists a significant tradeoff: Howmuch time do you spend on sites before youdesign your project and move ahead towardimplementation?

Insufficiently detailed planning: Localpartners often feel pushed to “turn over thesoil” before they feel prepared to move intoimplementation.

Project experience: Over time, experiencecan reduce some cost uncertainty.

Project scheduling or habitat protection:Often there is a need to suspend work toprotect habitat areas during critical periods,whether it is spawning, mating, etc. Suchsuspensions can impact the cost of a project.This is a particularly interesting issue insalmon habitat restoration.

Difficulties with land acquisition: Therecan often be conflict with a property ownerwhen needing to purchase and/or use aparticular property. There can also bedisputes over compensation. All of this takestime and adds to the costs of the program.

Understanding the Estimation and Uncertainty in the Costs of Ecosystem Restoration

| KATHARINE WELLMAN, Ph.D.S1 |