EP 1165-2-1
30 Jul 99
covered by specific legislation. Thus, the agency responsible for
planning, constructing, operating, and maintaining the project is
assumed to be responsible for the cost allocation.
c. Administrative Procedures. An inter-agency agreement, 12
March 1954, among the Departments of Army and Interior and the Federal
Power Commission recognized three methods of allocation as acceptable
for multipurpose reservoir projects. These were the Separable
Costs-Remaining Benefits (SCRB), the Alternative Justifiable
Expenditure, and the Use of Facilities methods. This agreement and
subsequent understanding standardized major principles and practices
for allocations at multipurpose projects.
d. Principles and Guidelines. The P&G address cost allocation
briefly, and specifically permit the SCRB and Use of Facilities
methods. (P&G 1.9.3)
e. Principles and Methods of Allocation. Selection of the
method to use in each case, except where specified by legislation,
must be based on informed judgment. For this reason, it is considered
undesirable to set rigid rules for assigning project costs among
project purposes. Although there are exceptions, the Corps considers
the SCRB method as preferable for general application. In most
instances this method provides an equitable distribution of total
project cost among the different project purposes.
(1)
The objectives of the SCRB method of cost allocation are:
(a) To allocate to each project purpose all costs associated
with inclusion of that purpose in the project. This amount, referred
to as incremental or separable cost, is the minimum that would be
allocated to the included purpose.
(b) To allocate costs in such a way that costs allocated to a
purpose do not exceed the benefits associated with inclusion of that
purpose or the costs of the most economical alternative way of
providing equivalent benefits. This amount would be the maximum that
would be allocated to the included purpose.
(c) To distribute joint (or common) costs among all project
purposes in such a way that each purpose shares equitably in the
advantages of multiple-purpose development as compared with
alternative single-purpose developments.
(2) While the procedure is complex, the principle is simple.
All project costs are distributed among the purposes on the basis of
the alternative costs that could justifiably be incurred to achieve
equivalent benefits by alternative means. The costs used in an
allocation include investment costs and operation, maintenance and
replacement costs, all reduced to a common time basis. These costs
may be expressed either as a present worth amount or an average annual
amount. For allocation purposes, costs and benefits are presented as
average annual equivalents.
(3) Although the above principles and methods followed by the
Corps in allocations have been developed largely in connection with
the determination of power costs, allocations are also necessary where
other reimbursable functions such as water supply and irrigation are
involved. Also, a cost allocation is required if the project includes
future water supply and/or recreation to determine if the costs
assigned to these purposes are within legal and administration
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