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SPU

Facilities Replacement Economic Analysis
Seattle Public Utilities

Seattle, Washington

BACKGROUND

SPU has established a process for evaluating all major project decisions based on asset management principles. Known as the Project Development Plan process, it defines the systematic approach SPU uses to define problems, analyze data, and recommend solutions.

BIS worked with SPU’s Alaskan Way Viaduct project team to apply the PDP process in support of decision making and planning in conjunction with the viaduct replacement project. Specifically, BIS assisted in evaluating the optimal plan for replacement or upgrade of existing combined sewer facilities in light of the Alaskan Way Viaduct work as well as increased regulatory restrictions related to water quality and CSO events in Elliot Bay.

PROJECT

The work included a benefit/cost analysis of alternatives to determine the lowest life-cycle cost solution for replacement of combined sewer facilities in the central waterfront area of downtown Seattle. BIS and SPU’s economists developed a model to evaluate all costs associated with each of the alternatives, which range from traditional “brick and mortar” solutions, such as in-line detention, to environmentally sensitive solutions, such as swales and green roofs. The economic analysis is based on a value model, which considers not only the direct cost of installation and operation of each option, but also their risks and benefits. Non-dollar costs and benefits, such as environmental performance, were quantified in relative terms using consistent scoring scales; this is sometimes referred to as a “triple bottom line” approach.

Risks and benefits were identified in workshops with expert teams. As much as possible, costs, risks, and benefits were quantified in dollar terms for incorporation directly into the life-cycle cost. The effect of a given risk is quantified as the probability of occurrence times the consequence cost, and these costs are entered along with construction cost estimates and their uncertainty ranges into a Monte Carlo model of life-cycle cost. The output of the Monte Carlo model is a distribution showing the full range of possible costs for each option considered. This allows SPU not only to identify the least-cost alternative, but also to see which options are most uncertain and which have long “tails,” suggesting they may be prone to extreme cost overruns. The cost distributions were used by SPU to estimate the benefit/cost ratio of ceasing evaluation of options that had only a small likelihood of being the least-cost option in the end.

INTER-AGENCY COORDINATION

The Alaskan Way Viaduct project affects other agencies besides SPU, so a major component of this work was response to suggestions and requests from WSDOT and Seattle City Light. BIS participated with SPU and City Light in a similar analysis from City Light’s perspective, which was intended to support a joint response from both utilities to a proposal from WSDOT for a common utility tunnel.

Date Completed: Ongoing

Highlights
Provided methodology to consider cost, risk, and benefits in order to recommend a solution. Optimized decision making based on asset management principles. Repeatable, objective justification for project decisions.
Reference
Ann Good
(206) 233-7185
ann.good@seattle.gov
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