Corps Of Engineers:

Improved Analysis of Costs and Benefits Needed for Sacramento Flood Protection Project

GAO-04-30: Published: Oct 27, 2003. Publicly Released: Nov 26, 2003.

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In 1996 and 1999, Congress authorized the U.S. Army Corps of Engineers (the Corps) to strengthen sections of the American River and Natomas Basin levees that provide flood protection for Sacramento, California. In 2002, the Corps reported that the cost of this work, known as the Common Features Project, had increased significantly. GAO was asked to determine why costs increased, the extent to which the Corps analyzed and reported the potential cost increases to Congress in a timely manner, and whether the Corps correctly estimated economic benefits.

Estimated costs for the Common Features Project rose from $57 million in 1996 to between $270 million and $370 million in 2002--primarily because of design changes. For the American River, costs more than tripled from $44 million to $158 million in 2002, primarily due to changes such as deepening the walls built in the levees (cut-off walls) to prevent seepage and closing gaps in the walls at bridge crossings. Cost estimates for the Natomas Basin--still in planning--increased from $13 million in 1996 to between $112 million and $212 million in 2002. The Corps has yet to analyze alternative flood protection approaches for the Natomas Basin that might be more cost-effective. Furthermore, it has not analyzed its exposure to potentially significant cost increases for the Natomas Basin work. The Corps did not fully analyze, or report to Congress in a timely manner, the potential for significant cost increases for the American River levee improvements authorized in 1996. Specifically, a severe storm in the Sacramento area in January 1997 indicated some cut-off walls would need to be much deeper and therefore would be more costly. Corps guidance generally directs the Corps to seek new spending authority from Congress if it determines, before issuing the first contract, that it cannot complete the project without exceeding its spending limit. However, the Corps began construction in 1998 without analyzing or reporting potential cost increases. By 2003, it had committed most of the funding authorized for the entire Common Features Project to the 1996 American River work, leaving the additional 1999 work and the Natomas Basin improvements without funding. In 1996, the Corps incorrectly estimated the economic benefits for the American River levee improvements by overcounting the residential properties to be protected. In 2002, it incorrectly estimated benefits for the 1999 improvements by, among other things, miscalculating the size of the area that the improvements would protect. The Corps' quality control process was ineffective in identifying and correcting these mistakes.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: Additionally, for the Natomas Basin project component, the Secretary of the Army should direct the Corps of Engineers to analyze the costs and benefits of alternatives to the current levee improvement plan and identify the flood protection plan that provides the greatest net benefits.

    Agency Affected: Department of Defense: Department of the Army

    Status: Closed - Not Implemented

    Comments: The Corps is planning to complete a General Reevaluation Report (GRR) for the Common Features project. When it is completed, the GRR will include a cost benefit analysis of alternatives for flood protection. However, the report is not expected before the fall of 2010.

    Recommendation: For the American River project component, the Secretary of the Army should direct the Corps of Engineers to reanalyze the benefits of the improvements authorized in the WRDA of 1999, correcting for the mistakes made in counting and valuing properties and the inappropriate methodology used to calculate flood damages.

    Agency Affected: Department of Defense: Department of the Army

    Status: Closed - Not Implemented

    Comments: In the Corps of Engineers' comments on the draft report, they claimed to have reanalyzed the benefits of improvements authorized by the Water Resources Development Act of 1999, using appropriate methodologies to calculate flood damages, including counting and valuing of affected properties. GAO disagreed. In a July 2004 letter to GAO, the Corps reiterated its claim to have conducted an accurate reanalysis. GAO continues to disagree. Nonetheless, the Corps has informed GAO that they plan no further action to address this recommendation. As such, the recommendation will be closed as not implemented.

    Recommendation: For the American River levee improvements authorized in 1999 and for the planned Natomas Basin work, the Secretary of the Army should direct the Corps of Engineers to arrange for a credible, independent review of the completeness and accuracy of the revised benefit-cost analyses.

    Agency Affected: Department of Defense: Department of the Army

    Status: Closed - Not Implemented

    Comments: According to the Corps, the benefit cost analyses planned as part of its General Reevaluation Report (GRR) for the Common Features project will be subject to an independent technical review (ITR) by senior experts from the Corps and the non-federal sponsor as well as an external peer review (EPR) by senior technical experts in the private sector. However, the GRR report is not expected until the fall of 2010.

    Recommendation: For the American River levee improvements authorized in 1999 and for the planned Natomas Basin work, the Secretary of the Army should direct the Corps of Engineers to report information to Congress on the range of potential project benefits and the probability of achieving those benefits, as called for in the Corps' guidance, in future benefit-cost analyses.

    Agency Affected: Department of Defense: Department of the Army

    Status: Closed - Not Implemented

    Comments: The Corps is planning to prepare a General Reevaluation report related to the Common Features Project in the fall of 2010. Because the scope of the GRR has been expanded, the final report will include information on both the Natomas Basin flood protection work and the the American River sites (WRDA, 1999 features). However, since the last Corps progress report to GAO (September 2007), the Corps has not submitted any reports to the Congress on the Common Features Project.

    Recommendation: For the American River levee improvements authorized in 1999 and for the planned Natomas Basin work, the Secretary of the Army should direct the Corps of Engineers to determine whether it is appropriate to conduct risk analyses of project costs and document the basis for that decision in its project files.

    Agency Affected: Department of Defense: Department of the Army

    Status: Closed - Not Implemented

    Comments: The scope of the Corps' General Reevaluation Report (GRR) has been expanded to include not only the Natomas Basin but also the rest of the greater Sacramento area. According to the Corps, the schedule for the GRR calls for the final output (Chief's report) of the GRR to be completed by the fall of 2010. This GRR schedule is dependent on the availability of funds. If funding capacity is not sufficient in future years a prioritization of construction and study funds might affect the schedule. Nonetheless, according to the Corps, when the Chief's Report is eventually prepared, it will include all risk analyses documentation and the requirements to evaluate the appropriateness of conducting risk analyses of project costs. The Corps has no plans to address the portion of this recommendation directed toward the American River levee improvements authorized in 1999.

    Recommendation: Additionally, for the Natomas Basin project component, the Secretary of the Army should direct the Corps of Engineers to submit a report to Congress that includes a cost estimate for all of the planned Natomas Basin work, and wait until Congress authorizes funding that is based on the report before beginning construction of any Natomas Basin levee improvements.

    Agency Affected: Department of Defense: Department of the Army

    Status: Closed - Not Implemented

    Comments: The Corps is planning to complete a General Reevaluation Report (GRR) for the Common Feature project, which includes the Natomas Basin flood protection work. According to the Corps, when it is completed, the Chief's report and the accompanying GRR for the Natomas Basin will be submitted by the Administration to Congress for authorization, as appropriate.

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