June 2011 - Parsons Brinckerhoff

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Articles PRISM calculates benefits and costs of factors that are seemingly not readily quantifiable in dollars or not quantifiable at all by drawing upon a body of long-standing and proven techniques. but they are limited as decisionmaking tools because of the somewhat arbitrary nature of the factors selected, the metrics used, and the weightings applied. Better tools are needed to advance sustainability decisions. In economics this is a relatively straightforward process because the objective is clear and all the essential concerns can be expressed in the common units of dollars. A sustainability analysis tool that could bring this kind of transparent, understandable approach to existing processes would enhance public discourse and help advance investment decisions on triple bottom line merits. However, lacking some generally accepted approach to the analysis of all tradeoffs and all alternatives on an equal sustainability footing, the decision process will continue to be fractionated and prone to delay. An integrating concept To provide a proportionate sense of scale and context, PRISM tblv uses a common metric of dollars and dollar equivalents to measure the relative magnitude and distribution of benefits and impacts. While this might seem to be forcing the monetization of certain factors that are not readily quantifiable in dollars or at all, PRISM tblv is able to draw upon a body of long-standing and proven techniques to arrive at consistent, monetized metrics for disparate factors. For example, federal requirements for evaluating cost-benefit of highway safety projects require economic analysis that place dollar values on human lives, and cap and trade systems have established a range of market values for carbon emission. For parameters that may seem completely subjective, such as aesthetics or neighborhood cohesion, standard valuation techniques already exist to determine what people would be willing to pay for varying levels of satisfaction. PRISM tblv uses these valuation techniques to rationalize the process by translating disparate unit valuations into a common, monetized metric source: Tim Lindenbaum (flickr) (dollar equivalents). Recognizing that there will be variation in how aesthetics are valued or what is the intrinsic value of an acre of wetland, PRISM tblv facilitates sensitivity analyses that can assess the potential differences in outcomes attributable to a range of values for a given parameter. In fact, these sensitivity analyses are the essence of what the model has to offer. PRISM tblv is not about driving an analysis toward a single right or wrong answer. It is a “conversation starter” about how the various factors interrelate when they are “reduced” to common terms. Which ones stand out as the most important? Which ones are marginal across their entire range of plausible valuations? What do the tradeoffs look like when reduced to monetary terms? This dollar equivalent approach can focus attention on issues and data and provides at least some means of initially comparing one factor, such as carbon emissions, to another, such as wetland value or improved mobility, over the short and long terms. In our personal lives we make economic choices all the time on the basis of personal dollar-equivalent valuations. How much more are we willing to pay for the house with the view? How does the value of the view from a house on a distant lake compare with the value of a shorter commute for a similar home that backs onto an a busy shopping center? If the PRISM tblv approach could be brought to bear, and a first approximation of triple bottom line factors transparently communicated in units that most people can relate to for most things, decision makers could be better informed and society better able to move toward better decisions in a more expeditious manner. Couldn’t such an assessment at least serve as a “conversation starter” on the way to consensus? EFR PRISM tblv: Triple Bottom Line Valuation Tool | 59
Articles Emerging solution PRISM tblv is being developed on the same software platform and analytical methodologies that underpin PRISM econ, a proprietary web-based application that is designed as an easy-to-use, flexible, and transparent model. PRISM’s modular structure is graphically illustrated in Box 2. As a triple bottom line valuation approach, PRISM tblv offers several advantages: 1. Documents net effects in the aggregate and individually across a wide spectrum of relevant factors. 2. Contextualizes impacts and facilitates tradeoffs by providing proportionate indicators of relative significance. 3. Creates a better understanding of the inter-relationships and tradeoffs through sensitivity testing of a wide range of parameters within a single model. 4. Provides a level playing field for more productive discussion, debate and tradeoffs. 5. Establishes a clear, fair, transparent, and quantifiable basis for decision and action. 6. Assists in making the case for public support and funding. PRISM tblv requires site-specific data and information to quantify each factor, with much of this building upon the wealth of information already mandated in environmental processes. PRISM tblv can also be used in a range of decision analyses from program to project as an extension of conventional planning and environmental impact work. Investments in new facilities can be balanced against comparable investments in preservation of existing infrastructure and opportunities for enhancement across the range of sustainability factors explicitly quantified. An illustrative example The functionality of PRISM tblv is illustrated in the following example. In this hypothetical example, we explore a few of the options for solving an acute traffic congestion problem in a suburban area that is restricting commerce and harming livability. PRISM tblv is used to evaluate triple bottom line value versus no action for the following alternatives on the same general alignment: • Alternative 1: limited access surface arterial • Alternative 2: urban boulevard • Alternative 3: parkway with a wide buffer of green space For these three alternatives, PRISM tblv monetizes the net effects for several sample benefit categories. This example is only for illustrative purposes, and in a real-world application many more categories would be addressed and the valuation analyses shared among stakeholders. Using a series of parameters, including effect start and end year, discount rate (per year and per benefit category), net effects (i.e., number of units), dollars per unit, and present value of the construction costs, PRISM tblv estimates the net present value and benefit cost ratios for the three alternatives, which allows the user to identify several pieces of information. PRISM’s Modular Structure 2 Short Term Module 1 Construction Impact • Economic output and value added ($) • Earnings ($) • Construction and other jobs generated PRISM econ Module 2 Regional Economic Impact • Economic output and value added ($) • Earnings ($) • Full-time jobs generated • State/local tax impacts ($) Long Term Module 3 Benefit-Cost Analysis • Benefit/Cost Ratio: Allocate an established capital budget • Economic Rate of Return: Compare packages that have different costs, different benefit flows, and/or different timing • Net Present Value: Overall dollar magnitude of benefits PRISM tblv Module 4 Triple Bottom Line Valuation • Absolute discounted dollars • Dollar equivalents for economic, environmental, and social effects • Discussion/commentary 60 | PRISM tblv: Triple Bottom Line Valuation Tool
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Contents Roundtable 1 Discourse on
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June 2011 - Parsons Brinckerhoff

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