Framework For Comparing Alternatives - US EPA

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Framework for Comparing AlternativesFor Water Quality Surveillance and Response SystemsOffice of Water (MC 140)EPA 817-B-15-003June 2015

DisclaimerThe Water Security Division of the Office of Ground Water and Drinking Water has reviewed andapproved this document for publication. This document does not impose legally binding requirements onany party. The information in this document is intended solely to recommend or suggest and does notimply any requirements. Neither the U.S. Government nor any of its employees, contractors or theiremployees make any warranty, expressed or implied, or assumes any legal liability or responsibility forany third party’s use of any information, product or process discussed in this document, or represents thatits use by such party would not infringe on privately owned rights. Mention of trade names orcommercial products does not constitute endorsement or recommendation for use.Version History: The 2019 version is the second release of the document, originally published in June2015. This release includes updated component names (Enhanced Security Monitoring was changed toPhysical Security Monitoring and Consequence Management to Water Contamination Response), anupdated reference to the 2018 version of the Energy Price Indices and Discount Factors for Life-CycleCost Analysis: Annual Supplement to Handbook 135, an updated Glossary, and updated links to externalresources.Questions concerning this document should be addressed to WQ SRS@epa.gov or the following contact:Steve AllgeierUSEPA Water Security Division26 West Martin Luther King DriveMail Code 140Cincinnati, OH 45268(513) 569-7131Allgeier.Steve@epa.govi

AcknowledgementsThe document was developed by the USEPA Water Security Division, with additional support providedunder USEPA contract EP-C-10-060. Peer review of this document was provided by: Kevin Gertig, Fort Collins UtilitiesJulie Hunt, Trinity River Authority of Texasii

Table of ContentsLIST OF FIGURES. IVLIST OF TABLES . VABBREVIATIONS . VISECTION 1: INTRODUCTION .11.1SCOPE OF GUIDANCE .11.2APPLICATION OF GUIDANCE .11.3GUIDANCE OVERVIEW .2SECTION 2: DEVELOP LIFECYCLE COST ESTIMATES .42.1IDENTIFY UNIQUE COST ELEMENTS FOR EACH ALTERNATIVE .52.2DEFINE THE ANALYSIS PERIOD AND USEFUL LIFE OF SYSTEM ASSETS .62.3CALCULATE LIFECYCLE COSTS .72.3.1Implementation Costs .82.3.2Operations and Maintenance Costs .92.3.3Renewal Costs . 112.3.4Value of Remaining Useful Life . 132.3.5Total Lifecycle Cost . 142.4EXAMPLE CALCULATION OF THE LCCE FOR OWQM DESIGN ALTERNATIVES . 14SECTION 3: SCORE ALTERNATIVES WITH RESPECT TO EVALUATION CRITERIA . 213.1ESTABLISH EVALUATION FRAMEWORK . 213.1.1Establish Evaluation Criteria . 213.1.2Weight Each Criterion . 223.1.3Develop a Scoring Scale. 223.2SCORE THE ALTERNATIVES . 223.3EXAMPLE QUALITATIVE EVALUATION OF OWQM DESIGN ALTERNATIVES. 23SECTION 4: SELECT THE PREFERRED ALTERNATIVE . 294.1FINAL ANALYSIS OF THE RESULTS . 294.1.1Scatterplots . 294.1.2Cost vs. Capability Ratio . 304.1.3Interpretation of Analysis Results. 304.2EXAMPLE OF THE FINAL SELECTION PROCESS . 31RESOURCES . 33GLOSSARY . 34iii

List of FiguresFIGURE 1-1.FIGURE 2-1.FIGURE 2-2.FIGURE 2-3.FIGURE 3-1.FIGURE 4-1.FIGURE 4-2.OVERVIEW OF THE PROCESS FOR COMPARING ALTERNATIVES.3STEPS FOR DEVELOPING A LIFECYCLE COST ESTIMATE .4EXAMPLE TIMELINE OF ASSET RENEWAL OVER AN ANALYSIS PERIOD .7ASSET RENEWAL TIMELINE FOR THE EXAMPLE LCCE . 16STEPS FOR SCORING ALTERNATIVES USING EVALUATION CRITERIA. 21SCATTERPLOT OF LCCE VS. CAPABILITY SCORE. 30SCATTERPLOT FOR EXAMPLE ALTERNATIVES . 31iv

List of TablesTABLE 1-1.TABLE 2-1.TABLE 2-2.TABLE 2-3.TABLE 2-4.TABLE 2-5.TABLE 2-6.TABLE 2-7.TABLE 3-1:TABLE 3-2.TABLE 3-3.TABLE 3-4.TABLE 4-1.TABLE 4-2.SCALES OF SRS DESIGN ALTERNATIVES THAT CAN BE CONSIDERED IN A COMPARATIVE ANALYSIS .2EXAMPLE LCCE COST ELEMENTS .6EXAMPLES OF IMPLEMENTATION COSTS .9EXAMPLES OF OPERATIONS AND MAINTENANCE COSTS . 11EXAMPLES OF RENEWAL COST . 13ASSETS ASSOCIATED WITH THE EXAMPLE ALTERNATIVE DESIGNS . 15SUMMARY OF COSTS FOR EACH ASSET USED IN THE EXAMPLE . 15SUMMARY OF COSTS FOR THE EXAMPLE ALTERNATIVES . 20WEIGHTS ASSIGNED TO THE EXAMPLE EVALUATION CRITERIA . 25SCORING LOGIC FOR EXAMPLE EVALUATION CRITERIA . 26QUALITATIVE SCORING OF EACH ALTERNATIVE . 27DEVELOPING A FINAL CAPABILITY SCORE FOR EACH ALTERNATIVE . 28LCCE AND CAPABILITY SCORES FOR THE EXAMPLE OWQM DESIGN ALTERNATIVES . 31CAPABILITY VS. COST RATIOS FOR THE EXAMPLE OWQM DESIGN ALTERNATIVES . 32v

UVUVisWCRWHEATCost vs. capability ratioCustomer Complaint SurveillanceLocal controller used for data transmissionSensor suite to measure conventional parametersDesign goalDepartment of EnergyN,N-diethyl-p-phenylenediamine;Information technologyLarge cabinetLifecycle cost estimateNational Institute of Standards and TechnologyOperations and MaintenanceOnline Water Quality MonitoringPublic Health SurveillancePerformance objectivePhysical Security MonitoringRemaining useful lifeSampling and AnalysisStandard cabinetSingle present valueWater Quality Surveillance and Response SystemThreat Ensemble Vulnerability Assessment – Sensor Placement OptimizationToolTotal useful lifeUniform present valueUnited States Environmental Protection AgencyUltravioletUV-Visible spectral absorption instrumentWater Contamination ResponseWater Health and Economic Analysis Toolvi

Framework for Comparing SRS AlternativesSection 1: Introduction1.1Scope of GuidanceThis document provides guidance for selecting the most appropriate Water Quality Surveillance andResponse System (SRS) design for a utility from a set of viable alternatives. It provides a framework thatguides the user through an objective, stepwise analysis for ranking multiple alternatives and describes, ingeneral terms, the types of information necessary to compare the alternatives.Before the comparative framework described in this document can be applied, the SRS design alternativesto be compared must be developed. These design alternatives should be informed by design goals,performance objectives andconstraints established for the SRS asLIMITATIONS OF THIS GUIDANCEdescribed in Guidance for DevelopingThe scope of this document is limited to defining theIntegrated Water Quality Surveillanceframework for comparison of viable and well-defined SRSand Response Systems. Design goalsdesign alternatives. It does not describe how to develop adefine the specific benefits that aset of viable SRS design alternatives.utility would like to realize throughFor guidance on developing viable SRS designs, please visit thedeployment of an SRS. BenefitsUSEPA Water Security website:obtained through operation of an SRShttps://www.epa.gov/waterqualitysurveillancecan be considered in two broadcategories: (1) those that supportroutine operation and management of the distribution system and (2) those related to detection of andresponse to water quality incidents in the distribution system. Performance objectives define metrics togauge how well the SRS achieves the established design goals. Constraints, often driven by practical andfinancial considerations, dictate the requirements or limitations within which the SRS must be designedand operated. The same information used to develop the alternatives (design goals, performanceobjectives and constraints) may be useful as evaluation criteria in the analysisof alternatives.1.2Application of GuidanceThe framework presented in this guidance can be applied at a variety of scales including alternatives forthe design of the overall SRS, design of an individual SRS component, and design or selection of aspecific asset. An asset is a specific piece of equipment or other item used in the implementation of anSRS. Table 1-1 describes these three scales, providing example alternatives that could be analyzed ateach scale and the level of definition required to complete the analysis. For effective application of theframework, all alternatives must be adequately and consistently defined at the scale being analyzed.Furthermore, the same cost elements should be included for all alternatives being compared.The number of alternatives selected for comparison is limited by the scale of the system being considered.Comparison of large-scale designs, such as that for an SRS, works better with a relatively small numberof alternatives due to the inherent complexity of the entire system. At a smaller scale, such as acomponent or asset, it becomes feasible to compare a larger number of alternatives.1

Framework for Comparing SRS AlternativesTable 1-1. Scales of SRS Design Alternatives that can be Considered in a Comparative AnalysisScale ofComparisonExample Design AlternativesExample Required Level of Definitionfor the Scale of ComparisonSystemAlternative SRS designs consideringcomponents to be included in the system, witha trade-off between cost and capability:1. Base SRS (WCR, CCS, PHS, S&A)2. Base SRS OWQM3. Base SRS PSMThe components to be included in theSRS. Attributes of conceptual-leveldesign for each component such asequipment, information managementsystems, additional personnel, andpartner involvement necessary for eachalternative. Order of magnitude costestimates for each alternative.ComponentAlternative OWQM designs, with a trade-offbetween number of monitoring stations andnumber of parameters monitored:1. Monitoring for conventional parameters(chlorine residual, pH, and conductivity) at20 locations in the distribution system2. Monitoring for conventional parametersplus UV-Visible spectral absorption at10 locations in the distribution system3. Monitoring for conventional parameters at12 locations and for conventionalparameters plus UV-Visible spectralabsorption at 3 additional locations in thedistribution system4. Monitoring for conventional parameters at6 locations and for conventionalparameters plus UV-Visible spectralabsorption at 6 additional locations in thedistribution systemParameters to be monitored, instrumenttypes, monitoring station design, andtypes of potential installation locationsfor each alternative. Approximate unitcost of each station type.AssetAlternative technologies for measuring chlorineresidual at OWQM stations:1. Instrument based on the DPD method,provided by Vendor 12. Instrument based on the DPD method,provided by Vendor 23. Instrument based on the amperometricmethod, provided by Vendor 24. Instrument based on solid-statetechnology, provided by Vendor 35. Instrument based on solid-statetechnology, provided by Vendor 4Specific model of the online chlorineresidual sensor used in each alternative.Purchase price and estimated annualoperations and maintenance cost foreach model.WCR Water Contamination Response; CCS Customer Complaint Surveillance; PHS Public Health SurveillanceS&A Sampling and Analysis; OWQM Online Water Quality Monitoring; PSM Physical Security Monitoring;DPD N,N-diethyl-p-phenylenediamine; UV Ultraviolet1.3Guidance OverviewAn overview of the framework for comparison of alternatives that will be discussed in this document isillustrated in Figure 1-1. This framework considers the tradeoff between benefits realized and costsincurred among the alternatives. While certain aspects of this analysis are quantitative, there are alsoqualitative factors to be considered, and thus some degree of value judgment is necessary to select apreferred alternative. A number of software tools are available to support application of this framework.In particular, these tools automate several of the calculations and document the analysis.2

Framework for Comparing SRS AlternativesFigure 1-1. Overview of the Process for Comparing AlternativesThe process presented in this document assumes that the total possible number of alternatives underconsideration has been reduced to a select set of alternatives that are viable, and that any alternatives thatwere obviously non-compliant with critical requirements or outside budget constraints were eliminatedfrom further consideration.This document is organized as follows: Section 2 describes the process of developing life-cycle cost estimates. Section 3 describes the process of scoring alternatives with respect to evaluation criteria. Section 4 describes the process of selecting an alternative based on the lifecycle cost estimates andevaluation scores.3

Framework for Comparing SRS AlternativesSection 2: Develop Lifecycle Cost EstimatesThe relative lifecycle costs of alternative SRS designs are important to consider when evaluating whichalternative to select. The general terms that comprise the Lifecycle Cost Estimate (LCCE) are shown inEquation 2-1 and defined below.LIFECYCLE COST ESTIMATE Implementation Costs Operations and Maintenance Costs Renewal Costs – Value of Remaining Useful LifeEquation 2-1. Lifecycle Cost Estimate Equation Implementation costs include all design, procurement, installation and training costs associated withimplementing the system. Operations and maintenance costs are ongoing costs for items such as reagents, replacement parts,support contracts and the level of effort, including personnel costs, required to maintain the system.Renewal costs account for the cost of replacing assets that have a shorter useful life than the periodchosen for analysis. In addition to procurement costs for replacement equipment, renewal costs mayinclude the costs of redesign if the new assets differ from the original (such as a new model of waterquality sensor), installation and initial training, and decommissioning and disposal of the equipmentbeing replaced.Value of remaining useful life accounts for the residual value of those assets that have useful liferemaining at the end of the period chosen for the analysis. Useful life is explained in more detail inSection 2.2. Figure 2-1 expands on Figure 1-1, showing the three basic steps involved in developing the LCCE forSRS design alternatives. These steps are described in further detail in subsequent sections. An examplethat illustrates these steps is provided in Section 2.4.Figure 2-1. Steps for Developing a Lifecycle Cost Estimate4

Framework for Comparing SRS Alternatives2.1Identify Unique Cost Elements for Each AlternativeAn LCCE is developed to a level of accuracy appropriate for the intended use of the result. In the contextof the framework for comparing alternative SRS designs, the LCCE only needs to include costs that aredifferent among the alternatives. For example, if all alternatives require procurement of the sameinformation technology (IT) and communication equipment, the costs associated with this equipment maybe excluded due to their commonality across alternatives.When selecting cost elements to include in the LCCE, it is generally preferable to minimize the number ofcost elements included to avoid unnecessary information collection and calculations. However, it isimportant to ensure that results are sufficiently detailed to observe meaningful differences among thealternatives. The scale of the SRS alternatives under comparison, as described in Section 1.2, willinfluence the cost elements that should be considered. For example, an LCCE at the system orcomponent level may require the inclusion of design and project management costs that are notnecessarily required when developing an LCCE at the asset level.Also, only those costs large enough to make a difference within the margin of error of the estimate needto be included. The scale of the SRS alternatives under comparison (system, component or asset) willinfluence the necessary level of detail in the underlying data used to calculate the LCCE. In general, thelevel of detail required in the LCCE increases as the scale of the alternatives under comparison decreases.The specific cost elements needed to calculate an LCCE will vary by the SRS component(s) considered inthe designs. Table 2-1 provides examples of general, high-level cost elements that might be included foreach of the SRS components, as well as cost elements relevant to the entire system. Specific examples ofcost elements for each SRS component are provided in Section 2.3.5

Framework for Comparing SRS AlternativesRemainingUseful LifeRenewalOperations & MaintenanceImplementationTable 2-1. Example LCCE Cost ElementsExample Cost ElementSystemOWQMPSMCCSPHSWCRS&ADevelop design documentation for thesystem, component or assetXXXXXXXDevelop an information managementsystemXXXX---Procure equipment-XX---XDevelop and implement an initialtraining and exercise program-XXXXXXCoordinate with partner agenciesX-XXXXReview and analyze data andinvestigate alerts-XXXX--Maintain equipment-XX---XPlan and implement training andexercises-XXXXXXProcure software licensesXXXX---Procure consumables-X----XMaintain documentationXXXXXXXProcure replacement informationtechnology hardware and softwareXXXX---Procure replacement equipment-XX---XXXXX--XValue depreciated assets at the end ofthe analysis period (negative cost)* Note that the four cost element categories shown in this table correspond to the terms listed in Equation 2-1.2.2Define the Analysis Period and Useful Life of System AssetsA common analysis period is used to develop the LCCEHELPFUL HINTfor each alternative considered in the comparison. Theanalysis period must be long enough to demonstrate theThe analysis period is defined only for thedifferences in the LCCE among the alternatives.purpose of the LCCE and is not necessarilyrelated to the actual life of the SRS.However, costs become more uncertain as they areestimated further into the future, particularly given thatthe SRS is heavily dependent on rapidly evolving technologies such as water quality sensors and ITequipment. Thus, the analysis period should be kept as short as possible.Selection of the analysis period should be informed by the useful life of all assets among the alternatives.Total useful life is defined in this document as the periodof time that an asset is able to be economicallyHELPFUL HINTmaintained. The total useful life of an asset is determinedSet the analysis period equal to the longestby a number of factors including availability oftotal useful life among all assets used in thereplacement parts, estimated cost of repairs, performancealternatives under comparison.degradation over time, and availability of improvedtechnologies.6

Framework for Comparing SRS AlternativesInformation available to determine the total useful life of an asset includes: Manufacturer’s documentation Utility experience with similar assets Expert or consultant knowledge about similar assetsFigure 2-2 provides an example timeline showing how the total useful life of each asset is applied overthe analysis period. In this example, the alternatives being considered have four unique assets withdifferent total useful lives. As suggested above, the analysis period is chosen as the longest total usefullife across assets (which is the total useful life of Asset 3). For all assets, the lifecycle starts with thebeginning of project implementation. If the end of the total useful life of an individual asset is reachedwithin the analysis period, the asset must be replaced to maintain a fully functioning system. Thisreplacement is termed renewal, and the figure illustrates the point at which each renewal cost would beincurred. At the end of the analysis period, three of the assets have remaining useful life, or additionaltime they can be viably operated before renewal. Both the renewal costs and the value of the remaininguseful life are used in calculating the LCCE, as described in the next section.Figure 2-2. Example Timeline of Asset Renewal over an Analysis Period2.3Calculate Lifecycle CostsAfter identifying unique cost elements for each alternative, determining the total useful lives of systemassets, establishing an analysis period, and identifying necessary renewals, the lifecycle costs for eachalternative can be calculated. Equation 2-1 identified the terms that comprise an LCCE, and this sectiondescribes the methods for calculating each of those terms and combining them to develop the overallLCCE.To ensure a fair comparison, it is necessary to adjust all costs to a base year. Typically, the first year inwhich expenditures are incurred is selected as the base year. Costs realized in any year other than thebase year are adjusted to base year dollars using an economic technique termed discounting. Discountingaccounts for the time-value of money, specifically that a dollar in the future is not worth the same as adollar today due to inflation and because the money could be invested to obtain a return in the future.Methods for discounting are included below, and discounting factors can be found in the Energy PriceIndices and Discount Factors for Life-Cycle Cost Analysis: Annual Supplement to Handbook 135. The7

Framework for Comparing SRS Alternatives2018 edition is the latest version of this resource at the publication date of this guidance document. Asthis resource is updated annually, the most recent edition should be referenced to obtain discountingfactors. Within this guidance document this resource will be referred to as the “latest version of theAnnual Supplement to Handbook 135 (NIST)” without a publication year identified.The following sections describe the approach for developing an LCCE for an SRS design alternative.Each section describes the method for calculating one of the LCCE terms presented in Equation 2-1.Throughout this document the terms used in equations (for example C I [Asset]) are expressed using thefollowing form of notation: C is used to represent a cost. V represents a value. Specific LCCE terms, as listed in Equation 2-1, are represented as subscripts such as I forimplementation. A bracketed term is used to indicate whether the cost (or value) applies to an asset [Asset] or analternative [Alternative]. The term [Alternative] denotes the summation of the cost or value for allassets used in the alternative.Thus, C I [Asset] represents the implementation costs for an asset.The Analysis Period is denoted as AP years, and the number of times an asset is renewed during theanalysis period is denoted as N.The Total Useful Life of an asset is denoted as TUL, and the Remaining Useful Life of an asset is denotedas RUL.2.3.1 Implementation CostsPotential implementation costs for an alternative include the procurement of equipment, procurement ofIT hardware and software, design and documentation of the system, initial training, and all other costsassociated with the initial startup. Table 2-2 provides example implementation costs for the componentsof an SRS.Utility experience with an asset is the most reliable way to estimate these costs. Costs can also beestablished by requesting a quotation from potential suppliers or from other utilities or organizations whohave undertaken a similar project.Calculating the implementation costs for each alternative (C I [Alternative]) involves the simplesummation of the relevant costs identified for the alternative. Implementation costs usually occur duringthe base year and therefore don’t require discounting. However, if lagging implementation costs occur inlater years, they need to be discounted using the approach described in Section 2.3.3.8

Framework for Comparing SRS AlternativesTable 2-2. Examples of Implementation CostsComponentImplementation Cost ExampleSystem Provide management and oversight during SRS implementation Develop and document the overall SRS design Design and implement an information management system, possibly including a dashboardthat manages and displays information for multiple components Procure IT hardware and softwareOWQM Procure sensors and necessary supplemental equipment such as tubing and reagentsDesign, construct and install OWQM stationsProcure and implement IT hardware, software licenses and communication systemsProcure or develop a data analysis and alert notification systemTrain staff on use and maintenance of installed sensorsDevelop component alert investigation procedures and train staff on their roles andresponsibilitiesPSM Identify critical facilities and design a custom security monitoring system for each facility Procure video equipment, intrusion detection systems and communication systems Procure and implement IT hardware and software to display real-time data from intrusiondetection systems and video equipment Properly commission all security equipment Train staff on use and maintenance of installed security hardware Develop component alert investigation procedures and train staff on their roles andresponsibilitiesCCS Design and implement a system to collect and manage all customer feedback related towater quality concerns Procure or develop a data analysis and alert notification system Develop component alert investigation procedures and train staff on their roles andresponsibilitiesPHS Establish partnerships with all relevant publi

of alternatives due to the inherent complexity of the entire system. At a smaller scale, such as a component or asset, it becomes feasible to compare a larger number of alternatives. LIMITATIONS OF THIS GUIDANCE The scope of this document is limited to defining the framework for comparison of viable and well-defined SRS design alternatives.

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