TM 5-814-8
CHAPTER 9
ECONOMIC CONSIDERATIONS
9-1. Introduction
labor (69). As a result of different price changes
for the various types of material and labor, the
This section provides economic considerations
relative slopes of the lines are different. Costs in
concerning water pollution control systems. In
appendix A are related to a EPA-STP index
keeping with the intent of Executive Order 12088,
value. The ENR indices are updated weekly in the
budget requests for water pollution control work
Engineering News-Record and the EPA-STP in-
at Federal facilities should reflect an effective life
dex value is updated quarterly in the Journal
cycle cost solution. This involves an evaluation of
Water Pollution Control Federation.
.
both capital and annual costs (total life cycle
(2) Geographic variability. Costs will vary at
costs). Guidelines have been issued by DOD and
different geographical locations due to transporta-
DA for making life cycle costing studies. Total
tion and other expenses. Thus, cost indices at a
system costs are sensitive to materials of con-
given time will vary from place to place. Table
struction, i.e., steel tanks cost less than rein-
9-1 illustrates this point by the variation in the
forced concrete tanks but have a shorter life; type
EPA-STP at several key U.S. cities. Appendix A
of equipment; inflationary effects on material,
relates all costs to a national index, rather than
chemical and labor costs; energy availability; and
an index for a particular geographical location.
geographical location.
The cost adjustment for foreign locations must be
evaluated on a specific case-by-case basis. Some-
9-2. Construction Costs
times availability of materials is critical and may
Construction costs include expenditures for labor
affect design decisions. Thus, early assessment of
and materials to build facilities including piping,
foreign economic conditions is important.
steel, concrete, excavation, buildings, electrical
Table 9-1. Typical geographical variations in cost indices
work, heating and ventilation, etc. Costs for
(values are ENR construction cost index for March 1983).
special localized site development factors may
--
Base Value: 1967 = 100
include site or trench dewatering, piling, and rock
Location
Index Value
excavation.
Atlanta
390
a. Cost curves. Appendix A contains typical
Baltimore -
350
construction cost curves for several treatment
Birmingham
352
unit operations. The curves show the range of
Chicago
341
cost values associated with varying plant capaci-
Cleveland
380
Dallas
410
ties. The bibliography contains additional refer-
Denver
365
ences pertaining to treatment plant costs.
Kansas City
406
b. Cost indices. Cost indices relate costs at one
Los Angeles
418
time and place to costs at any other time and/or
Minneapolis
347
place. For example, if a project was estimated to
New York
329
Philadelphia
381
cost 0,000 in 1973 using an index of 1138,
St. Louis
347
that same project would cost 2233/1 138 multi-
San Francisco
390
plied by 0,000 or 6,221 in 1982 when the
National Average
374
cost index rises to 2233. Geographical adjust-
ments may also be necessary. AR 415-17 pro-
9-3. Life cycle cost evaluation
vides guidance on cost adjustment factors.
All pollution control plans for military installa-
(1) Commonly used indices. Indices com-
tions must include a life cycle cost evaluation
monly used are the U.S. EPA Sewage Treatment
when applicable. This evaluation is an analysis to
Plant (EPA-STP) Cost Index and the Engineer-
determine the wastewater treatment system or
ing News-Record (ENR) Indices (see figure 9-l).
component thereof which will result in the lowest
The slopes of the curves represent the relative
increase in costs with time. The basic difference
total cost in meeting regulatory criteria. The
between the two indices is that the EPA-STP
evaluation must include total capital and annual
index includes skilled labor and mechanical equip-
costs for the complete treatment system and for
ment costs, while the ENR index includes struc-
alternative unit operations within the overall
tural steel, cement, 2 X 4 lumber, and common
system. For this reason, the construction cost
9-1
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