Geosynthetics August/September 2020 - 42

GSI NEWS

By George R. Koerner

Benefit/cost analysis as it relates to
service life of geosynthetics
GEOSYNTHETIC
INSTITUTE
GSI's mission is to develop
and transfer knowledge,
assess and critique
geosynthetics, and provide
services to the member
organizations.

www.geosynthetic
- institute.org

George R. Koerner is the
director of the Geosynthetic
Institute in Folsom, Pa.

0820GS_p38-cv4.indd 42

n the surface, performing a benefit/cost (B/C) analysis is a straightforward process. However, ensuring that such an analysis is accurate and thorough is a much
more nuanced task. In 2008, Bob Koerner laid out the procedure for geomembranes in
Geosynthetic Research Institute (GRI) White Paper #12 "GS Selection Based on B/C
Ratio." This article expands on Koerner's methodologies, identifying the necessary
steps and considerations for a project manager to create an effective B/C analysis when
considering geosynthetics. Hopefully, it will shed some light on a process that many
industry professionals use daily.
A B/C analysis is used to evaluate the total anticipated benefit of a project compared
to its total expected cost to determine if the proposed implementation is economically
worthwhile. If this comparative evaluation method suggests that the benefits associated
with a proposed action outweigh the costs, then a business or project manager will
often choose to follow through with the implementation.
The first step of a B/C analysis is to identify and quantify all benefits anticipated
as a result of implementing the proposed action. These benefits can include direct
profits, decreased costs due to technology improvements, increased production
capabilities, and increased revenue due to factors such as customer satisfaction,
standardization, efficiency, sustainability, reliability and product durability. Some
of these factors are more difficult to directly translate into monetary values than
others; therefore, it is important to use available market data when possible to
determine the impact that certain benefits have on the project's profit margin. Along
with costs, the service life of the project greatly affects the magnitude of many of
these benefits.
The next step is to identify and quantify all relevant costs associated with the
proposed action. In order to successfully identify such costs, one must follow a
standardized procedure in compiling all monetary and nonmonetary costs incurred
by the implementation of a particular project. Fixed costs (installation equipment),
variable costs (labor, raw materials) and recurring costs (site maintenance) must all
be considered. Additionally, the project's opportunity cost, which stems from losing potential benefits obtained from using alternate project solutions, must also be
accounted for.
The cost-identification process also requires projecting costs throughout the
useful service life of the implementation. This projection will not only map out
important lifetime maintenance, depreciation, risk and uncertainty patterns, but
will also provide important insight when financing a project long-term. The optimal
project solution from a cost-projection perspective would have a long service life and
minimal recurring costs throughout its life.
The final step is to weigh the benefits and costs to determine if the proposed
action is worthwhile. The expected benefits must be divided by the identified costs
to produce a B/C ratio. If the ratio is greater than 1, it can be concluded that the

7/22/20 4:21 PM

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Geosynthetics August/September 2020

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