Cost Benefit Analysis

Topics: Decision theory, Project management, Risk Pages: 8 (2359 words) Published: April 23, 2013
Cost Benefit Analysis: New Orleans Sleeves Project

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Cost Benefit Analysis: New Orleans Sleeves Project
Decision environment often experience dynamics and swings which create short and long term effect on chances of survival for two alternatives to solve a problem. When faced with a decision dilemma that requires critical assessments, analysis resorts to analytical tools that ensure competitive positioning advantage. However, there must be a clear justification for the decision through review of benefits and projected results of suggested decision. Thus, this reflective treatise attempts to explicitly review the cost and benefits of rebuilding the sleeves protecting New Orleans. Besides, the paper provides a justification for the decision to either rebuild the sleeves in New Orleans or not. In addition, the treatise presents quantifiable benefits against the costs incurred in making such critical decisions. Part A: Cost Benefit Analysis of Rebuilding Sleeves in New Orleans

Rebuilding the sleeves in New Orleans has its merits and demerits. As a matter of fact, the project is likely to cost 14 billion dollars after every a hundred years besides the eighty five billion dollars for rebuilding the city. This estimation is informed by the probability of hurricanes destroying the city after every 100 years. In making the decision to either rebuild the sleeves in the city of New Orleans, it is critical to review the benefits of the interested constituencies such as the city residents, the residents of those surrounding the city, the federal government, and the Mayor of the city. Stakeholders are individuals, groups or organisations with a stake/claim in a project’s outcome. Generally, not all stakeholders will have the same objectives and motivations for a project. The first process of managing stakeholders is to identify them. New Orleans City Residents

The city of New Orleans hosts an estimated population of 360,000 persons. This population occupies the high and low attitudes of the city. More than half of this population is active in economic activities besides being ready labor in the expansive manufacturing, tourism, and services industries located in New Orleans. The number of house hold units in New Orleans is estimated at over 80,000. Moreover, the residents of the city have established a unique culture of identity as belonging to the coastal city family.

At present, the “Size of nonagricultural labor force: 615,500; construction and mining: 40,700; manufacturing: 31,500; trade, transportation and utilities: 122,400; information: 9,800; financial activities: 35,900; professional and business services: 71,900; educational and health services: 83,700; leisure and hospitality: 82,200; other services: 23,200; government: 104,200” (Hallegatte 2006, p. 13). On average each person earns $ 16 per hour. Actually, this translates to a total income of $199,449,600 per day for the resident. This translated into an annual income of more than $ 180 billion.

The benefits accrued by the residents of New Orleans thus are more than the cost of reconstructing the sleeves. Since the project is to occur only once in 100 years, the cost of $14 billion for the sleeves and $85 billion for infrastructure rebuilding against the annual income of $180 billion makes the reconstruction feasible and beneficial to the residents more than the cost of reconstruction. Residents of the Surrounding Floodplains

A population of more than 100,000 persons occupies the surrounding floodplains of New Orleans. These persons are active in provision of labor in the ship building industry, agricultural sector, manufacturing and service industries. Same as the residents of the city of New Orleans, the average annual income for this population is roughly $4.6 billion. However, it is a fact that rebuilding the New Orleans sleeves will increase the chances of these plains...
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