Guideline 8.1-- Units of Value

DOE-DP-STD-3023-98

b. An RBP system may be employed in a graded manner so that monetization of

certain costs and benefits can be deferred until later stages of the analysis and

conducted in a more targeted fashion for a more limited subset of the decision

options.

If the decision is made not to monetize, the basis and justification for such action

should be fully documented. The justification should address how the absence of

direct expression of the cost effectiveness of any activity does not impact the

supportableness, usefulness, or relative ranking of the prioritization results.

Monetizing should be performed in accordance with the guidance provided by the

OMB, reference (k). This guidance states that presentation of monetized benefits and

costs is preferred where acceptable estimates are possible, but recognizes that this is

often difficult. Where monetization is not possible for certain elements of the benefits

or costs that are essential to consider, other quantitative and qualitative

characterizations of these elements should be provided. The principle of " illingness-

to-pay"captures the notion of opportunity cost by providing an aggregate measure of

what individuals are willing to forgo to enjoy a particular benefit, and OMB considers

this valuation methodology to be the conceptually superior approach. In the area of

health and safety, OMB suggests that for nonfatal effects, the use of either the

willingness-to-pay approach or valuations based on the expected direct costs avoided

by changing such risks is appropriate. Changes in fatality risks as a result of

Government action are best monetized according to the willingness-to-pay approach.

It should be made clear that in this context, the terms " alue of statistical life"or " alue

of life,"if used at all, refer to the willingness-to-pay for reductions in risks of premature

deaths. Valuation of certain environmental and cultural amenities may be difficult to

accomplish using a willingness-to-pay approach. Where this is a problem, OMB

suggests that for many such goods, particularly goods providing " on-use"values,

contingent-valuation methods may provide the only analytical approaches currently

available for estimating values. A schedule of monetized benefits should be included

that would show the type of benefit and when it would accrue, expressed in constant

undiscounted dollars (discounting is addressed in Guideline 8.2). Any benefits that

cannot be monetized (some examples might be an increase in the rate of introducing

a more productive new technology or an increase in the risk of extinction of

endangered species) should be presented and explained. Even if not monetized,

these benefits should still be quantified (if at all possible) or fully characterized

qualitatively.

It is often much easier to defend a range of values for statistical deaths or injuries

averted than it is to defend a particular value, e.g., it is worth spending precisely $X

million to avert a premature fatality. One can more easily defend the notion that it

would be irresponsible to forgo safety improvements if lives could be saved for as little

as $Y a piece, but it would also be an unsound use of resources to spend more than

$Z per life saved, so the value that should be accorded to averting fatalities should fall

between $Y and $Z. Since many factors in RBP are uncertain, adding a few

additional uncertainties in the monetization of adverse effects averted usually does not