3
Economic Considerations

Most major public expenditures of the magnitude required to design, construct, and operate an LSWTF are subjected to a rigorous economic analysis as an integral part of the process of deciding whether or not to proceed. The analysis might take the form of a benefit-cost study to determine if the expected benefits justify the costs or a return-on-investment calculation to identify less costly alternatives that could provide a similar quality and quantity of data. Although the committee was not asked to perform an economic analysis of an LSWTF, nor was it provided with the necessary data and resources to do so, the committee believes the following economics-related observations and conclusions are integrally related to the goals of this study.

The cost of constructing an LSWTF of the type described in Chapter 2 has been cited in various sources as $70 million to several hundred million dollars (INEEL, 1998; Philips, 1999; Haynes, 1999). The collective experience of the committee with large experimental facilities for both wind engineering and earthquake engineering research suggests that annual operating costs would average 5 to 10 percent of the construction cost ($5 million to $25 million). Individual experiments could cost $1 million or more. Although these costs are small compared to the dollar losses associated with wind-hazards on an annual basis, the committee doubts that the value of information produced in an LSWTF would justify them, given the current state of wind engineering research.

The decision to build an LSWTF carries with it an implicit commitment to fund the continuing operation of the facility. Operational costs are usually covered through user fees or direct appropriation. In light of the large potential operating and maintenance costs, the facility would have to operate on a nearly continuous basis to break even. However, it is not obvious to the committee that sufficient interest or capability exists, either in the government or in the private sector, to provide an adequate and sustainable source of funding for the operation of an LSWTF. In the areas of wind engineering and earthquake engineering, funds from private industry for research and experimentation on structures have been limited, in fact, practically insignificant, compared to funds provided by the federal government. Furthermore, there is no evidence to suggest that, even if the private sector were committed to supporting work at an LSWTF, private funds would be sufficient to sustain operations. Finally there is no guarantee that federal funds would be made available on an ongoing basis to support research at an LSWTF even if a national wind-hazard reduction program were established.

The committee believes that these economic realities must be considered in the decision process to build an LSWTF and offers the following conclusion. An LSWTF would be costly to build, operate, and maintain. Although valuable information could be produced at an LSWTF, the committee doubts that the value of this information would justify the cost of producing it. The committee is unable to identify a potential user base either in the United States or



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3 Economic Considerations Most major public expenditures of the magnitude required to design, construct, and operate an LSWTF are subjected to a rigorous economic analysis as an integral part of the process of deciding whether or not to proceed. The analysis might take the form of a benefit-cost study to determine if the expected benefits justify the costs or a return-on-investment calculation to identify less costly alternatives that could provide a similar quality and quantity of data. Although the committee was not asked to perform an economic analysis of an LSWTF, nor was it provided with the necessary data and resources to do so, the committee believes the following economics-related observations and conclusions are integrally related to the goals of this study. The cost of constructing an LSWTF of the type described in Chapter 2 has been cited in various sources as $70 million to several hundred million dollars (INEEL, 1998; Philips, 1999; Haynes, 1999). The collective experience of the committee with large experimental facilities for both wind engineering and earthquake engineering research suggests that annual operating costs would average 5 to 10 percent of the construction cost ($5 million to $25 million). Individual experiments could cost $1 million or more. Although these costs are small compared to the dollar losses associated with wind-hazards on an annual basis, the committee doubts that the value of information produced in an LSWTF would justify them, given the current state of wind engineering research. The decision to build an LSWTF carries with it an implicit commitment to fund the continuing operation of the facility. Operational costs are usually covered through user fees or direct appropriation. In light of the large potential operating and maintenance costs, the facility would have to operate on a nearly continuous basis to break even. However, it is not obvious to the committee that sufficient interest or capability exists, either in the government or in the private sector, to provide an adequate and sustainable source of funding for the operation of an LSWTF. In the areas of wind engineering and earthquake engineering, funds from private industry for research and experimentation on structures have been limited, in fact, practically insignificant, compared to funds provided by the federal government. Furthermore, there is no evidence to suggest that, even if the private sector were committed to supporting work at an LSWTF, private funds would be sufficient to sustain operations. Finally there is no guarantee that federal funds would be made available on an ongoing basis to support research at an LSWTF even if a national wind-hazard reduction program were established. The committee believes that these economic realities must be considered in the decision process to build an LSWTF and offers the following conclusion. An LSWTF would be costly to build, operate, and maintain. Although valuable information could be produced at an LSWTF, the committee doubts that the value of this information would justify the cost of producing it. The committee is unable to identify a potential user base either in the United States or

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internationally to support operations on a user fee basis. There is no national wind-hazard reduction program, and funding for wind engineering research is limited (the committee believes inadequate). Redirecting existing funds to support LSWTF operations and maintenance would essentially put an end to ongoing research in the field and, therefore, cannot be advocated. Finally, building and operating an LSWTF using direct federal appropriations would be a poor use of government research funds. In summary, the committee believes an LSWTF would be an extremely costly means of producing data that, as discussed in Chapter 2, would contribute in only a small way to reducing wind-related hazards and to advancing the general field of wind engineering research. Without quantitative economic data to evaluate, the committee was not able to address the potential benefits and costs of an LSWTF in detail. However, in the absence of any evidence to suggest that a favorable economic conclusion would result, and for the other reasons cites herein, the committee believes it would be uneconomical and inappropriate to construct an LSWTF.