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<br />Conceptual Request for Proposals <br /> <br /> <br />C.3 Performance Risk <br /> <br />tv <br />CJ"l <br />W <br />o <br /> <br />The Act directs that cost effectiveness (least cost per ton of salinity control) <br />be a prime criteria for ranking and selecting projects, However, it is rare <br />that the actual performance of a project can be estimated precisely, Some <br />methods of salinity control are more variable than others in their <br />implementation, Under certain circumstances, accepting some risk may <br />reduce the program's costs, The ranking needs to consider that the most <br />cost-effective proposals often have a degree of perfonnance risk and whether <br />this risk is acceptable, <br /> <br />Perfonnance risk evaluation will be used to adjust the ranking of proposals <br />to consider the reliability of the cost and salt load reduction estimates used <br />in the cost-effectiveness computations, The evaluation will include: <br /> <br />. Investment security - Upfront funding or high initial payments for <br />projects may add to the program's exposure to cost overruns, failures, <br />and defaults, Proposals where the program pays as salt is produced <br />or as facilities are completed, inspected, and placed into operation <br />greatly reduce this risk, <br /> <br />All proponents will be required to limit (cap) the program's costs <br />through perfonnance bonds or other guarantees, Otherwise, the lack <br />of detailed plans, geological surveys, cost estimates, adequate <br />contingencies, environmental compliance documents, detailed fish <br />and wildlife mitigation plans, or state and local permitting, zoning, <br />and water rights would increase the potential costs to the program <br />and severely downrate the proposal's cost-effectiveness ranking, <br /> <br />. Cost escalation - In the case of privately financed projects that are <br />reimbursed annually, broad-based inflation adjustments may add a <br />small degree of risk, Highly volatile indexes may add a higher <br />degree of risk, <br /> <br />. Methods used to predict salt load reduction - For example, <br />industrial use or desalting of a known quantity and concentration of <br />brine would nonnally have few risks associated with this category of <br />perfonnance risk, as long as the waste stream were handled <br />correctly, Irrigation projects and other nonpoint source projects, <br />where the regional salt loading is directly measured, computer <br />modeled, and allocated to each of the different sources, will have <br />somewhat more risk in this category, depending upon the accuracy of <br />the regional salt loading measurement, Projects that rely on only <br />one measurement (like soil salinity) that is not corroborated through <br />other independent methods or measurements would have the highest <br />risk, <br /> <br />C-12 <br />