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Cost-Benefit analysis of liquefaction mitigation strategies

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This paper presents a cost-benefit model as part of the options appraisal process to evaluate alternative ground mitigation interventions to reduce vulnerability and/or improve resilience of built assets to earthquake induced liquefaction disaster (EILD) events. The paper presents a review of alternative approaches to cost-benefit analysis and develops forward looking (risk based) and backward looking (impact based) cost-benefit models that can be used by practitioners and policy makers to improve community resilience through better contingency and disaster management planning. The paper customises the models against EILD scenarios and identifies the cost and benefit attributes that need to be assessed if the models are to be effectively integrated into a resilience assessment and improvement framework for improved community resilience to EILD events.
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IABSE Symposium 2019 Guimarães
Towards a Resilient Built Environment - Risk and Asset Management
March 27-29, 2019, Guimarães, Portugal
447
Cost-benefit analysis of liquefaction mitigation strategies
Keith Jones, Mariantonietta Morga, Nadeeshani Wanigarathna, Federica Pascale
Anglia Ruskin University, Chelmsford, UK
Larisa Yarovaya
Unievristy of Southampton, Southampton, UK
Contacting author: keith.jones@anglia.ac.uk
Abstract
This paper presents a cost-benefit model as part of the options appraisal process to evaluate
alternative ground mitigation interventions to reduce vulnerability and/or improve resilience of
built assets to earthquake induced liquefaction disaster (EILD) events. The paper presents a review
of alternative approaches to cost-benefit analysis and develops forward looking (risk based) and
backward looking (impact based) cost-benefit models that can be used by practitioners and policy
makers to improve community resilience through better contingency and disaster management
planning. The paper customises the models against EILD scenarios and identifies the cost and benefit
attributes that need to be assessed if the models are to be effectively integrated into a resilience
assessment and improvement framework for improved community resilience to EILD events.
Keywords: cost-benefit modelling; disaster management; community resilience; liquefaction;
ground mitigation; contingency planning; built asset management.
1. Introduction
Cost-benefit analysis (CBA) is a well-recognised
option appraisal technique to compare the costs
and resultant benefits of alternative
development/mitigation projects. The technique is
particularly useful when government or public
institutions are seeking to justify significant
investments to improve local infrastructures and
community resilience to disasters. The basic idea of
CBA is to identify the costs of undertaking
development/mitigation projects and compare
these to the benefits over time that could accrue
from the development/mitigation projects. The
benefit to cost ratio (B/C) provides a dimensionless
indicator that can inform the business decision on
whether development/mitigation projects should
be funded. Cost-benefit analysis can be applied at
different scales, from assessing development
options for individual stakeholders to evaluating
the potential net benefit of development options
across multiple stakeholder groups. In the
LIQUEFACT project, CBA is being used to evaluate
the economic viability of different liquefaction
mitigation options on both individual built assets
(individual stakeholder group) and the wider
community (multiple stakeholder groups). This
paper reviews alternative approaches to CBA and
describes two approaches developed in the
LIQUEFACT project to assess alternative ground
mitigation options as part of an earthquake
induced liquefaction disaster (EILD) resilience
assessment and improvement framework (RAIF).
Earthquake-induced soil liquefaction occurs when
soil strength and stiffness decrease as a
IABSE Symposium 2019 Guimarães: Towards a Resilient Built Environment - Risk and Asset Management
March 27-29, 2019, Guimarães, Portugal
448
consequence of an increase in pore water pressure
in saturated cohesionless materials during, and
following, seismic ground motion as a result of the
applied stress; hence causing the soil to behave like
a liquid. (National Academy of Sciences 2016).
2. Cost-Benefit Analysis
Cost-benefit analysis uses the concepts of
consumer surplus and externality to evaluate
alternative investment opportunities by
considering profit (or loss) of investment options
for society. When the externality is negative the
cost to society is greater than the cost to the
individual stakeholder. When the externality is
positive the cost to society is less than the cost to
the individual stakeholder and as such there is a net
benefit to society (Johansson and Kristom, 2016).
The CBA process involves the identification of
stakeholder’s objectives/outcomes required of a
development/mitigation project and the economic
evaluation of a range of alternative intervention
options (physical, operational, social etc.) to
achieve the outcomes. For each option, the project
costs are calculated and compared against the
estimated benefits to produce a ranked order
listing. The results from the ranking list are
combined with an assessment of risk and the un-
monetarised factors not considered in the CBA to
produce a final ranking order of preferred
development/mitigation solutions (Johansson and
Kristom, 2016).
The cost component of the CBA methodology is
calculated by considering both the capital and
operating costs associated with an intervention.
Capital costs include facilitating works costs,
building works costs, construction costs, design
and other consultation fees, development costs,
risk estimates, inflation estimate and taxes. Capital
costs can be estimated from previously completed
projects; published data sets or from constructors’
quotations. Operating costs include repair and
refurbishment costs, utilities costs, disposal costs
and facilities management costs. It is generally
accepted that the operating cost of a built asset is
substantially higher compared to its capital costs
(Evan et al., 1985) and as such they must be
included when developing lifecycle cost models.
Finally, all costs need to be discounted to current
value to account for future cash flow projections.
Future cash flow is discounted using a discount rate
to derive present value estimates that are used to
allow direct comparison between the cost of
investments and the expected return on that
investment over time.
The benefit component of the CBA methodology is
calculated by valuing the tangible and intangible
benefits associated with an intervention. The
International Valuation Standards Council (IVSC)
(2016) identifies three main approaches to
estimate the value of tangible benefits: the market
approach; the income approach; or the cost
approach. The market approach provides an
indication of value by comparing products with
identical or comparable products for which price
information is available. The income approach
estimates the value of a product by reference to
the value of income, cash flow or cost savings
generated by the product. The cost approach
provides an indication of value by calculating the
current replacement or reproduction cost of a
product and making deductions for physical
deterioration and all other relevant forms of
obsolescence.
The intangible impacts are more difficult to value
directly and normally rely on proxy measures.
There are three main approaches used to value
intangible impacts: the revealed preference
approach; the stated preference approach; and the
subjective well-being/life satisfaction approach.
The revealed preference approach quantifies the
value of non-market products using market
information and behaviour to infer the economic
value of an associated non-market impact (OECD,
2006). The stated preference approach uses
specially constructed questionnaires to elicit
estimates of people‘s Willingness to Pay (WTP) for
or Willingness to Accept (WTA) a particular
outcome (Fujiwara and Campbell, 2011), or to offer
people choices between “bundles” of attributes
from which analysts can infer society’s WTP or WTA
(OECD, 2006). The Subjective Well-Being/The Life
Satisfaction approach attempt to measure people‘s
experiences rather than their preferences through
direct measures of well-being, such as life
satisfaction (Fujiwara and Campbell, 2011).
IABSE Symposium 2019 Guimarães: Towards a Resilient Built Environment - Risk and Asset Management
March 27-29, 2019, Guimarães, Portugal
449
Whilst in many cases the costs associated with
development/mitigation options appear easier to
estimate than the benefits of such interventions
care must be taken to avoid, or at least minimise,
optimism bias and risk. Optimism bias (the proven
tendency for appraisers to be too optimistic about
key project parameters) and risk perception
(uncertainties that arise in the design, planning and
implementation of an intervention) are known to
have a significant impact on cost estimates which if
unaccounted for can undermine confidence CBA
models. As such CBA models should include a
sensitivity analysis and, where interventions have
significant direct effects on markets, compliance
costs should be estimated using general
equilibrium analysis which captures linkages
between markets across the entire economy (U.S.
Environmental Protection Agency, 2010).
3. CBA in Disaster Mitigation
The generic approach to CBA has been adapted to
assess the efficiency and benefits of mitigation
interventions that seek to reduce disaster impacts.
Figure 1 presents the five basic steps of CBA for
disaster mitigation according to Smyth et al. (2004).
Figure 1. Steps of CBA for disaster mitigation.
Source: Smyth et al. (2004).
As with the generic approach to CBA there are a
number of practical issues associated with the
quantification of tangible and intangible benefits
that have to be addressed if the technique is to be
successfully applied to disaster scenarios.
In disaster mitigation CBA the costs represent the
expenditure needed to retrofit or refurbish an
asset whilst the benefits are related to avoided
damages (to assets and people) due to the
improved performance of retrofitted assets. The
cost of retrofitting assets are compared with future
benefits quantified in terms of equivalent
annualized values discounted to present-day that
could be realised in the future if a disaster occurs.
Whilst there are many different approaches to
developing CBA models for disaster mitigation (Kull
et al., 2013; Jonkman et al., 2004; NIST, 2013; )
White and Rorick, 2010; Wethli, 2014; Mechler,
2005, Mechler et al, 2014) the assessment of losses
to a system are complicated by the uncertainties in
the timing, location, and severity of future disasters
events.
White and Rorick (2010) present three theoretical
approaches to CBA based on the comparison of the
impact of disasters with and without disaster risk
reduction (DRR) mitigations. The first approach
adopts either backward-looking (impact) or
forward-looking (risk) methods to assess the cost
and benefits of DRR mitigations. The former uses a
comparison between the impact of a given disaster
in a community with DRR mitigations and a
hypothetical community without DDR mitigations
while the latter suggests a comparison of the
realized impacts in a community without DRR
interventions to the hypothetical impacts with DRR
mitigations. The second approach is a comparative
approach where the impact of DRR mitigations are
compared in two different communities stricken by
disasters of the same magnitude. The third
approach is a before-and-after approach that
compares impact data from the same community
for similar disasters occurring before and after a
DRR mitigation programme. However, whilst there
is evidence of the economic effectiveness of CBA
in DRR there are also numerous limitations with
their existing application to disaster management,
including a general lack of sensitivity analyses and
the absence of meta-analysis linking theoretical
IABSE Symposium 2019 Guimarães: Towards a Resilient Built Environment - Risk and Asset Management
March 27-29, 2019, Guimarães, Portugal
450
solutions to empirical findings (Shreve and Kelman,
2014).
In an effort to address the weaknesses identified
with DRR CBA and to develop operational tools to
translate the Sendai Framework for Disaster Risk
Reduction (UNISDR, 2015) into practice, the Joint
Research Centre of the European Commission
developed “the guidance for Recording and Sharing
Disaster Damage and Loss Data” (EU expert
working group on disaster damage and loss
data, 2015). The guidance identified that losses
should be recorded against four key types of
“affected elements”: Social; Economic;
Environmental; and Heritage (Figure 2). These
categories have been used to assess the losses
associated with the EILD event CBA.
Figure 2. Summary of loss categorisation provided in The guidance for Recording and Sharing Disaster
Damage and Loss Data (EU expert working group on disaster damage and loss data, 2015).
4. CBA applied to Earthquake Events
Cost-benefit analysis has been used to assess the
effectiveness of mitigation interventions to reduce
earthquake associated losses at both the individual
building/assets and city/regional level.
At the building/asset level Goda et al (2010) used
CBA to investigate the efficiency of different types
of seismic isolators to mitigate seismic risk applied
to two identical buildings located in Vancouver.
Their CBA model considered both the initial
construction cost and the repair/re-construction
costs associated with post event damage but did
not include mortality or morbidity costs and as such
represented only the tangible costs of earthquake
events.
Kappos and Dimitrakopoulo (2008) applied CBA to
the assessment of the economic feasibility of
retrofitting a portfolio of domestic buildings in the
city of Thessaloniki. Thier CBA model used a series
of hazard curves based on probabilistic models and
vulnerability analyses to develop fragility curves to
examine the cost effectiveness of retrofitting
actions to the urban pre-1959 reinforced concrete
designed housing. The CBA model used local and
international datasets to assess replacement and
retrofit costs for a range of building typologies with
the building damage being calculated as the
Disaster loss
Economic loss
Damages to
property (Buildings,
contents, Vehicles,
Products/Stock/Cro
p)
Damages to
infrastructure and
loss of services
Distrucption to
businesses
Environmental loss
Damages to habitat
and eco-systems
Damages to water
bodies
Social loss
Deaths and injuries
Increased crimes
Family violance
Etc..
Heritage loss
Damages to Cultural
assests
Damages to Historic
Assets
Damages to World
Heritage assets
IABSE Symposium 2019 Guimarães: Towards a Resilient Built Environment - Risk and Asset Management
March 27-29, 2019, Guimarães, Portugal
451
product of the replacement cost times the area of
the building times the mean damage factor derived
from a damage probability matrix that describes
the vulnerability of the building. In addition to the
physical cost of damage to the buildings the CBA
model also considered indirect losses including
human fatality.
Padgett et al. (2010) developed a risk-based
seismic lifecycle CBA to evaluate alternative retrofit
mitigations to non-seismically designed bridges as
part of a seismic upgrade programme. Padgett et
al’s approach again used probabilistic seismic
hazard models combined with fragility curves of
the as-built and retrofitted bridges across a range
of damage scenarios and retrofit options to
compare the expected costs of damage before and
after a retrofit program. The CBA model considered
the cost and benefits over the service life of the
bridges (an assumption of 50 remaining years life
was used for all bridges) but did not include the
costs of ongoing maintenance during the remaining
service life period.
In the previous examples CBA were used to assess
losses and evaluate mitigation interventions at the
structural serviceability and ultimate limit states.
However, in many modern buildings (increasingly
used by the critical infrastructure providers) failure
at the functional limit state can have a significant
impact on service delivery, and in turn total loss
assessment, and failure to address this aspect is a
significant weakness in most CBA models (Kanda
and Shah, 1997). Addressing the business-related
aspects associated with EILD events is a key aspect
of the LIQUEFACT project.
5. CBA applied to EILD events
The LIQUEFACT project has developed a CBA
methodology to evaluate liquefaction risk
management strategies at the community, single
built asset and critical infrastructure levels.
Unlike disaster events that affect a wide
geographical area, EILD event impacts are generally
localised, affecting individual sites and/or assets
and as such the traditional disaster CBA model has
been customised to reflect localised hazard,
exposure and vulnerability assessments. In
LIQUEAFCT CBA is applied at two levels. Firstly, CBA
is used as part of the options appraisal process to
identify the most appropriate liquefaction
mitigation option at an individual asset (or
collection of assets) at the site level. At this level
the cost of a mitigation option is set against the
perceived benefit to the asset owner/operator in
terms of avoiding the costs (both direct and
indirect) associated with loss of performance or
failure (full and/or partial loss of performance over
time) of the asset following an EILD event.
Secondly, the CBA for those individual assets within
a region that are critical to support community
resilience to an EILD event are aggregated to
provide an assessment of the overall CBA for the
region of the mitigation interventions applied to
the individual assets.
The CBA model developed by LIQUEFACT follows a
four stage approach similar to that developed by
Mechler (2014).
· Stage 1: Estimate the risk in the antecedent
condition without soil liquefaction risk
management strategies being implemented.
This requires estimating and combining
liquefaction hazard, exposure and
vulnerability.
· Stage 2: identify possible soil liquefaction risk
reduction / mitigation measures and their
costs, which, for hard infrastructure projects,
consist of design, construction and
maintenance.
· Stage 3: Analyse the risk reduction associated
with each mitigation option: estimate the
benefits of reducing liquefaction risk.
· Stage 4: Calculate the economic efficiency of
the measures. A measure can be defined
economically efficient if the benefits exceed
costs.
In operationalising the above two frameworks have
been developed. The forward-looking CBA
framework (risk-based approach) combines data
on hazard and vulnerability to assess antecedent
risk and reduced risk after mitigation. Whilst this
approach is mathematically rigorous, its
application can be problematic in situations where
data and resources available to undertake the
assessment are limited. The backward-looking
framework (impact based-approach) uses past
damage to assets to assess the risks associated with
the disaster event and quantify potential future
IABSE Symposium 2019 Guimarães: Towards a Resilient Built Environment - Risk and Asset Management
March 27-29, 2019, Guimarães, Portugal
452
damage states that history suggests would exist
should such an event occur again. Both the forward
and backward looking CBA frameworks have been
integrated into the RAIF (LIQUEFACT D1.31) and an
initial validation of the approach has been
performed through a detailed review of literature
and in discussions/interviews with practitioners
and academics.
6. Impacts and costs associated with
EILD events
Natural disasters result in a range of impacts that
affect social, economic, environmental and
heritage elements. Further, the impact can occur as
a direct result of the disaster event or over time as
indirect or macroeconomic effects (Mechler,
2005). The expected range of impacts associated
with EILD events include:
· Social: household structure; furnishings,
fixtures and fittings; temporary housing;
increased rents; loss of income; reduced
purchasing power; mortality and morbidity
rates; service loss/reduction; reduced well-
being; lower living standards; increased
poverty.
· Economic: loss/damage to public assets;
service disruption; consequential loss to
businesses; ejecta clean-up; repair and
reconstruction; post event survey; reduction
in skilled labour; disruption to supply chain
logistics; unemployment.
· Environmental: pollution control and clean-
up; decontamination.
· Heritage: damage to historical assets; business
closure; reduced tourism; loss of natural
habitat; impacts on biodiversity.
In addition to the cost elements the CBA model
needs to assess the benefits associated with
alternative mitigation options. Two approaches to
mitigate liquefaction have been investigated in
LIQUEFACT: reducing the site susceptibility to
liquefaction (through ground densification,
stabilisation, dissipation and desaturation); and/or
enhancing the capacity of assets to reduce the
damage caused by liquefaction (structural
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modifications, change of use, or change of
operating procedures).
For each of the above the costs associated with
retrofitting alternative mitigation options to
existing built assets are calculated (see section 2)
and compared to the costs associated with loss of
performance/functionality for the individual asset
owner and the wider community. Two resilience
toolkits are being developed that assess the impact
that the loss of performance of assets will have on
individual asset owners and the wider community
(LIQUEFACT D5.12) The associated costs and
benefits are discounted to current value to account
for future cash flow and a sensitivity analysis is
performed by varying the input variables to the
resilience toolkits.
7. Integrating CBA in Built Asset
Management Planning
The final stage of the CBA process is to integrate
the CBA models into the RAIF and develop built
asset management plans for improved resilience to
EILD events. Whilst this work is ongoing an initial 10
step framework has been developed,
1) Define the characteristics of the building or
asset under consideration;
2) Identify the susceptibility of the building or
asset to an EILD event;
3) For those buildings or assets at risk of physical
damage assess the impact that different
damage states have on the performance /
functionality of the building or assets;
4) Identify a range of mitigation options (both
physical and operational) that can reduce the
impact on both the building/asset owner and
the wider community;
5) Calculate the cost (capital and operating) of
implementing each mitigation option through
reference to existing cost databases or
contractors estimates;
6) Calculate the benefits in terms of avoidable
losses without mitigation at the organisation
and community levels using the resilience
scorecards;
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IABSE Symposium 2019 Guimarães: Towards a Resilient Built Environment - Risk and Asset Management
March 27-29, 2019, Guimarães, Portugal
453
7) Combine 5) and 6) for each mitigation option
using a hybrid version of the forward and
backward looking CBA frameworks to derive
loss-frequency curves and develop a rank order
list based on the B/C ratio;
8) Compare the economic and social benefits
associated with each mitigation option and
evaluate the impact of including each as part of
the maintenance/refurbishment life cycle of
the building or asset;
9) Instigate full technical design procedures for
those mitigation options that form part of the
next maintenance/refurbishment cycle;
10) Develop disaster management and business
continuity and resilience plans to manage the
impact that an EILD event will have on building
asset performance for any mitigation options
that have been deferred future application.
8. Conclusions and Next Steps
The LIQUEFACT project aims to develop a more
comprehensive and holistic understanding of the
earthquake soil liquefaction phenomenon and the
effectiveness of mitigation techniques to protect
structural and non-structural systems and
components from its effects. The LIQUEFACT
project will evaluate the mitigation techniques
against the potential improvements that could
accrue to community resilience in regions prone to
EILD events. This paper provides an introduction to
CBA as it is applied to the valuation of mitigation
interventions that seek to reduce the impact of
disaster events on individual buildings/assets and
the wider community. The paper has outlined the
basic principles of a CBA and drawn attention to the
issues that need to be considered when assessing
both the costs and benefits associated with a
mitigation intervention. The paper has reviewed
the role of CBA in the project development cycle
and discussed alternative theoretical approaches
that have been developed by researchers studying
disaster management and disaster risk reduction
mitigation. In reviewing these theoretical
approaches the paper has considered both the
benefits and limitations of applying CBA in disaster
management and disaster risks reduction and,
3 Available at:
https://zenodo.org/record/1887957#.XAY30Ux2taQ
whilst it acknowledges that the limitations are
significant, concludes the benefits of using CBA to
inform business decisions, outweighs the
limitations. The paper also outlines a bespoke
hybrid LIQUEFACT CBA framework that can be
applied to the evaluation of alternative mitigation
interventions that seek to reduce the impact that
EILD events have on individual buildings/assets and
the wider community. In developing the
LIQUEFACT CBA framework the paper has
considered the specific characteristics of EILD
phenomenon and explained how these are
addressed within the LIQUEFACT CBA framework.
Finally, the paper explains how the LIQUEFACT CBA
framework is integrated into the LIQUEFACT RAIF
to support a 10 step model that will be used to
validate the LIQUEFACT CBA, RAIF, LRG through a
range of use-cases currently being developed in the
LIQUEFACT project. Further details of the CBA
modelling can be found in LIQUEFACT Deliverable
5.33.
9. Acknowledgment
This project has received funding
from the European Union’s
Horizon 2020 research and
innovation programme under
Grant Agreement No 700748.
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... Amongst the most difficult problems in geotechnical earthquake engineering is liquefaction. Due to the liquefaction in the previous earthquakes, settlements, lateral displacements, and lateral spreading were observed in the loose sandy soils and severe damages have been recorded in the structures (Bao et al. 2019;Jones et al. 2019;Amanta et al. 2019). These earthquakes and induced damages emphasize the necessity of soil improvement against liquefaction. ...
... Due to the destructive effects of liquefaction, much research has been motivated to assess liquefaction potential and liquefaction mitigation methods (Boulanger and Hayden 1995;Miller and Roycroft 2004;Yegian et al. 2007;Shenthan et al. 2004;Hasheminezhad and Bahadori 2019;Zeybek and Madabhushi 2017;Farzalizadeh et al. 2021;Flora et al. 2021;Fasano et al. 2021). It is challenging to compare the different methods of controlling liquefaction in susceptible soil to choose the most appropriate method (Jones et al. 2019). However, the main aim of most soil improvement techniques used for liquefaction mitigation is to avoid large increases in the excess PWPs during earthquake (Bao et al. 2019;Dines et al. 2020;O'Donnel et al. 2017;Shen et al. 2019;Huang et al. 2019). ...
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  • R Campbell
Fujiwara, D. and Campbell, R. Valuation Techniques for Social Cost-Benefit Analysis: Stated Preference, Revealed Preference and Subjective Well-Being Approaches. Department for Work and Pensions and HM Treasury. 2011. Online: https://www.gov.uk/government/publicatio ns/valuation-techniques-for-social-costbenefit-analysis
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  • R Mechler
  • J Czajkowski
  • H Kunreuther
  • E Michel-Kerjan
  • W Botzen
  • A Keating
  • C Mcquistan
  • N Cooper
  • I Donnell
Mechler, R., Czajkowski, J., Kunreuther, H., Michel-Kerjan, E., Botzen, W., Keating, A., Mcquistan, C., Cooper, N. and O'Donnell, I. Making communities more flood resilient: the role of cost benefit analysis and other decision-support tools in disaster risk reduction. 2014