The primary purpose of the study reported herein is to present methods for using estimated project benefits as the basis for distributing the capital, oeprating, maintenance, and replacement costs associated with the proposed Senegal River development program. The problem is complicated because the Senegal River is an international stream, so that it is necessary to consider not only the various economic use sectors involved with the program, but also the three separate countries of Mali, Mauritania, and Senegal. In attempting to meet the primary objective stated above, the report proposes an economic model which estimates economic benefits of the development program for each of various use sectors. These benefits then are distributed to each of the three participating countries. In order to demonstrate the use and capabilities of the model, the results of several computer runs are included in the report. Each run is based on specific assumptions concerning such parameters as commodity prices and rate of project development. The model is based on sound economic priniciples, but at present there are many unknown factors and conditions associated with the proposed river development program. Thus, the model results contained in the report are of necessity based on many assumptions. For example, the project configuration itself was assumed. however, at the present time the model is capable of providing some indications of the relative sensitivities of the conomic system to various input parameters and system variables. Four commonly accepted cost allocation methods are examined and of these, one method, the adjusted separable cost-remaining benefits method, is recommended for adoption in future cost allocation analysis pertaining to the proposed Senegal River development program. In this connection, as project configuration, costs of production, and other input quantities become more clearly defined, cost allocations suggested by the model will become more accurate and realistic. However, it is emphasized that the relative benefit streams from the proposed development program to each of the participating countries will be continuously changing in terms of the constantly shifting pictures of (1) world prices and (2) the rate of development for project utilization within each of the countries involved.
Riley, J. Paul; Andersen, Jay C.; Bishop, A. Bruce; Bowles, David S.; and Keith, John E., "Cost Allocation Alternatives for the Senegal River Development Program" (1978). Reports. Paper 130.