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Decisions, Decisions: Civil Engineering and Environmental Systems, 2013
Decisions, Decisions: Civil Engineering and Environmental Systems, 2013
Decisions, decisions
Paul W. Jowitt∗
Institute for Infrastructure and Environment, Heriot Watt University, Edinburgh EH14 4AS UK
One of the key drivers in the emergence of civil engineering systems in the 1960s as a field of discourse
was the potential of developing greater engineering understanding using a range of systems models and
the need for better engineering decisions and outcomes. Important engineering decisions generally fall
into two types. Those that seek to minimise losses such as those associated with very low probability and
high consequence catastrophic outcomes and those that seek to maximise opportunity between competing
options. This short essay concerns the latter. The assessment of large-scale, wide impact engineering
decisions has proved problematic. This stems from a number of factors. There are often many non-monetary
impacts, the systems boundaries (in space and time) are not clear, the stakes are high and there are many
stakeholders (some of whom are not involved in the decision process). All these factors mean that the use
of Cost–Benefit analysis as a decision-making criterion is controversial, ambiguous and in some cases
inappropriate. In addition, there are often other non-monetary factors to be considered. The consequence
is that long-term infrastructure decisions get bogged down or deferred and the default decision is to do
nothing.
Context
By the 1960s, engineering decisions – such as those that involved large-scale infrastructure – were
becoming more complex and with wider impacts. These impacts extended over time, space and
across different elements of society, the economy and the environment. Research in the 1950s
under the Harvard Water Programme had recognised this and had brought together large-scale
water resources simulation and optimisation tools (facilitated by the increasing availability of
what were then deemed to be powerful computing facilities) with economic appraisal methods
applied to large-scale water resources development. Similar techniques were being developed in
other areas of application that also impacted on the public domain.
In the decade just before the first appearance of the Journal of Civil Engineering Systems (as this
journal was then called), a number of major infrastructure decisions were in the offing. In the
UK, these included the Channel Tunnel (for at least the third time!), the location of the Third
London Airport and the possibility of generating energy from a tidal barrage across the Severn
Estuary. Similar large-scale infrastructure decisions were being made or considered across the
globe. The High Aswan Dam had been completed in 1970 and was filled by 1976. France’s
massive expansion of its nuclear energy programme was initiated in 1974 in the wake of the
∗ Email: p.w.jowitt@hw.ac.uk
1973 oil crisis. On the other hand, the financial strictures brought on by the oil crisis also led to
a reduction in the renewal and development of strategic infrastructure. There were other factors
that also hindered large-scale infrastructure investment – environmental and social concerns were
beginning to affect decisions on infrastructure, causing their delay or cancellation. For example,
the Silent Valley Dam Project in Kerala, India was cancelled in the face of widespread protests
over the impacts on the environment and communities (MEF 2002).
It was beginning to emerge that there was not just an oil crisis, but a decision-making crisis
over large-scale infrastructure projects with wide-scale impacts, at least in democratic societies.
This has proven to be a two-edged sword – political parties’ responsiveness to public opinion
often extends only as far the date of the next election, to the detriment of long-term infrastructure
planning and delivery. It is often only in command and control economies, where public opposition
has little influence, that projects with major social and environmental impacts (such as the Three
Gorges Dam in China) have remained possible. This situation is characterised by the changing
stance of the World Bank with respect to its lending policy for large dams (McNees 1996, 1):
At first, large dams were simply regarded as engineering structures – that is, in terms of their usefulness for generating
electric power and improving the management of water. In the 1960s, cost/benefit analysis became accepted as the
standard criterion for the justification of large dams, and the World Bank pioneered the modeling of river basins and
new methods of economic analysis of multipurpose projects in developing countries.
It was not until the 1970s and 1980s that social and environmental impacts, previously treated as inevitable ‘side
effects,’ emerged as fundamental concerns. The Bank responded by adopting guidelines to integrate social and
environmental concerns into the analysis of proposed projects and to avoid or mitigate the adverse consequences
of large dams. It issued guidelines on dam safety in 1977; on involuntary resettlement in 1980, 1986, and 1990; on
safeguards for indigenous people in 1982; on natural habitat in 1986 and 1995; on environmental aspects of dams
and reservoirs in 1989; and on environmental assessment in 1991.
These changes are tantamount to saying that the systems boundaries had been extended.
Measuring worth
Even within the confines of a decision problem which has only monetary outcomes, measuring
its worth is not straightforward when the flows of money take place over time. The time value of
money is dealt with using discounting methods, but the choice of the discount rate, especially for
large-scale, long-term projects, is open to debate. This is amply demonstrated in a paper by Heal
(2008, 2) on climate change economics:
As anyone who has spent even a short time studying climate change must be aware, one of the most controversial
issues is the choice of a discount rate. By this we mean the pure rate of time preference (PRTP), as distinguished
clearly from the consumption discount rate (CDR).
Even without the complication of cost and benefit streams over time, the utility (worth) of a
monetary sum does not necessarily equate to its true value. This observation was described in
what has become known as the St Petersburg Paradox, first stated by Nicolas Bernoulli in a letter
to Pierre Raymond de Montmort of 9 September 1713 and then presented to the St Petersburg
Academy by his cousin Daniel (Bernoulli 1738). Put simply, it is this:
Peter tosses a coin and continues to do so until it should land ‘heads’ when it comes to the ground. He agrees to give
Paul one ducat if he gets ‘heads’ on the very first throw, two ducats if he gets it on the second, four if on the third,
eight if on the fourth, and so on, so that with each additional throw the number of ducats he must pay is doubled.
Suppose we seek to determine the value of Paul’s expectation.
The expected value of the bet is infinity, yet no-one would be prepared (or could!) afford the stake.
Essentially, the utility of money is not linear – the utility of $2 million is not twice the utility of
$1 million. Insurance policies work off the same paradox – policyholders pay over the odds to
protect themselves against losses.
Civil Engineering and Environmental Systems 287
The St Petersburg Paradox shows that it has been long recognised that monetary value does not
equate linearly to real perceptions of value/utility. This was put on a firm theoretical footing by
von Neumann and Morgenstern (1944) in their seminal text on the Theory of Games and Economic
Behaviour, which established a normative approach to decision-making and Utility Theory and
which could be extended to decisions that had monetary and non-monetary outcomes.
Their text on the Theory of Games and Economic Behaviour provided another direction for
systems theory to explore, namely the nature of engineering decision-making under conditions of
both random and competitive uncertainty. The latter is exemplified by their development of Game
Theory, which not only led to major insights in terms of duality theory, linear programming and
shadow pricing, but also to the theoretical foundations of utility/value theory. In many ways, the
whole text is a rite of passage for the ‘student’ of engineering systems who want to understand
decision analysis more formally.
Whether or not a decision problem under uncertainty is concerned with randomness of out-
comes or the unknown actions of an adversary, it depends on some notion of ‘value/utility’ and
‘expectation’ (the outcomes measured on some scale weighted by their likelihood). This requires
some rigour which von Neumann and Morgenstern sought to provide.
The von Neumann and Morgenstern postulates of Utility Theory are quite simple.
First, preferences are transitive, so that if A is preferred to B and B is preferred to C, then A is
preferred to C.
Second, there is no added value from successive episodes of uncertainty. That is, the following
gambles would have the same utility/attractiveness.
Gamble 1: Outcome A with probability p1, outcome B with probability p2 and outcome C with probability p3 (and
where, of course, p1 + p2 + p3 = 1).
Gamble 2: Outcome B with probability p2 and outcome A or C with probability (p1 + p3), followed by a second
episode which results in outcome A with probability p1/(p1 + p3) and outcome C with probability p3/(p1 + p3).
This ensures rational decision-making excludes seekers of risk for its own sake. The prescription
is one of normative decision-making and does not necessarily reflect the revealed behaviours of
the gambler!
The consequence of von Neumann and Morgenstern’s two requirements is a utility scale unique
up to linear transformation. That is, if outcomes A, B and C have numerical utilities U(A), U(B)
and U(C), then an equally valid scale is V (A), V (B) and V (C) with
V (A) = α · U(A) + β,
V (B) = α · U(B) + β,
V (C) = α · U(C) + β,
where α > 0.
This enunciation of Utility (value) Theory (and its calibration through hypothetical lotteries)
has two implications for civil engineering systems: the first in engineering risk analysis – the
way we assess low-probability/high-consequence (catastrophic) events. What is an acceptable
risk? The recent papers by Elms and Brown in this Journal and elsewhere are concerned with
such issues. But even with engineering decision problems without such extremes of outcomes
and even where the uncertainty of outcome is far narrower, there are issues to be addressed in
assessing utility. This is the second implication.
There are two issues which make informed decision-making difficult. The first is with multi-
criteria decision-making. The second is where there are many stakeholders. Both are exacerbated
if those involved – including engineers – are not aware of the limitations and assumptions implicit
in the methods they are using. It helps to have read the literature.
288 P.W. Jowitt
Of course, if there is no uncertainty, then it is simply a matter of choosing the option that leads
to the most preferred outcome. If only that were so simple. It rarely is. The outcomes of real
engineering decisions are often multi-attributed, multi-faceted and there may be several criteria
which need to be addressed (cost, safety, performance, environmental impact and so on). Not only
that, but there will usually be a range of stakeholders/parties whose opinions are diverse.And some
will have more power than others to influence the decision. Consultation with affected/interested
parties does not necessarily mean that their opinions count for much.
In engineering practice it has now become common practice to make decisions using multi-
criteria decision analysis. Typically, the method is applied to options appraisal – such as choosing
the preferred option for several competing solutions for such as a wastewater treatment problem,
choosing a preferred contractor, a river crossing. Or even more ambitiously, for the location of
a major piece of infrastructure such as an airport, national high-speed rail route, etc. In such
appraisals it is not unusual to see the various decision criteria identified, the performance of each
option under each of these ‘scored’ and the importance of each criterion ‘weighted’ (using one
of many dubious methods). The (discounted) Benefit–Cost Ratio (with some implicit or explicit
boundary) might be a one such criterion. The preferred option is then determined by taking the
score for each criterion, weighting it by the importance of that criterion and adding the weighted
scores to get an overall rating. This ‘Score ‘em, Weight ‘em and Add ‘em’ approach appeals to
engineers. Engineers like numbers! But rarely have the engineers using such methods familiarised
themselves with the literature on Utility/Value Theory (either the seminal work of von Neumann
and Morgenstern or the powerful work on valuewise independent utility functions of Fishburn
(1964, 1970) and, more modestly, Jowitt (1984)). As a result, they often ignore the limitations,
such as the possible synergistic/antagonistic impacts of some of the criteria, or the interpretation
(and therefore the determination) of the weighting factors for each criterion. In many cases this
might not turn out to matter too much for decisions which do not matter much. . . . It gets worse:
the weighting factors of the different criteria often take place in a group session of the different
stakeholders or proxy stakeholders. The individual’s scores within the group are averaged out,
and worse, the weightings are too. The methods are often not rooted in any established theory and
the final scoring is unrecognisable by any individual. It is amorphous and there is no granularity
and results in little ownership. If engineers are going to engage in the process of decision-making
then it would be best if they were at least familiar with the underlying theory and literature.
It would be far better for decisions of significance if the options were kept open, the evidence
presented and the preferred option determined by debate and consent. The numbers game is best
confined to problems of low significance!
The difficulties in offering an engineer’s rationale for decision-making are starting to emerge.
Which is perhaps why many engineers shun this aspect? With large-scale infrastructure decisions,
it starts to drift into politics and economics. . . .. Engineers and economists need to know their
place! An economist colleague described it thus:
No doubt a similar aphorism could be expressed for engineering. An engineering colleague offered
the following view about engineers and politics:
Civil Engineering and Environmental Systems 289
Civil engineers shouldn’t get involved in politics? Transport is all politics! (Ridley, personal communication, 2006)
Ironically, whilst even politicians talk about systems-level thinking, the development of systems-
level solutions is still not a well-thought out area of engineering analysis and synthesis, despite
some basic foundations laid down over 50 years ago through such as the Harvard Water Programme
(Harvard Gazette 2005; Maass et al. 1962). This not only provided a range of computational
modelling and simulation tools to assess water resources development, but also provided for the
reliability and quantitative risk assessment of various engineering solutions. It also gave guidance
on how various options should be assessed in terms of socio-economic performance and Cost–
Benefit analysis at a range of scales – i.e. using a range of systems boundaries, both spatial
and temporal. It was embodied into US legislation on water resources, requiring performance
assessment on a range of objectives which anticipated elements of the Brundtland Definition of
sustainable development by some 30 years:
(1) National Economic Development,
(2) Environmental Quality,
(3) Social well-being and
(4) Regional Development.
Within the Harvard Model, the decision outcome space is four-dimensional and the set of Pareto
optimal solutions is almost infinite. Nevertheless, it is over this complex space that decisions must
be made.
Whilst engineers might not be the final arbiters, they do need to provide the evidence upon which
decisions are made. We have entered the systems age. The problems we face are at the systems
level and we need systems-level solutions (Jowitt 2010). The engineer needs to be involved.
Forty years on
The start of my career as a civil engineer coincided with the Roskill Commission on the location
of the Third London Airport (Roskill 1971). Although I was not involved, it defined the topic
of my Ph.D. research – namely that civil engineering decision-making should adopt a systems-
level approach... . The Roskill Commission recommended Cublington (in rural Buckinghamshire,
61 km NW of London), primarily on the basis of a Cost–Benefit analysis. The incoming Heath
Government of 1970 rejected it on environmental grounds and opted instead for Maplin (in the
Thames Estuary, 74 km east of London). The ‘discovery’ that Maplin Sands were a breeding
ground for Brent Geese was one of the factors – one of the others was cost – that prompted the
Wilson Government, which came to power in 1974, to ditch Maplin and choose Stansted (in rural
Essex 48 km NE of London)! The whole story became the focus of a Systems Module in the UK’s
Open University... (OU 2011).
Table 1 shows some of the major infrastructure projects in the UK that were in the offing 40
years ago alongside those that are current (with one example from the USA). One might ask if
anything has changed.
The projects given in Table 1 almost tell their own story about how large-scale, long-term,
wide-scale infrastructure projects can be stymied by short-term political time horizons and exter-
nalities such as energy prices and financial uncertainty/instability. Looking in to the future, such
externalities are likely to include geopolitics/political instability, migration (rural to urban and
transnational), climate change and technological innovation.
What is less obvious from the examples given in Table 1 is that the criteria upon which such
decisions are made are often opaque. The twin decisions by the incoming UK Coalition Govern-
ment in 2010 – to support HS2 and cancel the Severn Barrage – are a case in point. The reasons
290 P.W. Jowitt
were rather thinly explained and accompanied by selective strategic commentaries. For HS2, there
has been a succession of revised Benefit–Cost Ratios (usually downwards!).
The Armitt Review (Armitt 2013) was established to determine:
(1) What institutional structure will best support the type of long-term strategic decision-making
that is demanded by infrastructure planning and implementation and
(2) How the cross-party consensus that is fundamental to actually delivering upon these decisions
can be forged.
The Armitt Review sought to square this circle, recommending a new National Infrastructure
Commission with statutory independence, undertaking for each decade an evidence-based assess-
ment of the UK’s infrastructure needs over a 25–30 year horizon. Once the proposed National
Infrastructure Commission has completed its assessment of needs, its work would be passed to
Government to obtain Parliament’s approval and then to the relevant Government Departments
to produce plans for the funding and delivery arrangements of the specific schemes. Despite
widespread support, the proposal has yet to meet with Government support.
Systems-level decision-making
As we have seen in recent times, the same issues continue to plague large-scale infrastructure
decisions. Infrastructure decisions are becoming increasingly important and high on the agenda.
And the term ‘systems-level approach’ has entered the language of the discourse.
What remains to be done is to figure out what that actually means and then to implement it.
That the major infrastructure projects of the present day are almost always controversial is not
surprising, but the problems appear to be exacerbated because the basis of the decisions is unclear
and the systems boundaries surrounding them are ill-defined (or not defined at all).
There are also issues related to the ownership of the decision and where responsibilities lie.
Split responsibilities
The ownership of the UK infrastructure base – in common with but perhaps more so than in other
countries – is diverse. It is split between the State (Central Government, Devolved Administra-
tions and Local Authorities); the Private Sector (electricity, water, oil and gas and telecoms); the
Regulated Industries (some of which are subject to multiple regulators – economic (to balance
customer and shareholder interests) and environmental and public health); Hybrid State/Private
Sector (e.g. the UK rail industry – Network Rail and the Train Operating Companies), etc.
This means that there is no single ‘owner’ of the UK’s infrastructure – and therefore no inte-
grated infrastructure plan. Each sub-owner determines its infrastructure plan according to its
own objectives. This does not encourage inter-sector coordination of infrastructure planning, and
worse, regulatory requirements sometimes preclude it.
For example, it is difficult to shift from vertical ‘economies of scale’ within a particular sector
to horizontal ‘economies of scope’ between sectors (e.g. linking the water and power sectors to
produce a better systems outcome in terms of water efficiency, energy use and CO2 reductions).
There are no simple answers to this – but what we can do is to provide the framework
for a systems-level approach which offers the prospect for developing sustainable long-term
infrastructure planning.
292 P.W. Jowitt
It almost goes without saying that long-term infrastructure planning should be sustainable. But
this needs to be sustainability at the ‘systems level’, not simply at the ‘within-project level’. The
latter is often just about best practice, sensible use of resources, environmental protection, low
carbon solutions, etc.
Sustainability at the systems level requires something far more strategic and involves the
assessment of the economic, social and environmental impacts at a range of scales – physical
and temporal. It brings us back to the central ethos of systems-level decision-making and the
questions it raises.
• How – and by whom – are such decisions made? The Owners, the Regulators, the Market or the
whim of politicians? Somehow, these need to be reconciled – and made rather more explicit.
• How do we deal with the future? Discounting deals with the discounting of monetary costs
and benefits, but it does not cope adequately with the future value (and the consequences) of
impacts which cannot be easily monetised. By definition, it discounts the future. And whilst
it may be possible to discount future carbon prices, one cannot discount the future emissions
(or their impacts) themselves.
• What are the systems boundaries – and who sets them?
• Transparency – how transparent is the information upon which the decisions are made?
• What are the decision criteria? Benefit–Cost Ratios, profit, whim or something more visionary
and consensual?
The latter brings us back to the Harvard Water Programme developed in the 1950s/1960s in the
USA, in which large-scale water resources assessments had to be assessed at a range of scales (i.e.
systems boundaries) and across a range of different stakeholders (including the environment).
The Harvard Water Programme was unique in that for the first time it established a working
interdisciplinary approach to the development of water resources. It was jointly administered by
the Economics Department and the then Division of Engineering and Applied Sciences. It spawned
the publication of the landmark text on Design of Water Resource Systems (Maass et al. 1962) and
later led to the establishment of the Journal Water Resources Research. (Harvard Gazette 2005).
The Harvard principles lost sway in the 1970s, with a shift to a more laissez-faire approach. There
are now signs of the pendulum swinging back... .
Conclusion
The need for systems-level decision-making for large-scale infrastructure proposals has never
been greater. One way or the other, it comes down to our ability to take a systems view and
make decisions accordingly. There will always be controversy. That is life. But controversies are
best assuaged by having the evidence, the objectives and scope of the decision in the open. The
engineer’s role in this process is vital.
References
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Copyright of Civil Engineering & Environmental Systems is the property of Taylor & Francis
Ltd and its content may not be copied or emailed to multiple sites or posted to a listserv
without the copyright holder's express written permission. However, users may print,
download, or email articles for individual use.