Evaluating water quality investments using cost utility analysis

This study borrows concepts from healthcare economics and uses cost utility analysis (CUA) to select an optimum portfolio of water quality enhancement projects in Perth, Western Australia. In CUA, costs are handled via standard discounted cash flow analysis, but the benefits, being intangible, are measured with a utility score. Our novel methodology combines CUA with a binary combinatorial optimisation solver, known as a 'knapsack algorithm', to identify the optimum portfolio of projects. We show how water quality projects can be selected to maximise an aggregate utility score while not exceeding a budget constraint. Our CUA model applies compromise programming (CP) to measure utility over multiple attributes in different units. CUA is shown to provide a transparent and analytically robust method to maximise benefits from water quality remediation investments under a constrained budget.