Definition

Economic assessment of contingency plans is an analysis of the benefits to be obtained by any investments in contingency that are considered by stakeholders. The aim is to assist ANSPs and regulators in assessing the rationale of investing in contingency planning for service continuity and in securing (best possible) value for money.

Objective

In order to help decision makers and contingency planners to scope contingency plans for service continuity with a higher degree of confidence, the plans should be substantiated by economic assessment before stakeholders' money is committed and work towards implementation begins. Contingency is an inherently unlikely event. Therefore economic assessment of contingency plans for service continuity raises specific issues. For instance, a prime objective is to achieve adequate contingency capability at a reasonably acceptable cost. The assessment of the value needs to take account of the very small likelihood of events such as fires and also the financial impact of such events on the ATM provision. The role of cost benefit analysis (CBA) within an overall economic assessment is to provide a means of assessing how to meet that strategy in the most cost effective way.

Description

A framework for the performance of the economic assessment could be as follows;

1. Hazard assessment. List and describe the outages. Determine the probability of occurrence of clusters of outages and perform an economic assessment of the “wait and see” scenario.
2. Develop candidate mitigating strategies for each cluster of outages. Describe the operating concept of the strategy. Describe how it matches the outages.
3. Perform economic analysis of each mitigating strategy. Dialogue with the stakeholders; perform analysis for each category of Stakeholders. Finalise the economic analysis, dropping the least cost-effective mitigating strategies and rank the remainder by merits.
4. Propose an informed local policy of Service Continuity

Within this overall framework it is important to remember that the wider economic assessment of contingency is only a part of the decision making process in service continuity. No decision to invest, however, depends solely on the results of an economic assessment of candidate strategies. A wider range of local technical and organisational factors must also be considered, such as:

• Political decision
• Binding nature of the legal framework
• The ability to finance which may vary depending on e.g. the cost of money or the status of the industry at that time
• The need to account for limited financial and/or human resources and priority of the programmes and to spread the required investments over a number of years
• The possibility to link the decision to the outcome of a future technological change
• The opportunity to link the decision to a programmed upgrade of facilities
• The possibility to link the contingency planning for service continuity to the success of bilateral or multilateral arrangements, hence to delay the decision as to the strategy until such arrangements are in place
• The attitude of the local airspace users and airports and their willingness to endorse a risk and/or share the burden of the financing of the mitigating strategy
• Conclusions of the safety and security assessment of each mitigating strategy.

Related Articles

• Operational Concept for Contingency
• Contingency Lifecycle
• Policy on Contingency
• Service Continuity
• Contingency Process

Further Reading

• For further information on Contingency Planning see the EUROCONTROL, Guidelines for Contingency Planning for Air Navigation Services (including Service Continuity). In particular, Appendix H of the Second Edition of the Guidelines contains a detailed analysis of CBA within a wider economic assessment process model, from page 136.
• Service Continuity-Economic Aspects: A complex decision-making process Hazard identification (probability of disruption) and support to Decision-Making are discussed in this presentation.
• Outages, their consequences and probabilities of occurence-How to Quantify them Economically Challenges to deal with probabilities, the duration of an outage and its impact and how can they be "quantified" economically.
• Building a Business Case The scope of this presentation is to analyse the "wait & see"scenario. The cost of "wait & see"scenario is estimated through LANSA ANS example.
• Overview of Economic Aspects of Contingency Summary of the basic principles of business case performance and of the logical framework for the performance of the economic assessement.
• See also the EUROCONTROL Reference Guide to EUROCONTROL Guidelines for Contingency Planning