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In evaluating whether a project is a cost-effective means of providing the water or sewer <br />service, the recipient should consider the need for the project, the costs and benefits of the <br />project compared to alternatives, and the effectiveness of the project in meeting the identified <br />need. Recipients are not required to conduct a full cost -benefit analysis; however, they should <br />consider and analyze relevant factors. For example, a recipient may not use funds to pursue a <br />costly dam rehabilitation to provide drinking water to a community if it could provide the same <br />service with a significantly smaller investment by drawing water from another available <br />reservoir, assuming that doing so would meet the other requirements of the final rule. As detailed <br />further below, recipients are only required to assess cost-effectiveness of projects for the creation <br />of new drinking water systems, dam and reservoir rehabilitation projects, or projects for the <br />extension of drinking water service to meet population growth needs. <br />Certain DWSRF eligibilities are already subject to a cost-effectiveness test. Specifically, <br />projects that create new drinking water systems must be a cost-effective solution to addressing <br />the identified problem.303 The EPA also imposes a cost-effectiveness condition on dam and <br />reservoir rehabilitation projects undertaken pursuant to its class deviation from the DWSRF rule. <br />These projects are particularly expensive and, unlike in the case of other types of eligible <br />projects, there are often available alternatives to conducting these projects. Projects for the <br />extension of drinking water service to meet population growth needs are also often particularly <br />expensive, and there are often different ways to meet the needs of expanding populations. <br />Treasury will accordingly require that recipients engage in a cost-effectiveness analysis when <br />engaging in projects for the creation of new drinking water systems, dam and reservoir <br />rehabilitation projects, or projects for the extension of drinking water service to meet population <br />303 See 40 CFR 35.3520(b)(2)(vi). <br />267 <br />