Cost Benefit Analysis - Key Features and Future Directions

Cost Benefit Analysis (CBA) has played a critical role in public policy for more than 50 years. CBA goes beyond financial analysis which considers direct monetary costs and revenues. It enables policy makers to assess whether a policy initiative or project will provide a net community benefit, taking into account that the (limited) resources deployed in implementing the initiative or project have alternative productive uses. Correctly applied, CBA is a rigorous technique for evaluating projects competing for limited public sector resources. However, it does have its limitations and failings. To overcome the systemic failings, advanced CBA needs to be capable of tracking the long term and 'second round' benefits of major transport projects and better quantifying 'intangibles' that are fundamental to architectural and cultural building projects. There is a need for improved consistency across practitioners, through peer review and the publication of peer-endorsed methodologies for CBA.