Cost benefit analysis

Cost Benefit Analysis (CBA) is a methodical and logical approach that is widely used in economic appraisal and evaluation, offering a rigorous approach in assessing the economic viability of investment proposals. It has wide-ranging applicability to project evaluation across many sectors, and has been refined to offer decision-makers additional evidence-based information upon which to make sound investment choices.

CBA involves the quantification and monetisation of cost and benefit streams associated with projects. It is used extensively across project selection, prioritisation and justification. Ultimately, applying robust CBA helps solve the allocation problem – a core issue fundamental to the discipline of applied economics – that is, assigning scarce funding among competing investment options.

ACIL Allen has deep expertise and experience in undertaking rigorous and robust CBAs, using sophisticated techniques such as Monte Carlo simulations. We have applied CBA to projects such as an inland freight railway line between Melbourne and Brisbane, the establishment of a low cost carrier hub at a Northern Australian airport, major hospital redevelopments (in New South Wales, Queensland and Tasmania) and the restoration/demolition of a disused bridge in Sydney.

CBA can also be used in the economic appraisal of current and proposed government policies, to assist governments in determining whether the benefits of these policies outweigh their establishment, implementation and compliance costs. For example, ACIL Allen has applied CBA in assessing options to increase the environmental sustainability of rental properties, the harmonisation of regulations governing the legal profession across states and territories, new child safe standards for organisations providing facilities and services to children, and new safety regulations for recreational boats.

Finally, ACIL Allen has also applied CBA to assess the returns to investment in research and development activities by organisations such as CSIRO, Sustainability Victoria, the Defence Science and Technology Group, and agricultural industry peak bodies such as Australian Pork Limited.