converge · Decision Making · 480–1440 min · 1-5 people · low energy

Cost-Benefit Analysis

Cost-Benefit Analysis (CBA) systematically compares the total costs of a project or program with its benefits, using a common metric (usually monetary). It provides a quantitative basis for assessing the overall value and efficiency of an investment.

When to use Cost-Benefit Analysis

Use when needing to make informed decisions about resource allocation, program design, or policy choices, especially when comparing multiple options.

What it solves

Difficulty in quantifying the overall impact of a program; needing a clear justification for investment.

How to run Cost-Benefit Analysis, step by step

  1. Define the scope of the analysis and identify all relevant costs and benefits (120 min)
  2. Quantify the costs and benefits in monetary terms (240 min)
  3. Discount future costs and benefits to their present value (60 min)
  4. Calculate the net present value (NPV) and benefit-cost ratio (BCR) (30 min)
  5. Conduct sensitivity analysis to assess the impact of uncertainty (30 min)

Materials needed

  • Financial data
  • Spreadsheet software
  • Discount rate tables
  • Sensitivity analysis tools

Facilitator tips

  • Ensure all relevant costs and benefits are included.
  • Use a consistent and defensible discount rate.
  • Conduct sensitivity analysis to assess the robustness of the results.

Common pitfalls

  • Difficulty in quantifying intangible benefits; use appropriate valuation techniques.
  • Bias in cost and benefit estimation; use independent data sources.

Variations

  • Social Return on Investment (SROI)
  • Cost-Effectiveness Analysis (CEA)

Running it online or hybrid

Data collection and analysis can be done remotely, with findings presented and discussed via video conference.

What it produces

A detailed report outlining the costs, benefits, and net present value of the project or program.

Origin

Adapted from BetterEvaluation — source

Build a session around Cost-Benefit Analysis

METODIC places Cost-Benefit Analysis inside a complete, timed session plan — agenda, worksheets, facilitator guide and slides — matched to your group and goal.

Generate a session with Cost-Benefit Analysis · Try METODIC free