Cost-Benefit Analysis

Overview:
Cost-benefit analysis is used by governments and other organizations
to evaluate the desirability of a given policy or to justify the allocation of scarce financial resources to attain an established performance goal. Cost-benefit analysis also provides a portable, scalable model for organizing facts, assumptions, estimates, and findings in support of complex decisions. This course introduces concepts that are applicable to selecting optimal decisions through the use of trade-off analysis. In the course, financial and program staff, such as budget and program analysts as well as project managers and contracting personnel, will learn to conduct accurate cost-benefit analyses, thereby identifying choices that increase public welfare and improve efficiency.

Objectives:
How to:
• Forecast cost and benefits over a relevant time period
• Convert all costs and benefits into a common currency
• Apply a discount rate
• Calculate net present value of project net benefits
• Perform sensitivity analysis
• Evaluate alternatives and select the best value option based on costs and benefits
• Incorporate risk (uncertainty) in calculating costs and benefits
• Utilize Microsoft Excel tools to facilitate compilation and analysis of cost-benefit elements
• Reference applicable OMB guidance and Executive Orders

Activities:
• Cost-Benefit Analysis Fundamentals
• Costs
• Benefits
• Time Value of Money
• Time-Based Decision Criteria Measures Used in Cost Benefit Analysis
• Sensitivity Analysis