Cost Benefit Analysis
Cost Benefit Analysis PDF: 1481 KB
At a glance
This Part of the ATAP Guidelines provides guidance on the use of cost-benefit analysis (CBA) in the appraisal of transport options/initiatives and their prioritisation.
The context is the first five steps of the ATAP Framework:
- Step 1 identifies jurisdiction goals, transport system objectives and targets (see Part F1)
- Step 2 identifies and assesses priority problems preventing the achievement of transport system objectives identified in step 1 (see Part F2)
- Step 3 involves generating and assessing a broad range of options for addressing a priority problem(s) identified in step 2 (see Part F3).
- The end result of step 3 is the identification of a preferred option that becomes a proposed justified initiative through the advancement of a supporting business case in step 4 (see Part F4).
- Prioritisation across proposed initiatives occurs in step 5 (see Part F5).
Cost-benefit analysis (CBA) plays a central role in step 3 Options Generation and Assessment, in which it is a key element of the appraisal process. It also influences decisions in step 5 Prioritisation of Initiatives and Program Development.
Chapter 3 of Part F3 presents the ATAP Guidelines’ three stage approach to the assessment of options / initiatives:
- Strategic Merit Test (SMT)
- Rapid appraisal – including a rapid CBA
- Detailed appraisal – including a detailed CBA.
The appraisal process involves monetised benefits and costs as well as non-monetised benefits and costs. All of the above are brought together in an Appraisal Summary Table (AST) to demonstrate the overall benefits, costs and net benefits (benefits minus costs) of an initiative.
The discussion in this Part supports the guidance given in Part F3 by providing an extensive coverage of CBA to facilitate good understanding and application by transport practitioners.
Note that the discussion in this Part applies to the assessment of both options and initiatives as defined above. While the discussion generally refers to initiatives, it is meant to refer equally to options.