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Guide to Social Cost Benefit Analysis

Step 7: Prepare final report

176.The report serves two functions:

  • It communicates the results of the CBA. To be helpful to the reader, its centre-piece should be a summary cost-benefit table, which on one page sets out the main project alternatives, the main benefits, the main costs and the summary measures (NPV, CBR and/or MIRR), and includes notes that direct the reader to the place in the report where further information can be found on each cost or benefit. Instead of point estimates for the costs, benefits and summary measures, the table should set out ranges that reflect the level of uncertainty. A useful template for the summary cost-benefit table is provided below.
    Where the benefits are exceeded by the costs, but there are significant unquantified benefits, it may be inappropriate to include a benefit cost ratio in the table. The decision-makers' attention needs to be drawn to the need for a ‘backwards assessment', in other words an assessment of whether the unquantified benefits, net of unquantified costs, exceed the quantified negative NPV.
    And most importantly, the report should also provide the intuition behind the results.
  • It provides an auditable record of the way the analysis was conducted and the data sources.

 

Summary Cost-Benefit Analysis Table
$m present value (PV) ranges in 2015/16 terms
  Notes Option 1 Option 2 Option 3
Quantified Benefits        
Benefit 1 (1) $Range    
Benefit 2 (2) $Range    
Benefit 3 (3) $Range    
Etc        
         
         
Total   $Range    
Quantified Costs        
Cost 1 (4) $Range    
Cost 2 (5) $Range    
Cost 3 (6) $Range    
Cost 4 (7) $Range    
Etc        
         
         
Total   $Range    
Results        
Net of quantified costs and benefits - best estimate  

 

$Range

   
90% confidence interval (8) $Range    
Benefit/cost ratio - best estimate        
                - 90% confidence interval   Range    
Unquantified Benefits        
Benefit 4 (9)      
         
         
         
Unquantified Costs        
Cost 5 (10)      
         
         
         

177.Where the NPV of the quantified elements is a negative number, ie, a net cost, the task of the decision-maker is to judge whether the value of the unquantified benefits (net of the unquantified costs) exceeds the net cost of the quantified elements. If the NPV of the quantified costs and benefits is a positive number, then the project is worth doing irrespective of the size of the unquantified benefits.

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