5 Selection and Presentation
5.1 Pulling It All Together
This primer is divided into three substantive parts:
- identifying and estimating the relevant costs and benefits
- analysing the options/alternatives
- assessing risk, uncertainty and intangibles.
These three parts are strongly linked and it is therefore essential that all three are covered in the final presentation to decision-makers. More particularly, the final presentation should explain:
- the justification for the Government taking action
- all major assumptions including the scope of the analysis
- why certain costs and benefits have been included or excluded
- the valuation methodologies employed to estimate costs and benefits
- the discount rate employed
- any sensitivity analysis undertaken and any significant qualitative or non-monetary impacts identified (including externalities, deadweight losses, and behavioural effects)
- the justification for the decision criteria employed
- the final recommendation in a way that its implications and qualifications are easily understood by decision makers, and
- the biases, limitations and deficiencies of the analysis.
The ultimate outcome of any CBA is a decision whether or not to proceed with a proposal or a particular option. Normally the CBA will be presented to decision-makers as part of an approval paper or business case. In many ways, the presentation of the conclusions and recommendations of the CBA is as important as the underlying analysis. It is therefore important that the points highlighted above be brought out in a clear and concise manner that meets the information needs of decision-makers and provides objective guidance on the required decision. Non-technical language should be used wherever possible, but if it is necessary to use technical terms, these should be clearly explained.
5.2 Selecting the Preferred Option
It is also vital that the rationale for recommending the preferred option is clear and defensible. Sufficient evidence for the selection should be provided along with a clear audit trail for decision-makers to check the assumptions, evidence and calculations leading up to the selection. For example, the preferred option may not be the proposal with the highest Net Present Value due to some critical qualitative or non-quantifiable factors. Where this is the case, the specific reasons why the quantitative analysis has been overridden need to be made clear.
