Cost-Benefit Analysis

What is cost-benefit analysis? Cost-benefit analysis is a systematic approach to estimating and comparing the economic, social, environmental, and cultural impacts of different projects, programs, and policies. Widely used within government for both appraisal and evaluation, cost-benefit analysis is the most comprehensive and evidence-based method of analysis, and the method preferred by most treasury departments.

In recent years, we have undertaken more than 150 different cost-benefit analysis projects across 25 different state and federal government departments and agencies. Our independent and evidence-based cost-benefit analysis helps appraise options, evaluate outcomes, inform decision-making and demonstrate value. We also provide training in cost-benefit analysis through both in-house and public programs.  

If you are planning or commissioning a cost-benefit analysis, check out our selection of useful Resources for Cost-Benefit Analysis.

Examples of our work include:

Australian and New Zealand National Council for fire and emergency services (AFAC) – Australian Fire Danger Rating System Program

Until now, the science underpinning fire danger ratings has largely remained unchanged for more than 50 years. Yet during that time, our understanding of fire and fire behaviour has changed enormously.

The Australian Fire Danger Rating System (AFDRS) Program is redesigning the forecasting of fire danger in Australia. The AFDRS Program is a project of national significance being developed collaboratively by state, territory, and Commonwealth governments.

The AFDRS Program aims to improve public safety and reduce the impacts of bushfires by:

• Improving the scientific accuracy behind fire danger predictions.

• Improving the way that fire danger is communicated.

• Providing government and industry with better decision-making tools.

• Reducing the costs associated with bushfire impacts.

Following the development and testing of a working Research Prototype, we worked with the AFDRS Program Team to prepare a cost-benefit analysis in support of the Gateway Review process for the next phase (Phase Three) of the AFDRS Program to commence in 2019. That phase was subsequently funded and has since delivered the following:

• An enhanced fire behaviour index using findings from the Phase Two research prototype.

• Software and tools to collect and analyse data, and to provide agencies with interrogable fire danger information that will improve decision-making.

• A simplified fire danger rating framework (see below), including a unified system of clear, concise and action-oriented messaging that can be easily understood and responded to by the community.

• Research prototypes for other indices that could potentially prove useful to further enhance decision-making.

The new Fire Danger Ratings came into effect nationally from 1 September 2022. Instead of the six ratings shown above, the new Fire Danger Ratings now have four - Moderate, High, Extreme and Catastrophic.

Visit Australian Fire Danger Rating System for more information on the new ratings and visit AFAC for more information on the Australian Fire Danger Rating System Program including community and technical resources.

Access the Cost-Benefit Analysis Report 

Cancer Institute NSW – Bowel Cancer Screening Campaign

Bowel cancer is Australia’s second biggest cancer killer. However, if detected early, bowel cancer can be successfully treated in more than 90% of cases. Despite this, only 38% of eligible people in NSW currently take part in the National Bowel Cancer Screening Program, a Commonwealth government-funded program that invites people every two years aged 50 to 74 years to do a free bowel screening test.

The Cancer Institute NSW is responsible for developing, implementing, and evaluating social marketing programs to encourage bowel cancer screening in NSW.

We worked with the Cancer Institute NSW to prepare a cost-benefit analysis for their 2021 bowel cancer screening campaign in accordance with Section 7 (1) of the Government Advertising Act 2011 and other relevant requirements.

The 2021 campaign included the ‘There’s A Lot We Can Do’ creative. Fronted by Australian physician and media personality, Dr Norman Swan, the advertisement encourages people between 50-74 to use the Home Test Kit in a bid to fight bowel cancer.

More About the Bowel Cancer Screening Campaign

Resources for Cost-Benefit Analysis

If you are planning or commissioning a cost-benefit analysis, useful resources include:

Australian General Guidance on Cost-Benefit Analysis

• NSW Government Guide to Cost-Benefit Analysis (TPG23-08) - a Treasury Policy and Guidelines paper that sets out how to undertake cost-benefit analysis for NSW government initiatives. It also describes the role of cost-benefit analysis in supporting evidence-informed decision making and provides guidance for practitioners. It is central to the NSW investment framework for the appraisal and evaluation of public investments.

• NSW Government Technical Note on Ex-Post Cost-Benefit Analysis (TPG22-22) - supplementary guidance for undertaking ex-post cost-benefit analysis when an initiative is underway (interim or ‘in media res’ ex-post CBA) or completed (final ex-post CBA) to assess the net social benefits of an implemented initiative.

• Australian Government Guide to Policy Impact Analysis (2023) - replacing the Australian Government Guide to Regulatory Impact Analysis, the new guide is intended to inform policy making by the Australian Government by ensuring that advice to government is accompanied by robust analysis, data, and an accurate overview of the effects of proposed policies on the community. This analysis includes measuring the net benefit of each policy option by taking into account all of the costs and benefits.

• Australian Government Cost-Benefit Analysis Guidance Note (2023) - this note provides guidance to policy makers on the use of cost-benefit analysis for policy proposals, and is relevant for policy makers working on proposals made by both the Australian Government or intergovernmental decision-making bodies.

• Victoria State Government Economic Assessment Information Portal - access to guidance on how to undertake an economic assessment (cost-benefit analysis is the preferred form of economic assessment) to inform decision making across the Victorian Government.

• Victorian Guide to Regulation - Toolkit 2: Cost-Benefit Analysis (2014) - guidance issued by Victoria State Government in undertaking cost-benefit analysis for a regulatory proposal.

• Victorian Economic Evaluation for Business Cases - Technical Guidelines (2013) - guidelines issued by Victoria State Government for the economic appraisal of investment decisions (with cost-benefit analysis the preferred approach) in relation to economic and social infrastructure.

Key Texts and Journals on Cost-Benefit Analysis

• Society for Benefit-Cost Analysis - working to improve the theory and practice of benefit-cost analysis and to support evidence-based policy decisions. 

• Journal of Benefit-Cost Analysis - the only journal devoted exclusively to benefit-cost analysis, it publishes theory, empirical analyses, case studies, and techniques.

• Cost-Benefit Analysis Concepts and Practice 5th Edition (2018) by Anthony E. Boardman (Author), David H. Greenberg (Author), Aidan R. Vining (Author), David L. Weimer (Author) - widely cited, it is recognized as an authoritative source on cost-benefit analysis. 

Cost-Benefit Analysis Tools

• NSW Treasury Cost-Benefit Analysis Tool (2024) - excel workbook developed to support analysts to conduct calaculations in cost-benefit analysis.

• NSW Treasury Rapid Cost-Benefit Analysis Tool User Guide (2024) - provides details of the Tool’s functions, parameters and inputs and provides a step-by-step guide in how to use the Tool.

• New Zealand Treasury CBAx Tool and User Guidance (2023) - spreadsheet model containing a common database to help New Zealand organisations monetise impacts and do cost-benefit analysis.

International Guidance on Cost-Benefit Analysis

• The Green Book (UK 2022) and accompanying guidance and documents - guidance issued by HM Treasury on how to appraise and evaluate policies, programs and projects. Supplementary materials, which provide more detailed guidance on specific issues and applying the Green Book in particular contexts, include:

  • Value for Money (2022) - shows how the best value for money option is reached when applying the Green Book method.

  • Wellbeing Guidance for Appraisal (2021) - explains where, when and how wellbeing concepts, measurement and estimation may contribute to the appraisal of social, or public value.

  • Valuation of energy use and greenhouse gas emissions for appraisal (2021) - providing specific guidance on how analysts should quantify and value energy use and emissions of greenhouse gases.

  • Enabling a Natural Capital Approach (2023) - provides guidance, tools, and resources for considering and incorporating the value of the natural environment for people and the economy in policy and decision-making.

  • Cultural and Heritage Capital Portal - brings together research, guidance and estimates to help government and private organisations consider the value of culture and heritage capital.

• U.S. Office of Management and Budget - OMB Circular No. A-4: Regulatory Analysis (Nov 2023) - provides guidance to Federal agencies on how to conduct regulatory analysis, and standardizes the way benefits and costs of Federal regulatory actions are measured and reported. This Circular supersedes and rescinds the previous version of OMB Circular No. A-4, issued on September 17, 2003.

• U.S. Office of Information and Regulatory Affairs - Draft Guidance for Assessing Changes in Environmental and Ecosystem Services in Benefit-Cost Analysis (2023) - draft guidance to help agencies account more fully for costs and benefits linked to the environment. As the OIRA notes, ‘because nature provides us with so many things without cost, these benefits (referred to as ‘ecosystem services’) are not always fully captured in benefit-cost analysis….. we must measure what we value, not just value what is simple to measure.’

• European Commission Economic Appraisal Vademecum 2021-2027 - provides guidance on economic appraisal methodologies (including cost-benefit

  analysis, cost-effectiveness analysis, least-cost and multi-criteria analysis) in support of the early screening of investments.

• Economic Appraisal of Investment Projects at the European Investment Bank (2023) - presents how the EIB conducts economic appraisal (including its use of cost–benefit analysis, cost-effectiveness analysis and multicriteria analysis) across the various sectors of the economy where it operates.

• Reference Case Guidelines for Benefit-Cost Analysis in Global Health and Development (May 2019) - guidelines developed out of the ‘'Benefit‐Cost Analysis Reference Case: Principles, Methods, and Standards’ project, initiated by the Bill & Melinda Gates Foundation in 2016.

• OECD: Cost-Benefit Analysis and the Environment (2018) - This book explores recent developments in the theory and practice of environmental cost-benefit analysis.

• New Zealand Guide to Social Cost Benefit Analysis (2015) - guidance issued by the New Zealand Treasury on carrying out social cost-benefit analysis.

• United States Environmental Protection Agency Guidelines for Preparing Economic Analyses (2016) - provides a framework for performing economic analyses of environmental regulations and policies and incorporating recent advances in theoretical and applied work in the field of environmental economics.

• European Commission Guide to Cost-Benefit Analysis of Investment Projects (2014) - practical guidance on major project appraisals including common principles and rules for application of the cost-benefit analysis approach in different sectors.

• Asian Development Bank: Cost-Benefit Analysis for Development (2013) - provides an overview of recent methodological developments in cost–benefit analysis as well as suggested improvements in the economic analysis of projects in selected sectors through case studies.

Australian Technical Guidance on Cost-Benefit Analysis

• Disaster Cost-Benefit Framework TPG23-17 (2023) - developed by NSW Treasury, the framework guides use of cost-benefit analysis for disaster resilience initiatives (disaster resilience includes the prevention, preparedness, response, and recovery phases of disaster management). The framework sets out guiding principles to support development of initiatives that support disaster resilience as well as methods, data sources, and standard parameters to support their appraisal. The Framework also includes a Flood Cost-Benefit Analysis Tool to support CBA of flood resilience initiatives.

• Framework for Valuing Green Infrastructure and Public Spaces (2023) - developed by NSW Department of Planning and Environment together with NSW Treasury, the framework provides a standardised, robust, and comprehensive way to identify and quantify costs and benefits associated with green infrastructure and public spaces. This framework is complemented by technical appendices for recommended approaches.

• Technical Note to TPG23-08: Carbon value in cost-benefit analysis - the NSW Government Guide to Cost-Benefit Analysis (TPG23–08) states that the cost of CO2 emissions (and other emissions measured in CO2 equivalent emissions), or the benefits of reduced CO2 emissions, should be included in CBA where the cost or benefit is likely to materially affect the NPV and BCR. This technical note sets out the method, consistent with the discussion in the CBA Guide, to calculate carbon values for all initiatives.

• Australian Government: Office of Impact Analysis Guidance Note, Value of Statistical Life (2023) - provides guidance on the use of estimates of the value of statistical life in cost-benefit analysis.

• Australian Transport Assessment and Planning Guidelines - T2 Cost Benefit Analysis (2022) - CBA is the core appraisal tool in the ATAP Guidelines framework. This part of the Guidelines, ‘T2’, provides general guidance for undertaking CBA of transport initiatives and their associated options.

• NSW Government Valuing Green Infrastructure and Public Spaces (2022) - interim framework providing detailed guidance for undertaking cost-benefit analysis of projects, programs and policies relating to green infrastructure and public space.

• Infrastructure Australia Assessment Framework Guide to Economic Appraisal (2021) - guidance on various economic appraisal techniques and the circumstances in which they should be applied within the Assessment Framework.

• Queensland Government Cost Benefit Analysis Guide: Business Case Development Framework (2021) - provides practical guidance for undertaking robust and transparent cost-benefit analysis in support of business cases for infrastructure proposals (supports the Stage 2: Options Analysis and Stage 3: Detailed Business Case).

• Transport for NSW Cost-Benefit Analysis Guide (2019) - provides a consistent, best-practice framework to help the NSW Transport cluster conduct cost-benefit analysis.

• NSW Health Guide to Cost-Benefit Analysis of Health Capital Projects (2018) - sets out the principles, concepts, methodology and steps to be used in the evaluation of major health capital project proposals.

• Australian Government Research Report: Environmental valuation and uncertainty (2014) - general guidance for undertaking cost-benefit analysis of policies that are likely to have an environmental impact, or that are characterised by significant uncertainty.

• Productivity Commission - Environmental Policy Analysis: A Guide to Non-Market Valuation (2014) - examines issues around use of non-market valuation methods in environmental policy analysis.