C9.1 Cost Benefit Analysis


Cost Benefit Analysis (CBA) is a method of evaluation that estimates the value of projects to determine whether those projects are worth undertaking or continuing. It is used to evaluate the total anticipated cost of a project compared to the total expected benefits in order to determine whether the proposed implementation is worthwhile for a company or project team. If the results of this comparative evaluation method suggest that the overall benefits associated with a proposed action outweigh the incurred costs, then a business or project manager will most likely choose to follow through with the implementation.

At its most basic, cost benefit analysis, CBA, could be a calculation that continuing production of a product or product option is no longer viable.

At its most complex, CBA can be used to take into account the benefits the company receives as well as the benefits that accrue to the community at large, including social costs and benefits for an entire region or country.


Cost-benefit analysis compares the costs and benefits of two or more alternatives of or at least the situation with and without the project; the costs and benefits are considered over for a certain period of investigation. A CBA is based on discounted cash flow methodology.

CBA is not new. It has been used for making decisions in the water sector for more than 50 years.


Performing a cost benefit analysis is a valuable way to weigh the pros and cons of implementing a proposed action. A cost benefit analysis that has thoroughly identified and realistically quantified all costs and benefits is an accurate way to determine whether an opportunity is worth a company’s time and energy.