C9.2.1 Identifying Costs
The first step is to identify and quantify all costs associated with a proposed action.
It should be noted that CBA does not take into account any moral issues, as it is a monetary-based analysis.
It is very important that all potential costs that will be incurred by implementing a proposed action are identified. You should include:
- All monetary costs that will be incurred upon implementation and throughout the life of the project. These include:
- start-up fees
- licenses
- production materials
- payroll expenses
- user acceptance processes
- training
- travel expenses etc
- All non-monetary costs that are likely to be absorbed. These include:
- time
- lost production on other tasks
- imperfect processes
- potential risks
- market saturation or penetration uncertainties
- influences on the organisation’s reputation
You should assign monetary values to the costs identified above. To ensure equality across time, monetary values are stated in present value terms. If realistic cost values cannot be readily evaluated, consult with market trends and industry surveys for comparable implementation costs in similar businesses. It is important that you select appropriate prices for evaluating the benefits and costs in monetary terms.