This literature review examines scholarly articles, books, and other sources related to cost-benefits analysis (CBA). It provides evaluations of sources so readers may better understand the theory behind CBA effectiveness and investment decision support.
The Effectiveness of a Costs and Benefits Analysis in Making Federal Government Decisions: A Literature Review
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Cost-Benefits Analysis (CBA) is the process of using theory, data, and models to examine products, tradeoffs, and activities for assessing relevant objectives and alternative solutions (Womer, Bougnol, Dula, & Retzlaff-Roberts, 2006) in order to assist decision-makers in choosing the most appropriate alternative. This paper explores how CBA may best be used, focusing on the effectiveness of CBA during the early phase of a program life-cycle in ensuring that there are viable alternatives in making investment decisions. It addresses program importance, cost estimation, and the decision-making process in order to understand the overall effectiveness and efficiency of CBA in making key investment decisions and enforcing accountability among program managers. It also examines the measures and the methodology used to develop a CBA, addresses the accuracy and reliability of CBA, and identifies techniques available to support decision-making in the early phase of a program's life-cycle. It also notes, however, that because not all costs and benefits can be quantified, measures other than CBA should be considered in making investment decisions.