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Index - Major Sections
Home
**InHCc HMIS**
Site Map
Health Economic and Reform
Benefits
Discussion
Data and Data
Analysis
Health Management
Product and Services
References
Team
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Index - Same Level Subject
Project Evaluation
Accounting
Cost Accounting
Investment Analysis
CDC Guidelines
Index - Child Subjects
Executive Summary
Goals and Outcomes
Introduction
Scope and Process
Collaborations
Technical Assistance
Goals and Outcomes
Drivers
Requirements Analysis
TCO
Analysis of Alternatives
Benefit-Cost Analysis
Return on Investment
Capital Plan
Project Plan
Risk Assessment
Security Plan
IS Architecture
Appendices
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CDC GUIDELINES
Benefit-cost analyses help identify the best alternative from a fiscal perspective.
Alternative solutions that are not affordable within potential budget availability should
be dropped from consideration.
The fundamental method for formal economic analysis is Benefit-Cost
Analysis. OMB guidance on benefit-cost analysis can be found in Circular A-94 Guidelines
and Discount Rates for Benefit Cost Analysis of Federal Programs
http://www.whitehouse.gov/OMB/circulars/a094/a094.html
Elements of Benefit-Cost Analysis:
- Assumptions and constraints
- Benefits and cost quantification
- Evaluation of alternatives using net present value
- Risk and sensitivity analysis
- The elements of benefit-cost analysis include:
- Identify Assumptions and Constraints - Assumptions are explicit
statements used to specify precisely the environment to which benefit-cost analysis
applies. The purpose of assumptions is to reduce complex situations to manageable
proportions.
- Identify and Quantify Benefits and Costs - Benefits and costs should be
quantified in monetary terms wherever possible. All types of benefits and costs should be
included. The benefits should be linked to the program goals and needs identified in
previous planning steps, e.g., strategic plan and requirements analysis. Benefits and
costs should be estimated over the full life cycle of each alternative considered. Life
cycle costs include all initial costs plus the periodic or continuing costs of operation
and maintenance and any costs of decommissioning or disposal. Estimates of costs and
benefits should show explicitly the changes that result from undertaking the project.
- Evaluate Alternatives Using Net Present Value - Investment alternatives
should be evaluated using net present value criterion. Potential projects should be ranked
according to the discounted value of their expected benefits less the discounted value of
expected costs. Qualitative evaluation considerations, such as explicit legal or
regulatory requirements, considerations of business strategy, or unquantifiable social
benefits or costs, may override quantitative criteria in deciding on the final ranking of
project alternatives.
- Perform Risk and Sensitivity Analysis - Benefit and cost estimates are
typically uncertain. Risk analysis can be used to identify where the relevant
uncertainties exist or where development work will be needed to resolve the uncertainties.
Sensitivity analysis should be used to test the response of the investment's net present
value to changes in key assumptions.
Table of Contents
Appendices
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