Cost benefit analysis is an important technique used to establish   'value for money' and is typically applied to the detailed review of packages and proposals.  

Establishing economic value

Internationally, comprehensive cost benefit analysis increasingly aims to reflect ‘total economic value’, including all measureable costs and benefits, including:

Ø Direct costs: Capital and operational costs
Ø Revenues: Tolls, fares and other revenue sources
Ø Externalities, including: emissions, health, pollutants, congestion, agglomeration, noise and severance.
Ø Consumer surplus: Residual value not captured by revenues 
Ø Option values: Occasional, indirect and non-use values

It is important to make cost benefit analysis as comprehensive as possible, but this is not all that needs to happen in the decision-making process.  This is because, even if the cost benefit analysis does succeed in representing total economic value, it cannot be used to represent all societal values and therefore consideration of non-monetised factors will be required.

Importance of sensitivity testing

It is often appropriate to undertake sensitivity testing during cost benefit analysis, for example, to establish the potential variation in benefits in the event of different future scenarios, such as:

Ø  Significant variations in future oil and other fuel prices. 
Ø Operation of the future transport system under different pricing and charging regimes.
Ø  The achievement of aspirational policies and strategies (as opposed to 'business as usual' assumptions.

Note: Funding and financial analysis may also be required and when it is necessary to establish value for money at a more strategic level, techniques such as ‘cost effectiveness assessment’ can be employed.