Cost-Benefit Analysis Training
A cost-benefit analysis (CBA) is an effective way to evaluate a project and quantify the relationships among a project’s inputs, outputs and purpose. It permits you to not only assess the long-term impact of proceeding with (or not proceeding with) a project, but enables you to directly compare different types of projects. The analytic focus of a CBA can range from a single farm to a country-wide project. By participating in this course, students will understand the purpose and benefits of CBA in agriculture project design; learn the tools, techniques and requirements to conduct a CBA for agricultural projects; and interpret and use CBA results to inform the agriculture project design and evaluation process. Discussion topics include:
- Target setting
- Project design
- Logical frameworks
- Country Development Cooperation Strategies (CDCS)
- Risk and sensitivity analysis
Additionally, this course includes a glossary of CBA terms as well as a detailed case-study of an agricultural project in Haiti that walks participants through the techniques they will learn. CBA is a powerful and flexible analytic technique that improves project design and is recommended by USAID for all projects, regardless of sector.
Training Module 1: What Is Cost-Benefit Analysis?
This module provides a general introduction to the cost-benefit analysis approach for development projects and explains how CBA can help determine if a project is both financially and economically sound.
Module 2: Cost-Benefit Analysis Training
This module is an introduction to the basics of cost-benefit analysis at USAID and its applications in project design and evaluation. Topics include the difference between financial and economic analysis, the strengths of the approach (comparisons across projects, addressing scalability and sustainability, its use in multiple sectors, etc.) and times when cost-benefit analyses may not be appropriate.
Module 3: Results Framework and Relationship to Country Development Cooperation Strategy
This module provides key definitions and examines the program cycle, country development cooperation strategy (CDCS), problem identification and the results framework.
Module 4: CBA Basics: Creating a Table of Parameters, Financial Cash Flow, and Counterfactuals
This module looks at core cost-benefit analysis components including the table of parameters, the time value of money, cash flow and counterfactuals.
Module 5: Discounting, Time Preferences and Calculating Net Present Value
This module teaches participants to compare a project’s costs and benefits over time. It introduces the concepts of compounding, discounting, present value and net present value and how these concepts can inform effective decision making for a project.
Module 6: Stakeholders and Their Points of View in Building a CBA Model
This module describes the importance of viewing a project from multiple stakeholder perspectives. It explains that analyzing the viewpoints of all investors and operators in a project can increase the probability of success.
Module 7: Aggregating Cash Flow from the Farm to Project Level
This module provides the components needed to obtain the basis of CBA decision criteria—aggregating cash flow from the farm to project level. You will be shown how to achieve this aggregation by considering project goals, targets, timing, and estimating the number of project adopters and dropouts.
Module 8: Economic vs. Financial Analyses
The importance of economic analysis (which looks at the creation, use and destruction of society’s resources as opposed to a financial analysis’s evaluation of cash flow) is described in the module. Methods to reconcile the results of the financial analysis with the economic analysis are provided. Market distortions such as subsidies and transfers are discussed, as are externalities
Module 9: Project Investment Decision-Making Criteria Using NPV, IRR and the C/B Ratio
In this module participants will learn to develop mutually-exclusive project alternatives that can be evaluated by examining the internal rate of return (IRR), net present value (NPV) and the cost-benefit ratio (C/B Ratio). These metrics contribute to understanding the impact of the project from a country government’s perspective and include its impact on the entire economy.