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Handbook of Cost-Benefit Analysis January 2006

FINANCIAL MANAGEMENT REFERENCE MATERIAL NO. 6

© Commonwealth of Australia 2006 ISBN 1 921182 01 6 (print) ISBN 1 921182 03 2 (online) Department of Finance and Administration Financial Management Group Updated January 2006. This publication replaces the Handbook of Cost-Benefit Anlaysis, 1991, ISBN 0 644 149159. Cover Photo: Parliament House Canberra, photographer Lincoln Fowler, courtesy of Tourism Australia (FILE 100\100877). This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney-General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600 or posted at http://www.ag.gov.au/cca. An appropriate citation for this document is: Commonwealth of Australia, Handbook of Cost Benefit Analysis, January 2006.

The Financial Management Reference series of publications
No. 1 No. 2 No. 3 No. 4 No. 5 No. 6 List of Australian Government Bodies. Governance Arrangements for Australian Government Bodies. Financial Management and Accountability Legislation. Commonwealth Authorities and Companies Legislation. Introduction to Cost-Benefit Analysis and Alternative Evaluation Methodologies. Handbook of Cost-Benefit Analysis.

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The Financial Management Guidance series of publications
No. 1 No. 2 No. 3 No. 4 No. 5 No. 6 No. 7 No. 8 No. 9 Commonwealth Procurement Guidelines, January 2005. Guidelines for the Management of Foreign Exchange Risk, November 2002. Guidance on Confidentiality of Contractors’ Commercial Information, February 2003. Australian Government Cost Recovery Guidelines, July 2005. Guidelines for Implementation of Administrative Arrangements Orders and Other Machinery of Government Changes, September 2003. Guidelines for Issuing and Managing Indemnities, Guarantees, Warranties and Letters of Comfort, September 2003. Guidelines for the Management of Special Accounts, October 2003. Guidance on the Listing of Contract Details on the Internet (Meeting the Senate Order on Department and Agency Contracts), January 2004. Australian Government Competitive Neutrality Guidelines for Managers, February 2004.

No. 10 Guidance on Complying with Legislation and Government Policy in Procurement, January 2005.

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No. 11

The Role of the CFO – Guidance for Commonwealth Agencies, April 2003.

No. 12 Guidance on Identifying Consultancies for Annual Reporting Purposes, July 2004. No. 13 Guidance on the Mandatory Procurement Procedures, January 2005. No. 14 Guidance on Ethics and Probity in Government Procurement, January 2005. No. 15 Guidance on Procurement Publishing Obligations, January 2005. No. 16 Public Private Partnerships Introductory Guide, May 2005. No. 17 Public Private Partnerships Business Case Development, May 2005. No. 18 Public Private Partnerships Risk Management, May 2005. No. 19 Public Private Partnerships Contract Management, May 2005.

Foreword
The Handbook of Cost-Benefit Analysis (hereafter the Handbook) provides guidance in the use of cost-benefit analysis for evaluation and decision-making. It is aimed at enhancing capacities and fostering good practices in the use of cost-benefit analysis. The Handbook also covers two alternative methodologies – financial evaluation and cost-effectiveness analysis – for the evaluation of projects and programmes. The target audience of this Handbook is Australian Government agencies1. It is intended for use by those officers involved in appraising and evaluating projects and programmes that carry major resources implications. However, it should be noted that other evaluation methodologies, which are not covered in the Handbook, are available and may be used by agencies. In any case, agencies should outline and justify the evaluation methodology chosen....
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