Cost Benefit Analysis (CBA) was developed nearly a century ago as a pre-investment tool to estimate the national economic return on capital for large public infrastructure projects, initially in the water resources sector. CBA places all future streams of costs and benefits on a common temporal footing, by using a discount rate which reflects the diminishing value of both costs and returns into the future. This enables the results to be presented as a single measure in present value terms. The tool can assist in assessing the potential development impact and value for money of donor projects.
CBA can be used as a tool for measuring impact using updated assumptions and other monitoring data and has the advantage of being able to conduct “what if” scenarios. The CBA framework assists in measuring attribution of the project as it forces the analyst to include only the net incremental benefits attributable to the project investment by a structured comparison of “with” and “without” scenarios.