Cost–benefit analysis

Many decision processes involve the development and systematic evaluation of a set of alternatives. Analysys Mason has successfully supported a diverse set of clients in such decisions through our cost–benefit analysis process. Using structured analysis and clear communication of alternatives, we have helped build the foundation for multi-million pound investments across a range of sectors and geographies.

A cost–benefit analysis can be a powerful tool for assisting our clients with their decision-making in many contexts, including regulation, investments, sourcing strategies and technology development. While we often work with formalistic frameworks in the public sector, we also use the same methods in the private sector. Example projects include an evaluation of the merits of reserving 700MHz spectrum for blue-light users, an evaluation of a satellite communications system, and the development of a sourcing strategy for a major public government organisation. 

There are many different approaches used for cost–benefit analysis, meaning the choice of framework will depend on a client’s specific context. However, the process of developing a cost–benefit analysis usually consists of the following steps:

• description of the current situation – including the problem and potential project goals
• identification of relevant options (actions)
• analysis of the impact of the different options – including how different actors are affected
• evaluation of the positives and negatives for each option against the costs 
• quantification of uncertainties
• recommendations on selecting a preferred option. 

Owing to the variations between different cost–benefit analysis frameworks, we are careful to do the following:

• Select and adapt the appropriate framework to the context of the project, sometimes by using a simplified version of a framework.
• Clearly communicate the main uncertainties that emerge from the analysis.
• Highlight any high-level policy agendas that have been central for the development of options and the recommendation. 

We have used a cost–benefit analysis to provide clients with a comprehensive assessment in a range of projects, such as spectrum policy, sourcing strategies, organisation development and investment decisions.