Cost benefit analysis: the state of the art in Australia

Cost benefit analysis is the economic appraisal of project proposals, it is a tool for assessing and comparing a range of public policy and infrastructure projects to inform decision makers as to their net social benefits and help determine priorities based on marginal costs and benefits. A review of recent cost benefit analyses, supported by Auditors General reports, academic literature and media reports provides some evidence of a number of issues for further investigation. In particular, the controversial and large-scale projects WestConnex and the East West Link provide examples of the issues under consideration. The novel approach taken here is to focus on practice, procedural and institutional issues, rather than the technical application of cost benefit methodologies. While some of the issues considered have appeared frequently in the literature, the article provides new insights the innovation bias towards increasing benefit estimation, and the alignment of risks and rewards within the appraisal industry. This article is not intended to be a cost benefit analysis of CBA; it reviews and discusses contemporary issues with project appraisal and business cases for major infrastructure projects. By focusing on recent critiques, some of the discussion may appear to be biased towards a critical rather than balanced perspective. It provides a foundation for further research and considered debate on the role of CBA and the processes by which major infrastructure decisions are being made in this country.