Assessing public projects' value for money: An empirical study of the usefulness of cost–benefit analyses in decision-making

Abstract

Value for money, as measured by cost–benefit analyses (CBAs), is a crucial part of the business case for major public investment projects. However, the literature points to a range of challenges and weaknesses in CBAs that may cause their degree of usefulness in decision-making to be limited. The paper presents an empirical study of CBA practice in Norway, a country that has made considerable efforts to promote quality and accountability in CBAs of public projects. The research method is qualitative, based on a case study of 58 projects. The results indicate that the studied CBAs are largely of acceptable quality and heeded by decision-makers. Appraisal optimism seems to have been reduced by the introduction of external quality assurance of CBAs. However, there is need for a more consistent assessment of the non-monetized benefits, and distinguishing them from other decision perspectives such as the achievement of political goals. The paper offers a set of practical recommendations to increase CBA usefulness further.