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Introduction (Alma)

Advantages Of Cost-Benefit Analysis (James)

City of Kelsey Mayor and City Council members,

Performing a cost benefit analysis gives the individual the opportunity to research specifics about what the city is actually spending and learn how every dollar is being allocated. The act of defining and listing these costs is a valuable exercise and allows one to identify and evaluate each expenditure. The process itself is very beneficial, though it’s often impossible to fully predict every expense the city will eventually incur. Non-predictable expenditure is an inevitable part of every organization, but brainstorming through the prediction process will help you anticipate potential curve balls not previously identified. This analysis will also frame all of your projects and expenditures in the same simple terms. The simplicity of the cost-benefit analysis allows individuals to compare projects of all types no matter how dissimilar they are. Another benefit is a process that provides an objective way to compare projects. Often managers become emotionally attached to a program because of the time and emotional commitment invested for certain projects (Hamel et al., 2018). Comparing projects based on the actual financial costs and benefits eliminates the emotional element and may help overcome unseen biases for the good of the city. Estimating costs and benefits can give the city an idea of the lowest amount of revenue a new project needs to obtain in order to function in the green and to help set revenue goals to make future projects profitable.

Disadvantages Of Cost-Benefit Analysis –

There are three identified disadvantages of a Cost-Benefit Analysis to examine the programs and policies for the City of Kelsey. In reviewing the City of Kelsey policies, the “Annual Budget for the Fiscal Year 2005-06” only provided the estimated General Fund operating revenues. As a result, the first disadvantage is identifying and quantifying costs and benefits because that could cause inaccuracies. A cost-benefit analysis necessitates the identification and quantification of all costs and benefits. The next disadvantage is the inaccurate present value calculations which may lead to misleading analysis. The cost-benefit analysis method assesses expenses and benefits across time, and the current values are calculated. Evaluating all goods in terms of current-day values balances all current and future costs and benefits, eliminating the need to account for inflation or speculative gains. The possibility that the evaluative approach may result in a budget proposal is the last disadvantage of employing a cost-benefit analysis. Estimated costs may be used instead of actuarial estimates when a project manager prepares a cost-benefit analysis and distributes it to stakeholders. This could lead to misallocation of funds and the creation of unattainable goals.

Tools to Analyze Policy Decisions

When analyzing policy decisions for the City of Kelsey, a variety of tools or methods are utilized. The analysts who work for the city and other decision makers must determine which tools are most efficient in a given situation. These experts must also consider which tools will be best supported by all stakeholders during the ex-ante and ex-post phases of the process. The most effective tools that decision-makers should consider during these phases will leave positive or negative, economic and social impacts. In the City of Kelsey, experts suggest relying on tools that focus on program evaluation by first determining which policies need attention. Once the problems are determined, they then use tools or methods of analyzing the processes of problem structuring, forecasting, prescription, monitoring, and evaluation. The tools used to determine which policies to address include a multidisciplinary approach that ultimately determines policy adoption, problem solving, and their outcomes. The method frequently used by experts in problem structuring defines problems in the agenda-setting phase but does not yet find any solutions to those problems. During this process, critical thinking is utilized to determine the charactoristics of institutional elements, stakeholders, objectives, alternatives, uncertain events, and most importantly, is the “right problem” being recognized. In most cases, different tools for brainstorming, argument mapping, and multiple analysis tools, such as influence diagrams, are created. Once knowledge of preferred policy consequences has been recognized, forecasting followed by prescription aids in the adoption phase of policy formation using statistical analysis tools derived from knowledge gained from extrapolative, theoretical, and judgmental reasoning. Furthermore and pertaining to both private and public sectors, an article written for Gale Onefile concerning statistical analysis reads,“The recent growth in businesses’ abilities to collect increasing amounts of data, and their strive for promoting data-driven decision making have led to a rising demand for competent data analysts” (Doganaksoy et al, 2019). Next, the tools used in prescription include spreadsheets that express consequences in terms of value or utility. This is usually completed with what is called a cost-benefit analysis or cost-effective analysis which configures non-monetary benefits in the equation. Finally, the last two processes, monitoring and evaluation, utilize tools such as surveys and performance reviews to determine if implemented policies are effective and efficient.

Private Sector Comparison (Bri/Monica)

How might your selection of these tools differ when analyzing policy decisions for the private sector?

reference

Doganaksoy, N., Gheibi, S., McCollum, J. (2019). Introducing advanced exploratory data analysis tools in an MBA program. Global Journal of Business Pedagogy. Vol. 3. Issue 1. p125. https://go.gale.com/ps/i.do?p=ITBC&u=uphoenix&id=G…

Hamel, G. (2018, April). Advantages of a Cost-Benefit Analysis. USA Today, (),. https://yourbusiness.azcentral.com/advantages-cost…