Social cost-benefit analysis

What Is Social Cost-Benefit Analysis In Project Management?

The primary goal of all businesses is to get maximum return on investments. Thus, the
promoters prefer to assess commercial viability. However, some ventures may not
give appealing results for business profitability, so such programs are executed
because they have social consequences. These are infrastructure works, including
roadway, rail, bridges, and certain other construction works, irrigation, electricity
initiatives, etc., that have a major role in socio-economic concerns instead of merely
commercial prosperity. Therefore, such initiatives are assessed for the net socio-
economic advantages and cost control that is nothing other than the national survey of
potential socio-economic costs.

So, SCBA, often known as Social Cost-Benefit Analysis in project management, has
become a tool for effective financial evaluation. It is an approach to assessing
infrastructure investments from a social (or economic) perspective. Get to know more
from PMP training, which is the most prominent credential in project
planning worldwide. 

What is a social cost-benefit analysis? It is a technique used for determining the value
of money, specifically public investments, and it is becoming extremely popular. In
addition, it helps in decision-making regarding the numerous parts of the organization
and closely related project design programs. 

Benefits of SCBA in Project Management

Social cost-benefit analysis in project management enables a complete comparison of

several project options. This is not merely a financial concern. Even so, an SCBA
recognizes non-financial consequences as well. For instance, consider the effects of
increased accessibility on the environment, the economy, and other factors.

Social cost-benefit analysis helps governments to pursue innovative initiatives that

benefit all, not just a selected few. Additionally, it aids in the entire development of an
economy by assisting in decision-making that increases job, investment, savings, and
consumption, increasing a country's economic activity.

Social cost advantages can be used for both investments. Thus, public investment is
vital for a developing nation's economic progress.

1. Market Instability
A private corporation would evaluate a deal based on productivity and relevant
market prices. However, the government must consider additional variables.
Determining social costs in the event of market inefficiency and when market pricing
cannot specify them. These hidden social costs are referred to as shadow prices.

2. Investments & Savings

A venture that results in increased savings is considered an investment in a market.

3. Income is distributed and redistributed

The initiative should not lead to revenue accumulation in the control of a few and the
distribution of income.

4. Career and Living Standards

The impact of a program on employment and level of livelihood will also be

considered. Therefore, the contract should result in a rise in employment and living
standards.

5. Externalities

Externalities can be detrimental and advantageous to an enterprise. As a result, both

impacts must be considered before approving a deal. For example, positive
externalities can take the shape of technological advances, while negative externalities
might take the form of rapid urbanization and ecological degradation.

6. Subsidy and Taxation

Taxation and subsidies are treated as expenses and revenue, respectively. However,
taxation and subsidy are regarded as transfer payments for social cost-benefit analysis.

What is the scope of SCBA?

SCBA's purpose is to establish the financial benefits of each venture in perspective of

shadow prices because initiatives impact people's savings and investments and the
development's impact on the revenue sharing in society. Additionally, it is critical to
consider how certain factors like employment and self-sufficiency will be achieved if
the strategy is delivered.

SCBA can be used to engage both in the public and private sectors.

1. Public investment: conducting social cost analysis for economic infrastructure

development is critical for the developing world. When the national government
contributes to shaping that country's economy, it is essential to analyze the
development's social impact.

2. Private investment: Evaluating the social impact of private development

initiatives is vital as federal and quasi-government authorities authorize these
initiatives.

Social Cost-Benefit Analysis (SCBA) is a powerful analytical technique to evaluate

Public Investment. This technique is now at a fairly advanced stage with the
emergence of many different manuals (like those of OECD, UNIDO, etc.) for
carrying it out. It covers the life of the projects.

WHAT IS SOCIAL COST-BENEFIT ANALYSIS OR MEANING OF SCBA

SCBA is the evaluation of investment proposals in terms of their estimated net impact
on the economy. The estimated impact is evaluate by using parameters reflecting
Social objectives and national goals. It is a Macro-economic appraisal and can be said
to be a Socio-economic appraisal of a public investment proposal. Thus, it is
concerned with the systematic appraisal of the effects of the project on the economy
as a whole.

SCBA measures the economic, social and environmental costs and benefits to the
society expected to arise from the implementation of the project. It is a scientific
attempt to evaluate the difference to an economy, being other things equal, as a result
of a specific investment. It portrays the difference between the economy with the
project and the economy without the project.

What is Project environmental appraisal?

Environmental Appraisal is the process of identifying opportunities and threats

facing an organization. Concept of Environment. Environment. literally means the
surroundings, external objects, influences or circumstances under which someone or
something exists.

ENVIRONMENTAL APPRAISAL (ENVIRONMENTAL IMPACT

ASSESSEMENT)

Environmental Assessment (EA) is supposed to provide the project analyst with a

good quantification of the biophysical and social impacts from developments.
Environmental Assessment generally refers to the broader system of environmental
analysis, including project-specific Environmental Impact Assessment (EIA). Most
countries have an EIA policy and supporting legislation. Traditionally, EIA was
designed to operate at the project level; that is to identify impacts and mitigation
measures for an individual project. In the past several years however, the EIA process
has gradually been extended to sectoral levels, strategic reviews of policy, and even at
a global level. This section will briefly discuss focus on project EIA. Project-Level
EA (Usually Called Environmental Impact Assessment EIA) Project-level EA
(usually called EIA) generally refers to the environmental assessment of a single
project, such as one highway or a cement factory. Definition of EIA There are many
definitions of EIA. The following are the sample of some of these definitions which
indicate the nature of the process, including;

EIA is defined as the process of evaluating the direct and indirect environmental and
social implications of a proposed development project. Or the systematic examination
of the likely environmental consequences of proposed projects The results of the
assessment

- which are assembled in a document known as an Environmental Statement - are

intended to provide decision-makers with a balanced assessment of the environmental
implications of the proposed action and the alternative examined.

The ES is then used by decision-makers as a contribution to the information base

upon which a decision is made. The overall goal of an EIA is to achieve better
developmental interventions through protecting the environment (human, physical
and biotic).

Reasons for Using EIA

EIA has been developed as a result of the failure of traditional project appraisal
techniques to account for environmental impacts. Many development projects in the
past were designed and constructed in isolation from any consideration of their
impacts on the environment, resulting in:

• Higher costs,

• Failure of projects,

• Significant environmental change, and

• Negative social effects Aims of EIA Despite differences in individual

EIA systems throughout the world, the EIA process shares certain aims: • to provide
decision-makers with analysis of the total environment so that decisions can be made
based on as nearly complete and balanced information as possible;

• to assess and present intangible/unquantifiable effects that are not adequately

addressed by cost/benefit analysis and other technical reports; • to provide
information to the public on a proposal; • to formalise the consideration of alternatives
to a proposal being considered, in order that the least environmentally harmful means
of achieving the given objective can be chosen;

• to improve the design of new developments and safeguard the environment through
the application of mitigation and avoidance measures Module 

Strengths of EIA It has a number of strengths.

• First, it can be a flexible process and employ a large number of evaluation methods
and techniques.

• Second, EIA is increasingly viewed as a process, not as a mandated document.

• Third, EIA is becoming more commonly parallel to and part of standard pre-
feasibility engineering and economic studies. In general, EIA is focused on a
previously selected project and only the better EIAs consider the sector as a whole or
the wider implications, such as policies. Weaknesses of EIA Project-level EIA also
has a number of weaknesses.

• First, a single project-level EIA has little leverage beyond the influence of the single
project.

o Project level EIAs can be piecemeal regards to sector or regional planning. EIAs
have to be repeated for each sector or regional project. o An EIA rarely influences
which projects are selected before the assessment is carried out. As a result, project-
level EIAs are mainly reactive, at a time when pro-action becomes increasingly
necessary.

o In the worst cases, EIA does not begin until a fairly well defined project is
proposed, then it is forced into reacting to a relatively rigid proposal. Ideally, EIAs
should always address the outcome of the no-project alternative, emphasising that
EIA is a public process rather than a single study.

On the other hand, the noproject outcome must account for the costs of no project
such as power outages, bad roads, ineffective schools, and inefficient or unsafe water
supply. EA should help decision-makers ascertain the when, where, how and cost of
proposed projects as well as the no-project option.
• Second, EIA is often weak on indirect and synergistic impacts unless the EIA team
is unusually qualified and well funded. Some still think of EIA as a mandated
document, rather than part of feasibility or as a valuable tool for standard project
selection and design. Occasionally in the worst cases, an EIA becomes a post-project
justification or mitigation exercise. In addition, project conditionality applying to
environmental concerns is difficult to enforce.

What Is Project Risk?

A project risk is any unforeseen thing that might — or might not — occur during a
project. A risk isn’t necessarily negative; it’s just an event where the outcome is
uncertain. As such, a project risk can have either a negative or positive effect on the
project’s objectives.

What Is Business Risk?

Business risks are uncertain factors, internal or external, that threaten the financial
health of an organization. Examples of external business risks would be natural
disasters or cyberattacks. Internal business risks are threats that come from within the
company, such as falling out of compliance, having too much debt, or labor disputes. 

Most Common Project Risks

In today’s business landscape, it’s necessary for companies to take risks to reach their
goal. Among the risks that arise in every project, some are more common than others.

Cost Risk

Cost risk is an escalation of project costs. It is the risk that the project will cost more
than the budget allocated for it. Perhaps the most common project risk, cost risk is due
to poor budget planning, inaccurate cost estimating, and scope creep. The risk is
higher when clients want too much even though the project has few resources only.
Cost risk can lead to other project risks such as schedule risk and performance risk.

Schedule Risk

Schedule risk is the risk that activities will take longer than expected, and is typically
the result of poor planning. It’s closely related to cost risk, because slippages in
schedule typically increase costs and also delay the outcome of the project, including
its benefits. Delays result in missed timelines and a possible loss of competitive
advantage. Schedule risk leads to cost risk because longer projects cost more. It can
also lead to performance risk, missing the timeline to perform its intended mission.

Performance Risk

Performance risk is the risk that the project will fail to produce results consistent with
project specifications. This is a common risk that is difficult to attribute to any single
party. A project team can deliver the project within budget and schedule and still fail
to produce the results and benefits. On the other hand, performance risk can lead to
cost risk and schedule risk when the performance of a team or technology results in an
increase in cost and duration of the project. In sum, the company lost money and time
on a project that failed to deliver.