What is this paper about?

This is the first in a series of papers from Infrastructure Victoria’s research program on improving the way government undertakes project appraisal. The focus of this research is to improve the government’s ability to more consistently assess the relative merits of infrastructure projects, programs and policies by developing tools to help value, in monetary terms or ‘dollar terms’, more economic, social and environmental impacts. This will help extend the use of cost benefit analysis (CBA) — which produces Net Present Values (NPV) and Benefit Cost Ratios (BCRs) — across non- transport sectors and monetise key economic, social and environmental impacts not currently captured in CBA in the transport sector.

These papers will propose parameter values — that is, unit costs in dollar terms for some economic, social and environmental impacts — to be used in CBA. This will lead to the development of a CBA tool that can be used as a quick and cost-effective way of initially assessing and prioritising project, program and policy options. If you are interested in understanding more about how the economic, social and environmental impacts from infrastructure proposals could be valued in monetary terms, this paper is for you.

This first paper outlines:

• Limitations with the current approach to evaluating infrastructure projects, programs and policies. ‹
• How CBA in the social housing, health, criminal justice and transport sectors can be further developed or strengthened by improving the valuation of non-market impacts. ‹
• The impacts that could be considered in CBA for each sector. ‹
• Why using the benefit transfer method — that is, using proxies from other jurisdictions or studies to estimate impact — is our preferred approach as a first step to extending and improving the use of CBA in non-transport sectors