How effective is cost-benefit analysis in assisting decision making by public sector managers? Case studies of two Australian departments

Abstract

This research uses the public value strategic framework (Moore 1995) as a means and end in analyzing how effective CBA is in assisting public decision making. The research found that the effectiveness of CBA in assisting public decision making is in a paradoxical situation. Conceptually, as agreed by public managers, CBA is a useful tool in assisting public decision making. However, in practice, by looking at two different departments, this study shows that CBA as a decision making tool has been used in pragmatic way to support their decision rather than as a ‘rational’ decision making tool. This happens and potentially undermines the creation of public value because of a lack of transparency in the use of CBA. This could hold big implications, decreasing public trust which then leads to reducing legitimacy and support of government decision making. Operational capacity, both to undertake and utilize CBA to support decision making, were not convincing. Lack of human resources and also some methodological problems has degraded the ability to undertake CBA. Lack of transparency has potentially de-motivated public managers (decision makers) to learn CBA. This might also be related to lack of incentives or punishments that are able to make public managers (decision makers) comply with the use of CBA.