A Few Words About Cost Benefit Analysis

One of the most common, difficult, and misunderstood approaches in program evaluation is cost benefit analysis. There is a deceptively simple aspect to the main questions posed here. How much did the program cost? What were the benefits: Were the benefits worth the costs? While these questions are straightforward, their definition and answers are not. Determining the costs and the benefits depends on the approach, orientation, and values of the evaluator. While not intended as a primer on cost benefit analysis, the following critical issues should be considered in the approach to program evaluation.

• Who benefits from the project?

Juvenile justice programs often have multiple goals. Consequently, there are likely to be several potential beneficiaries. Often, there are goals to increase the efficiency of the organization, and a second set to improve the services delivered. If the project increases the efficiency of the agency, administrators are likely to define the project as beneficial; if, on the other hand, it increases services but does not increase efficiency, other perspectives may find this more beneficial. Cost benefit analysis requires that the evaluation measure all of the potential benefits of the program, not just those pertaining to agency efficiency

• Who incurs the cost of the project?

Sometimes an agency that provides direct funding for a project may not be the agency that is operating it. Further, if cost savings are an issue, who is the beneficiary? Take as an example a project that aims to reduce the use of state incarceration of youth by encouraging local alternatives. While there is an overall cost reduction through fewer youth being incarcerated, the local unit has to provide primary support for the alternative program, which translates to a cost increase for the local jurisdiction. This is often the problem with statements indicating that incarceration is cheaper than probation. Once there is a commitment to a state facility, the costs to the local jurisdiction cease.

• What are the types of benefits and costs?

Costs and benefits of a project can be either direct or indirect. In addition to the direct benefits related to the project goals other, perhaps unanticipated, benefits may occur such as increasing employee productivity or morale. Similarly, there may be other forms of costs to the project. What are the alternative costs? How else could the funding have been spent? What has to be given up in order for this project to operate? How are program costs influenced by the level of fixed costs of the agency, e.g., agencies that are well funded may be absorbing part o the cost for operating the program?

• How are benefits and costs to be identified and measured?

Value differences among evaluators or between evaluators and administrators, as well as different perspectives regarding the goals and objectives of the project, can result in substantial disagreement about how costs and benefits are to be measured.

While these issues point to some of the difficulties of cost-benefit statements, they are not meant to eliminate cost considerations in juvenile justice evaluation. Cost assessments, particularly including alternative and comparative costs can add significantly to an evaluation. Given the difficulties of conducting a direct comparison of costs to benefits, it is often more feasible to conduct comparative cost studies. In such approaches you would measure resources consumed by comparable programs and a set of objective indicators of outcome for each program. Costs per unit for various types of outcomes could then be computed. This yield some valuable information for decisionmakers.