THE MAIN ASPECTS OF EVALUATING GOVERNMENT PROJECTS AND PROGRAMMES BY USING THE COSTBENEFIT ANALYSIS

Abstract

In a world of finite public and private resources, it is very important to support effective management of public finances. Effective management focuses on the core areas of public financial management – public program and project appraisal. The essential theoretical foundations of CBA are: benefits are defined as increases in human wellbeing (utility) and costs are defined as reductions in human wellbeing. Cost-benefit analysis is an analytical tool that can be used to measure the economic and social impact of government action by reference to the "net social benefits" that action might be produced. As such, it can be a valuable aid to decision making. Its power as an analytical tool rests in two main features: 1) costs and benefits are each as far as possible appropriate expressed in terms of money and hence, are directly comparable with one another; 2) costs and benefits are valued in terms of the economy and society as a whole, so the perspective is "global".