Cost-Benefit Analysis

Course:  COSTB
Duration:  2 Days
Level:  I
Course Summary

Everyone makes choices. In their daily work, project managers, technical professionals and business analysts routinely consider different means to improve performance and results. Sometimes, the "means" are alternative project approaches; sometimes, the means are acquisition of competing products or services. Project personnel require solid skills in project evaluation and prioritization and identification of the ROI on projects. The challenge is always to answer the question: "Which choice is best?" The cost-benefit analysis reveals the answer.

Today's project managers and decision-makers demand hard facts before they approve a project or authorize an acquisition. Cost-benefit analysis (CBA) is the technique business-savvy IT organizations use to identify the "best" choice.

Learning how to do it right is exactly what you will get from this fast-paced, highly-interactive workshop. You will receive straightforward CBA templates, hear a plain language explanation of the facts to include in the CBA, participate in a series of challenging exercises, and learn a practical Step-by-step CBA preparation process.

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Topics Covered In This Course

Overview

  • Introduction to Cost-Benefit Analysis
  • Conceptual Foundations of Cost-Benefit Analysis

Fundamentals of CBA

  • Valuing Benefits and Costs
  • Alternative ways to calculate Net Social Benefits
  • Discounting Benefits and Costs in Future Time Periods
  • Dealing with uncertainty and risk
  • The Social Discount Rate
  • The Shadow Price of Capital

Valuation of Impacts

  • Why Conduct Demonstration Projects?
  • Alternative Evaluation Designs
  • The CBA Framework
  • Conceptual Issues in Conducting CBAs
  • Definition and Typical Analysis Problems
  • Capability Maturity Model and C/B Timing in a Project
  • Estimating the Project
  • Operational Cost Forecasts
  • Determining the Analysis Factors
  • Identifying Benefit Categories & Forecasting Benefits
  • The Analysis Process
  • Determine on-going staffing costs
  • Estimated savings and expenses by user department areas
  • Itemized benefits - both tangible and intangible.

Methods and Accuracy

  • Cost Effectiveness Ratios and Policy Choice
  • Omitted Costs and Benefits
  • Break Even point
  • Calculate Return On Investment (ROI)
  • Assess the organizational impact of different project options
  • Presentation Techniques
  • Break-Even Points & other Analysis Techniques
  • Future Value, Present Value and Net Present Value
    • Calculate the Net Present Value (NPV), Internal Rate of Return (IRR), Return on Investment (ROI) and Payback Period of each project option
  • Internal Rate of Return
    • Generate comparative graphs that show ROI, cumulative ROI over a five-year period, NPV, and IRR for each option under consideration
  • Putting the Financial Analysis all together.
  • Performing What-If Analysis

Step-by-step Cost-Benefit Analysis Template

  • General Project Information
    • Purpose, scope, system overview, Project References, Acronyms and abbreviations, Points of Contact
  • Management Summary
    • Assumptions and Constraints, Methodology, Evaluation Criteria, Recommendations
  • Description of Alternatives
    • Current System
    • Proposed System
    • Alternative System(s)
  • Costs
    • Development Costs
    • Operational Costs
    • Non-recurring Costs
    • Recurring Costs
  • Benefits
    • Non-Recurring Benefits
    • Recurring Benefits
    • Non-Quantifiable Benefits
  • Comparative Cost-Benefit Summary
    • Cost of Each Alternative Over the System Life
      • – Non-Recurring Costs
      • – Recurring Costs
      • – Total Cost
      • – System Life Costs
      • – Present Value Cost
      • – Residual Value Estimate
      • – Adjusted Cost
    • Benefits
    • Net Present Value
    • Benefit/Cost Ratio
    • Payback Period
What You Can Expect

A key aspect of any project lies in the ability of the requesting organization (often relegated to the Project Manager) to present a case for why a project should be authorized.

Many projects are authorized on well-meaning benefits, but too often, when the project is completed, the "benefits" are seldom realized. Managing the client's (or manager's) expectations requires a realistic approach to estimating anticipated project benefits and understanding the project costs – both capital and operational.

This workshop provides a practical and usable approach the project leader, project team and other involved parties can use immediately.

This two-day workshop is designed to cover the foundation methods, tools and techniques for justifying a project. It also will provide a better understanding of the practical techniques that can be used to obtain project approval.

The class achieves its results through presentation, discussion, team exercises and the option to apply the methods on participants' current projects. At the end of this course, participants will be able to:

  • Learn the overall cost estimating process and the various techniques for creating early project estimates.
  • Review methods for performing background analysis and developing project scope, requirements and objectives.
  • Determine when to use Cost-Benefit Analysis in the project lifecycle.
  • Understand the factors that can dramatically affect project estimates.
  • Learn the difference between Estimates and Bids and the Role of Assumptions.
  • Learn the types of tangible costs and how each can be used in supporting project benefits.
  • Learn how to describe the role of intangible benefits and how they can become powerful reasons for authorizing a project.
  • Learn methods for incorporating intangible benefits into a financial analysis.
  • Learn the various justification behavior techniques for new technologies and varying organizational attitudes.
  • Understand and use financial analysis techniques – ROI, Breakeven Analysis, Net Present Value and Internal Rate of Return.
  • Obtain practical templates for the development of a Business Case and Cost/Benefits Analysis.
Who Should Take This Course

The workshop is organized and presented for busy professionals who use/will use a Cost-Benefit Analysis to support informed IT project and acquisition decisions. Participants typically include project management specialists, technical professionals, business analysts and business unit managers.

Recommended Prerequisites

There are no prerequisites. Some project management experience is desired.

Training Style

Instructor-led, group-paced, classroom-delivery learning model with structured hands-on activities and case study analysis.

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Every student attending a Verhoef Training class will receive a certificate good for $100 toward their next public class taken within a year.

You can also buy "Verhoef Vouchers" to get a discounted rate for a single student in any of our public or web-based classes. Contact your account manager or our sales office for details.

Schedule For This Course
There are currently no public sessions scheduled for this course. We can schedule a private class for your organization just a couple of weeks from now. Or we can let you know the next time we do schedule a public session.
Notify me the next time this course is confirmed!
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