FROMM Engineering CostBenefit Analysis Cost Benefit Analysis 5

FROMM Engineering Cost-Benefit Analysis Cost Benefit Analysis 5 6 1

Definition The sequence 1. Definition of alternatives or decision options n The Cost-Benefit Analysis (CBA) is one of the qualitative, non-monetary analysis methods of decision theory. The different variants from which one should be selected are collected and recorded. It is helpful if this list is not too long, because otherwise the method becomes very complex. n The Cost-Benefit Analysis is a methodology that should rationally support decision-making in complex problems. The CBA is a relatively old method that has its origins in the economic "utility analysis". In Germanspeaking countries it became known through Zangemeister (1976). 2. Definition of evaluation criteria The criteria are determined on the basis of which a decision is to be made. These criteria are often product requirements or goals to be achieved. A list of up to 10 criteria is usually created here. n The cost-benefit analysis evaluates the effectiveness and the outcome. It finds use in controlling, in project management and in investment decisions, wherever an assessment based on several quantitative and qualitative criteria, goals or conditions must be made. This is where the actual evaluation takes place: Points are now awarded for each criterion and alternative and the weighted points are calculated. 6. Summation and selection The weighted number of points per alternative is obtained by adding up the individual weights. The alternative with the highest score best meets the defined criteria. 3. Weighting of the evaluation criteria A percentage is stored for each criterion, which proves the importance of the criterion. The sum of the individual weightings must be 100%. Advantages 4. Determination of the evaluation standard n Decisions can be made transparently The individual criteria are evaluated with points. To ensure uniqueness here, the evaluation scale must be precisely defined, e. g. 10 points = excellent, 0 points = insufficient. 2 5. Evaluation of Alternatives 3 n The decision-making process is in writing and can also be understood in the future. n The utility analysis can be carried out well in a team and / or by different people and serve as a basis for discussion. 4