Cost Benefit Analysis, and the measuresof economic performance that can be derived from it (seeNote 6: When and How to Use NPV, IRR and Adjusted IRR), isthe preferred method for demonstrating the economicjustification of transport investments. Such an approach,however, relies on the ability to be able to measure costsand benefits in monetary terms (see Note 5: Framework),which renders it problematic for projects where the majorityof benefits cannot be readily monetised. Such a projectcould be a Low Volume Rural Road (see Note 21: Low VolumeRural Roads). In such situations consideration should begiven to the use of measures derived from cost effectivenessor weighted cost effectiveness (also known as Multi CriteriaAnalysis) techniques as the basis for the decision regardingwhether to invest or not. Cost effectiveness techniques arealso a very useful tool for project screening or ranking.Such a screening process ensures that projects that aresubjected to a more detailed analysis (including costbenefit analysis) are those that best fit with theobjectives of the investment (e.g. poverty alleviation).Section 1 of this note outlines the situations in which costeffectiveness techniques should be used, whilst Section 2describes the two main types of approaches. Section 3discusses the issue of economic viability and costeffectiveness whilst Section 4 presents a summary of recommendations.
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