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The cost effectiveness analysis (KWA) (English Cost Effectiveness analysis) an instrument is for the evaluation by economy of projects, whose costs can be determined over market prices, their use however not to be monetary measured can (e.g. human life) or its monetary measurement in the society is disputed.

Use and demarcation

The cost effectiveness analysis is to differentiate of the cost benefit analysis (English Cost Benefit analysis), which is used particularly for the evaluation by projects of the public hand. While with the KWA only the cost criteria are monetary evaluated, with the cost benefit analysis also the remaining criteria in monetary sizes are expressed. On the Inputseite/Kostenseite corresponds the procedure to the cost benefit analysis with the beginning of The use (effect) enters against it differently than with the KNA in non-monetary units analysis. Rather the use in physical sizes is represented, which indicate the reaching of operationalisierbarer Subziele. The effects are evaluated as in an efficiency analysis after a weighted point system. The KWA is particularly suitable for those evaluation and decision situations, with which the costs an important role are to be played and proven therefore separately.

Procedure

The KWA regarded first the cost criteria separately from the remaining criteria, also the weighting is void here. The goal yields of the remaining criteria are evaluated however, as with the efficiency analysis, and combined into the effectiveness. Also the effectiveness and cost numbers are not added, but are not set to each other in the relationship. As result one receives a cost effectiveness index, which expresses, with which costs one point on the effectiveness scale is connected. The indices make a clear order of rank possible of problem solutions. As decision rule it is considered that that solution alternative is to be preferred, which exhibits the smallest cost effectiveness quotient. The results can be graphically represented then. A high effectiveness with small costs falls thereby into the positive range and in reverse.

AdvantagesDisadvantages
  • Obligation to define goals clearly
  • High transparency and comprehensibleness
  • Decision making aid for monetary with difficulty assessable problems

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  • only rarely complete catalog of criteria
  • Result every now and then dependent on the circle of acquaintances
  • manipulatable result by variation of the goal criteria and evaluation
  • Decision maker must make intuitive acceptance or Werturteile.

With the KWA can also projects, which e.g. the protection and receipt from human lives to contents have, likewise on a rational level judged and are decided. This method is thus favourable, if monetary evaluations of the environment are rejected by the society. The KWA serves here as decision making aid for political decision makers, by supplying the basis for alternative evaluation.

Proceed

The task of the KWA consists of helping to select a measure. In addition first goals and their units must be formulated. The alternatives are means, with whose assistance goals can be achieved. The costs are determined in the form of since by the choice of a special alternative no more did not determine resources for other purposes to the order. In the center of the KWA the model is located. The means of the representation can reach from mathematical equations to an verbal description the situation. The task of the model consists of it, both the costs, which each alternative causes, and the extent, up to which each alternative to the reaching of the goals contributes to forecast. With the help of a criterion alternatives are classified, in order to be able to make the most desirable choice. It supplies the yardstick, with whose assistance the costs can be weighed out against their effectiveness. The execution of the KWA takes place in eight steps:

1. Goal analysis: Those goals which can be carried out must be operationalisiert completely, without contradiction and. If the goal analysis is not carefully accomplished, this results in falsified results.

2. Collection of secondary conditions: The secondary conditions are measure gifts, without which the goals cannot be fulfilled.

3. Alternative regulation: Here the action alternatives are sketched. They must be able the goals to fulfill and with the secondary conditions be consistent.

4. Cost analysis: Pagatori costs (to market prices goods and service consumption evaluated for the implementation of a measure) and are to be assigned to each measure.

5. Effectiveness analysis: The Outputseite must be relevant and measurable. Two indexing steps follow:

  • Development of suitable effect yardsticks for the individual goals
  • Measurement of the different partial effectivenesses on an effectiveness scale: Cardinal scale (extent of effectiveness differences), Ordinalskala (statement of komparativen differences: more highly) or nominal scale (only class organizations: Yes-No)

6. Temporal homogenization: The temporally differently resulting costs and effectivenesses are referred by discounting to a common time, in order to make it comparable.

7. Consideration of risk and uncertainty : Due to imperfect information costs and effectivenesses can situation-cause different results to exhibit. It applies to differentiate therefore:

  • Decision with objective risk: statistic probabilities can be assigned (e.g. three with cubes)
  • Decision with subjective risk: only an allocation of subjective probabilities is possible (e.g. flood events)
  • Decision with uncertainty: neither objective nor subjective probabilities can be assigned. Often in this case an analysis of sensitivity is accomplished.

8. Delivery of project recommendations: At the end of the KWA a cost effectiveness matrix is provided, which considers the discounted and on risk and uncertainty of co-ordinated values.

Example question catalog

Leading questions for the analysis steps of the KWA for a concrete river section:

  • Which goals does the water framework guideline of the European Union
  • Which problem oriented goals are to be pursued with the
  • Are also national goals to be aimed
  • In which extent is each formulated goal to be achieved at
  • Which secondary conditions have to be seized, in order to be able to carry out ideally all
  • Which action alternatives are developing on target system and secondary conditions
  • Which pagatorischen costs and result with the individual action
  • Development of indicators, which can determine the range of the reaching of the aim of the project.
  • Measurement of the effectivenesses of the action alternatives.
  • Choice of suitable discounting rates.
  • How can the problem of the discounting be solved from
  • Production of a with project-relevant variables.
  • Choice of a suitable representational form of the action alternatives.
  • Description of the intangiblen effects of the action alternatives.

Literature

  • Train-to-live, to Manfred: Organization, Vahlen 2002 ISBN 3800628252
  • Christoph: General equilibrium models as instrument energy and environmentalpolitical analysis, long 1996 ISBN 3631303998
  • Michael: The economical costs of environmental policy, Physica publishing house 1991 ISBN 3790805351
  • White churches, franc: An application orientated cost model for the evaluation of armed forces structures in the context of cost effectiveness investigations, long 1993 ISBN 3631463707
  • Quade, Edward foam mountain: Analysis for public decisions, American Elsevier 1975 ISBN 0444001530
  • William, Ecological and economic evaluation of agrarian environmental programs, long 1999 ISBN 3631355939

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