Cost-Benefit-Analysis Report — Project Evaluation and Management

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    Management
  • Document type:
    Assignment
  • Level:
    Undergraduate
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SOUTH AUSTRALIAN RIVER MURRAY SUSTAINABILITY PROJECT

Cost Benefit Analysis Report ====================================================

Executive Summary

Cost-benefit analysis is a procedure for comparing alternative courses of action by reference to the net social benefits that they produce for the community as a whole. It is a technique used to compare the total costs of a programme/project with its benefits, using a common metric (most commonly monetary units). This enables the calculation of the net cost or benefit associated with the programme. 

Cost-Benefit-Analysis Report - Project Evaluation and Management

This cost benefit analysis report will be used to evaluate the total anticipated cost of South Australian River Murray Sustainability Project as compared to the total expected benefits in order to determine whether implementation is worthwhile for Australian Government and Commonwealth. The report will look in to the impacts of the National Partnership Agreement on South Australian River Murray Sustainability Project both in economic terms and impact on society’s well being. The project was initiated based on the provisions of the Intergovernmental Agreement on Federal Financial Relations (IGA FFR) read with the Agreement and its Schedules, which provide information in relation to performance reporting and payment arrangements.

Abbreviations

CBA Cost Benefit Analysis

ACTEW Australian Capital Territory Electricity and Water Corporation

CBA Cost Benefit Analysis

Introduction

This is a cost benefit analysis report of the South Australian River Murray Sustainability Program where Commonwealth and South Australia made an agreement and mutually agreed to work together to deliver water reform outcomes in South Australia in the context of implementing the Intergovernmental Agreement on Implementing Water Reform in the Murray -Darling Basin. The Agreement, will contributes to the implementation of the South Australian River Murray Sustainability Program. The program will support South Australia’s contribution to a healthy working Murray -Darling Basin, including a healthy environment, strong communities and a productive economy, through implementation of the Murray-Darling Basin Plan (the Basin Plan) and associated reforms and initiatives

This program is funded by the Commonwealth under this Agreement which will be implemented consistently with the objectives and outcomes of all National Agreements and National Partnerships agreed by the Parties.

Cost-Benefit-Analysis Report - Project Evaluation and Management 1

Description of the proposal

The role of the Commonwealth in this project is to provide financial contributions to South Australia to support the implementation of this project. It is also supposed to monitor and assess the performance and achievement of the set targets and deliverables at any given stage. This monitoring and evaluation shall ensure outputs are delivered and outcome achieved within the set time lines.

Project stakeholders must comply with the Building Code 2013 which is a condition of Australian Government funding. The constructors must meet the requirements of the Fair Work (Building Industry) Act 2012 and are must be accredited by Australian Government Building and Construction Occupational Health and Safety.

South Australia on the other hand agrees to deliver outcomes and outputs assigned to South Australia for implementation. They also monitor, assess and review and report the delivery of outputs as set out in the Agreement.

South Australia must implement appropriate governance mechanisms to ensure the administration and management of the program is equitable, transparent and robust.

They should establishing program guidelines, application documentation and processes, eligibility and assessment criteria, and appeals processes that will allow the State to identify which projects will best meet the objectives and funding elements with reference to value for money.

Developing communication and stakeholder engagement, implementation, risk management, compliance management, audit compliance and performance assessment plans and a monitoring and evaluation strategy to support the program.

It is South Australia that will ensure eligible applicants have met all Commonwealth conditions placed on any previous Commonwealth funding they may have received.

(SA) and all applicable Australian Standards must be complied with. Natural Resources Management Act 2004 (Cth) and Native Title Act 1993 (Cth) and the Environmental Protection and Biodiversity Conservation Act 1999 Ensuring that all third party contractual arrangements require successful applicants to comply with all applicable laws and regulations such as planning, environmental, occupational health and safety, building and regulatory approvals. the

Cost-Benefit-Analysis Report - Project Evaluation and Management 2

Impact chart

What are the program objectives?

  • Australian state to deliver $120.0 million grant program in order to improve the overall productivity of River Murray irrigation industry.

  • Assist irrigators who have access entitlement to extract water from the South Australian River Murray Prescribed Watercourse in ode to improve their farms productivity.

  • Establish and implement competitive and transparent distribution process for the industry funding with robust governance and appealing processes.

Identify the impacts (costs and benefits)

Cost identificationis the first step in identifying and quantifying all costs associated with the program. First is the monetary costs to be incurred on project implementation all though the project life.

Unit cost

$(Million)

Travel expenses

Production materials

Licenses

Salaries and wages

Training

Start-up fees

0

0

0

Monetary Costs to be Incurred

Secondly are the non-monetary costs likely to be incurred. The assigned monetary values are assigned as per the current market trends and industry surveys.

Unit cost

$(Million)

Market saturation

Imperfect processes

Potential risks

Penetration uncertainties

Influences on one’s reputation

Non-Monetary Costs Likely to be Incurred

Identifying Benefits

the benefits identified and qualified once the program is fully implemented, all the monetary benefits to be experienced upon implementation and thereafter are together with all the non-monetary benefits likely to experience are identified.

Monetary benefits

Unit benefit

$(Million)

Direct profits from services,

Increased contributions from investors,

Decreased production costs

Increased production capabilities

Non Monetary Benefits

Unit benefit

$(Million)

Increased reliability and durability

Improved government reputation

Greater customer satisfaction

Greater market saturation

Decreased production times

Greater customer base

Value the impacts (costs and benefits)

There will be an average annual yield of at least 16.8 gigalitres water savings achieved by the Commonwealth and South Australian River Murray Irrigation project.

General farm improvement and improved farm water management through the provision of funds for irrigation system improvement, this eventually improve water delivery to crops.

Cost-Benefit-Analysis Report - Project Evaluation and Management 3

Infrastructural improvement through provision of funds for upgrades off-farm irrigation delivery infrastructure.

The benefits can be achieved if technical and legal due diligence and assessment by State agency delegated by South Australia to confirm the estimates of water savings, works proposed are properly costed and fit-for purpose and to determine the merit of funding.

The projects under the South Australian River Murray Irrigation will return at least 50 per cent of water savings to the Commonwealth at a project value of no more than 2.5 times the prevailing average market price of water access entitlements recovered.

Purchase of water access entitlement will be done at the prevailing average market price and subject to the annual limit of funding provided for the element by the Commonwealth.

All the purchases will be done according to the South Australian procurement policies and compliance procedures.

The program will recover at least 19.2 gigalitres long term average annual yield water to the Commonwealth. This water will be supplied to the Commonwealth in the form of South Australian River Murray Class 3 water access entitlements.

There will be decreased in cost of production due to the improvement of and standardization of operation processes and procedures.

Evaluate Costs and Benefits

The final step when creating a cost benefit analysis is to weigh the costs and benefits to determine if the proposed action is worthwhile. This is achieved by comparing the total costs and total benefits values.

The formula used is:-

NSB = (B — C)> 0

Where NSB is net social benefits, B is social benefits and C is social costs, in this context prices is set equal to marginal cost.

Conclusion

The program will deliver competitively awarded grants to support irrigation systems , farming employment opportunities or economic diversification within the region.

Bibliography

Boardman, A.E., D.H. Greenberg, A.R. Vining, D.L. Weimer. (2011). Cost-Benefit Analysis: Concepts and Practice. 4th ed. Pearson Education, Inc., Upper Saddle River, USA.

Perkins, F. (1994). Discounted project assessment criteria. Practical cost benefit analysis: Basic concepts and applications. MacMillan Education Australia PTY, LTD, Sydney.

Markandya, A., P. Harou, L.G. Bellù and V. Cistulli. (2002). Environmental economics for sustainable growth: A handbook for practicioners. Edgar Elgar, Cheltenham.

Kuyvenhoven A., & L.B.M. Mennes. (1985). Guidelines for project appraisal: An introduction to the principles of financial, economic and social cost-benefit analysis for developing countries. DGIS, The Hague.

Haltiwanger, John. 1997. Measuring and Analyzing Aggregate Fluctuations: The Importance of Building from Microeconomic Evidence. Federal Reserve Bank of St. Louis Review 79 (3):55-77.

Snowdon, Brian, Howard Vane, and Peter Wynarczyk. 1994. A Modern Guide to Macroeconomics: An Introduction to Competing Schools of Thought. Al-dershot: Edward Elgar.