Module 2: Assessing feasibility – Cost-benefit analysis and Cost-effectiveness analysis

Introduction

This Information Sheet provides an introduction to Module 2: Assessing feasibility – Cost-benefit analysis and Cost effectiveness analysis.

The following information sheets are part of this series:

  • Introduction to the module
  • Topic 1: Defining adaptation objectives and activities
  • Topic 2: Developing and allocating costs
  • Topic 3: Defining benefits and effectiveness
  • Topic 4: Calculating and comparing costs and benefits
  • Topic 5: Using project implementation tools
  • Topic 6: Using project closure tools

As a field planner, you are required to evaluate and select climate change adaptation projects. This is no easy task, because often, several climate change adaptation project options are available. Understanding the project process and understanding methods of selecting interventions allows you (planners and practitioners) to select and support the most feasible interventions.  In this section, we will look at The project life cycle as an introduction to the module.

The project life cycle

A climate change adaptation project typically proceeds through the following four phases, known as the project life cycle:

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Dividing a project into four phases makes it easier to plan, manage and control project processes and understand your role in a project, as well as in the broader adaptation process. Let’s look at each of these of these project phases.

Stage 1: Project initiation

In the generic project process, the initiation phase begins with the setting of objectives, whereas, the overall objective for all projects pursued under the RVCC project has been clearly defined. All adaptation interventions in the RVCC project are pursued with the aim:

 “[t]o mainstream climate risk considerations into the Land Rehabilitation Programme (LRP) of Lesotho for improved ecosystem resilience and reduced vulnerability of livelihoods to climate shocks”.

In addition to this, the RVCC Integrated Project Monitoring and Evaluation Framework sets out the project outputs and outcomes expected  in order to achieve this objective.

Stage 2: Project preparation stage

This phase begins the project process and includes assessment, project selection, and planning (scope of work, time, cost and quality).

Assessment

With the project objective and outcomes in mind, a vulnerability assessment for an area is conducted to identify the specific needs that are to be addressed by the adaptation intervention that will ultimately be selected and implemented. This assessment, along with the cost-benefit/cost effectiveness analysis, will be the key determinants of whether the intervention selected will deliver the expected outcomes and objectives.

This concept was discussed in detail in Module 1, Topic 3: Climate Change Vulnerability Assessment.

Remember, even in these early stages, it is important to keep in mind the requirements (objectives, outcomes, outputs, and indicators) of the RVCC project that are detailed in the M&E framework.

Project selection

Project selection involves deciding which climate change intervention to implement, based on a thorough evaluation of each potential option. The process entails identifying and weighing up the costs, benefits, advantages, disadvantages and feasibility of each proposed project and selecting the intervention that will have the greatest impact in reducing vulnerability, enhancing adaptive capacity and building resilience.

The project selection methodologies that will help you make this critical decision are introduced in Information Sheet 2.1: Defining adaptation objectives and activities.

Once the most feasible project has been selected, it should be formally authorised and contracted, then the planning phase can begin.

Project planning

Project planning is the third step of the second phase of the project lifecycle. This step is crucial, as a poorly planned project will inevitably yield poor results. Every project requires sufficient time to properly plan what activities need to be done, how they will get done, who will perform each activity, how long each activity will take, how much activities and resources will cost, and what the risks involved are.

The project planning phase, therefore, involves determining the project scope, the planned budget and the planned schedule, and establishing the required quality standards to be delivered. These will then serve as benchmarks, or a baseline, for evaluating project progress and performance during the implementation phase.

By the end of Stage 2, you should have a sufficiently detailed plan to facilitate the achievement of project objectives.

Stage 3: Project execution

Project implementation simply means executing the project plan. During this phase, the ‘work’ is done as project resources are used to perform all the project activities in order to achieve the project’s objectives and produce project deliverables.

Project monitoring & control

As the project is executed, all project work needs to be monitored and controlled. Without monitoring and control, completing the project successfully, on time and within budget is unlikely.

The RVCC Integrated Monitoring and Evaluation System provides a framework for this.

Monitoring

Monitoring a project requires regularly and systematically measuring – and documenting – actual progress (what was actually done, and the results achieved) and comparing it to planned progress (what was expected, as stated in the project plan). This will establish whether there are any major issues that may prevent the project from being completed successfully.

For example, variance analysis is an essential part of the budget management process. Variance analysis is a comparison between budgeted and actual expenditure. As a result of unforeseen factors, some budget items are under-spent and some over-spent. Variance analysis enables project managers to monitor their budgets on a monthly or quarterly basis and take early corrective action, if necessary. Your project needs to run according to the baseline budget developed during the planning phase. This is the source document, and you will compare ‘actual’ against ‘budgeted’ income and expenditure.

Beyond tracking project progress, another key part of monitoring is measuring project outcomes at mid-term (during project implementation) and end-term (at the end of implementation). This involves identifying and assessing[9]:

  • Progress towards achieving the outcomes, including unintended effects of activities related to the project outcomes.
  • The contributing factors to the project outcomes.
  • The contribution the UNDP has made to the project outcomes.
  • The effectiveness of the partnership strategy in achieving the project outcomes.

This process is detailed in the RVCC Integrated Project Monitoring and Evaluation System. This forms part of a framework for monitoring climate change interventions which is discussed further in Module 3: Monitoring and evaluation of climate change interventions.

Controlling

Controlling a project means implementing changes and taking corrective action to get the project ‘back on track’ if and when there are significant deviations (variance) from the project plan. Controlling involves managing any activities that are needed to correct cost or schedule overruns, inadequate deliverables, etc.

Using the budget example of earlier, you could use the variance analysis to manage expenditure.

  • For example, when you spend less than budget, it raises the following questions:

Did you deliver what you were supposed to?

If the answer to this question is ‘YES’, then the reason for saving could be that you delivered a service or product of poor quality or that you had an inaccurate plan and the costs were over-budgeted for.

If the answer to the question is ‘NO’, then the saving could be because of non-delivery of a service or product.

  • Alternatively, when you spend more than the budget for that line item and time period, it raises the following question:

‘Did you deliver what you were supposed to?

If the answer to this question is ‘YES’ then the reason for the over-expenditure could be that you delivered more than you intended to, or the costs exceeded the amount budgeted for.

If the answer to this question is ‘NO’, then the over-expenditure could be because of poor budget planning. Immediate corrective action must be taken or else the project will be in trouble.

Stage 4: Project closure

The final phase of the project lifecycle is completion or closure, which begins when all the project work has been completed during implementation, and all the project deliverables have been delivered. Closing out the project can involve[10]:

  • Ensuring final payments have been made to suppliers and contractors;
  • Recognising and evaluating the project team’s performance;
  • Identifying and documenting lessons learned for future projects;
  • Collecting and archiving project documents;
  • Handing over project assets;
  • Conducting a project evaluation.

Project evaluation

During the implementation and closure phases, it is crucial to evaluate the results of the climate change intervention to establish the actual costs and benefits of implementing the project in order to identify what has worked and what needs to be improved in future projects. During project closure, the knowledge and information gained from the monitoring and evaluation of project tasks and the climate change intervention as a whole is collated and consolidated and will eventually be reported and fed back into the broader adaptation process to ensure that future adaptation efforts are successful.

A framework for evaluating climate change interventions is detailed in Module 3: Monitoring and evaluation of climate change interventions.

 

Additional support material

RVCC Integrated Project Monitoring and Evaluation System         https://goo.gl/mY6M6t

 

References

Gido, J. & Clements, J.P 2015. Successful Project Management, 6th ed. Stamford: Cengage Learning.

Orotin, P. (2017, December). Integrated Project Monitoring and Evaluation System: Final Report. Reducing vulnerability from climate change in Foothills, lower Lowlands and Senqu River Basin in Mohale’s Hoek District in Lesotho, 2015-2020.

UNAIDS, n.d. Glossary: Monitoring and Evaluation Terms [Online] Available at: http://www.unaids.org/sites/default/files/sub_landing/files/11_ME_Glossary_FinalWorkingDraft.pdf

United Nations Framework Convention on Climate Change, 2011. Assessing the costs and benefits of adaptation options: An overview of approaches [Online] At: https://unfccc.int/resource/docs/publications/pub_nwp_costs_benefits_adaptation.pdf

 

Key terms

Adaptation assessment This is the practice of identifying climate change adaptation options and evaluating them using a set of predefined criteria. These criteria could include availability, benefits, costs, effectiveness, efficiency and feasibility.
Benefits The avoided damage costs or the accrued benefits following the adoption and implementation of adaptation measures.
Costs

The costs of planning, preparing for, facilitating, and implementing

adaptation measures, including transition costs.

Deliverables Tangible items / products that are produced by the project team in accordance with customer requirements during and at the completion of the performance of the project.
Expenditure The money spent in order to deliver the climate change adaptation interventions.
Income The funding / money coming in.
Indicator A quantitative or qualitative variable (factor) that provides a reliable and valid measurement of achievement or reflects performance or changes from the current state.
Objectives These represent what is to be accomplished and the benefits achieved from implementing an intervention; the tangible end product that the project team must produce and deliver.
Project implementation Project implementation is about doing or executing. The project manager responds to project events as the project is implemented.
Project schedule The project schedule is about planning what needs to happen in the project. The project schedule ‘models reality, it is not reality’. It changes as  events happen in the project.
Project selection This the process of evaluating and selecting a project/climate change adaptation response, using a set of predefined criteria.
Scope This is all the work that must be done to produce all the project deliverables that meet the customer requirements and acceptance criteria and accomplish the project objective.