Cost-benefit in a nutshell

How do you turn an idea into reality?

Often it takes a clear and compelling business case to drive action and investment. A common way to do this is to complete a cost-benefit analysis that will underpin the economic case for investment. Evaluating the economic benefits of green infrastructure can be difficult as the community and environmental benefits that we draw from natural systems are often taken for granted – after all we have enjoyed them for free all of our lives. Yet, these ‘ecosystem services’ have an inherent value, and there are methods available to attribute a monetary value to these – whether that be the healthcare costs avoided by providing people with greener spaces that promote exercise and mental well-being, or the increase in property values created by supporting bigger, healthier trees in a street.

Making the business case early

The business case is often made once a design has been detailed and the proposal is put forward for investment. At this point it may be appropriate to appoint an economist to provide a detailed cost-benefit analysis or complete a business case to meet the requirements of the investing organisation. However, sometimes it is useful to complete a ‘short and sharp’ cost-benefit analysis early in the design process – to test the potential of an idea or a concept and to determine whether it's worthwhile moving to the next stage of investigation.

Recognising this need, E2Designlab have developed a preliminary business case summary that we call a ‘nutshell’ – a compact little cost-benefit assessment designed to grow and mature an idea into reality. The nutshell approach uses high-level results from a concept-level analysis to identify and monetise benefits and allow a preliminary cost-benefit assessment to be made at an early stage. We conduct a workshop with stakeholders to identify possible benefits and use the CRC's INFFEWS tools to evaluate the possible benefits before summing all this up in a short little business case document.

A nutshell cost-benefit for stormwater harvesting in City of Melbourne

We recently worked with City of Melbourne to develop a nutshell cost-benefit assessment for a concept design that considered extracting stormwater from Moonee Ponds Creek to irrigated Princes Park. A range of possible benefits of the scheme were developed in a workshop with council representatives. The impact of drought on the park and adjacent trees was a major concern, and drawing on evidence collated from the Millennium Drought we were able to monetise a range of costs that could be avoided in a future drought related to premature tree death, loss of amenity and recreation and necessary safety audits.

The evaluation of benefits compared with preliminary cost estimates informed the internal decision as to whether the concept should be taken forward for further exploration. The analysis also considered who benefited from the project, considering benefits to Council, the local Carlton community and to the wider Melbourne community.

The nutshell assessment is presented in a succinct summary designed to be shared with internal stakeholders to make the case for a project. A our 'nutshell' summary assessment are included here.

 

New cost-benefit tools available

The CRC for Water Sensitive Cities has developed a range of tools to help general practitioners calculate a cost-benefit for various water sensitive investments. This includes the INFFEWS Cost-Benefit tool, an excel based tool for calculating cost-benefit, and the INFFEWS Value Tool, a database of relevant evidence that can be used to monetise various benefits.

E2Designlab has applied the INFFEWS tools in several projects including to support our 'Nutshell' assessments. We have also recently developed a series of case studies for the CRC for Water Sensitive Cities showcasing how the tool can be used.