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Table 5 CBA components that have relatively good agreement, poor agreement and flexibility in application

From: A cost–benefit analysis framework for preventive health interventions to aid decision-making in Australian governments

CBA component

Areas of agreement

Areas of disagreement

Areas of flexibility

When to conduct a CBA

Commensurate with the scale of investment

Required for investments over A$ 10 million

CBA not recommended for primary analysis by PBAC

Type of analysis that is appropriate for investments less than A$ 10 million

Perspective and referent group

Societal perspective for CBA

The referent group or standing varies from communities within LGAs, the state jurisdiction and whole of Australia

Health perspective recommended by PBAC using CUA


Comparator/base case

Well-defined status quo. Avoidance of “straw man” comparator

Terminology (base case versus comparator)


Options for appraisal

A range of realistic options should be included

The number of options included

The nature of options included

Time horizon

Principle that the time horizon should be the economic life of the project

Longer time horizons are associated with increased uncertainty

Appropriate time horizons for various interventions


Social discount rate


Theoretical basis for social discount rate

The rate to be used in primary and sensitivity analyses


Costs and benefits

Second-round impacts excluded in primary analyses

The appropriate value for the VSL and VSLY

Technique for estimating non-market impacts

Inclusion of productivity impacts

Decision rules

NPV and BCR should be reported

The preferred outcome measure (NPV or BCR) when these measures give varied results


Sensitivity analyses

Extensive uncertainty analysis should be undertaken to test the impact of key assumptions and variables

Terminology (uncertainty analysis, risk analysis, sensitivity analysis)

Type of analyses: one-way, scenario, best/worst-case, Monte-Carlo simulations

Distributional impacts and other considerations

Distributional impacts should not be incorporated into technical results

Distributional impacts should be considered by decision-makers


Method of undertaking distributional analysis


All critical assumptions and input parameters should be documented with supporting evidence

Reporting standardized but varied across guidelines

  1. A$ Australian dollars, BCR benefit–cost ratio, CBA cost–benefit analysis, CUA cost-utility analysis, LGA local government area, NPV net present value, NSW New South Wales, PBAC Pharmaceutical Benefits Advisory Committee, VSL value of a statistical life, VSLY value of a statistical life-year