cost-benefit analysis

n.A methodology to evaluate different actions, methods, or strategies by estimating the ratio of all expenses to benefits, both tangible and intangible, inherent in each option.


Cost analysis is more than the purchase price of the thing being evaluated. It includes the fully burdened cost that includes indirect costs over the expected life. For example, the fully burdened cost of an electronic recordkeeping system may include maintenance contracts or support, staff training, and time necessary to ensure that the system conforms to appropriate recordkeeping requirements. Similarly, benefit analysis considers more than immediate direct savings by monetizing intangible benefits. For electronic recordkeeping systems, direct savings may include salary savings over the life of the project as a result of increased efficiency, as well as increased functionality and improved customer satisfaction.For example, a comparison of storing paper records off site versus scanning those records will need to address the reduced costs of storing records in less-expensive space, the added costs of retrieving the records, and the intangible costs of the delay in retrieving the records. A scanning project would consider the reduced costs of storing records in the office, the intangible benefits of rapid retrieval, and the future costs of migrating records to overcome obsolescence.