The Information Technology Management Reform Act addresses the concept of Cost-Benefit Analysis (CBA) in Section 5122, Capital Planning and Investment Control (under Executive Agencies Responsibilities), which requires that the process of an executive agency include:

criteria related to the quantitatively expressed projected net, risk-adjusted return on investment and provide for identifying for a proposed investment quantifiable measurements for determining the net benefits and risks of the investment.

• The purpose of a CBA is to promote efficient resource allocation through well-informed decision-making by agencies of the Executive Branch of the Federal Government when initiating, renewing, or expanding programs or projects which would result in a series of measurable benefits or costs extending for three or more years.
• The time period for the analyses of IT projects should cover the system life cycle.
• Analyses should consider at least three alternative means of achieving program objectives.
• The standard criterion for deciding whether an IT project can be justified in a benefit-cost analysis is net present value -- the discounted monetized value of expected net benefits (i.e., benefits minus costs).

The NIH IT Management Guide addresses CBA in the context of the NIH IT management process.

The Cost Benefit Analysis Guide for NIH IT Projects is a comprehensive guide that specifically addresses the cost benefit analysis process for IT projects at NIH. Two samples have been developed to illustrate a CBA. Cost-Benefit Sample 1, Post-Implementation Review Analysis, illustrates several basic CBA concepts and is relatively simple. Cost Benefit Analysis Sample 2, A Cost-Effectiveness Analysis for the Development of a New IT System, utilizes an Excel spreadsheet that can be used as a model for a CBA for any type of IT project.

The CBA Evaluation Guide provides tools for the review and evaluation of Cost-Benefit Analyses.

Additional Guidance

• OMB Circular A-94, Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs, addresses CBA for all types of programs and does not specifically address IT projects
• Supplement to OMB Circular A-76, Performance of Commercial Activities, provides inflation rates, tax rates, and other factors that are necessary to the cost estimating process