Information Systems
College of Business Administration
University of Missouri - St. Louis
Systems Analysis FAQ
Cost-Benefit Analysis Assignment
Some FAQ's and their answers have been provided by former students.
If some advice seems inconsistent with what Dr. Sauter has said in class, please contact her for clarification.

What is a cost-benefit analysis?
The goal is to determine whether or not it makes sense to go forward with the project. Specific output and deliverables are discussed on the feasibility page.

Why do I need a cost-benefit study?
A business plan does provide valuable information needed for the daily operation of any successful project. Data that is needed for the success of the project is included in the business plan. A cost-benefit study outlines all the data needed to ensure that a project is an economic success over a longer period of time. The inclusion of a complete marketing analysis, financial projections, and design parameters in our cost-benefit analysis lay a solid groundwork for all future tasks to be completed. A cost-benefit study is important for several reasons:

I. Having cost-benefit study gives legitimacy and credibility needed for our project and reassurance to any investor that this is the correct project to invest.

II. The cost-benefit study gives us investment parameters according to the recommended size and scope of project.

III. cost-benefit study lays out the ground work needed by the designers of the project. By designing any project without a cost-benefit to follow, much time and money will be wasted.

Are we supposed to find the solution by the time this is due?
We talk to the client the first time and get SOME HINT as to what we are "in for" in terms of the project. That is, what kinds of solutions can we brainstorm that will fix the problems as they have spoken them now. CLEARLY, this is not intended as the final set of solutions, and maybe not even as a good set of solutions. There is much we don't know yet! Think of yourselves as a consulting company. You have met with the client and now you need to decide whether or not you want to bid on the project or even want to go through with it. If you client had said the major problem was space, then you probably would need to "bow out" of the project because that is not within your area of expertise. Or, if they said the only solution is a new building ... that is out of your price range.

What should you be doing?
BRAINSTORM. What kinds of possible solutions and BALLPARK how much will they cost? You can have lots of things you suggest. The bottom line is, "does it make sense to go ahead with this project?" Now. what do you have to do? Your book has some good examples of deliverables. And, don't forget that "dummies" book .... I believe it has a sample letter.

Why are we doing this?
This assignment is just intended to help you focus. The rest of the semester you will focus ... focus ... focus.

Are all idea good ideas?
All are ideas are not good ideas. But each idea is important because you can gain alternate views or answer that you didn't see before.

Can we combine some of the ideas together since some overlap?
Yes, just make sure you state which each one is.

How long does the cost-benefit study need to be?
As long as it takes to demonstrate your solution is feasible..

Is it feasible for us or for the real world?
For you, don't go getting a big head and thinking you are going to change the world. Start little and work your way to the top. Don't start big and have to cut things from the project. Cutting leads to choppy reports, adding is easy and allows for a smooth ending.

What particular items should be addressed in a cost-benefit analysis is?
Think about what it is going to take to make your proposed solution tot he problem happen. Include the costs (money, time, frustration, etc.) of the solution, and weight these costs against the benefits that they will provide. Include risks involved with implementing your plan. Create a worst case scenario and best case scenario to devise a range of possible turnouts. Include some room for unforeseeable problems, as they are inevitable.

How do I put a value on less aggravation?
There is no easy way to measure stress in a cost-benefit study. It is intangible. Mention all the fewer headaches and problems that will result from whatever you intend on implementing but focus on the gains in saved money and saved time.

What if my solution won't involve spending more money?
A cost analysis can include things such as the hours that it will take to complete this and any other sacrifices made to complete the proposal.

How many solutions should we come up with to do a cost-benefit analysis on?
You should brainstorm as many possible solutions as you can. The more options you have the better you will assist the client. See some examples (link to examples of cost-benefit analysis).

Why do we do the cost-benefit study now?
If forces you to weigh your options and pick logical reasonable solutions.

How will the cost-benefit assignment affect our final project?
The cost-benefit assignment will help your group determine which alternative solutions seem the most realistic and feasible to focus on in your final project. This will hopefully give you some guidance in helping to narrow down the final possible solutions for your client.

Is it okay to say the project we've been given is not feasible?
Not unless you've got a LOT of evidence and information that I was not privy too. Instead, you should focus this assignment on how to make it feasible. If you can only see a solution that is beyond your scope, then you don't understand the problem. Remember, for every problem there are many solutions. Are your lights on?

What if we don't think the project is feasible? Can we say that?
Yes you can say that you don't see how the project is feasible. However, you will then need to refocus your group efforts and find a problem and solution that you can see as feasible. With as broad as this assignment is everyone should be able to come us with one feasible solution to propose.

What happens if, in a project, you decide not to bid on the project?
Simply tell the client that this project is not possible for your company to complete. Other companies will surely have the right expertise for their project.

Will this be included in the final project?
Yes. You will have to explain the cost-benefit of your selected solution.

What are some things to remember when interviewing the client for the first time?
Be willing to listen, avoid unnecessary assumptions, choose words for follow-up questions carefully, avoid value-laden questions, avoid assigning value to answers during interview, remember non-verbal communication.

If we don't come up with "The right answer", during the cost-benefit assignment, will we get a bad grade?
No absolutely not. The purpose of this exercise is to brainstorm new ideas. You might not develop the final solution during the cost-benefit exercise, but you have the rest of the semester to do that.

How do I go about assessing a project's cost-benefit?
There are six different categories of feasibility and they are economic feasibility, technical feasibility, operational feasibility, schedule feasibility, legal and contractual feasibility, and political feasibility. Together, the culmination of these cost-benefit analyses form the business case that justifies the expenditure of resources on the project. Detailed explanations of what these cost-benefit categories contain can be found in your textbook.

Should we include all the types of cost-benefit (i.e., economical, technical, operational, schedule, legal and contractual, political)?

Do you want actual cost or would a good estimate be sufficient?
Actual cost are always better than a rough estimate. If you are bidding on a project, you should know how much the cost would be. You do not want any surprise in the final project. This study will tell you if it will be affordable to all parties involved.

Are the cost-benefit analysis and economic cost-benefit the same thing?
Yes, they are the same.

How specific do you expect us to work on cost-benefit assignment?
I want as much detail in units of dollars, hours or whatever is appropriate.

Where can I find the numbers I need for estimating cost?
Ask the client, if he doesn't know, do some research. Use the library and call around to see if anyone else knows.

Is there a certain format we are to use for the cost-benefit study?
No there is no certain format, it just need to cover all of the valid information and you need to provide justification as to how you deduced if it is /is not feasible.

What is included in the cost-benefit assignment and how much detail is needed for each factor?
Included in the cost-benefit assignment is economic, technical, operational, schedule, legal and contractual, and political. At this point in the project most of these are estimates giving the analysis an idea of where they are headed in the amount of time they have. Determining project benefits comes from the cost-benefit assignment so bringing in detail is important when heading towards a focus or even deciding if the project is worthwhile. (Refer to page 168-181 in book).

How important is cost-benefit in terms of the entire project?
In real life, cost-benefit is absolutely crucial for projects. This project is only slightly different because the information as well as the resources that we have is limited.

How will we know what all the costs will be?
Since there is so much you do not know at this point just find the obvious costs associated with the solution.

Is there a right or wrong answer for the cost-benefit study?
No, I don't think there is a right or wrong answer. I think the cost-benefit study should explain the system as you want it to be explained.

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