BGI Consulting has prepared the cost-benefit analysis methodology and model for evaluating the socio-economic impact of investments

Cost-benefit analysis (CBA) – one of the principal methods, applied for evaluating the alternatives of planned investments, foreseeing their financial and economic returns and, based on these results, making informed decisions on the selection and financing of projects. It is anticipated that application of this method will be further expanded, encompassing new fields, and will be especially relevant in the 2014-2020 financial perspective.

The main goal of the project, financed by the Ministry of Finance of the Republic of Lithuania and implemented by BGI Consulting in cooperation with CSIL Milano, was to introduce methodology and model, based on research and international best practice, for evaluating the socio-economic impact of precisely Lithuania’s public sector investments, financed by the EU Structural Funds and funds from Lithuania’s national budget.

A methodology, oriented exclusively towards development of economic analysis stage of CBA, was introduced. In particular, the following activities were included in the implementation of this project: the list of components of socio-economic impact (cost and benefit) (estimates) for 13 public policy sectors was identified, the list and values of cost conversion factors, as well as instructions and practical examples on the application of cost and benefit components (estimates), and conversion factors were provided, a model for practical calculation and periodic updating of cost and benefit components (estimates) was created.

Based on the outcomes of this project, BGI Consulting, in cooperation with the Ministry of Finance of the Republic of Lithuania and the Central Project Management Agency (CPMA), in April and May of 2014 organized practical training on CBA “Practical Training on Cost-Benefit Analysis: From Selection of Alternatives to Economic Analysis”. Training was targeted at the representatives of various Lithuania’s institutions (ministries, implementing agencies and other institutions), responsible for strategic planning, selection and evaluation of projects and programmes financed by the EU Structural Funds and funds from the national budget. 

The training was conducted in four sessions, covering the following topics: 

• “Problems in Preparing Cost-Benefit Analysis and Evaluation of Investment Projects (Comparative Models of Public Sector)” (lecturers - Andrej Dubovskij and Linas Jasikevičius (CPMA)),
• “Cost-Benefit Analysis: the Main Theoretical and Practical Aspects and New Prospects for the Forthcoming Financial Period” (lecturer - Davide Sartori (CSIL Milano)),
• “Cost-Benefit Analysis: Theoretical and Practical Aspects of Economic Analysis - Conversion Factors, Cost and Benefit Components (Estimates) and Their Application” (lecturers: Jonas Jatkauskas, Tomas Mačiekus and Edvinas Bulevičius (BGI Consulting)),
• „Cost-Benefit Analysis: Introduction and Testing of the Model for Calculating and Updating Conversion Factors, and Cost and Benefit Components (Estimates)” (lecturers: Tomas Mačiekus, Jonas Jatkauskas (BGI Consulting)).

Prepared CBA methodology and model, as well as implemented trainings on CBA, contribute significantly to the enhancement of institutional capacities and professionalism, and assist Lithuania’s institutions in proper and effective planning and implementation of investments in the 2014-2020 financial perspective.

The project was commissioned by the Ministry of Finance of the Republic of Lithuania and the Central Project Management Agency.