Cost-Benefit Analysis in World Bank Projects

Abstract

Cost-benefit analysis used to be one of the World Bank's signature issues. It helped establish its reputation as the knowledge Bank and served to demonstrate its commitment to measuring results and ensuring accountability to taxpayers. It was the Bank's answer to the results agenda long before that term became popular. This report takes stock of what has happened to cost-benefit analysis at the Bank, based on analysis of four decades of project data, project appraisal and completion reports from recent fiscal years, and interviews with current Bank staff. This study draws two broad conclusions. First, the Bank needs to revisit the policy for cost-benefit analysis in a way that recognizes legitimate difficulties in quantifying benefits while preserving a high degree of rigor in justifying projects. Second, it needs to ensure that when cost-benefit analysis is done it is done with quality, rigor, and objectivity, as poor data and analysis misinform, and do not improve results. Reforms are required to project appraisal procedures to ensure objectivity, improve both the analysis and the use of evidence at appraisal, and ensure effective use of cost-benefit analysis in decision-making.