Division 2.3.4 Simplified economic analysis in special cases

In certain limited cases where the benefits of a major project are very difficult or impossible to quantify and monetise, but where costs can be predicted with reasonable confidence, notably for major projects driven by necessity to ensure compliance with EU legislation, a cost-effectiveness analysis (CEA) can be performed. In such cases the appraisal shall focus on verifying that the project is the most efficient solution for the society to supply a given, necessary service at the pre-defined conditions set out. In addition, qualitative description of main economic benefits should be provided.

CEA is carried out by calculating the cost per unit of ‘non monetised’ benefit and is required to quantify benefits but not to attach a monetary price or economic value to the benefits.

The conditions for applying CEA are as follows:

• the project produces only one project output which is homogenous and easily measurable;

• this output is a crucial supply, entailing that action to secure it is essential;

• the aim of the major project is to achieve the output at minimum cost;

• there are no significant externalities;

• there is a wide evidence of appropriate benchmarks to verify that the chosen technology meets the minimum required cost performance criteria.