PAF CIA

Project Appraisal Finance

CIA
Research Article Review

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Name xxxxxxxxx
Section xxx
Registration Number xxxxxx

Article: AN INVESTIGATION INTO SOCIAL COST-BENEFIT ANALYSIS PRACTICE IN

THE APPRAISAL OF PUBLIC PROJECTS IN KENYA by Stephen Odock and Muranga
Njihia,

Department

of

Management

Science,

University

of

Nairobi,

4TH

International Operations Research Society of Eastern Africa (ORSEA) Conference,

2008.
Objective of the study and research problem:
Objective:
The following are the objectives of this research paper are
1. To find out the problems faced by CBA (Cost-benefit Analysis) specialist in
Kenya.
2. To see whether the specialist of CBA in Kenya consider CBA vital in
enhancing the performance of the project.
3. To understand the degree up to which the analysts of a project complete a
Social CBA in a public development project appraisal in Kenya.
4. To find out the reason behind someone not undertaking Cost-Benefit
analysis in Kenya.
Research problem:
This paper talks about the lack of practice of CBA and it is only more of a
theoretical concept. This research report addresses the following questions - In
case of development project appraisal in Kenya do the analysts follow CBA? How
do they do it? Does CBA help in enhancing the project performance?
Research Methodology:
The research is an explorative study to establish the CBA status of various
projects practiced in Kenya. Project analysts and organizations that appraise
public development projects in Kenya were considered for the population.
Stratified sampling was utilized to identify project analysts drawn from the
categories of institutions mentioned below and the total sample size was 62:

Development consultants and academics: sample of 10 each were

selected using snowball sampling.
Donor agencies, Government ministries and Non-Governmental
organizations: Sample size of 10, 22 and 10 respectively, were selected
randomly.

A structured questionnaire was used to collect the primary data required. The
questionnaire had both open and closed ended questions.

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The reactions of the respondents were altered to ensure consistency, exactness,
completeness and arranged to help in coding and classification before final
analysis of the study. The information codding, arrangement and analysis was
done using SPSS. Descriptive statistics were analyzed by percentage and
frequency distributions.
Outcome:
In this study respondents were from all sectors of the economy and out of which
67% of them had more than 10 years experience in project management. From
the sample 45 responded with a response rate of 65 percent; of which 58% used
CBA and 20% did not use CBA but alternatively used other methods to obtain the
same objectives. 23% did not use CBA or any other method.
56% of respondents who undertake CBA have moderate or high level of
understanding of CBA. Other respondents use a 'mix and match' form of CBA.
Few do not understand it and the rest use their own rule of thumb.
61% of respondents believe that by using CBA the probability of success of a
project improves; as long as it is properly followed and undertaken.
The drawback of CBA is considering reality as static rather than dynamic. The
difficulties faced in undertaking it are: valuation of non-monetary effects,
incorporating uncertainties like changes in technology and establishing a
mechanism for shadow pricing.
Respondents who do not undertake CBA or any other methodology are the ones
who lack adequate skills and resources to undertake the exercise.
Conclusion:
CBA (Cost Benefit Analysis) is not a pointless exercise as the respondents view it
to increase the performance of project. One of the limitations found out in CBA
theory and practice is it is static rather than as dynamic; which is a technique
that considers dynamism and multiple variables without loss of information.
The findings about project performance from analysts who dont utilize any
specific technique demonstrate that we can live with much less certainty than is
generally assumed. The dissenting character of such recommendation is a
barrier for now as it threatens existing CBA models. Anyway, further research can
be taken up as it is a promising avenue.
My views and Learning:
1. This paper throws a light on the views of various analysts on the cost
benefit analysis in project appraisal on public projects and has shown that
the approach is currently static but still it provides a means to increase the
performance of the project.
2. The research methodology used was appropriate, the outcomes do
capture the objectives of the study and the open and closed ended

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questionnaire was able to capture the data needed from the analysts but
the response size was just 45 which may not justify the population.
3. There was no gap or limitation mentioned in the paper and further the
paper talks about further research which can be taken up to design the
dynamic model of an cost benefit analysis.
4. Overall the research was conducted in an orderly manner and the findings
support their objectives.
5. From the study I learnt the importance of a cost benefit analysis in project
appraisal of public projects and how the analysts in Kenya view and use
CBA in their project appraisals.