Ideal Approach - Step 3: Assessing Project Costs

Project costs include:

  • Direct costs (including investment costs and operating costs) associated with design and implementation and monitoring and evaluation; and
  • Indirect costs, including:
    • economic costs (e.g. loss of productivity due to more stringent safety procedures);
    • social costs (e.g., adverse health impacts); or
    • environmental costs (e.g., deforestation, land-use changes, greenhouse gas emissions, loss of biodiversity, etc.).

A cost estimate is obtained through the following steps:

  1. Identify Cost Categories: the risk management scenarios is broken down into cost categories;
  2. Gather cost data: unit costs must be assessed for each of the cost category identified. This unit cost list can be drawn from various data sources (market survey, statistical collection, etc.) or from direct consultation with providers. Cost studies conducted for similar projects can also be used; and
  3. Adjust costs to local conditions: where applicable, cost data must be adjusted to take into account local conditions, including timing (costs estimated in past years must be escalated to account for inflation), local market conditions, etc.

The quality of the estimate depends on the availability and accuracy of quantitative data at each of these steps.

Source: McKay Savage
Hatfield Consultants The World Bank funded by the Canadian POPs Trust Fund through the      
Canadian International Development Agency
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