Application of Cost-Benefit Analysis in the HS2 East

Application of Cost-Benefit Analysis in the HS2 East
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Application of Cost-Benefit Analysis in the HS2 East
A cost-benefit analysis is a methodical process used most especially by firms to help them evaluate and analyze the decisions they are to make and which they are not to make concerning investing in a project (Lupu 2019, p.110). This analysis makes this possible by its ability to combine and classify the various costs and benefits that are anticipated while undertaking the project agreed upon. The firm uses the cost-benefit analysis when they have different alternative projects to help them choose a project with more benefits and fewer costs. Before implementing any project, the project manager or the project team is to undertake an analysis to evaluate the costs that may result from undertaking the project and find out whether it is worth implementing the project. This is to be conducted to find out the financial feasibility and compare it with the firm’s or organization’s capacity. For instance, the HS2 East project, which involves a high-speed line that runs from Birmingham to the East Midlands Parkway station to the south of Nottingham, should identify its costs and benefits before the project's commencement to avoid its abandonment before completion.
The cost-benefit analysis would be helpful to be administered to the HS2 East project because of its various features. One of the features includes finding out whether a project is approvable. This method can be used in the HS2 project to determine if the project is sound regarding the benefits overweighing the project’s costs and the differences between the benefits and costs. It could also be used to compare the costs and benefits, which help to develop a ratio between them that would help in the decision-making process (Ustaoglu & Williams 2019). This would allow the organization find the basis they may use to convince the donors and the stakeholders why the project is worthy of being carried out. With this method, the firm carrying out the project can also approximate the time taken to acquire the benefits that come with the project. This is possible because as the cost-benefit analysis analyzes the benefits, the time to be able to realize them is also calculated.
For the firm to carry out an effective cost-benefit analysis during the implementation of the HS2 project, it should do it in the following steps. The first is to understand the cost required to maintain the status quo. This step is to ensure the potential costs that may come about by doing nothing are identified, which will help determine whether the project can be maintained during its implementation (Haug et al. 2019, p.140). This would be helpful because sometimes it would be better to do nothing than invest in the project. Secondly, with the help of the project team, the firm is to identify the costs that may be incurred during project time (Faria et al. 2020, p.27). The team is to effectively do this by carrying out brainstorming sessions and, at the end of the session, come up with a list of all possible costs that may impact the project. Third, the team is also to identify the benefits of investing in the project. The team may carry out this step the same way with the risks. Some questions that would help them identify these benefits may include the additional revenue from the investment, the period between the completion and the gaining of long-term benefit, and the rate of return of investment. Fourthly, monetary values are assigned to the costs and benefits identified. At this step, the firm ensures that the same monetary unit is used to measure the costs and benefits. The next step is the creation of timelines for costs and expected revenue. Finally, the firm is to compare the costs and benefits and decide whether to invest in the project (Singh et al. 2021).
While implementing the HS2 project using the cost-benefit analysis, various costs can be incurred, such as direct costs. These costs include the ones that are expected to directly affect the firm to ensure the implementation and the success of the rail project. The costs may be incurred by purchasing raw materials such as steel metals, plastics, payments of labor, and equipment relevant for implementing the project (Adukia et al. 2020, p.350). Another cost includes indirect costs, which do not directly affect the firm during the implementation of the project. These costs may be brought about by transportation fees that the organization is to account for. These transportation fees may include the ferrying of certain employees such as contractors and engineers to ensure the successful implementation of the project. Rent costs can also be incurred, which may be brought about by the facilities used for accommodations for specific employee...