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The challenges of cost-benefit analysis (CBA) are often misunderstood as a viable decision-making tool. For
this Assignment, you examine the value of CBA.
Using the Resources provided this week, and after reading the scenario, it is your responsibility to convince
others of the value of using cost-benefit analysis.
To prepare:
Read the following scenario:
You are the city manager of a municipality of 250,000 citizens located in a county with 250,000 more residents
living in unincorporated areas surrounding the city. Recently, a large automaker announced its plans to locate
an assembly plant in the unincorporated area of the county. The new facility is expected to bring new growth to
the city and county.
Through a joint service agreement with the county, the city furnishes water to all county residents and is
expecting to provide service to the new auto plant. Historically, the user rates charged to county residents
residing outside the city have been substantially higher than those charged to city residents. As a result of the
higher user fees, the provision of water to unincorporated areas has been a source of revenue for the city.
The city’s main water treatment plant is over 40 years old and is operating near capacity. Also, the
maintenance costs of the plant are starting to increase at an alarming rate. With the anticipated new demand for
more water, the city needs to make a decision about expanding its water treatment capacity.
The mayor and council are looking for guidance on how to determine the best way to increase the city’s water
treatment capacity. The mayor is a former military officer and is familiar with the U.S. Army’s approach to cost-benefit analysis. The mayor is trying to convince her fellow councilmembers that the city needs to develop a
cost-benefit analysis to determine the best course of action. You agree with the mayor’s approach to decision
making; however, some older members of the council have some doubts about the use of cost-benefit analysis
as a decision-making tool. The cost-benefit doubters claim that they are elected to make decisions for the city,
and they do not want to relinquish their decision-making responsibilities to some opaque operations research
technique that the average citizen could not possibly understand. In order to convince the council of the value
of cost-benefit analysis, the mayor has asked you to:
By Day 7
Write a 5-page memorandum addressing the first four steps in the U.S. Army Cost-Benefit Analysis Guide as
they relate to the city’s need to increase its water treatment capacity.
Sample Solution
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