DI 39536.215 Cost Benefit Analysis --DDS

A cost benefit analysis will always be prepared but may be very brief if the requested change is minor such as for a few additional printers.

NOTE: The decision of whether a purchase is a major or a minor one will be made on a case-by-case basis, decided by OD. The only requirement would be that the analysis clearly reflects the alternatives considered and the rationale for the choice made. When requesting a completely new system or a total replacement of an existing system, a complete cost benefit analysis, as outlined below, is required.

The feasibility study must include a cost benefit analysis comparing the cost considerations of the proposed system with the existing operation and of the options rejected. One of the main considerations is the cost of processing operations which may be reduced or eliminated by a new or modified system. Current operations with assigned monetary values must be evaluated to determine the cost/payback benefit.

The following costs must be considered:

  1. Comparative employee cost should include fringe benefits as well as base salaries and training.

  2. Significant costs associated with physical environmental requirements such as electrical, cabling, space, air conditioning and raised flooring should be itemized.

  3. The cost analysis must be complete. Unexplained items such as “programming costs not included” or “not including cost of peripheral equipment” are not acceptable. A lease versus purchase analysis and the payback point in months or years must also be furnished.

  4. It is not absolutely necessary to prove that an automated system or an expansion of an existing system will save money although there should be some proximity to the total cost of operations which the automated system would replace or the expansion would provide. Processing time savings and more efficient management are additional factors to be considered in the analysis.

    Tangible costs which will be incurred if the proposed system or enhancement is not implemented should be considered as cost avoidance in the same manner as the cost of the existing operation. These costs would include all costs for additional employees which will have to be hired to process the workload under the existing method of operation.

    To assist the DDS in the format to be followed for the cost benefit analysis, a sample format has been included in DI 39536.240, Exhibit II. Other formats, providing details appropriate to the scale of the project are acceptable, provided they meet the minimum requirements outlined in the sample.

    Feasibility studies are conducted before a system proposal is prepared. It is part of the study phase of systems analysis. The systems proposal uses these studies as documentation of the recommended action proposed.

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DI 39536.215 - Cost Benefit Analysis --DDS - 08/05/1996
Batch run: 01/27/2009