Present-value analysis: A systems approach to public decisionmaking for cost effectiveness

Decision makers within Governmental agencies and Congress must evaluate competing (and sometimes conflicting) proposals which seek funding and implementation. Present value analysis can be an effective decision making tool by enabling the formal evaluation of the effects of competing proposals on efficient national resource utilization. A project's costs are not only its direct disbursements, but its social costs as well. How much does it cost to have those funds diverted from their use and economic benefit by the private sector to the public project? Comparisons of competing projects' social costs allow decision makers to expand their decision bases by quantifying the projects' impacts upon the economy and the efficient utilization of the country's limited national resources. A conceptual model is established for the choosing of the appropriate discount rate to be used in evaluation decisions through the technique.