Cost Effectiveness

Cost effectiveness concerns assessment of the effectiveness of technical cooperation in relation to its cost: i.e. does the project represent the best use of given resources for achieving the planned objectives? Cost effectiveness can be considered at different levels. At one level, internal cost efficiency may be examined to see whether this would be the least-costly way to produce outputs of the desired quality in the required time. A more important question, however, is whether this would be the most effective way to achieve the objectives with the human, capital and financial resources available. The cost effectiveness should be considered with respect to the overall objectives of the technical cooperation and the opportunity costs that it entails.

While, for capital investment, cost effectiveness can be assessed using the criteria of internal rate of return, for technical cooperation there is no such quantitative measure. One possible approach is to consider whether the project represents the "least cost method" and "most effective approach" to solve the problem given the overall policy/programme framework in the country: i.e. could the same level of benefits and results be achieved using an alternative, less costly approach? Project design should therefore consider different options for producing the desired outputs.