R&D Evaluation

Perennial Economics has worked with a number of research and development corporations (RDCs), cooperative research centres (CRCs) and other research agencies to undertake cost benefit analyses (CBAs) of their R&D investments. The results of the analyses are used by the research agencies in their broader evaluations of the impact of research and development.

The key characteristics of the CBA method employed in R&D evaluations can include the following.

• The CBAs include a base case or counterfactual scenario, the benchmark against which the ‘with investment’ scenario is compared. The base case is usually defined as what would have occurred without investment in the technology or research.

• The CBAs are generally conducted over a 30 year time period.

• Costs and benefits are specified in real terms.

• The evaluation criteria include net present value (NPV), benefit-cost ratio (BCR) and internal rate of return (IRR).

• To account for uncertainty, sensitivity analyses are undertaken using a range of values for key variables. When available, probability distributions are used to describe the values of key, uncertain variables. Estimates of NPV, BCR and IRR are then generated through Monte Carlo simulations using @Risk software with Microsoft Excel.

Recently completed CBAs undertaken by perennial Economics detail the mine closures in NT, SA and WA. Income Leakage from FI/FO in the NT.