Road and dam construction projects may not generate high returns, but have a social impact. In CBA, the total cost and expected returns of a project are estimated in monetary terms.
The CBA approach involves the estimation of cost incurred on raw materials, labour, rents and acquiring land. It does not consider the environmental aspect of the project.
On the other hand, in SCBA, the emphasis is given on the social cost and benefits of a project. The SCBA approach assesses the social or economic impact of a project on the society as a whole.
A project may have two types of social impacts
- Positive Impact or Social Benefit
- Negative Impact or Social Cost
Applications of SBCA
SCBA is a relatively new approach to select a project. It is generally applied to government projects as the government aims at enhancing the well-being of the society. On the other hand, private organisations pay less attention towards the social costs and benefits associated with a project, as the social costs and benefits do not directly affect the profit of the organisation.
- Public projects
- Private projects
Challenges in SBCA
The following are important challenges in SBCA
Difficulty in identifying project beneficiaries:
It is difficult for an organisation to determine who gets benefitted by a project and at what time. The social costs and benefits of a project can have wide temporal and spatial dimensions.
Difficulty in valuation:
It is not easy for an organisation to evaluate the actual social costs and benefits involved in a project. As mentioned earlier, the social costs and benefits are subjective in nature; therefore, it is not always possible to quantify them.
Difficulty in compensating the affected people:
Suppose an organisation is planning to undertake a car manufacturing project and needs to acquire farmland for setting up the project. In such a case, it is very difficult for the organisation to decide compensation.
Difficulty in resolving the conflicts of interest:
There are differences in interests of different social groups regarding a particular project. A project has various impacts on the society at large. The interests of various social groups are not necessarily the same.
Difficulty in formulating decision criteria:
It is not easy to lay down the conditions on the basis of which a project can be accepted or rejected. In CBA, projects are selected on the basis of the financial profitability of the projects.
