Cost Effectiveness Analysis for Public Service Sector Projects - ENGR 222, Class 24 (14 Oct 2026)

Overview

Isaac Wait explains why cost-effectiveness analysis is useful for public services whose benefits are difficult to express in dollars, and defines it as cost divided by a consistent quantitative measure of effectiveness. Through a West Virginia commercial driver’s license office example and an exercise comparing anti-poaching agencies, the class ranks alternatives by cost per outcome and applies a budget limit; it also reviews how to calculate a project’s cumulative savings balance.

Key takeaways

Cost-effectiveness analysis is appropriate when public-service benefits are difficult to monetize or the service is necessary regardless of whether a benefit-cost ratio is favorable.
The cost-effectiveness ratio is cost divided by a consistent measurable outcome; a lower ratio means less spending per unit of effectiveness.
For the CDL office example, matching monthly cost and monthly license volume produces dollars per license, and the $2,300-per-hour budget supports Huntington, Charleston, and Weston.
The anti-poaching exercise measures effectiveness as annual arrests and compares agencies using dollars per poacher arrested under a $5 million budget.
A cumulative savings balance includes three components: the prior balance, interest on that balance, and new savings; at 2%, the prior balance can equivalently be multiplied by 1.02.

Chapters

0:00 Why Public Services Can Be Difficult to Evaluate with Benefit-Cost Analysis

Homework 8 is due at 11:59 p.m.; Homework 9 is posted and due one week later, with 37 days remaining for the course project.
Traffic enforcement cameras illustrate the challenge of estimating benefits in advance: they may reduce violations and crashes, but the likelihood and economic consequences of those outcomes are uncertain.
Services such as passport processing and community hospitals produce benefits that are difficult to capture fully in dollar terms, even when they are necessary.

6:00 Cost-Effectiveness Ratios for Fire Departments and Other Public Services

Cost-effectiveness analysis compares total cost with a quantitative measure of effectiveness when benefits are hard to monetize or the service must be provided regardless.
The ratio is cost divided by effectiveness; comparisons require using the same effectiveness measure across alternatives, such as annual overdose responses or fires addressed.
A Huntington firehouse may respond to structure fires and medical emergencies, so a single dollar-valued benefit estimate could miss much of its public value.

9:21 Ranking West Virginia CDL Offices Under a $2,300-per-Hour Budget

The hypothetical comparison covers five commercial driver’s license offices, each open 160 hours per month, with operating costs that include personnel and allocated fixed and variable expenses.
Monthly operating cost is calculated by multiplying hourly cost by 160; dividing by licenses processed per month yields dollars per license.
Lower cost-effectiveness ratios are preferred, indicating more output for less cost; the class ranks Huntington, Charleston, Weston, then the remaining offices.
With a $2,300-per-hour limit, the selected offices are Huntington, Charleston, and Weston; adding the next office would exceed the limit.

18:49 Applying the Ranking Method to Anti-Poaching Agencies

The in-class exercise compares agency costs with annual poacher arrests, producing a ratio in dollars per poacher arrested after the yearly time units cancel.
Habitat XP is identified as a strong option because it combines relatively low operating costs with a reasonable number of arrests; Gorilla Watch has comparatively few arrests.
The class sorts agencies by cost per arrest and adds their costs cumulatively against a $5 million budget, selecting three agencies and excluding EcoPlanet and Gorilla Watch.
The cumulative total for the first two ranked agencies, Habitat XP and Helping Hands, is $766,000.

27:41 Calculating a Project’s Cumulative Savings Balance

The year-end balance equals the previous year’s balance plus new savings plus interest earned on the previous balance.
For a 2% interest rate, adding interest separately is quantitatively equivalent to multiplying the prior balance by 1.02 before adding the new savings.
Working through the balance by hand helps students verify the year-by-year spreadsheet calculation for their project.

30:51 Project Check-Ins, Grading, and Course Closing

Students can visit office hours without an appointment to check project calculations; one student had already verified parts one through four.
The instructor expects to grade the in-class work and post scores the following morning.
The class closes with brief discussion of Isaac Wait’s other courses, including senior seminar for civil engineers and engineering career preparation.

Summary, takeaways, and chapters were generated by AI from the video's transcript and may contain errors. The video belongs to its creator, Isaac Wait.