The role of cost-benefit analyses in establishing and maintaining land and geographic information systems for the whole of government: Victorian experiences

This is a paper from NALIS '94 Symposium and Exposition 1994.While there has been some criticism of cost-benefit analysis to justify government expenditure over the years there is no doubt it is still one of the best tools to support a business case for a new initiative. One of the strengths of cost-benefit analyses is that they present a structured approach to assessing alternative strategies for developing different initiatives and in this case, land and geographic information systems. It provides two basic indicators to help decision making - first the net benefits in monetary terms and second, a benefit to cost ratio. Both are good indicators for justifying a business case. The more rigorous cost-benefit analyses also include discounting, sensitivity analysis and risk assessment to make the monetary estimates of the costs and benefits more realistic. Since land and geographic information systems are at best a mixed good, a simple assessment of profitability in terms of profitability ratio, net present value, internal rate of return or payback period is usually conservative when assessing the value of such initiatives to a state or jurisdiction. Cost-benefit analyses however allow at least the documentation of the intangibles to support the decision making process that is often political and visionary in nature. The cost-benefit analysis undertaken by a consultant for the Victorian Government in 1993 to determine the costs and benefits of developing the Government's approach to managing and using land and geographic information systems is an excellent example to review since the process was a success. Government ministers accepted the resulting vision and the cost-benefit analysis, with a result government departments have commenced implementing the broad strategy set out in the consultant's report. The study into the State's geographic information systems was also timely. Without doubt Victoria had lacked political leadership and commitment in the management of spatial and land related data for nearly a decade. As a state, Victoria had slipped from being a leader in Australia, with strong international respect, to a position significantly behind the "pack". While there had been some very good individual initiatives in Government, overall the State had not capitalised upon the enabling information technologies for the management of spatial data. However there were some significant constraints and limitations placed on the GIS Study which to some degree have limited its usefulness. For example the study was only concerned with the inner sector of government and not the outer sector, i.e. it was not concerned with local government or utility organisations which in one sense are the major users of spatial information. Needless to say it was not concerned with the private sector. In addition the terms of reference did not permit it to look at institutional arrangements or administrative structures within government. This latter aspect has presented significant difficulties in implementing the strategy. Even recognising the restrictions, the study has proved successful in gaining the attention of government ministers and instigating a period of reform in the spatial information sector in government which hopefully will see the State of Victoria again achieving a position of leadership within Australia in this area.14-16 November 199