Cost-Benefit Analysis in The Local Authorities and Effective Decision-Making in Public Investment

Abstract

Issues on sustainable cities and communities have been intensely debated nowadays. In Malaysia, Local Authorities (LAs) are among the stakeholders responsible for these matters. However, LAs have received criticism for poor financial management in generating and managing the funds which hindered them from performing their duties in fulfilling public expectations. Thus, the Cost-Benefit Analysis (CBA) was introduced as a tool that guided their decision on the projects that would be beneficial to the societies and involve an acceptable trade-off cost. Accordingly, this article discusses the literature on CBA, its use in decision-making, and the factors influencing its implementation. The stakeholders’ theory was employed to assess the expected relationship between the use of CBA and its effectiveness in public investment decision-making. Notably, this article contributes to the LAs by providing input on the CBA role and the factors that can encourage its application in investment evaluation, particularly in the public sector.