Cost-benefit analysis in the government transport sector : the case for MSD (Manufacturing and Services Department)

Abstract

The decision to purchase transport equipment in the public sector involves a long-term commitment of funds. Thus, such decisions.need to be evaluated carefully particularly because of the country's structural deficit. A cost-benefit analysis (CBA) is a special investment appraisal technique that aims to achieve the optimum allocation and management of public funds. The Manufacturing and Services Department (MSD) was chosen for the purpose of applying CBA to purchasing decisions in the government transport sector as besides lacking a transport policy, it is the most representative transport agency within the public sector. The literature review provided the theoretical background on the approach of a CBA in the public sector. Interviews conducted with government practitioners sought to bring out the national factors involved in a CBA-focused model for the acquisition of transport equipment in the public sector. This model was also developed for the effective evaluation of various acquisition options. Research findings identified three main problems in the Maltese public sector decision-making environment. These are the lack of standardisation in the evaluation of decision alternatives, the total inexistence of mathematical investment analysis and the lack of serious regular communication between government departments. Finally, a variety of recommendations were put forward to counteract problems and weaknesses identified in the management ot government's transport fleet, to ensure accountability for cost management and overcome obstacles to introducing the CBA approach in public sector decision-making.