The evaluation methods of previous chapters are usually applied to alternatives
in the private sector, that is, for-profit and not-for-profit corporations and
businesses. Customers, clients, and employees utilize the installed alternatives.
This chapter introduces public sector alternatives and their economic
consideration. Here the owners and users (beneficiaries) are the citizens of the
government unit—city, county, state, province, or nation. Government units
provide the mechanisms to raise (investment) capital and operating funds for
projects through taxes, user fees, bond issues, and loans. There are substantial
differences in the characteristics of public and private sector alternatives
and their economic evaluation, as outlined in the first section. Partnerships of
the public and private sector have become increasingly common, especially
for large infrastructure construction projects such as major highways, power
generation plants, water resource developments, and the like.
The benefit/cost (B/C) ratio was developed, in part, to introduce objectivity
into the economic analysis of public sector evaluation, thus reducing the
effects of politics and special interests. However, there is always predictable
disagreement among citizens (individuals and groups) about how the bene-
fits of an alternative are defined and economically valued. The different
formats of B/C analysis, and associated disbenefits of an alternative, are
discussed here. The B/C analysis can use equivalency computations based
on PW, AW, or FW values. Performed correctly, the benefit/cost method will
always select the same alternative as PW, AW, and ROR analyses.
A public sector project to enhance freeway lighting is the subject of the
case study.
