Guidance on Policy Evaluation, Cost-benefit Analysis
and Economic Appraisal
The role of evaluation
Since 1997, the OECD Working Party on SMEs and Entrepreneurship (WPSMEE) has
strongly encouraged OECD member and non-member governments to systematically
evaluate their SME and entrepreneurship policies. The rationale for this is that policy
decisions should lead to net economic and social benefits; in other words, the costs of
implementing projects and programmes should be less than the benefits. Cost-benefit
analysis underlies all evaluation of SME policies and programmes. This means that costbenefit
analysis should be carried out before (ex ante or a priori) a decision is committed to,
and before any expenditure is incurred. At this ex ante stage, the alternative options for
achieving the project objectives should be evaluated to ensure the best approaches are
adopted to implement the proposed project or programme. After (ex post) expenditure is
incurred, projects and programmes should be evaluated at various stages of progress, to
ensure that the potential net economic and social benefits are actually achieved.