Return on investment analysis: Applying a private sector approach to the public sector
Abstract
In an environment of scarce resources and rising government deficits the public not only expects but demands
greater accountability for the spending of public funds. This demand has created a trend in the public sector,
not only in the United States, but worldwide, towards the importation of private sector business analysis
practices to improve government accountability-oriented analysis. One example is increased emphasis on
return on investment (ROI) analysis in public sector organizations. Development and application of ROI analysis
is challenging in the public sector since most government organizations do not generate profit necessary for
calculation of ROI in the manner in which it is done in the private sector. This paper addresses previous
attempts at using ROI in the public sector, identifying whether these attempts properly used ROI and what
prevented their ultimate success in terms of use value. This paper argues that properly designed and
conducted ROI analysis, based on methods used successfully in the private sector, can better reveal how and
for what goods and services public money is spent and a means for evaluating whether it was spent well in
providing goods and services. The methodology developed in this study provides a means for comparing the
value derived from investment and work performed by and for government using an approach to ROI based on
private sector methods.
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.Collections
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