Approach and methodology
All economic appraisal must take place in the context of the Treasury Green Book, with which DfT has to comply. This is based on key principles such as cost effectiveness and proportionality which are refl ected throughout this proposal. DfT also works within the Treasury “Five Case” model:
“Business cases can be broken down into fi ve different aspects which are interconnected but distinct (namely, the strategic, economic, fi nancial, commercial and management aspects of the case). The business case should enable Treasury and other stakeholders to ascertain that proposals:
• are supported by a robust Case for Change – the Strategic Case;
• optimise Value for Money – the Economic Case; • are commercially viable – the Commercial Case; • are fi nancially affordable – the Financial Case; and,
• can be delivered successfully – the Management Case.”
This report focusses on the Economic Case, which is where any Benefi t to Cost Ratio (BCR) or Net Present Value (NPV) is calculated. Even within this, the Treasury note that distributional impacts need to be recorded, and that BCR or NPV alone is not the full extent of an appraisal. It also mentions option development, but this is really only applicable to larger scale packages or projects. For that reason we do not think that the preparation of an “Options Report” is required. Risk analysis and optimism bias are, however, still relevant but should be included in the project proposals (as is the case for the schemes currently under consideration by Carplus), rather than a separate exercise.
Much of the work which would fulfi l the fi ve case model has been done for the projects under consideration (for example management and risk). This report therefore focusses on the task of producing meaningful numeric analysis which will be useful to decision makers when they have to assess value for money of different schemes.
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