| STEP |
MAIN PROCEDURES IN BRIEF |
GUIDANCE |
| 1. EXPLAIN THE STRATEGIC CONTEXT |
- Refer to underlying policy or strategy, e.g. policy statements, statutory requirements, or business plans.
- Indicate how the proposal is expected to contribute to the relevant strategic aims and objectives.
|
NI Practical Guide section 2.1
Green Book chapters 3 & 4 |
| 2. ESTABLISH THE NEED FOR EXPENDITURE |
- Establish the need for expenditure by:-
- analysing the expected demand for services; and
- identifying deficiencies in current service provision.
- Justify and quantify the proposed level of service provision over the appraisal period.
Where funding the non-Govt sectors is in view:- Assess Additionality i.e. establish that the proposed assistance is the minimum necessary.
|
NI Practical Guide section 2.2
Green Book chapters 3 & 4
NI Practical Guide section 4.3 |
| 3. DEFINE THE OBJECTIVES AND CONSTRAINTS |
- Define the expected outcomes and outputs.
- Specify targets that are SMART i.e. Specific Measurable Achievable Relevant and Time-dependent.
- Include implementation targets e.g. dates, milestones.
- State the key constraints on the project, e.g. technical, financial, legal, timing etc.
- Indicate the relative priority of individual objectives or elements of the proposals
- Provide sufficient detail to enable option generation and option performance assessment.
|
NI Practical Guide section 2.3
Green Book chapter 4 |
| 4. IDENTIFY & DESCRIBE THE OPTIONS |
- Identify and describe a baseline option, usually the status quo, and a suitably wide range of alternative options.
- Consider variations in scale, quality, technique, location, timing and funding method.
- Examine alternative procurement options including appropriate consideration of a PPP solution.
- Choose a suitable number of options for full appraisal.
- Where some are rejected before full appraisal, explain reasons for rejection.
|
NI Practical Guide section 2.4
Green Book chapters 5 |
| 5. IDENTIFY & QUANTIFY THE MONETARY COSTS AND BENEFITS OF OPTIONS |
- Detail capital costs, including any refurbishment costs, and annual recurrent costs and benefits of all options.
- Express costings in total rather than incremental terms, to expose full resource consequences.
- Include opportunity costs and residual values for all assets employed, whether already owned or not.
- Assess displacement, and adjust costings accordingly.
- Adjust for inflation and (where relevant) tax differences.
- Where cost savings or efficiency improvements are projected, indicate whether they will represent financial savings or redeployment of resources.
- Consider costs and benefits to other parts of the public and private sectors.
Where funding the non-Govt sector is in view:- Assess Cost-Effectiveness by reference to relevant ratios such as cost per job, public assistance to project cost, etc.
|
NI Practical Guide section 2.5
Green Book chapter 5 and Annex 3
HMT supplementary guidance on the taxation of PFI and the public sector comparator
NI Practical Guide section 4.4 |
| 6. APPRAISE RISKS AND ADJUST FOR OPTIMISM BIAS |
- Prepare a risk log identifying and quantifying the main risks associated with the proposal.
- Consider how risks compare under the different options.
- Adjust costs, benefits and timing assumptions for optimism bias.
- Develop suitable risk management and risk reduction strategies.
|
NI Practical Guide section 2.6
Green Book chapter 5 and Annex 4;
HMT supplementary guidance on the treatment of optimism bias. |
| 7. WEIGH UP NON MONETARY COST & BENEFITS (INCLUDING NEW TSN & EQUALITY) |
- Identify relevant non-monetary costs and benefits.
- Quantify them in suitable units where possible.
- Employ appropriate technique to show how they compare under the different options e.g. "list and describe" in simpler cases; "impact statement" or "weighted scoring method" in others.
- Consider distributional issues incl. New TSN & Equality.
- Explain assumptions clearly e.g. weights and scores should be explained individually.
- Interpret the results of the non-monetary analysis.
|
NI Practical Guide section 2.7
Green Book Annexes 2 & 5 |
| 8. CALCULATE NET PRESENT VALUES (NPVs) AND ASSESS UNCERTAINTIES |
- Identify phasing of monetary costs and benefits over suitable time period, adjusted for inflation, optimism bias and (where relevant) displacement and tax differences.
- Calculate NPV (or NPC) for each option, using correct discount rate.
- Include spreadsheets detailing the calculations, including disaggregation of cost/benefit items.
- Show, for each year, the discount factors used, the total NPV for the year, and the cumulative NPV to that year.
- Identify the price basis and base year for discounting.
- Test and interpret the sensitivity of the NPVs (or NPCs) to changes in important assumptions, and explain choice of variations covered.
- Interpret the results e.g. estimate the probability of various possible outcomes and implications for option ranking.
- Provide sufficient detail to enable checking of calculations.
|
NI Practical Guide section 2.8
Green Book chapter 5 and Annex 6 |
| 9. ASSESS ARRANGEMENTS FOR FINANCING, MANAGEMENT, PROCUREMENT, MARKETING, MONITORING AND EX POST EVALUATION |
- Financing: Include budget, cash flow and funding statements, phased over time.
- Management: Give details of proposed personnel, procurement method, timetable, benefits realisation plan, accommodation needs, staffing issues etc.
- Marketing: Provide market assessment and marketing plan as appropriate
- Monitoring: Indicate how the proposed option will be monitored during and after implementation.
- Evaluation: Record pre-implementation levels of resource use and service provision. Indicate factors to be evaluated, when, how and by whom.
Where funding the non-Govt sector is in view:- Assess Viability i.e. examine cash flows, management & financial arrangements to ensure that funding is not wasted on proposals that will fail prematurely.
|
NI Practical Guide sections 2.9, 10 & 11
Green Book chapters 6 & 7
NI Practical Guide section 4.5 |
| 10. ASSESS THE BALANCE BETWEEN THE OPTIONS AND PRESENT THE RESULTS & CONCLUSIONS |
- Write up the steps of the appraisal in the order shown here.
- Give details of assumptions and calculations, using appropriate appendices.
- Include summary of main results (i.e. NPVs/NPCs, unquantifiables and uncertainties) for each option.
- Draw out the balance of advantage among options, assess VFM and affordability, and record conclusions and recommendations.
|
NI Practical Guide section 2.10
Green Book chapter 6 |
