Economic Appraisal Guidance
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NI Practical Guide to the Green Book

2.  

Step by Step Appraisal Guidance
   

Introduction
    The Northern Ireland Preface to the Green Book introduced a 10-step approach to appraisal in an effort to simplify the practical business of carrying out an appraisal. This seems to have proved helpful and a similar approach is adopted in the NI Practical Guide.
    The steps are broadly the same is before but there have been some modifications. For example, the assessment of risk and adjustment for optimism bias are now positioned as a new Step 6 to make clear that they should occur before the calculation of Net Present Values; and assessment of uncertainty (sensitivity analysis etc) is now grouped together with the calculation of Net Present Values within Step 8.
    The steps are presented broadly in the sequence in which they should be undertaken, but this should not be interpreted rigidly. For example, it is not necessary to wait until all the options are defined before starting to consider costs, nor is it necessary to identify all the costs and benefits before beginning to identify risks and uncertainties.
    However, something that may generally be interpreted rigidly is that the conclusions and recommendations should not be decided before the analysis is undertaken!

  1. Step One: Explain the Strategic Context
  2. Step Two: Establish the Need for Expenditure
  3. Step Three: Define the Objectives and Constraints
  4. Step Four: Identify and Describe the Options
  5. Step Five: Identify and Quantify the Monetary Costs and Benefits of Options
  6. Step Six: Assess Risks and Adjust for Optimism Bias
  7. Step Seven: Weigh Up Non-Monetary Costs and Benefits (including New TSN and Equality)
  8. Step Eight: Calculate Net Present Values and Assess Uncertainties
  9. Step Nine: Record proposed arrangements for Financing, Management, Marketing, Procurement, Monitoring and Evaluation
  10. Step Ten: Assess the Balance of Advantage between the Options and Present the Appraisal Results and Conclusions