DEPARTMENT FOR EMPLOYMENT AND LEARNING
Economic Appraisal Pro Forma
(For Expenditure between £30k and £150k)
(Organisation/Division)________________________
(Name)_________________________
(Position)_______________________
(Date)__________________________
(Signature)______________________
Business Case Approved By *
(Signature)___________________________
(Grade)_______________________________
(Date) _________________________________
* Evidence of approval should be retained for future inspection
Have you noted SMART objectives and constraints in the project
Have you carried forward at least three options (Including the status Quo)
Have you noted the mechanism/detail/timing for the post project
evaluation?
Each section of the attached Economic Appraisal Pro Forma should be completed. If
required, sections may be extended to provide enough space for the details to be
entered. More in depth guidance on each of the steps of appraisal can be found at
http://www.dfpni.gov.uk/eag In addition EA training is currently delivered by DFP
economists and these courses can be accessed via the CAL website.
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1.
Strategic Context and Assessment of need
The strategic importance of the project should be established by referring to
any relevant strategies or initiatives at the local or national level. You should
then seek to identify any deficiencies or problems with the current service
provision in order to establish the need for expenditure. Where possible seek
to quantify the need by providing appropriate data/statistics showing levels of
usage or demand.
DFP GUIDANCE STATES THAT STRATEGIC CONTEXT SECTIONS
SHOULD BE VERY SHORT AND NORMALLY NO MORE THAN 2 PAGES
OF ANY BUSINESS CASE.
Policy
Overview and contribution of the proposed project
document
Northern
The Programme for Government 2011-2015 (PfG) in Northern
Ireland
Ireland aims to highlight the actions the Executive will take to
Executive,
deliver its number one priority – “a vibrant economy which
Programme
can transform our society while dealing with the deprivation
for
and poverty which has affected some of our communities for
Government
generations”.
(PfG)
supporting economic recovery and tackling disadvantage.
“Building a
Priority areas include:
The
most
immediate
challenges
lie
in
Better Future,
Priorities and

Budget” 2011
– 2015
“Growing a Sustainable Economy and Investing in the
Future;

Creating
Opportunities,
Tackling
Disadvantage
and
Improving Health and Well-Being;

Protecting Our People, the Environment and Creating
Safer Communities;

Building a Strong and Shared Community; and

Delivering High Quality and Efficient Public Services”.
Contribution of the proposed project:
2
Northern
The overarching goal of this Strategy is to improve the
Ireland
economic competitiveness of the Northern Ireland economy.
Economic
This involves rebalancing the economy to improve the wealth,
Strategy
employment and living standards of everyone in NI.
One of the ways identified in the strategy to achieve this is to
improve the skills and employability of the entire workforce so
that people can progress up the skills ladder, thereby
delivering higher productivity and increased social inclusion.
What has also been identified is that a world class education
and skills system is critical for economic growth.
Contribution of the proposed project:
Department
This document, the Skills Strategy for Northern Ireland, is
for
based on an analysis that links higher levels of skills (via
Employment
qualifications) as being one of the best means of achieving
and Learning
higher productivity, leading in turn to raised employment and
(DEL):
increased social inclusion.
Success
through Skills
Contribution of the proposed project:
Transforming
Futures (2011)
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Any other
This section should include any strategy or policy document
policy or
specific to the Division/Sector/Organisation in question e.g.
strategy
the HE Strategy or FE means Business or the Skills Strategy
documents
specific to
this case
should be
included here
along the
same format
of those
outlined
above.
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2.
Objectives & Constraints
You should seek to set SMART (Specific, Measurable, Agreed, Realistic and
Time bound) objectives (or targets) for the project. Consideration of any
identified technical, legal, political, or financial constraints associated with the
proposed project should also be undertaken. You should seek to ensure that
the objectives can be tracked from the evidence presented in the need
3.
Identification of Options and Option Sift
The range of options considered should generally be as wide as possible.
Options can consist of various ways of meeting the need covering a range of
levels of provision. A long list of options may be given initially, before being
shortened to a more manageable list. Options should be clearly shortlisted
based on their consistency with project objectives and constraints. This
shortlist should contain the baseline case (or status quo) plus at least two
alternatives.
Option name
Option
Description
Included (I) or
Rejected (R)
5
Reason for
rejection
4.
Monetary Costs & Benefits
This section should assess the costs associated with each of the carried
forward options. You should seek to ensure that you present all costs in as
much detail as possible whilst also ensuring that you present the
source/basis/rationale for all costs.
Note that in relation to benefits only
monetary benefits should be included in this section, if no monetary benefits
will accrue this should be stated.
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5.
Risk Appraisal and Optimism Bias
The presence of risks, which can be economic, managerial, legal or financial e.g. risk of a capital cover overrun, may influence the
choice of option, therefore the implications must be thoroughly explored. It is crucial that potential risks are identified and their
impact assessed across all options. Using the template below, please give details of any risks along with the countermeasures that
will be put in place to minimise their impact on the project.
Risk description
Countermeasure
Option 1
Option 2
Option 3
Option 4
Total
Level of risk (low=1, med=2, high=3)
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You should then use this section to provide a concise explanation for the
scores you have allocated to each of the options in the table above.
Adjusting for Optimism Bias
You should provide historical evidence of cost overrun in similar size and cost
appraisals (evidence based) if possible. The average of these cost overruns
would then be summed as the OB amount (percentage overrun on similar past
projects). The monetary costs identified in step 4 should then be adjusted with
the OB figure. If no historical base is available then the Mott MacDonald
framework
can
be
used.
http://www.dfpni.gov.uk/index/finance/eag/eag_resources/eag-optimism-biascalculator.htm .
All supporting calculations should be presented or
appendixed to the submission of the business case.
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6. Non-Monetary Costs and Benefits
Use the table below to identify any non monetary benefits or costs associated
with the project and how these will be measured. The impact of each of the
non monetaries should then be scored (in accordance with the impact scoring
set out below the table) against each of your identified options.
Benefit area/detail
Measurement
Steps
Option
1
Option
2
Option
3
Option
4
Total
Ranking
Impact (I): 0 – neutral, 1 – Low, 2 – Minor, 3 – Moderate, 4 – Major
Description of non monetary scoring
You should then use this section to provide a concise explanation for the
scores you have allocated to each of the options in the table above.
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7.
Calculate Net Present Values (NPVs)
Where considering larger appraisals with a lifetime of more than three years it
is important that future cost and benefits are valued in today’s terms
Appraisals should include, for each option, a calculation of its NPV. This is the
name given to the sum of the discounted benefits of an option less the sum of
its discounted costs, all discounted to the same base date. Where the sum of
discounted costs exceed that of the discounted benefits, the net figure should
be referred to as the Net Present Cost (NPC).
The time horizon for NPV calculations should reflect the economic life of the
services being appraised, or the useful life of the relevant assets and should
be sufficiently distant to cover all the important cost and benefit differences
between options.
The anticipated effects of general inflation should be removed from all figures
before discounting.
Optimism Bias adjustments (Section 5) must be made before the calculation of
NPVS, that is, NPV analysis must be conducted on OB-adjusted figures.
NPV analysis should be completed using the NPV Calculator available from the
DFP website: http://www.dfpni.gov.uk/npc-calculator.xls
If you have any queries about the completion of NPV spreadsheets please
contact the Departments Economists.
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8. Financing and affordability arrangements.
This section should include an affordability analysis/statement of the preferred
option. This will generally include a budget statement showing the resource
costs over the lifetime of the project and a cashflow statement showing the
cash requirement of the preferred option, including VAT and inflation. 1
Affordability should also include a funding statement to note who would
provide the resources/cash required to deliver the option in question –
including any contribution from the Department. The consideration of financing
and affordability should be in line with the DEL financial year and for NDPBs
must include OTV Budget considerations.
Yr 0
Yr 1
Yr 2
Yr 3
Totals
£000’s
£000’s
£000’s
£000’s
£000’s
Total DEL Required:
Capital DEL
Resource DEL
Allowance for
depreciation/impairment
(included
in Resource
DEL figures
Existing
DEL
Provision:
above)
Capital DEL
Resource DEL
Allowance for
depreciation/impairment
(includedDEL
in Resource
DEL figures
Additional
Required:
above)
Capital DEL
Resource DEL
Allowance for
depreciation/impairment
(included in Resource DEL figures
above)
Funding Body
Sum funded
& % of total
£
£
£
Funding
secured?
Yes/No
If not secured, indicate status
of negotiations
( %)
( %)
( %)
1
GDP deflators can be found at the following link https://www.gov.uk/government/collections/gdpdeflators-at-market-prices-and-money-gdp you should select the latest available statistics, the figures
used to apply inflation can be found in the column ‘percentage change on previous year’ – consult
Victoria Reid or John Kerr if further advice is required
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9. Selection of the preferred option and detail on its management, monitoring
and post project evaluation considerations
A summary table may be included which covers all of the options detailing the
results of the analysis of monetary costs and benefits, non-monetary factors
benefits assessment, assessment of risk and uncertainty and affordability
considerations.
The proposed arrangements, dates and individuals responsible for project
management, monitoring and evaluation of the preferred option should be
documented by providing information on when, how and by whom these tasks
will be undertaken. This section should also include details of the intended
procurement process. This should also include the provision of a Benefits
Realisation Plan for the project (overleaf).
This table below summarises the appraisal process and justifies the preferred
option selection.
Option
Cost (£) Rank
Risk
Score
Rank
NMB
Score
Rank
Overall
rank
This section should note a specific date of which the PPE will be carried
out (within the 6-12 month NIGEAE timeframe).
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Benefits Realisation Plan
Benefits here can be traced back to the objectives and the non monetaries established earlier in the appraisal, in general they can be:
financial e.g. a reduction in management costs, non financial e.g. an improvement in the level of skills and/or outcomes e.g.
Improved standards of teaching provision. Information should be included on how benefits will be measured, when will they be
achieved and who will be responsible for monitoring the benefit(s)
Benefit owner
Benefit
description
Baseline
Target
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How will it be
measured
Who is
responsible
Dates/Timing
Risk log for preferred option
This section should identify all perceivable risks associated with the preferred option and can include those identified earlier in the
risks analysis.
Risk Description
Category
(funding,
operating
etc)
Impact
(low,
medium,
high)
Probability
(low,
medium,
high)
Proximity
(short,
medium,
long term)
Counter-measures
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Owner
Author
Date
Identified
Date
Last
Updated
Current
Status
DEL Economist Contacts:



Wendy Lecky
John Kerr
James Gordon
(028 9025 7672)
(028 9025 7775)
(028 9025 7426)
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