Contents
OPTIONS APPRAISAL
......................................................................................................................................... 3
W HAT D OES I T M EAN ........................................................................................................................................... 3
W HAT ’ S I N I T ......................................................................................................................................................... 3
C ASE R OADMAP ..................................................................................................................................................... 4
S TORY R OADMAP
.................................................................................................................................................. 8
CONFIGURATION MANAGEMENT .................................................................................................................... 10
D OCUMENT C ONTROL .............................................................................................................................................. 10
D OCUMENT H ISTORY ............................................................................................................................................... 10
R EFERENCES /D ERIVATION ....................................................................................................................................... 10
Guide - Options Appraisal
Objective Id: F2317970
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Options Appraisal
What Does It Mean
This is the process of comparing the options to determine how well they perform against each other in terms of both achieving the objectives and costs of delivering them. The norm is to take as the status quo either “Do Nothing” or “Do Minimum” to serve as a baseline for the comparisons.
What’s In It
You need to understand following for options appraisal:

Affordability

Assessment

Assumption

Baseline

Benefits/Savings

Benefits Presence

Capital

Costs

CPAM

Disbenefit
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Discount

Distribution

Do Minimum

Do Nothing

Economic Appraisal

Equivalent annual cost (EAC)

Extent of benefit/saving

Financial Appraisal

Net present value (cost)

Objectives

Optimism bias

Options

Preferred option

Preferred solution

Relative value

Requirements

Revenue

Risks

Risk Presence

Saving

Scores

Sensitivity

Shortlist

Status quo

Success factors

Value for money
Guide - Options Appraisal
Objective Id: F2317970
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Case Roadmap
The following table shows the relevance of options appraisal in the context of the main eHealth business case stages:
Indicative cost estimation and
potential funding with constraints and conditions
Engage with stakeholders and agree the building blocks e.g.
Approved Investment Map etc
Identification of shortlist and initial assessment benefits, costs and risks against the options
Initial identification of the status quo option - do nothing or minimum
Negotiate with Stakeholders and update the building blocks details as appropriate
Assessment of status quo to provide baseline values for options comparison based on benefits, costs, risks and assumptions
Engage Stakeholders and finalise the building blocks, measures, approach and conditions for the project/service
Undertake full assessment of the shortlist options - benefits, risks, ability to deliver and value for money
Finalised agreed results of the assessment of the shortlist options - benefits, risks, ability to deliver and value for money including variants of the preferred option that identified the preferred solution
Finalised assessment results for the status quo option
Initial identification of the benefits presence in the options and the extent within the shortlist options
Reduction of estimation and replacement with actual costs. The realisation of benefits during the project to reduce budget requirements and improve affordability
Finalisation of costs based on acceptable assumptions, minimal estimates, known pricing and conditions including redeployment of savings to offset costs
Full assessment of the shortlist options to determine the extent to which benefits/ savings are present in each and the relative value / scores for each
Finalises benefits presence results - scores and monetary values for the preferred solution
Guide - Options Appraisal
Objective Id: F2317970
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Pros of options are considered i.e. what makes each option worthwhile
Detailed assessment of the presence in and monetary value/ non-financial score for each option
Financial benefits used to reduce funding requirements agreed non-monetary scores used to determine best value for money
Identify the market potential and possible procurement options
Prepare cost estimates based on initial investigation of internal and external supplier options
Assess the procurement options developing a model for sourcing the preferred option as an appropriate solution
Finalise the contract based on the optimum CPAM option and agree the implementation / service delivery plan
Determine the costs of the shortlist options reducing the level of estimate and replacing with actual costs
N.B. Consider benefits/ savings, risks and market prices
Total actual costs are documented
Initial identification of potential to
distribute risks
Initial consideration of the service investment length potential value for money of the shortlist options
Updated risk distribution calculations and agreements
Finalised agreement of distribution of risks
Detailed assessment of all the shortlist options taking into account costs, benefits/ savings potential, risks, nonmonetary benefits and value for money over time
Finalised agreement on the preferred solution based on value for money including the optimised CPAM version if appropriate
Initial cost estimates based on status quo knowledge and identified market costs which could include indicative costs as requested from potential suppliers etc The potential and committed finding that could make the change affordable
The total cost of each option is identified and funding comparisons made based on terms and conditions for commitment and redeployment
The finalised costs, funding agreements and savings offsets to ensure the payments schedule is met timely throughout the service investment life
N.B. Includes mitigation costs as agreed with the stakeholders
Assessment of every option’s ability Examines the extent to which each Finalised agreement of the objectives
Guide - Options Appraisal
Objective Id: F2317970
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to satisfy the change objectives – strategic and business
Identification of all estimates with potential for optimisation providing appropriate uplifts, based on high optimism bias factors, to redress misunderstanding due to underestimating shortlist option can achieve the objectives determining the value for money of the option based on the preferred solution represents the best value for money based on affordablility
Improved knowledge reducing assumptions and estimates and hence the optimism bias factor adjustments that are required separately for every shortlist option
Finalised costs including minimal potential for optimism bias and most appropriate knowledge based allowance for overly optimistic calculations
Identify a wide range of options that meet the benefits objectives/criteria
Uses assessment of benefits, risks and costs to determine the preferred option based on value for money
Reassessment of options based on updates since the previous BC
Uses the significance of requirements to determine which options should be in the shortlist and an initial assessment of how and to what extent the requirements might be met
Examines the extent to which each option can or cannot meet the individual requirements assigning scores and monetary values as appropriate. Sets the baseline based on the status quo’s costs and ability to deliver
Finalised requirements agreement based on what the extent to which the preferred option can deliver within the affordability timetable and payment schedule constraints
Indicative cost estimates of allowances for financial risks including contingencies and mitigation
Initial risk presence assessment of the shortlist options determining and an estimate of costs and score values
Revised costs of and allowances for financial risks including contingencies and mitigation
Finalised costs and allowances:

for mitigating risks (contingencies, distribution etc)

of accepted risks
Assess the shortlist options and determine the extent to which risks are present in each interpreted as monetary values and scores for financial and non-financial risks respectively
Finalised values and scores of the risks presence in the preferred solution
Guide - Options Appraisal
Objective Id: F2317970
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Early estimates based on nonmonetary benefits and risks for all shortlist options
Initial consideration of variants of assumptions impact on shortlist options
Calculate the non-monetary scores, benefits and risks, for each shortlist option as follows:
Before Optimism Bias
Before sensitivity Analysis
Net Present Value - post optimism bias and sensitivity analysis
N.B. For all shortlist options
For assumptions significant to the options appraisal apply modelling to investigate the impact on the options both separately and combined i.e. vary the value/degree/level of the assumption(s) identify the level of stability of preferred option(s) and base recommendations on most appropriate conditions
Finalised non-monetary score values updated since the outline business case
Results of reassessment based on changes since previous business case
Agree and define the critical success factors
Assess and refine the success factors
- update critical list
Finalise the success factors and include in plans
Early estimates based on benefits, savings, risks and costs for all shortlist options
Calculate the financial cost values for each shortlist option as follows:
Before Optimism Bias
Before sensitivity Analysis
Net Present Value - post optimism bias and sensitivity analysis
N.B. For all shortlist options
Finalised financial cost values updated since the outline business case
Guide - Options Appraisal
Objective Id: F2317970
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N.B.
There could be more than one iteration of the OBC and/or FBC. The more accomplished during the OBC stage the less remaining for the FBC. It is possible that with the exception of the finalisation of the procurement adjusted option no options appraisal work be required in the FBC.
Story Roadmap
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Guide - Options Appraisal
Objective Id: F2317970
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Guide - Options Appraisal
Objective Id: F2317970
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Configuration Management
Document Control
Title:
Document Reference:
Version:
Guide - Options Appraisals
F2317970
0.1
Reason for last change: Draft
Date: 21 st March 2011
Security Class:
Title / Author:
Title / Owner:
0
Interim eHealth Commissioning Manager - Ian
Hamilton eHealth Head of Programmes - Lesly Donovan
Document History
Version
No.
Date
References/Derivation
Reference
Details of Changes included in Update
Objective
ID
Title
Highlight /
Tracking
Guide - Options Appraisals 10
Objective id: F2317970