Options Appraisal and Value for Money

Options Appraisal and Value for Money

Options Appraisal

The options appraisal is at the core of the Business Case and will typically include:

  • The implications of 'doing nothing'
  • The options for delivery (note that a series of appraisals might be needed to examine different aspects of project delivery, e.g. type of intervention or procurement route)
  • An assessment of the pros and cons for each option (benefits and dis-benefits)
  • The potential costs of each option and sources of funding
  • A recommended option for both delivery and funding.

You should always compare the options with a 'Do Nothing' option. Doing this helps to answer two important questions:

  • Will delivering the project actually make a difference compared with not delivering it?
  • What will the impact be if we don't deliver the project?

A Project Definition Workshop is a good way of introducing people to the project as well as carrying out an initial assessment of the project options. The workshop is usually chaired by the Project Sponsor and facilitated by the Project Manager, but you can get advice and help from your Directorate Programme Manager.  Before the workshop you should brief everyone involved and give people the project mandate and proposal documentation as background. Lessons learned from previous projects should also be considered as an important input to the process.

The options appraisal is a potentially a time consuming task and you must resist the urge to ‘plough through’ it and get it done quickly without considering the options properly. For a large or complex project, you may not be able to reach a final decision on the options in the space of one workshop, simply because of the amount of information needed to make the decision properly.

Wherever possible, the options appraisal should be quantitative – i.e. with each option given a series of scores to indicate how well it supports each of the project objectives.  The project objectives themselves can be weighted, enabling a single evaluation score to be produced for each option.  There are several advantages to conducting the options appraisal in this way:

  • It ensures that the project objectives are specific and measurable
  • It provides a clear record of how each option has been evaluated
  • It can easily be reviewed if new options are identified or assumptions change
  • It enables a simple Value for Money analysis to be undertaken
    (by dividing the evaluation score of an option by its cost).

A simple template for carrying out a quantified options appraisal is attached here(Please note that there's some rather complicated formatting in this to drive the calculations, which is easy to throw out if you add or delete rows, but anyone from the Accountancy team should be able to put these right for you.)

It's important to note that there are necessarily going to be some fairly crude assumptions involved in allocating weightings and scoring the options. For this reason, the quantified options appraisal shouldn't be seen as automatically generating the answer, but as a helpful way to analyse and evaluate the project options in a transparent, consistent way.