Appendix B Strategic Merit Test and rapid CBA template

This template provides a guide for stages 1 and 2 of the options assessment process.

 

TITLE AND TYPE OF OPTION

Identify the option by title.

Identify whether it is a reform or investment option.

Identify type of reform (such as regulatory or licensing change, demand management measure, development planning control) or investment (such as new capital investment, extension of existing infrastructure, asset renewal)
 
Proponent (contact name and organisation)
 
Part A - Description of option
1. DESCRIBE THE PROBLEMS THE OPTION ADDRESSES
Problems, issues or needs
1.
2.
 
2. DESCRIBE THE OPTION
At what stage of development is the option? What key issues are outstanding?
 
Describe the option in terms of:
  • Location
  • The nature of the initiative, including the estimated cost
  • Consequential works
  • The main benefits and costs of the initiative.
 
Is this the first time the option has been proposed? If not, provide details.
 
Does the option fall into the ‘small-scale initiatives’ category (i.e. investment cost of $10 million or less)?
 
4. DESCRIBE THE BASE CASE OPTION
What major capital and maintenance works will be needed in the future if the option does not proceed?
 
Are there other consequences from not implementing the option?
 
What assumptions are made about future developments that will affect the success of the option? (e.g. other initiatives being implemented, development of new industries or conurbations)
 

 

Part B - Strategic Merit Test
1. HOW DOES THE OPTION IMPROVE TRANSPORT WITHIN THE JURISDICTION?
 
2. WHAT GOVERNMENT GOALS AND OBJECTIVES WILL THE OPTION PROMOTE?
The answer to this question should be consistent with the goals and objectives defined in Step 1. A proposal should show that the option contributes to achieving government objectives, using as much detail about the objectives as is available. The Objective Impact Table (OIT) in Appendix C provides a formal means to address this question.
 
3. ARE THERE ANY MAJOR RISKS OR CONSTRAINTS ON THE OPTION?
For example, are there potential technical problems with construction and operation, could the initiative cause serious damage to an environmentally sensitive area or are there potential negative social impacts?
 
4. DOES THE SUCCESS OF THE OPTION DEPEND ON OTHER ACTIONS BEING TAKEN?
It is possible that the benefits of an option may not be realised without other actions being undertaken. In this situation, options may be bundled together to assess as a single option. Where the related action is not dependent on the appraisal process, the Base Case should include an assumption about whether or not a related action proceeds and the issue should be fully addressed in the risk assessment.
 
5. HAS THERE BEEN ADEQUATE CONSIDERATION OF ALTERNATE SOLUTIONS?
Other modes and non-infrastructure solutions may need to be considered. A proposal should show that alternative options were considered (see Part C). The grounds for rejecting particular options are reviewed as part of the SMT.
 

Part C – Options assessment

1. OPTIONS GENERATION AND ASSESSMENT
Document the process and results of the options generation and assessment process that has been used. Provide a high level summary of the options and results, and indicate where detailed supporting documentation can be accessed.
 
 

 

Part D – Rapid CBA
1. LIST THE BENEFITS AND COSTS OF THE INITIATVE IN THE TABLE BELOW
Identify the present value, in dollar terms, and the percentages of total benefits and costs, as estimated from the CBA. If no CBA has been undertaken as yet, provide rough cost estimates of the percentage of total benefits and costs (e.g. 40% savings in road-user costs).
Benefits Value ($) Percentage (%)
Benefits for existing users (savings in social generalised costs)    
Benefits for diverted and generated traffic (willingness-to-pay minus social generalised costs)    
Benefits (disbenefits) on related infrastructure associated with diverted and generated traffic    
Savings in (additional) infrastructure operating costs including maintenance    
Benefits (disbenefits) derived from positive (negative) externalities)    
Safety benefits (disbenefits)    
Other benefits (disbenefits)    
Total benefits   100
  Note: Impacts that are benefits should be positive. Impacts that are disbenefits should be negative. Note: Impact percentage figures for disbenefits should be negative
Investment costs   NA
Are the values in this table first estimates or expected values derived via a risk analysis    
 
2. CHECK THAT THE BASE COSTS ARE PROPERLY ADDRESSED
Have infrastructure costs (including asset renewal costs) in the Base Case been estimated?
 
Provide the amount as a present value
 
 
3. PROVIDE CBA RESULTS (INCLUDE CBA SPREADSHEET)
Year discounted to:
Net present value ($) Benefit-cost ratio First-year rate of return (%)
Internal rate of return (%) Discount rate used (%) Option life used (years)
4. DESCRIBE THE NON-MONETISED IMPACTS OF THE INITIATIVE
Describe other benefits and costs that have not been quantified in the CBA?
 
5. IDENTIFY THE GAINERS AND LOSERS
Discuss how the benefits and costs of the initiative and distributed throughout society, taking into account of secondary impacts. Who are the gainers and losers from the initiative?
 

Part E – Stakeholder consultation

1. DESCRIBE STAKEHOLDER CONSULTATION
List the key stakeholders and indicate the degree of consultation that has taken place to date and the level of support received
 
What stakeholder sign-offs are required?
 
What potential exists for part, or full, private sector funding of the initiative?
 
How the potential for part, or full, private sector funding was assessed?
 
Is there an intention to seek co-funding from beneficiaries (e.g. other agencies or the private sector)? If not, why? If yes, what is the status of negotiations or commitments to date?
 

 

Part F - Risk assessment
1. IDENTIFY THE MAJOR RISKS
Identify major risks prior to commencing construction (e.g. approvals not granted, legal challenges, technical problems).
 
What are the indicative timelines for the resolution of key issues likely to arise prior to commencement of construction?
 
Describe the major risks to delivery and ongoing success of the initiative.
e.g. Does the initiative rely on new or untested technology?
  • Is the timing or are the benefits dependent on the actions of other parties or government actions?
  • Are there external factors beyond government control that could inhibit the achievement of the initiative’s objectives?
 
Describe the major risks on the cost side (e.g. excess costs) and benefit side (e.g. where benefits are not realised).
 
Can these risks be mitigated? If so, describe proposed risk mitigation measures.
 
If a risk assessment has already been undertaken, provide the indicative impacts on costs, benefits and initiative timing.
 

Source: NGTSM06, Volume 2