3. Prioritisation

Prioritisation[1] determines the relative priority of individual initiatives.[2] Prioritisation enables decision-makers to identify and fund the most beneficial initiatives first, recognising that funding limitations mean that not all initiatives can be undertaken at once.

As an example, Infrastructure Australia makes recommendations on prioritisation across initiatives in creating its published Infrastructure Priority List advising the Australian Government on the funding-readiness of proposed initiatives (see Box 1). A priority list provides a pipeline of initiatives that can be delivered as funding becomes available.

Box 1 Infrastructure Australia’s Infrastructure Priority List

Infrastructure Australia undertakes a prioritisation process of the proposed initiatives it receives, resulting in its Infrastructure Priority List (IPL) (IA, 2014a). IA publishes the IPL and updates it at appropriate intervals.

The IPL rates proposed initiatives greater than $100 million under four categories of funding-readiness for the Australian Government:

  • Ready to Proceed
  • Threshold
  • Real Potential
  • Early Stage.

Proposed initiatives must proceed to the top rating (Ready to Proceed) before IA can recommend it for funding.

IA undertakes its prioritisation on the basis of several criteria including:

  • National significance
  • Economic justification.

IA is also required under legislation to prioritise across proposed initiatives that it rates as Ready to Proceed.

Key considerations in prioritisation should include (but not necessarily be limited to):

  • The contribution of initiatives to jurisdictional and national goals, and transport system objectives
  • The jurisdictional and/or national significance of initiatives
  • Alignment with government strategies, plans, policies and priorities
  • Expected benefits and costs (ideally expressed in monetised terms or in non-monetised terms for those benefits and costs where monetisation is not feasible).

3.1 Information requirements

A principle of the Framework is to ensure that decision-makers have all the information required to make fully informed decisions. This is also an important requirement for prioritisation.

There must also be a high level of consistency between the information that guided problem and option assessments and the information that guides prioritisation. This means that the assessment information generated in Steps 1 to 4 should ideally be the starting point for the prioritisation process. This will allow prioritisation to be based on the evidence-based expected impacts of proposals.

The evidence-based nature of that information will allow the prioritisation process to be as objective as possible. However, the benefit and cost information will not all be easily comparable, being a mix of quantitative, qualitative, monetised and non-monetised information. Weighing up the different types means the decision-making process is not straightforward. Inevitably, there will be an element of subjectivity, making it difficult to list proposals in a precise order of priority (i.e. from best to worst) in a purely objective manner.

Despite the difficulty of prioritisation, the Guidelines aim to assist by providing guidance on how to compile relevant and rigorous information to aid the decision-maker.

3.2 Broad prioritisation

Given this complexity, an initial broad prioritisation of initiatives may assist decision- makers. This could involve several categories (e.g. priorities A, B and C), with prioritisation based on:

  • The potential contribution of an initiative to jurisdictional objectives, and policies, from the Strategic Merit Test (SMT) (from Steps 2 and 3)[3]. For example, Infrastructure Australia rate proposed initiatives on the basis of national significance
  • Outputs of cost-benefit analysis (CBA) (from Steps 3 and 4) – both monetised and non-monetised benefits and costs (from Steps 3 and 4)[4]
  • Government policy choices on funding
  • Government statements on priorities.

3.3 More detailed prioritisation

Some jurisdictions may undertake more detailed prioritisation of initiatives. This should be guided by the decision-maker's subjective interpretation of any non-monetised impact information and political considerations.

Several analytical approaches can be used to assist decision-makers with more detailed prioritisation. They include ranking by:

  • Benefit–cost ratio (BCR) – see Appendix A
  • BCR plus the degree of ‘pass’ of the SMT – see Appendix A
  • Adjusted BCR (from adjusted CBA discussed in T2). This optional alternative method reflects more explicitly the relative importance government may place on different objectives.

Each of these techniques still require manual adjustment of rankings to incorporate any non-monetised impacts.

Other detailed prioritisation techniques referred to generally as ‘multi-criteria analysis’ (MCA) are also sometimes used. They involve numerically scoring impacts and possibly using weighting criteria. That information is then converted into either multiple scores (one for each of the criteria) or a single overall ‘weighted’ score, as indicators of the merit of an initiative.

F3 discussed MCA approaches in options assessment and recommended that they be limited to the first step of assessment for early options filtering. It noted problems with and criticisms of MCA, particularly the use of the ‘single (weighted) score’ approach, suggesting it preferably be avoided. The same level of caution applies with the use of MCA in the prioritisation of initiatives.

Detailed prioritisation may also incorporate other information such as staging options, interactions between initiatives, borrowing options and the possibility of private sector contributions.

Prioritisation will also need to be mindful of policy choices made by governments, including about the structuring of funding (see section 4.1).

[1] Prioritisation leads to a short-list of highest priority initiatives.

[2] Note that the concept of prioritisation also plays a role earlier in the Framework. In Step 2, priority is assessed across identified problems. Then in Steps 3 and 4, solution options are assessed on their merits, effectively prioritising them. Governments may also choose to specify the relative importance, or priority, of individual policy matters. Governments may also choose to state a preference, or priority, for some types of measures relative to others. For example, non-infrastructure solutions may be preferred to infrastructure solutions in some circumstances.

[3] Prioritisation of small initiatives is likely to involve only the SMT.

[4] Without double-counting benefits or costs.