A New Era for Appraisal?

A Treasury team has been reviewing the strengths and weaknesses of current appraisal across Government and released its findings and a revised version of the Green Book, which is the key guidance for all appraisals including transport.  In a remarkably frank response to an avalanche of criticism from practitioners, the Treasury team does not pull any punches. For example:

“One of the fundamental issues that the review has identified is the common failure of those writing appraisals to engage properly with the strategic context in which their proposal sits. Specifically, business cases frequently do not demonstrate the necessary understanding of:

• the proposal’s specific contribution to the delivery of the government’s intended strategic goals (such as levelling up or net zero); and
• the specific social and economic features of different places and how the intervention may affect them;
• Other strategies, programmes or projects with which the intervention may interact, including in a particular geographical area.”

Specifically on the use of the Benefit to Cost Ratio (BCR) in appraisal:

"While the BCR is a useful metric for capturing quantifiable costs and benefits, there is a tendency to place an inappropriate emphasis on it, in a way that frames value for money as an absolute concept…. Considerable time and effort is expended to ‘boost’ the BCR that would have been better spent developing and testing the other elements of the business case including its strategic coherence, risk management and the implications of significant unquantifiable factors.”

TPS has been working with a consortium of professional bodies to provide clear and practical advice on how to reform appraisal, and TPS, CIHT, LGTAG and RTPI wrote a joint letter and technical paper to the Treasury and DfT in the summer.  This was followed up by a joint online meeting with HMT and DfT in October.  TPS welcomed the review and fully supports the findings of the Treasury team.  The DfT has agreed to a series of meetings to discuss the implications of the planned reforms in more detail and TPS wants to engage with its members further over the coming months to help this process.

Keith Buchan, the TPS Board lead on the appraisal work, said

“The Treasury findings are clear in terms of the current system’s poor theoretical justification, lack of transparency, and poor outcomes in terms of failing to bring forward schemes which would achieve our objectives.  The next task is now to work through the detail of what is in the new Green Book, whether it fully addresses those findings, and how transport guidance can ensure that it has a significant impact on the schemes now being planned.  TPS will do what it can to assist in that process.”

A more detailed analysis from TPS can be found here  HMT Green Book response from TPS

The Findings and response document can be found here https://www.gov.uk/government/publications/final-report-of-the-2020-green-book-review and the revised Green Book here https://www.gov.uk/government/publications/the-green-book-appraisal-and-evaluation-in-central-governent