The Green Book

[Pages:148]THE GREEN BOOK

CENTRAL GOVERNMENT GUIDANCE ON APPRAISAL AND EVALUATION

2022

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ISBN 978-1-5286-2229-5 PU3051

THE GREEN BOOK

CENTRAL GOVERNMENT GUIDANCE ON APPRAISAL AND EVALUATION

This version first published 2020. This edition with minor updates published in 2022, see page vii for details.

2022

Contents

1. Introduction1

Scope and relationship with other appraisal guidance

4

2. Introduction to Appraisal and Evaluation

5

Principles of appraisal

5

Rationale7

Generating Options and longlist appraisal

7

Shortlist appraisal

8

Monitoring and Evaluation

11

3. The Overarching Policy Framework

13

Policy and Strategic Planning an Overview

13

The Five Case Model

18

Regulatory Impact Assessments

22

Option appraisal in government

22

4. Generating Options and Longlist Appraisal

23

Rationale23

SMART objectives

25

Important factors when considering the longlist

26

Longlist appraisal with Options Framework-Filter

29

Option choices and the options framework-filter

32

5. Shortlist Options Appraisal

39

Social Cost Benefit and Cost Effectiveness Analysis

40

Social costs and benefits

40

Adjustments for inflation

42

Discounting and Social Time Preference

45

Unintended consequences

47

Uncertainty, risk, optimism bias

47

Preferred option selection

49

Sensitivity analysis

52

Equalities analysis at the shortlist stage

54

Distributional analysis at the shortlist stage

54

Appraising projects and programmes

55

Portfolio appraisal

56

Competitive bids

56

6. Valuation of Costs and Benefits

57

Opportunity cost

57

Employment and productivity effects

57

Economic transfers

58

Residual values and other adjustments

58

Non-market valuation

58

Specific approaches to valuation

60

PPP, tax and other adjustments

64

Unmonetisable and unquantifiable costs and benefits

65

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Contents

7. Presentation of Results

66

Appraisal Summary Tables

66

8. Monitoring and Evaluation

69

A1. Non-market Valuation and Unmonetisable Values

73

Environmental and natural capital

73

Land values

81

Energy efficiency and Greenhouse Gas (GHG) values

82

Life and health

84

Travel Time

87

Unmonetisable values

88

A2. Place Based Analysis

90

Definition

90

When to employ place based analysis

90

Inclusion of employment and productivity effects

92

Leakage, displacement, and substitution

92

A3. Distributional Appraisal

96

A4. Public Private Partnerships

99

Overview of PPP options

99

Benefits and risks of PPP options

101

Treatment of costs in PPP options

102

A5. Uncertainty, Optimism Bias and Risk

104

Definitions

104

Adjusting for optimism bias

104

Monitoring and Sensitivity Analysis

105

Risk quantification

105

Risk management and categories of risk

109

The interaction between risk, optimism bias and contingency

114

A6. Discounting116

Role of discounting

116

Breakdown of the discount rate

116

Exceptions to the standard STPR

118

Long term discounting

118

Intergenerational effects

119

Discounting and inflation

119

A7. Transformation, Systems and Dynamic Change

122

Definition of Transformation and roles of Systems and Dynamic considerations

122

List of Green Book Supplementary Guidance

125

Glossary126

Bibliography132

The Green Book

iii

Contents

List of Figures

Figure 1. The Green Book and Appraisal in Context

3

Figure 2. Policy and the wider context Political, Economic, Social, Technological,

Environmental, Legal (PESTLE)

13

Figure 3. From Policy to Outcomes

14

Figure 4. The ROAMEF Policy development cycle

15

Figure 5. A generic example of the relationship between Strategy, Programmes and Projects 16

Figure 6. A hypothetical applied example the relationships between Strategy, Programmes

and Projects

25

Figure 7. Overview of Longlisting with the Options Framework-Filter process

34

Figure 8. The Options Framework-Filter summary matrix

37

Figure 9. The Natural Capital Framework

63

Figure 10. Generic Core Appraisal Summary table template

68

Figure 11. The Impact Pathway Approach

85

Figure 12. Illustration of longevity effects

86

Figure 13. Methodology for Income Equivalisation

97

List of Tables

Table 1. Adjusting for the Effects of Inflation (Using a 2% GDP Deflator)

42

Table 2. Present Values and Discount Rate

46

Table 3: Summary of environmental values, and land value uplift, referenced in Annex 1

(20/21 prices)

83

Table 4. Quintile Groups of all Households Ranked by Equivalised Disposable Income

(Based on Weekly Income Before Housing Costs 2019/20)

98

Table 5. Declining Long Term Discount Rate

119

Table 6. Standard Discount Rates and Associated Discount Factors

120

Table 7. Health Discount Rates and Associated Discount Factors

121

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Contents

List of Boxes

Box 1. Scope of Green Book Guidance

2

Box 2. Summary Outline of Key Appraisal Steps

6

Box 3. The meanings of widely used words as they are used in the Green Book

6

Box 4. Guidance and definitions and for managing successful Programmes and Projects 17

Box 5. The Five Case Model

19

Box 6. Logical Change Process

20

Box 7. Navigating the Appraisal Framework: the Rationale

24

Box 8. Navigating the Appraisal Framework and the Longlist

31

Box 9. Critical Success Factors

32

Box 10. Choices in the Strategic Options Framework-Filter

33

Box 11. Navigating the Appraisal Framework and the Shortlist

39

Box 12. Classification of Costs and Benefits

41

Box 13. Definitions of Costs

43

Box 14. Benefits Register Template

45

Box 15. NPSV and Discounting Worked Example

47

Box 16. Optimism Bias Case Study

49

Box 17. Navigating the Appraisal Framework the Option Selection and VfM

50

Box 18. A Definition of Value for Money

52

Box 19. Switching Values ? Worked Example

53

Box 20. Valuation Methods for Non-Market Prices

59

Box 21. Uses of Evaluation

69

Box 22. Core Evaluation Questions

72

Box 23. Identifying whether an intervention may affect Natural Capital

74

Box 24. Place Based analysis for projects without a specific spatial focus

91

Box 25. Place Based analysis for projects with a specific spatial focus

91

Box 26. Place Based (i.e. Sub-UK) Employment multipliers

93

Box 27. Hypothetical Illustration: Calculating place based employment effects

94

Box 28. Qualitative Issues when Considering PPP Options

100

Box 29. Example of Single Point Probability

106

Box 30. Example of Multi-Point Probability

106

Box 31. Example of Real Options Analysis

108

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Contents

Box 32. Business Risks

111

Box 33. Service Risks

112

Box 34. External Risks

112

Box 35. Risk Register

114

Box 36. Example of Risk Allocation Table

114

Box 37. Calculation Of STPR118

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The Green Book

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