1. 1 Investment Appraisal PPP Concepts and Terminology (1) John Plumb

2. 2 Agenda Strategic Context & Output Specification Investment appraisal - Business Cases General overview and clarification of terminology to be used in PPP

3. 3 Key to Investment WHAT do you want? WHAT will you pay for it? HOW do you want to finance it? HOW do you want to structure it?

4. 4 Kaj želite – cilji politike? Strateški kontekst Potrebe in zahteve Obseg projekta Omejitve in priključitev na že obstoječe vmesnike (obstoječa infrastruktura, …) Poslovni načrt – družbena cost – benefit analiza

5. 5 Terms Used – Words (1) Appraisal before –The process of defining objectives, examining options, and weighing up the costs and benefits and risks and uncertainties before a decision is made Risk –Connecting Uncertainty with Objectives –How to manage the uncertainty in a Project – Risk Management – threats & opportunities Objectives –Benefits to Customers, Society –Service Improvement

6. 6 Strategic Context Constraints- Regulation, Funding Culture - Values Commercial - Suppliers Controls – Influences Structure of operations and business Project life cycle costing

7. 7 Output Specification What do you – as public authority - want to obtain?) What can you change? What are the constraints? Performance Based –Measures outputs, not inputs e.g paths available not switch and crossings required –Passenger capacity, not number of seats –Building function and services not how its done The framework within which the performance is defined is the “Strategic Context”

8. 8 Investment Appraisal Development of the idea/proposal Feasibility /Options investigation Design and Specification Creation of the solution Procurement of delivery

9. 9 Terms Used – Words (2) Needs – Customer requirements, what service, what quality, what and who will pay and how needs will be satisfied Value for Money – Satisfaction of needs Resources employed Resources –Money –Skills, Time, Expertise

10. 10 Terms Used – Words (3) Business Case – answers why we are doing a project Scope of the project –What is included –What is excluded –What has to be managed at the interfaces How the value might be delivered and at what cost –Cost Benefit Analysis,

11. 11 Thoughts on Business Cases What they are not: Backfill to do what we want to Whizzy spreadsheets for accountants and others What they are: Answer ‘Why’? Justification Map Benefits and how they will be achieved given the risks Commit to resources and a course of action

12. 12 Business Cases Types – Economic, Financial, Commercial Level – Programme and Project Strategic, Preliminary –Culture, Command, Control, Government Outline, Full Business –Options appraisal, Cost Benefit Analysis, PSC Operational, Final –Revised, Contract Award, Detailed price and performance knowledge

13. 13 How does this measure up against what you do? Understand our baseline: –Do nothing – what happens? –Minimum Intervention – Make Good & Maintain Modernisation means? –Strategic – Mode &/or Route, Renewal and Enhancement Who Benefits? – Stakeholders Operational elements impact each other how?