Benefit to Cost Ratios (BCR) should be introduced into business cases at an appropriate time when it can be applied to a short list of options rather than necessarily being applied at the earliest stages of a project where the uncertainties affecting a project are yet to be properly understood.
The BCR itself is only part of the overall Value for Money assessment used by Government. There may be other impacts that wouldn’t be captured in an initial BCR but would be in the Value for Money assessment. Even at this early stage some assessment of those impacts and their order of magnitude may be useful in establishing whether the scheme is likely to be Value for Money overall.
At a high level at this stage aim to have a good understanding of Drivers of Costs versus Drivers of benefits underpinned by significance of assumptions with a risk factor applied.
If the viability of this looks highly uncertain or the difference between cost and achievable benefits is beyond that which can ever reasonably be filled, consider whether the Pause or Proceed Plan has to be implemented.
If the viability looks reasonable the next step is to undertake an assessment to determine an order of magnitude of the likely capital and operating costs. These are known as capex and opex.
As information and detail emerges as part of the benefits and costs exploration the assumptions, assessment and significance tool should be used to review and update the assumptions.
There are 3 tools to help.
Get in touch with the Better Value Rail team to help develop capital costs for your project.