Shared Spaces and Services: Technical Support Workshop 2: The Economic Appraisal Process and Shared Spaces 2 May 2018.

Shared Spaces and Services: Technical Support Workshop 2: The Economic Appraisal Process and Shared Spaces 2 May 2018

Agenda Introduction EA Steps 1 and 2 Strategic Context and Need
EA Steps 3 and 4 Objectives and options EA Steps 5 and 6 Monetary costs and benefits, risks and optimism bias EA Steps 7 through 9 Non-monetary costs and benefits, NPVs and affordability Value-for-money Next steps

Introduction Feedback Recap The workshop 2 approach and rationale
Workshop goals Familiarise proposers with the EA process Highlight specific areas that require attention Anticipate the demands of an EA

Feedback In general, participants found the first workshop to be helpful, overall Breakout sessions were not uniformly viewed as helpful

How the Technical Services will be delivered: Consultancy input
All proposers will be entitled to receive up to 1.5 days of consultancy input. Within the budget of 1.5 days: One day will be allocated to review and provision of written advice. The remaining half day will be allocated to the face-to-face meeting. The cut-off date for receipt of applications for review will be Monday 4 June 2018. The cut-off date for face-to-face meetings will be Friday 8 June, 2018. Half day time slots up to and including the cut-off date will be scheduled on a ‘first come/first served’ basis. Uptake of the face-to-face consultancy support will be monitored so that proposers are made aware of the ongoing availability of time slots.

Shared Spaces projects
Two elements The space, i.e., the physical facility Physical location Uses to which space can be put The sharing, i.e., the programme of activities To generate cross-community and/or cross-border use Could be services, activities, etc., to meet identified socio-economic needs Targeting of groups and areas

Shared Spaces: Projects
What is the problem? What is the P&R ‘market failure’? The ‘space’ Use and participation Programme of activities P&R needs Social & economic needs Cross-community and/or cross-border use Services & activities, e.g., sport, childcare

Shared Spaces – The EA process
EAs commissioned for all applications meeting the mandatory document admissibility requirement (Annex to this presentation) EA process then proceeds in two stages: Applications not meeting strategic context or demonstrating need excluded from further consideration Remaining EAs completed and forwarded to Department economists

The NIGEAE Northern Ireland Guide to Eexpenditure Appraisal and Evaluation Economic appraisal (EA): “A systematic process for examining alternative uses of resources, focusing on assessment of needs, objectives, options, costs, benefits, risks, funding, affordability and other factors relevant to decisions” “A key tool for achieving value for money and satisfying public accountability requirements.”

The 10 steps in economic appraisal
Step one - explain the strategic context Step two - establish the need for government intervention Step three - define the objectives and constraints Step four - identify and describe the options Step five - identify and quantify the monetary costs and benefits Step six - assess risks and adjust for optimism bias Step seven - weigh up non-monetary costs and benefits Step eight - calculate net present values and assess uncertainties Step nine - assess affordability and record proposed arrangements for funding, management, procurement, marketing, benefits realisation, monitoring and evaluation Step ten - assess the balance of advantage between the options and present the appraisal results and conclusions

Funding of the private or voluntary sectors
Three additional criteria Additionality - the proposed assistance should be the minimum necessary Cost effectiveness Viability

NI Guide to Expenditure Appraisal and Evaluation (NIGEAE)
Entirely online: Assistance to Private, Voluntary and Community Sectors

Step 1 Explain the strategic context
SEUPB eMS SECTION 4 Strategic Policy and Context

Step 1 Explain the strategic context
Refer to relevant policies or strategies Indicate how the proposal is expected to contribute to the relevant strategic aims and objectives Peace IV is key But also consider, e.g.: Policies & strategies in relevant sectors, e.g., sports, the arts, youth, health & wellbeing, regeneration Local policies, plans Community relations – T:BUC in NI, DFAT in Border Counties

Step 2 Establish the need for expenditure
SEUPB eMS SECTION 5 Need and Demand SECTION 4 Displacement SECTION 4 Additionality

Step 2 Establish the need for expenditure
The proposed service provision or financial assistance should be justified It should be established that the chosen level of service or assistance is appropriate Establish the need for expenditure by: Analysing the expected demand for services Identifying deficiencies in current service provision Projections of need or demand should be quantified Details of supporting calculations and assumptions should be provided

Additionality The extent to which an activity takes place at all, or is undertaken on a larger scale, or earlier, or to a higher standard, or within a policy target area, as a result of public sector intervention. Fully additional if the project would not happen at all without assistance Partial additionality if, without assistance: Same project would be carried out later (timing effect) Would go ahead on a smaller scale or to a lower standard Would go ahead in a different (lower priority) location

Establishing the baseline
An essential first step. A clearly defined baseline will: Provide context Support for the rationale/need Define relevant performance indicators Help measure impact Interpret the ‘Do nothing’ option

The baseline may be ‘moving’
Social, economic and environmental – projected trends Impacts of investments that partners may be required to carry out, e.g., statutory Impacts of investments or actions by other organisations Planned/in the pipeline investments or actions other organisations (weighted by likelihood) Where relevant, all of the above may affect the ‘do nothing’ option Highlight: Any adverse trends (‘things getting worse’) that your project may help to reverse Activities, investments, etc., that your project may complement

Some baseline questions
Context History of conflict/community unrest in the area Community relations Socio-economic conditions Is there a lack of shared spaces to facilitate joint/cross-community activities? Is there a (partnership) shared vision for the area? Mapping current service provision Where are the gaps? Is there unmet need?

Context: Sectarian incidents
PSNI hate motivation statistics

Socio-economic conditions: Socio-economic and demographic
N. Ireland – NINIS – mapping and tables Border Counties – Pobal Maps resource All-Ireland -Some datasets on the AIRO website

Socio-economic conditions: Deprivation
N. Ireland Border Counties NB The above are two quite different measures of deprivation

Mapping current service provision
What is the catchment area? Target groups? Mapping current service provision What is the current level of provision? Where are the gaps? Is there unmet need?

Projecting demand for services
Simple trend-based Baseline (target) population Times Population growth factor Propensity to use (%) Will existing supply meet that demand? Makes assumptions explicit But may still be difficult to implement And assumptions subject to error – demand risk

Assumptions may be wrong!
So, there will generally be a demand risk

Letters of support from groups/organisations expressing intention to use Expectation that such expressions of intention to use will provide details of: The facilities that they intend to use Their (projected) numbers of users The expected timing/frequency of use

Over what time period? Certainly, the programming period Project also beyond that time What is the ‘steady-state’ level of use that is anticipated, per annum? How long will it take to get there? The appraisal period for an EA is the life of the asset, i.e., 25 years

Assessment of future need should be quantified with supporting evidence Don’t rely on ‘build it and they will come’ Will generally be a demand risk, so think about mitigating that from outset

Displacement What the NIGEAE says:
Displacement is the degree to which an activity promoted by government policy is offset by reductions in activity elsewhere. Displacement reduces economic efficiency. A modest degree of displacement may be acceptable, but more substantial displacement may constitute grounds to refuse an application for assistance. The greater the extent of displacement, the lower is the net impact of the project Adverse value-for-money implication

Reilly’s ‘law’ of market areas
Source:

Displacement Displacement is typically a risk in regeneration projects with an equity rationale, i.e., trying to affect the distribution of activity Displacement risk should be minimised so far as possible First step is to determine if there is such a risk: Is the projected use filling an unmet need? Or diverting from (displacing) other suppliers? Ideally, want to be complementing other activities

Fermi-ize it Consider the following question: Break it down
How many adults in Northern Ireland participate in keep fit, aerobics, yoga, dance exercise activities at least once a year? Break it down What information would allow you to answer the question? After Tetlock and Gardner, Superforecasting: The Art and Science of Prediction. Pages

Fermi-ize it Consider the following question: Break it down
How many adults in Northern Ireland take part in keep fit, aerobics, yoga, dance exercise at least once a year? Break it down How many adults are there in Northern Ireland? 1.5 million aged 16+ What proportion of adults actually participate each year? According to CHS % Put those two bits of information together – about 240,000. Note: If we wanted to estimate total demand, both actual and ‘latent’ (the gap between demand and supply), would have to try and estimate how many would like to participate but cannot due to lack of access to a facility.

Step 3 Define the objectives and constraints
SEUPB eMS SECTION 3 SMART activity targets SECTION 3 Project activities SECTION 7 Project objectives, expected results and main outputs

Step 3 Define the objectives and constraints
Define the expected outcomes and outputs Specify targets that are SMART Include implementation targets, e.g., dates, milestones State the key constraints on the project, e.g., technical, legal, timing, etc. Indicate the relative priority of individual objectives or elements of the proposals

INTENDED OUTCOMES, IMPACTS
Logic model: The Shared Spaces objective The resources needed to deliver the project The planned activities that can be accomplished with the available resources If the planned activities are accomplished, the intended amount of product and/or service delivered to the beneficiaries If the planned activities are accomplished to the extent that is intended, then the beneficiaries will benefit in certain ways If the benefits to beneficiaries are achieved, then certain changes in organisations, communities or systems might be expected to occur INPUTS ACTIVITIES OUTPUTS INTENDED RESULTS INTENDED OUTCOMES, IMPACTS Planned work The intended effects Funding Staffing Facilities Skill sets Partnerships Networks Programme of activities to deliver the project Note: How the project is delivered is important, e.g., added value of cross-community and cross-border partnerships, networking Capital developments to create new shared spaces Participation in shared spaces, cross-community, cross-border Contribution to the results, i.e., Increase in: % who would define the neighbourhood where they live as neutral % who prefer to live in a mixed religion environment Decrease in: % who would prefer to live in a neighbourhood with people of only their own religion Creation of a more cohesive society through an increased provision of shared spaces

Outputs, Results and Outcomes
These are ‘produced’ by the project The results of activities that can be clearly stated or measured and are relevant to the desired outcomes Results Changes that the project is aiming to bring about in those who participate, e.g., attitudes and behaviours Outcomes Changes that benefit society as a whole Should relate back to what the strategic framework is seeking to achieve

Objectives The guidance:
Objectives must be stated so that it is clear what the proposal intends to achieve Useful to specify in terms of a hierarchy of outcomes, results and outputs Locate objectives within the ‘logic model’ to clearly establish the link between the investment and the benefits that are sought

Targets Use to help progress in terms of producing outputs, delivering results and meeting objectives The SMART acronym Specific Measurable Achievable Relevant Time-dependent

Implementation targets
Planning, design and preparation Construction Implementation

Constraints: In general
Physical Incompatibility with planning framework Heritage or environmental constraints Engineering constraints Legal/statutory E.g. Health & safety may affect ‘do minimum’ Competition and other market Competition and State aid Lack of market demand for deliverables (but this harks back to rationale and need- where’s the gap?) Political Consistency with other strategic frameworks (not at odds with what some other policy is trying to achieve) Meeting local needs and aspiration

Constraints and Shared Spaces
Site Will be specific to each proposal Consider potential to be a neutral venue, e.g., history Capacity What is feasible for your organisation to deliver Community relations and willingness to engage Collaborative partnerships in place? Peace IV spend profile All funds to be drawn down by end-June 2023

Step 4 Identify and describe the options
SEUPB eMS SECTION 6 Project options considered and preferred option

Step 4 Identify and describe the options
Identify and describe a baseline option, usually the status quo, and a suitably wide range of alternative options Consider variations in project specification (scale, timing, etc.) Choose a suitable option for full appraisal Note: That is the requirement for central govt. expenditure Different for assistance to voluntary & community sector But a range of options is required by SEUPB

Options Guidance dated 26 June 2015 – Streamlining of procedures and documentation: “Efforts should not be wasted generating options for the sake of it” “For instance, no need for slavish consideration of increases or decreases in scale” But Department reserves discretion to examine options in particular instances

Options Typically, will want to consider at least:
The ‘Do nothing’ option – a point of reference for the difference that you want to make A ‘Do minimum’ option The preferred option Some other viable ‘do something’ Note: The EAs for Shared Spaces will usually only consider ‘Do nothing’ and the preferred option – sifting process has to be done for SEUPB business case

Options Key is to go through the process of sifting options so that can rationalise and defend the preferred option For example: Does the project have to be on this scale? Why? Does it have to include programme z? Why? Answer with reference to objectives and the need that is being tackled Should help reinforce the additionality argument

Step 5 Identify and quantify the monetary costs and benefits
SEUPB eMS Project Budget

Headings: Costs Capital costs Current (operational) costs Wider quantifiable costs Benefits Direct, e.g., revenues Capital, e.g., residual values Wider quantifiable benefits

The EA will closely scrutinise your financial estimates/projections Will usually look only at the preferred option and the ‘do nothing’ (where baseline is non-zero)

Cost-Effectiveness Said to be achieved when:
The ratio of the outputs from a project or programme to the costs to the taxpayer of producing them is “satisfactory” Measured by ratios, such as: Cost per m2 of floorspace Cost per participant

Cost-Effectiveness In appraising assistance to voluntary and community sector, outputs should be measured in net terms, i.e., what is additional to the project Be clear on what elements of participation/engagement are additional

Cost-Effectiveness What is “satisfactory”? Difficult judgement to make
Benchmarking is one way of judging cost-effectiveness Comparing ratios for a specific project with similar projects But comparable ratios may not be available Appraisers need to be careful to establish the relevance of a benchmark, e.g.: Characteristics of what is being compared – is the benchmark really like for like? The context in which the benchmarks were derived, e.g., type of locality Timing differences.

Step 6 Appraise risks and adjust for optimism bias
SEUPB eMS Risk Register

Risks In the Economic Appraisal, analysis of risk is intended to help:
Adjust assumptions about costs, benefits and timing to allow for optimism bias Inform decisions about how best to manage risks which factors need careful management, etc. Inform the option selection process, e.g., where an option contains one or more high risks that are difficult/impossible to manage

Risks Risks vary with the type of project, context, etc. In general:
Planning and development Cost overruns and delays Funding and cash flows Project management, governance Demand risks Financial (revenue and/or operating costs)

Risks Achievement of shared space objectives
Cross-community engagement Cross-border dimension Participant profile Perception of site as neutral Generating sufficient participation (uptake/demand risk) Displacement risk

Risks The appraiser will take stock of the risks
Typically, risks are scored according to: Likelihood of occurring/materialising Impact on the project if the risk does materialise May score using RAG, HML or on a scale from 1-5 Avoid having risks scored as Red or High! Identify the risks – take a hard look and think about how to manage/mitigate

Optimism Bias Capital projects will always try to deliver on time and within budget Does not always happen!

Escalating costs An illustrative example
Tottenham Hotspur – new stadium Initially, a ‘ballpark’ figure of £400m Then, £750m Climbed to £850m Heading for £1bn+?

Optimism Bias Appraisals adjust for optimism bias
The tool that is used in EA provides a useful point of reference in thinking about the risks of cost overruns and time delays Calculator – worth browsing the tool Select OB calculator for building projects

Optimism bias Using the tool, the proposed capital costs for a project will be adjusted for Optimism Bias (OB) For example, if OB is 10%, that is added on for the cost assessment Be aware of the risks Look at what risks can be mitigated, to what extent and how to justify the mitigation Note: See also SEUPB Programme Rules paras 4.77 to 4.89

Step 7 Weigh up non-monetary costs and benefits
SEUPB eMS SECTION 3 Quality of cross-community and cross-border cooperation with demonstrable added value

Not always practical or even possible to value all costs and benefits in monetary terms Especially true of benefits which may be more qualitative, e.g., longer-term outcomes For smaller scale projects, may do just to list the items For larger projects, typically use some kind of weighted scoring method

The criteria to be applied to Shared Spaces projects are as follows: Potential to create a shared space capable of increasing sustained and meaningful engagement between communities Ability to establish a ‘regionally significant’ project with the potential to provide a lasting legacy to the Peace IV programme Ability to provide maximum opportunities for programming of the shared space for a number of purposes, including peace and reconciliation activities

Step 8 Calculate Net Present Values and Assess Uncertainties
Valuing future costs and benefits in today’s terms Estimated costs and benefits projected over the appraisal period and discounted back to the present

Monetary costs and benefits
Net present cost calculator

Monetary costs and benefits
The appraiser will run alternative scenarios to assess the impact of uncertainties on costs and benefits E.g. what if revenues fall short by x% The appraiser will be especially interested in whether the project is projected to run an operating surplus or deficit If a deficit, raises questions: Viability, where funding/backstopping the deficit is uncertain Sustainability and value-for-money, e.g., where the deficit is ‘large’

Step 9 Assess arrangements for financing, management, etc
SEUPB eMS SECTION 8 Management arrangements SECTION 9 Monitoring and evaluation plan SECTION 11 Exit strategy WORKPLAN Communication

Step 9 Assess arrangements for financing, management, etc
The appraiser will want to examine and draw conclusions on: Affordability, funding, cash flows and viability Project management and procurement Market assessment and marketing plan Planning for monitoring and evaluation

Viability Where funding non-Govt sector:
Assess viability i.e., examine cash flows, management and financial arrangements to ensure that funding is not wasted on proposals that will fail prematurely Alternatively, no ‘white elephants’ How to fund a recurring deficit – need to have an answer to that

Viability What the NIGEAE says
In the case of financially-assisted projects pursued primarily for social or environmental rather than economic aims, the viability criterion applies less strictly, to the extent that such projects need not be expected to achieve overall financial profitability. However: any commercial elements of social or environmental projects should still be expected to achieve financial profitability; and in all cases it should be confirmed that there is sound business planning and specifically that adequate arrangements for finance and management are in place.

Step 10 Assess the balance between the options and present the results and conclusions
Does the preferred option represent value-for-money?

Components of value for money
Resources Inputs Outputs Outcomes Economy Efficiency Effectiveness Value for money

The Three E’s Economy Efficiency Effectiveness
Making best use of resources Procurement Efficiency Ratios of outputs to inputs Delivery Effectiveness How successful at meeting objectives. Effectiveness is reduced where there is deadweight (due to activities that would happen anyway) and/or displacement. Highlights importance of good statement of need at appraisal stage.

Key Points Summary Need to be aware of what is entailed with an EA
Considerable overlap between the 10 EA Steps and the Business Plan Sections per SEUPB eMS Think about having collateral material available to buttress your evidence base

Next Steps Workshop 3 - Topics include:
Horizontal Principles Marketing and communications Monitoring and evaluation plan Wrap-up Getting advice and guidance up and running

Mandatory attachments

Stage 2: Additional Admissibility Test - Mandatory attachments required
Draft Partnership Agreement Last two years audited accounts Project management and Governance Structure Chart VAT Status (Registration Certificate or Statement to confirm Lead Partner VAT status) Lead Partner Constitution Budget Rationale (templates for both staff cost and other cost assumptions available on eMS) Risk Register (Template on eMS)

Financial Management Arrangements (Template on eMS) Proposed Construction Works and Design Information This should include location map, site plans, floor plans, architects’ drawings and elevations. Confirmation of Title or Transfer Arrangements (including commitment of owner and timescale) to be signed by Solicitor. Planning Consent or Statement from Planning Authority that Planning Application has been submitted and expected decision timeframe or Statement from Planning Authority that applicant has engaged on the proposed development with an expected application and decision timeframe.

12. Environmental Impact Assessment (EIA) together with information on site investigation work necessary, including site investigation reports completed or a timeframe of relevant site investigations to be carried out (if required). Professional Estimates – the budget should be supported with appropriate Professional Estimates. Match funding evidence to be provided that the full funding package is in place and the source(s) of the matching funding. It should be noted that 100% of project costs can be funded through PEACE IV (ERDF & public match funding) (template on eMS)

15. Cash flow forecasts – showing that ongoing operational costs have been considered and how these costs will be met. 16. Job descriptions for funded posts

Shared Spaces and Services: Technical Support Workshop 2: The Economic Appraisal Process and Shared Spaces 2 May 2018.

Similar presentations

Presentation on theme: "Shared Spaces and Services: Technical Support Workshop 2: The Economic Appraisal Process and Shared Spaces 2 May 2018."— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Shared Spaces and Services: Technical Support Workshop 2: The Economic Appraisal Process and Shared Spaces 2 May 2018.

Similar presentations

Presentation on theme: "Shared Spaces and Services: Technical Support Workshop 2: The Economic Appraisal Process and Shared Spaces 2 May 2018."— Presentation transcript:

Similar presentations

About project

Feedback