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6th September 2017 at 8:00 am

Getting beyond the benefit cost ratio

Breakfast meeting

Arcadis, 34 York Way, London, N1 9AB

“Gross national product counts air pollution, and cigarette advertising and…the destruction of our natural wonder in chaotic sprawl. It does not allow for the health of our children, the quality of their education or the joy of their play…the beauty of our poetry or the strength of our marriages. It measures everything, in short, except that which makes life worthwhile.” Robert Kennedy (US Presidential candidate speech, University of Kansas 1968)

In the UK, “The Green Book” is HM Treasury’s Guidance on how to prepare and appraise proposed policies, programmes or projects to obtain best public value and manage risks. It states that:

“The relevant costs and benefits to government and society of all options should be valued, and the net benefits or costs calculated… Wider social and environmental costs and benefits for which there is no market price also need to be brought into any assessment. They will often be more difficult to assess but are often important and should not be ignored simply because they cannot easily be costed.”

The Major Projects Association believes that the published benefits and costs that emerge using this guidance do not fully capture the wider benefits that can accrue to the very largest projects. And whilst the Green Book provides guidance on how such cost and benefits can be brought into project appraisal (e.g. multi-criteria analysis) there are difficulties in application. Additionally the influence of subjective judgements means that this sort of analysis is not widely or effectively employed.

Yet these benefits can be material for major projects and that not including them risks significantly understating the net overall long-term benefits that will be realised from a major project. We therefore recommend that more effort and thought is put into considering such wider benefits with greater rigor as part of the overall appraisal process. At this breakfast meeting we will discuss what more can be done to ensure that decision makers “get beyond the BCR” and prioritise major project investment utilising all relevant information.

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