The Winning Ingredients for Success

Case Studies of Successful and Unsuccessful Business Cases

Andrew Gordon and Lucy Malone

Business cases integral to gaining funding in the current climate

Contents

• What can go into the economic appraisal?

• Where have we been successful?

• And unsuccessful?

• Conclusion – what are the winning ingredients?

What goes into the economic appraisal?

Mode shift

Reduced car traffic

Decongestion Noise

Air quality

Carbon

Accidents

Maintenance

Increased walk/cycle

Mortality Absenteeism

Improvements to sustainable modes

Time benefits Journey quality

Jobs & GVA

Accessibility

What are the challenges?

• Gaps in WebTAG guidance, e.g.:

– Health

• Includes mortality and absenteeism

• What about other morbidity-related impacts?

– ‘Liveability’/quality of life

• What makes cities attractive places to live and work?

– How to measure the ‘catalyst effect’

• Not all about BCR

• Green Book appraisal suggests that we should assess all benefits (qualitative if too difficult to quantify)

• Local growth fund – competing against non-transport schemes

CASE STUDIES

Birmingham Cycle City Ambition Grant

• Birmingham’s Cycle Revolution – Long-term investment in cycling infrastructure and facilities to build a comprehensive on and off road network across Birmingham

• Benefits v Costs (millions)

• BCR = 3.08 = High Value for Money

Birmingham Cycle City Ambition Grant

• Key data sources and evidence bases used:– Household Interviews, Mott MacDonald 2009-2012

– Cycling Demonstrations Towns DfT Report, Cycle England 2009

– Cycling Trends in Birmingham Technical Report, Sustrans 2011

• Followed WebTAG, particularly:– A4.1 Social Impact Appraisal

– A5.1 Active Mode Appraisal

– A5.4 marginal external costs

Birmingham Cycle City Ambition Grant

• Strategic Case – Visionary & aspirational

– Clear message

– Well defined scheme

– In-depth discussion of key issues and how they will be addressed

– Strong qualitative assessment of non-monetised impacts

– Clear links to other policies and initiatives

Birmingham Cycle City Ambition Grant

• Economic Case – Well evidenced appraisal

– Significant monetised benefits

• Management Case– Evidence of robust procurement, management and delivery

processes

Merseyside LSTF

• Supporting Sustainable Access to Opportunity in Merseyside: – Sustainable transport

infrastructure

– Support for bus services

– Working with employers to raise use of sustainable modes

– Travel solutions for people accessing employment & training

Merseyside LSTF

• BCR = 13.04 = Very High Value for Money

• DfT adjusted BCR = 4.2 = Very High Value for Money

• Aligns with DfT assessment of overall LSTF BCR at 5.1

• Benefits v Costs (millions)

Merseyside LSTF

• Strategic Case – Visionary & aspirational

– In-depth discussion of key issues and opportunities and how they will be addressed, overall and for each package – socio-demographics / mode of travel / travel distance / congestion / employment opportunities

– Strong evidence of working in partnership with the private sector in development and delivery (e.g. Liverpool Chamber of Commerce)

• Finance Case – High level of match funding from private, public and community

sector partners – £16.75m

Merseyside LSTF

• Economic Case – TUBA Assessment in accordance with WebTAG

– Utilised Liverpool City Region Transport Model (LCRTM)

– Less robust evidence base

– No appraisal of health benefits

– Significant monetised benefits (submitted & adjusted)

March – Wisbech Rail Service

• Line closed to passenger services in 1968 and freight in 2000

• Local support for reopening to help relieve traffic congestion

• Previous studies concluded a low BCR ranging 0.99 to 1.98

March – Wisbech Rail Service

• Mott MacDonald undertook an assessment of wider economic benefits

• Utilising the Mott MacDonald Transparent Economic Assessment Model (TEAM)

• WebTAG compliant Wider Impacts in Transport Appraisal (WITA) analysis

• Assessment of secondary indirect benefits and labour market effects

Direct Impacts

Induced Impacts

Indirect Impacts

Jobs / SalariesGVA

Gross Benefits

Gross minus deadweight,

displacement, leakage etc

Net Economic

Gain

Project Intervention

Multiplier

Multiplier

- 161 additional FTE jobs

- £9.0m of additional GVA benefits per annum

Increasing to £56.7m based upon a direct service to Cambridge

Secondary indirect benefits- 392 houses- £39.2m of

house building expenditure

March – Wisbech Rail Service

Primary indirect benefits for Wisbech – £39.7m

BCRs in the range of 2.3 to 3.04 for various options assessed

March – Wisbech Rail Service

• Significantly strengthened the case for investment

• Increased the BCR of the scheme by >1

• Enabled recommendation of the option offering the greatest potential for delivering wider economic benefit – a direct rail link between Wisbech and Cambridge

• Prompted progression of scheme to GRIP 2 Feasibility Study now being undertaken by Mott MacDonald

0.99 – 1.98 2.3 – 3.04

Common Failings of Documents Seeking to Make a Case for Funding

Through evaluating unsuccessful business cases, we have identified common failings:

• Strategic Case – Weak narrative and vision

– Did not meet requirements of the funding / aspirations of promoter did not align with objectives of funder

– Political reasons for application rather than based on evidence

– Lack of evidence of problem and in-depth discussion of issues

– Retrospective / unrealistic & non-transparent option assessment

Common Failings of Documents Seeking to Make a Case for Funding

• Economic Case – Based upon qualitative assessment

– Lack of quantitative evidence and monetised benefits

– Lack of robust evidence and analysis to support claims of VfM

– No assessment of wider benefits

• Finance Case – Uncertainty over third party / private sector funding contributions

• Management & Commercial Cases – Lack of detail on management and delivery processes including

governance structures, consultation & procurement procedures.

The Key to a Successful Business Case

• Strategic Case– Clear vision and objectives

– Aspirational and innovative

– Strong narrative with in-depth discussion of issues & opportunities

– Well defined schemes

– Sells the scheme using the evidence and information available

• Finance Case – High level of match funding

– Private sector contribution

The Key to a Successful Business Case

• Economic Case – Well defined schemes

– Evidenced and robust analysis to support VfM

– Doesn’t matter if BCR is low if you can evidence additional benefits

– Supports economic growth / comment or quantification of wider benefits

• Management & Commercial Case – Evidence of deliverability

– Robust and considered procedures and processes

The Key to a Successful Business Case

• Overall: – Scheme addresses identified problem

– Strong case for investment

– Bidding to appropriate fund

– Meets requirements of guidance

– Scheme promoter input

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