The new Green Book and what it means for transport planning and projects

The Green Book review makes it clear that strategic cases must better demonstrate how projects meet wider social and government outcomes. Yet, with opinions differing on what makes a strong strategic case, implementing the new guidance won’t be straightforward. Transport planning expert David Arthur shares his thoughts.

In November last year, HM Treasury reported the findings from its review of the Green Book, the UK government’s overarching guidance on how to appraise policies, programmes and projects.

The review was announced as part of the Spring 2020 Budget and was initiated in response to concerns that the government’s appraisal guidance may mitigate against investment in poorer parts of the UK and undermine the government’s ambition to level up.

The findings of the review are wide-ranging. They cover the whole business case process, with an emphasis on how strategic cases could be improved. The review is particularly vocal about the way strategic cases are made in investment proposals, pointing out a failure to demonstrate how projects contribute to wider government goals, and criticising a lack of well-defined objectives, which in turn undermines the option generation and assessment process. It also found that strategic cases don’t adequately explore economic and social impacts, or how projects interact with other strategies, programmes and developments in given areas.

In addition, the review highlights an overdependency on the use of the Benefit-Cost Ratio (BCR) to quantify benefits, drawing attention to the fact that it works well for benefits that are easy to put a monetary value on, yet risks ignoring costs or benefits for which there may be good evidence, but are difficult to monetise. It also highlights that this emphasis risks giving a misleading impression of the level of certainty in the estimates, and often doesn’t identify the beneficiaries.

If implemented, the recommendations set out in the review could lead to significant changes in the way that transport projects are generated, developed and appraised when they are fed into the Department for Transport’s (DfT) own supplementary appraisal guidance, which sets out how the Green Book should be applied across the sector in England. In this article we take a deeper look at some of the areas identified for improvement, the recommendations and discuss how they may be implemented.

Setting the right objectives

The review is correct to identify the need for improved quality and clarity around project objectives. Many business cases include objectives that are too generic, containing limited references to specific evidence of problems or opportunities. As a consequence, when potential scheme options are being assessed, they are of limited use.

Furthermore, objectives are often framed through the lens of a pre-determined intervention and its potential impacts. A good example is when engineering-related feasibility work for a scheme option is progressed prior to objectives being set, and the business case is developed at a later date.

Instead, it is important that objectives are outcome-based so that a wider (and potentially more effective) range of scheme options can be assessed.  The revised Green Book includes strengthened guidance on setting objectives in relation to Specific, Measurable, Achievable, Realistic and Time based (SMART) principles and identifies that only those options performing well against the objectives should be progressed to the shortlist for detailed appraisal.  For their part, organisations must in turn begin to incorporate strategic case development and objective setting prior to commencing technical feasibility work on scheme options.

Focusing on the strategic case

A key attraction of using the BCR to inform funding decisions and approvals is that it provides a single standardised metric which can be easily applied in comparing and prioritising projects. However, the new emphasis on improving how strategic cases are made will require funding bodies to look more closely at the contribution of projects towards wider goals, and make decisions regarding the relative strengths and weakness of the projects competing for funding.

So, what constitutes a strong strategic case? Opinions vary considerably – and this is where the next challenge lies. Given that contexts vary enormously and that each project is unique, we know that cases cannot be judged on a purely mechanistical level using metrics like the BCR. This realisation has highlighted the need for an enhanced shared understanding amongst both practitioners and decision makers about what a strong strategic case needs to demonstrate.  Whilst this challenge isn’t discussed specifically in the review, it does note that government now needs to show what ‘good looks like’.

There is also the issue of quality, which varies significantly between schemes. In some instances, there may be a compelling need for a particular scheme or intervention, but unless the strategic case is well articulated and evidenced, it is unlikely to be prioritised for funding.  It is vital therefore that practitioners have the right skills to ensure that, when the underlying case for intervention is strong, the strategic case is well made so that the scheme progresses through the prioritisation and approval processes. The review recognises a need to upskill and build capability amongst practitioners. Crucially, it also identifies a shortfall in capacity, understanding and experience within Whitehall to undertake consistent and rigorous scrutiny of business cases. Both must be met for real progress to be made.

Distinguishing between Benefit-Cost Ratio and Value for Money

As it stands, bids can be ranked solely on the BCR metric, and this information can inform key government processes such as spending reviews. The review highlights this as an area for improvement, further pointing out a lack of transparency around the assessment process: it is often not clear whether evidence of bids meeting strategic government objectives has been considered.

In the case of transport projects, this issue has been recognised previously, to a degree, and some mitigation measures have been taken.  For example, the Department for Transport’s (DfT) Value for Money (VfM) Framework guidance[1] identifies that the assessment of VfM should consider non-quantifiable impacts and uncertainty around key assumptions.

Notwithstanding this, a strong focus on the monetised BCR remains, including a common misconception that BCR is the sole determinant of VfM. Scheme promoters typically seek to demonstrate a BCR of two or above (rather than high VfM) when projects are submitted for funding approval.  The review recommends that a low BCR should be accepted if an option offers the best VfM in terms of meeting the objectives, marking a clear shift in emphasis from recent practice.

However, there was room for the review to go further. While business care appraisals cover economic, environmental and social criteria, assessments are still reported under the Economic Case heading. This invariably leads to more emphasis on economic criteria – those that are most easily monetised – to the detriment of environmental and social criteria. Using a Sustainability Case heading instead, comprising three pillars of equal weight: economic, environmental and social factors, would help redress the imbalance.

Delivering change

The review rightly recognises that changes in guidance on their own are not sufficient to deliver the desired changes in practice. It identifies a number of actions to take from incorporating the recommendations into the Spending Review process to building capacity and capability in the Civil Service, as well as enhancing transparency.

Ultimately, the impact of the review will need to be judged on the extent of changes to the prioritisation and funding of projects. For example, in the case of transport, the revised guidance should assist higher cost public transport schemes, particularly those outside of the core cities, which typically perform less well in terms of VfM.

Looking ahead, there is a need for the recommendations to be fully embedded in the DfT’s own business case guidance, in addition to the appraisal guidance set out in the Transport Appraisal Guidance (TAG). If this can be delivered in conjunction with changes and improvements in practice by scheme promoters and funding bodies, better and more balanced decision making that helps spread opportunity across the UK should follow.

[1] Value for Money Framework, DfT (2017)

A version of this article was first published in the February 2021 edition of Smart Transport.