Call Girls in DELHI Cantt, ( Call Me )-8377877756-Female Escort- In Delhi / Ncr
20100209 scaf workshop on ia
1. SCAF WORKSHOP ON INVESTMENT
APPRAISAL – CURRENT POLICY AND
PRACTICE IN MOD
9 FEBRUARY 2010
NEIL V DAVIES, JOHN OGILVIE, PRABHAT VAZE
MINISTRY OF DEFENCE
Division of Economic Statistics and Advice
2. SLIDE 1
VALUE FOR MONEY
Value for Money (vfm) is optimal combination of
Economy – ie Cost of Inputs (1/M):Inputs/Money)
Efficiency – ie Ratio of Output to Inputs
(O/I:Outputs/Inputs)
Effectiveness – ie Value of Outcomes from Outputs
(V/O:Value/Outputs
Hence vfm =
Vfm is a relative not absolute construct
3. SLIDE 2
OUR ROLES IN MOD INVESTMENT APPRAISAL
AND EVALUATION
Responsible for MOD policy on Investment
Appraisal (IA) and Project Evaluation (PE) and
ensuring MOD compliance with HM Treasury’s
“Green Book” guidance
Provide advice and guidance on IAs and PEs eg
JSP507
Scrutinise IAs/COEIAs, OBCs for all projects
subject to Central Approval (eg Ministers, IAB,
DEC)
Review sample of TLB IAs/PEs for Health of
Financial Systems Review
4. SLIDE 3
PURPOSE OF IA
To ensure Value for Money is obtained from
investment decisions
Effective appraisal and evaluation are fundamental
requirements of Treasury delegations
5. SLIDE 4
MAIN FORM OF IA IN MOD: COST
EFFECTIVENESS OF ANALYSIS
Compares the costs of alternative ways of
producing the same or similar outputs, which are
not given a monetary value
While every effort should be made to quantify
benefits, cost benefit analysis is not appropriate or
feasible for most defence projects
6. SLIDE 5
COMBINED OPERATIONAL EFFECTIVENESS
& INVESTMENT APPRAISAL (COEIA)
Military E F
or D
B
Business
Effectiveness C Options
A
45º
Whole Life Cost
7. SLIDE 6
BASIC QUESTIONS FOR IA
Why is it necessary to commit resources?
What do we want to achieve?
What options are available?
How much will they cost?
8. SLIDE 7
MODEL OUTLINE OF MOD IA
establish requirement
define objectives
identify options
quantify costs and benefits of (shortlisted) options
compare these in NPV terms
evaluate risks and uncertainties
consider unquantifiable factors
present results and make recommendation
plan for Project Evaluation
9. SLIDE 8
QUALITY OF TLB IAs
Quality improving from a low base
Numbers of IAs declining
01/02 02/03 2003 2004 2005 2006 2007 2008 2008 2008 2009
H1 H2 H1
Poor 72% 72% 49% 35% 42% 42% 44% 33% 47% 20% 27%
Adequate 19% 23% 32% 44% 34% 38% 35% 56% 45% 66% 59%
Good 9% 5% 19% 21% 24% 20% 21% 11% 8% 14% 14%
Sample 22 87 78 96 137 74 98 82 38 44 51
of IAs
Total No 1154 1355 1207 831 498 389 334 229 64 165 83
of IAs
10. SLIDE 9
PRACTICAL ISSUES WITH IAs/COEIAs
SUPPORTING CENTRALLY APPROVED
PROJECTS
We have around 180-200 live projects at any time
Most IAs at a high standard by the time they go to
IAB
But at draft stage main problems
• vague/uncertain specification of requirement
• limited consideration of alternative options/case written
around preferred option
• particular challenges with partnering
• affordability often uncertain
11. SLIDE 10
CHALLENGES
1. Increasing competition for resources
- Fiscal position means next comprehensive Spending
Review will bring severe squeeze on spending
- Defence will need to compete with other spending
priorities
2. Strategic Defence Review
- This will provide long-term direction
- Need for evidence on VFM to support direction
- Can appraisal provide more for strategic decisions?
3. Gray Review findings and appraisal
- Highlights problems of Entryism and Optimism Bias
- Findings include skills gaps and technical shortcomings
- Poor information mixes with competing interests and
incentives
12. SLIDE 11
WHERE WE MIGHT FOCUS:
Training & Guidance
Requirements &
options identification
Optimism bias
Integrate
supplementary
guidance
Examples & better
presentation
Training for managers
& practitioners
13. SLIDE 11
WHERE WE MIGHT FOCUS:
Training & Guidance Evaluation
Requirements & Encourage more
options identification evaluation
Optimism bias Share best practise on
IA evaluation
Integrate
supplementary Highlight feedback
guidance role into appraisal
Examples & better Use existing
presentation evaluative results:
optimism bias
Training for managers
& practitioners
14. SLIDE 11
WHERE WE MIGHT FOCUS:
Training & Guidance Evaluation Wider applications
Requirements & Encourage more Could appraisal help
options identification evaluation at concept level?
Optimism bias Share best practise on What role in planning
IA evaluation round?
Integrate
supplementary Highlight feedback What IA evidence can
guidance role into appraisal be used for
prioritisation?
Examples & better Use existing
presentation evaluative results:
optimism bias
Training for managers
& practitioners