| 2.5.24 | Costs and benefits should be measured by reference to a common baseline, to enable fair comparison of options. There are two aims in view here: to clarify the differences between the options; and to ensure that all the resources used in the project are accounted for. The approach that addresses both of these aims best is to include the total resource consequences of all options, including the 'status quo' baseline option. DFP generally requires this approach to be adopted. |
| 2.5.25 | However, the project boundary should be sensibly defined. For example, if a new management information system is to be introduced to a Department, then, in regard to staff costs, it should be sufficient to cost only the staff time directly affected by the new system, not the cost of all the Department's staff. Large blocks of cost that are common to all options do not need to be appraised in detail, although they should generally be indicated. |
| 2.5.26 | An alternative incremental approach is to set the baseline for cost/benefit measurement equal to those of current provision or a do minimum, so that only the costs and benefits over and above this are included for the alternative options. This incremental resource approach is less informative than the total resource method, provides poorer accountability by distracting attention from the totality of the resources devoted to a proposal, and can pose problems for post implementation evaluation. For these reasons, the total cost approach is generally required. |
| 2.5.27 | However, if estimating the total resource consequences of options proves difficult, for example, because of serious data limitations, some flexibility may be needed; and the relevant Departmental economist should be consulted to help determine the most suitable modified approach. In such cases, where DFP approval is required, DFP's agreement to the use of the proposed modified approach should be sought via the appropriate Supply Officer. |
| 2.5.28 | Mutually dependent expenditures must be appraised together. Where one expenditure clearly gives rise to another, they should not be appraised separately. For example, an appraisal concerning the construction of a building must take account of all the associated costs arising such as land purchase, infrastructure and works services, fitting out with equipment, security, staffing, maintenance and other operational costs. It would be incorrect to appraise any of these costs separately in piecemeal fashion. They are interdependent and must be appraised together. |
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