Introduction

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1. A structured method for developing and defending the use of public resources is of utmost importance. For government departments in the UK, best practice is particularly important as the raison d’être of the National Audit Office is to scrutinize public spending and carry out value for money audits into the administration of public policy. The Green Book is guidance issued by Her Majesty’s Treasury on how to appraise policies, programmes, and projects through a Five Case Model that helps develop proposals to optimize the societal value produced using public resources.
2. The Green Book refers to the Five Case Model as follows:

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“The Five Case Model is the required framework for considering the use of public resources to be used proportionately to the costs and risks involved and taking account of the context in which a decision is to be taken.”

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3. Accordingly, the Five Case Model has been the required standard for government business cases in the UK and Wales since the early 2000s. There has also been increasing international interest in the principles, with its use by the New Zealand Treasury in its Better Business Cases framework, the States of Guernsey, and most recently by the G20 for national and regional infrastructure schemes.
4. The Green Book states that guidance should be applied proportionately, with the effort and level of detail required for the business case based on the complexity, scale, and significance of the proposed project. A Proportionality Assessment Tool is available in the Towns Fund business case template for guidance.
5. The Five Case Model is used to prepare a variety of documents, including but not limited to:

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• Programme Business Cases (PBC)
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• Project Business Cases — three stages: Strategic Outline Cases (SOC), Outline Business Cases (OBC), and Final Business Cases (FBC)
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• Business Justification Cases (BJC)
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• Policies and Strategies

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[1] “Five Case Model”

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[2] UK Government, “The Green Book: appraisal and evaluation in central government”

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[3] HM Treasury, “The Green Book 2020”

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[4] New Zealand Treasury, “Overview of the Five Case Model”

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[5] States of Guernsey, “Five Case Model Guidance”

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[6] OECD / G20, “G20 Compendium of Good Practices in Infrastructure Development”

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[7] Towns Fund, “Business Case Template”

Five Case Model

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6. The Green Book states:

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“The five case model provides a universal thinking framework that, if understood and applied correctly, accommodates the widely varied features of any investment or spending proposal.”

7. Put simply, it allows a project to be viewed from five different perspectives. Used as a whole, the Five Case Model provides key information that can be leveraged in the decision-making process. As stated in the Green Book, these “must be developed together in an iterative process because they are intimately interconnected”.

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Strategic Case

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8. The Strategic Case outlines the rationale for the proposed change and provides support for this by linking it to the relevant national, regional, and local strategies, policies, and targets. It sets the vision and outlines the SMART objectives: Specific, Measurable, Attainable, Realistic, and Time-bound. These objectives are used in the development of the other four cases, namely the economic, financial, commercial, and management cases, particularly in the creation of the options and appraisal process seen in the Economic Case.
9. The Strategic Case demonstrates a clear understanding of the impact of current circumstances if they were to continue under Business-As-Usual (BAU), and the resulting need for implementing a proposed change. It also considers the potential benefits, risks, dependencies, and constraints associated with both prospects. The Strategic Case should also include stakeholder views, including any public consultations, research, or engagements that have taken place prior to formulating a view of the proposed changes.

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Economic Case

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10. The Economic Case identifies the proposal that delivers the best public and social value to society. Using the Strategic Case as a guide, this portion explores how different objectives can be achieved depending on the approach taken. These options are first considered in a “long list”, before being refined to a “short list” that should include, but is not limited to, the BAU option, a “do minimum” option, and the preferred option.

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[8] HM Treasury, “The Green Book 2020”.

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[9] UK Government, “The Green Book: appraisal and evaluation in central government”.

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[10] HM Treasury, “Project Business Case 2018”.

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[11] HM Treasury, “The Green Book 2020, Five Case Model”.

11. The subsequent appraisal then considers the economic benefits and costs related to each option. These benefits and costs are rigorously quantified using a formal analytical method, such as Cost Benefit Analysis or Cost Effectiveness Analysis, with any unquantifiable benefits being qualitatively assessed. This aspect of the Economic Case forms the core of the proposition and therefore requires thorough scrutiny. Deadweight, displacement of benefits, and double counting are examined when modelling. In addition, optimism bias addresses the risk of overly optimistic projected benefits, costs, and/or durations. A guide for addressing optimism bias is also available, based on research by Mott MacDonald on large public procurement in the UK.
12. Although principally concerned with the value to society, the analysis takes into consideration options that may result in varying impacts on different sectors of society. In these cases, an analysis of distributional impacts is included.
13. Value for Money (VfM) is a key consideration for the Economic Case, as per the Green Book. An assessment of VfM should outline the identified potential benefits and costs, both quantified and unquantified, with an accompanying sensitivity analysis. This adjusts known assumptions and parameters to test the impacts of key risks and uncertainties on each option. An example VfM framework is available from the Department for Transport (DfT), with more detail on VfM considerations available in HM Treasury’s guidance on managing public money.
14. Once completed, this comprehensive assessment of the economic benefits and costs of all approaches should clearly identify a preferred option. Although this is typically the option with the highest Net Present Value (NPV) or most favourable Benefit Cost Ratio (BCR), there may be unquantifiable but significant costs or benefits which could justify selecting another option.

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[12] HM Treasury, “Supplementary Green Book Guidance: Optimism Bias”.

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[13] HM Treasury, “Green Book guidance: short plain English guide to assessing business cases”.

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[14] HM Treasury, “The Green Book 2020, Economic Case Guidance”.

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[15] Department for Transport, “Value for Money Framework”.

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[16] HM Treasury, “Managing Public Money”.

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[17] HM Treasury, “Green Book guidance: assessing business cases”.

Financial Case

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The Thames Tideway Tunnel (TTT) project, currently underway in London, is a large-scale multi-year infrastructure project in the wastewater sector. It provides an example of how the business case can change multiple times during the planning phase. To ensure

continued support and development, the Five Cases initially outlined in the business case were updated.

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[33] UK in a Changing Europe, “Shared Prosperity Fund: What’s next for the UK?”

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[34] UK Government, “UK Community Renewal Fund Prospectus”

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[35] UK Government, “UK Community Renewal Fund Prospectus 2021–22”

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[36] Ofwat, “Thames Tideway”

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51. An initial Regulatory Impact Assessment (RIA) was carried out in 2007, which considered the options for adequately dealing with the untreated sewage that pollutes the River Thames, as well as the risks, costs, and benefits of those options. Based on this analysis, a preferred option was identified.
52. The RIA was followed by a document in 2011 which presented strong strategic and economic cases for the TTT and reaffirmed why a tunnel continued to be the preferred choice for dealing with the issues faced in the River Thames.
53. In line with Five Case Model guidance, the strategic and economic case for the TTT presented a multifaceted view of the rationale, including environmental, health, legal, and climate considerations, with supporting updated analysis of benefits and costs.
54. The Thames Tunnel Evidence Assessment, published in 2012, was also an important update to consider, as it provided more evidence and assessment for all proposed options to address sewerage in the Thames.
55. A subsequent report for the TTT reflected 2013 evidence for implementing Sustainable Drainage Systems (SuDS) in the Thames and whether these would meet some of the quality standards set for the TTT. This report, produced by the Environment Agency for the Department for Environment, Food and Rural Affairs, ultimately found that SuDS alone would not be capable of achieving the objectives and standards set for the TTT, again providing support for the preferred option.
56. In addition to the studies mentioned above, there was also an update to the economic valuation of the TTT environmental benefits dated August 2015. This aimed to establish whether there had been a change to the expected benefits of the TTT, the benefits possible without the TTT, public opinion of the TTT, and the impact of aggregate benefits given changes to economic and demographic variables over the appraisal period. In summary, this 2015 study found that the scope of improvements and availability of substitutes to the TTT remained largely the same since the initial assessment in 2006, although there was an increase in the aggregate benefit estimate due to the availability and use of new information to replace previous estimates.

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[37] DEFRA, “Regulatory Impact Assessment”

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[38] UK Government, “Thames Tunnel Business Case”

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[39] UK Government, “Thames Tunnel Evidence Assessment”

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[40] Environment Agency, “SuDS and the Thames Tunnel Assessment Final Report”

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[41] DEFRA, “Economic Valuation of Thames Tideway Tunnel Environmental Benefits”

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57. A further update was then published in October 2015, taking into account data emerging since the previous publication. This update included details of relevant studies that had taken place in the intervening period, such as the 2012 National Policy Statement for Waste Water. This clarified the policy framework for projects such as the TTT that are identified as Nationally Significant Infrastructure Projects and reaffirmed the need for the TTT.
58. A methodological change also contributed to the increase in aggregate benefits found, as income level replaced Socio-Economic Group (SEG) to estimate willingness to pay (WTP). SEG had been the only statistic available at the time of the previous study, despite findings that it masks variation in income and consequently leads to an underestimation of aggregate WTP.
59. As we can see, it is vital that multi-year projects, such as the TTT, continually monitor changing properties related to the initial cases put forward. These could be regulatory, statistical, financial, or simply related to public perceptions of the project.
60. Further depth and certainty can and should be pursued in relation to each of the cases, at the very least to continually assert that the chosen option is the one that most strongly aligns with relevant strategies, delivers the best value to stakeholders, makes the most financial sense, can be delivered with acceptable risks, and has reasonable commercial arrangements to allow for the project to be delivered.

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[42] UK Government, “Thames Tideway Tunnel Strategic and Economic Case”

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[43] UK Government, “National Policy Statement for Waste Water”