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THE GREEN BOOK

CENTRAL GOVERNMENT

GUIDANCE ON APPRAISAL

AND EVALUATION

2022

© Crown copyright 2022

This publication is licensed under the terms of the Open Government Lice nce v3.0 except where otherwise stated. To view this licence, visit nationalarchives. gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gsi.gov.uk. obtain permission from the copyright holders concerned. Any enquiries regarding this publication should be sent to us at public.enquiries@hmtreasury.gsi.gov.uk

ISBN 978-1-5286-2229-5

PU3051

THE GREEN BOOK

CENTRAL GOVERNMENT

GUIDANCE ON APPRAISAL

AND EVALUATION

2022
This edition with minor updates published in 2022, see page vii for details. iiThe Green Book

Contents

1.

Introduction 1

Scope and relationship with other appraisal guidance 4 2.

Introduction to Appraisal and Evaluation 5

Principles of appraisal

5

Rationale

7

Generating Options and longlist appraisal

7

Shortlist appraisal

8

Monitoring and Evaluation

11 3.

The Overarching Policy Framework 13

Policy and Strategic Planning an Overview

13

The Five Case Model

18

Regulatory Impact Assessments

22

Option appraisal in government

22
4.

Generating Options and Long-list Appraisal 23

Rationale

23

SMART objectives

25

Important factors when considering the longlist

26

Longlist appraisal with Options Framework-Filter

29
5.

Shortlist Options Appraisal 39

Discounting and Social Time Preference

45

Unintended consequences

47

Uncertainty, risk, optimism bias

47

Preferred option selection

49

Sensitivity analysis

52

Equalities analysis at the shortlist stage

54

Distributional analysis at the shortlist stage

54

Appraising projects and programmes

55

Portfolio appraisal

56

Competitive bids

56
6.

Opportunity cost

57

Employment and productivity effects

57

Economic transfers

58

Residual values and other adjustments

58

Non-market valuation

58

PPP, tax and other adjustments

64
iiiThe Green Book

Contents

7.

Presentation of Results 66

Appraisal Summary Tables

66
8.

Monitoring and Evaluation 69

A1.

Non-market Valuation and Unmonetisable Values 73

Environmental and natural capital

73

Land values

81

Life and health

84

Travel Time

87

Unmonetisable values

88
A2.

Place Based Analysis 90

When to employ place based analysis

90

Inclusion of employment and productivity effects

92

Leakage, displacement, and substitution

92
A3.

Distributional Appraisal 96

A4.

Public Private Partnerships 99

Overview of PPP options

99

Treatment of costs in PPP options

102
A5.

Uncertainty, Optimism Bias and Risk 104

Adjusting for optimism bias

104

Monitoring and Sensitivity Analysis

105

Risk management and categories of risk

109
The interaction between risk, optimism bias and contingency 114
A6.

Discounting 116

Role of discounting

116

Breakdown of the discount rate

116

Exceptions to the standard STPR

118

Long term discounting

118

Intergenerational effects

119
A7.

Transformation, Systems and Dynamic Change 122

List of Green Book Supplementary Guidance

125

Glossary

126

Bibliography

132
ivThe Green Book

Contents

List of Figures

Figure 1. The Green Book and Appraisal in Context

3 Figure 2. Policy and the wider context Political, Economic, Social, Technological,

Figure 3. From Policy to Outcomes

14

Figure 4. The ROAMEF Policy development cycle

15 Figure 5. A generic example of the relationship between Strategy, Programmes and

Projects

16 Figure 6. A hypothetical applied example the relationships between Strat egy, Programmes and Projects 25
Figure 7. Overview of Longlisting with the Options Framework-Filter process 34
Figure 8. The Options Framework-Filter summary matrix 37

Figure 9. The Natural Capital Framework

63
Figure 10. Generic Core Appraisal Summary table template 68

Figure 11. The Impact Pathway Approach

85

Figure 12. Illustration of longevity effects

86

Figure 13. Methodology for Income Equivalisation

97

List of Tables

GDP

Table 2. Present Values and Discount Rate

46
Table 3: Summary of environmental values, and land value uplift, referenc ed in Annex 1 Table 4. Quintile Groups of all Households Ranked by Equivalised Disposab le Income

Table 5. Declining Long Term Discount Rate

119
Table 6. Standard Discount Rates and Associated Discount Factors 120
Table 7. Health Discount Rates and Associated Discount Factors 121
vThe Green Book

Contents

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