Is the revised Green Book a green light for better business cases and decision making?

Now more then ever, Government will need to ensure that it is responsibly yet effectively spending capital on the projects that will give the best national and local outcomes. The means by how we appraise will be increasingly important to deliver high quality projects

At the recent Spending Review, the Government set out a large capital funding programme of around ￡100bn for the period 2021/22 – a ￡27bn increase in real terms on 2019/20. This set out funding across transport, research and development, the NHS, and digital infrastructure.

Accompanying this was the revised Green Book. It has increased in its presence, but the Green Book has been evolving since 2003. In 2018 there were attempts to bring it forward with the times, but has this review, taking it 'back to basics', finally set out a way and means to support decision makers and practitioners.

Arup previously hosted a roundtable with leading Northern policy makers to discuss the opportunities a revised Green Book could bring, following an Arup paper on our recommendations for improvement. We reconvened this expert roundtable, and we were joined by key representatives from HM Treasury, to discuss the changes. This article sets out the key takeaways:

Back to basics - The Green Book is not a rule book; it is a framework

Reiterating what was previously discussed, the Green Book is not the answer in itself, but a mechanism for achieving it in an ever changing, complex world. Going back to basics, the revision is intended to be intelligent and flexible, with the value of the core components of business case development being highlighted. This includes using the options framework to short list, with objective reasons for sifting, noting you cannot retrofit a project in to the process if you haven’t properly sifted. Also the Green Book makes sure the trusty 5 case model is front and centre, with a clear golden thread. This business case pyramid must build on a strong foundation, but for the case / pyramid to stand up, all the cases must be built together and equal. There is also a greater, rigorous assessment against Government’s strategic policy objectives, such as decarbonisation and levelling up. The challenge for Government is how department appraisals, such as DfT’s TAG responds to the Green Book changes, and how Green Book remains a good strategic framework for advising on value for money to make best decisions.

The Strategic Case vs the Benefit Cost Ratio

What is more important? Well apparently the strategic case. This strategic dimension has always been there but it has got downplayed. Maybe by economists driving appraisal rather then policy makers. Now it is clear that even with high level assumptions, the strategic case must play a key role. What needs to be defined is a clear policy framework, that captures both national, regional and local policy drivers, which must be clear and direct. There is also a bigger emphasis on PESTLE considerations and SMART objectives – limited and explained, these must drive the project, helping define the options for investment before any cost-benefit analysis is done. Place based appraisals are more prominent now in the Green Book, including a recognition that job creation nationally for a scheme is pointless, with greater interest on local creation which will arguably be stronger and transformational. Talking of transformational schemes, there is now a nod to this and principles for considering it in a business case, however for the North a clear definition and policy for levelling up is still missing. The real test for Government in the New Year when they publish their Integrated Rail Plan will be how the powerful Northern strategic case for schemes such as Northern Powerhouse Rail and HS2 is balanced against the capital ask.

You cannot run Government on the BCR. Considerable time and effort is spent on getting a positive BCR at the jeopardy of testing other elements of the business case. This goes for government investment, how can you compare a defence project BCR against a school BCR – they have very different policy drivers. That being said, the BCR is still important but only when the case and objectives for the project are nailed down, and you have determined your scheme. Decision makers / politicians eyes must not glaze over the strategic case in order to find the BCR.

Training and application

There is a clear acceptance that culture change and training in Civil Service is required in the application of the Green Book. This includes at a senior level. It is important the Green Book and the confidence in process is not just about changes in words, but also about new ways of working to improve the quality of business cases.

With enhanced understanding and application, one thing that will be key for practitioners and promoters is more transparency on how decisions have been made, and what influenced the evaluation. There remains different interpretation across government departments – will this training and renewed drive for improvement help ensure consistency.

Conclusion

It is important to not just to continue to critique to Green Book to perfection – the test for us all is now how do we apply it effectively and how we can ensure the projects positively impact on the places and people we care so much about.

Based on discussion, there are potentially 5 calls to action:

1. Creating a culture change in the business case process, that does not see the Green Book as a rule book but constructive framework for shaping business cases and appraisal
2. Understanding how the strategic case can be strengthened, including developing clear policy frameworks, SMART objectives, and PESTLE consideration
3. Putting the BCR in its rightful place – it is not the be-all and end all
4. The importance of training and awareness raising of the proper application of the Green Book
5. A need for coordination and integration across different decision makers and funding streams, including the role of devolution