NDA Guidance For The Production Of Business Cases by lzv41816

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									NDA Guidance For The Production Of
Business Cases


Doc No EGG 08                                                           Rev 6
                                                                        November 2009

1.0     Scope

        Business cases are a mandatory part of planning, approval, procurement, and delivery
        of investments within the public sector, and therefore are a fundamental obligation on
        both NDA and its contractors. Business case use represents good practice across
        industry, and they form the cornerstone of many stage gate decision processes and
        project management methodologies eg OGC, Front End Loading (FEL) process,
        PRINCE 2.

        A good business case provides an organisation with evidence to support its decision
        making and gives assurance to stakeholders that they have acted responsibly. Although
        they tend, in some peoples minds, to be associated with large scale investments,
        business cases are equally relevant, and just as important, to smaller projects or
        developments. The common factor being that the business case process must involve
        close scrutiny of all relevant financial and non-financial aspects of a proposed project.
        This should ensure that an optimal solution is selected for a given set of circumstances
        and that the identified benefits can be realised.

        This document details the approach to be used by NDA and its contractors to the
        development, underpinning, and management of business cases. This guidance is
        based on the HM Treasury’s five case model for business cases and the investment
        appraisal requirements contained within HM Treasury’s ‘Green Book’.

        It also details how NDA’s Value Framework is used to underpin business cases at
        different stages of development.

2.0     Responsibilities

2.1     NDA
        •   To ensure NDA guidance remains aligned with HM Treasury guidance
        •   To identify the key benefits and detriments that are important to NDA's overall mission
        •   To provide guidance on how detriments and benefits are to be valued and to ensure a
            consistent approach is taken across the NDA estate
        •   To engage with stakeholders in determining the values to be applied to benefits and
            detriments

2.2     Business Case Owners/Producer
        •   To apply this guidance and the associated templates
        •   To engage with regulators and stakeholders to ensure that all the relevant benefits and
            detriments are identified as the Value Framework metrics are based on a national
            perspective.
        •   To ensure the data supporting the business case is presented in a clear and transparent
            manner so that it can be readily understood by stakeholders.



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3.0     Procedure

3.1     Application Of This Guidance

        This guidance shall be used by NDA and its contractors wherever there is a requirement
        to produce a business case to support an individual investment decision. However, the
        detail and level of analysis shall be scaled commensurate with the importance and
        complexity of the decision that is being made.

        Note: Approval of a SLCs Life Time Plan (LTP) does not constitute approval in
        principle of individual programmes, or sanction of work activities as specified in
        PCP 17. Approval in principle of programmes, and sanctioning of projects etc is
        through the SLCs and NDA’s Sanctioning and Validation Processes with the LTP
        forming a contractual basis for monitoring performance.

3.2     Public Sector Business Cases And The Five Case Model

        HM Treasury guidance (Reference 1) recommends that individual business cases whilst
        being a single document are made up of five separate parts or cases, with each case
        focussing on a specific aspect of the overall business case. This is the Five Case
        Model.

        The individual cases, and their purpose, are as follows:

        •   The Strategic Case – This describes the strategic requirement and outlines the case
            for change. Why is action necessary, what are the potential benefits, and what
            needs to be done to develop the business case to a point at which a decision to
            implement can be made.
        •   The Economic Case – This investigates the options to achieve the desired
            outcomes identified in the strategic case, and examines the value that different
            options deliver.
        •   The Commercial Case – This investigates the different contracting strategies that
            could be used to deliver the ‘preferred’ options identified in the Economic Case.
        •   The Financial Case – This investigates the different funding strategies that can be
            used to deliver the ‘preferred’ options identified in the Economic Case and examines
            the overall affordability of these options.
        •   The Management Case – This describes the management arrangements that will be
            put in place to ensure successful delivery of the identified outcomes and benefits.

        This guidance is built around Programmes and Projects but should, in a measured way,
        be applied to all Work Activities requiring sanction. For the purpose of NDA Sanctioning
        the business case is expected to evolve from an initial version (when the Work Activity is
        first identified) through to a final version at the point of NDA Sanction - the point when
        the Work Activity is fully defined and can be executed/delivered. Figure 1 demonstrates
        the development of the business case in relation to a gated process. Red denotes
        undeveloped, through amber, to green which represents full development.



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        For guidance on sanctionable Work Activities and the role of the business case in NDA
        Sanction and Validation see PCP17 – Sanction and Validation.

3.3     Business Cases And NDA Governance And Decision Processes

        The development of the business case starts with a high level view of what the strategic and
        business objectives are, and the options for achieving them, and concludes with a fully costed
        and implementable solution with clearly defined and measurable benefits. To allow the
        business case to be reviewed at different stages of development, and to prevent wasted effort
        the business case development process is grouped into five distinct phases, with the structure
        of the business case for each phase based on the five case model. The individual phases are
        as follows:

        NDA Strategy Development
        1. Topic Strategy (TS)

        SLC Sanctioning Process
        2. Programme Level Business Case (PLBC)
        3. Initial Business Case (IBC)
        4. Developed Business Case (DBC)
        5. Final Business Case (FBC)

        The relationship between the different stages of business case development and NDAs
        governance, sanction and validation processes is shown in Figure 2 and described in more
        detail in Appendix 2. For SLC Work Activities which require sanctioning under PCP-17
        the Topic Strategy phase is not applicable as this is an NDA owned document the
        requirements of which are communicated to the individual SLCs through the issuing of
        Site Strategic Specifications (SSS).

        Business cases must be based on full lifecycle costs and benefits; e.g. for a programme or
        project the initiation, design, construction, commissioning, operations and decommissioning,
        irrespective of what scope the sanction request covers.

3.4     Business Case Templates

        The requirements for the development and content of Topic Strategies (TS) are not covered in
        this document. Guidance on these is contained within the Strategy Management System
        (SMS) Gating Guide. The template contained within Appendix 1 is to be used for the
        remaining four business cases (PLBC to FBC) to be used by NDA or SLC personnel in
        support of sanction for specific programmes or projects.

        The business case should be a clear and concise summary of all the relevant information that
        tells a coherent story, with references used to guide the reader into the underpinning detail
        (see Figure 3). As the document evolves and is reviewed the emphasis will change from the
        justification of why something should be done to the details of how it will be done. This allows
        the earlier ‘Why’ sections (Strategic and Economic Cases) to be summarised in later versions
        of the business case as the ‘How’ sections (Commercial, Financial, and Management) are
        further detailed (See Figure 4).


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        Ideally individual business cases should contain minimal duplication of information and be 20
        to 30 pages in length of which the first two to five pages should be the executive summary.

3.5     Options Appraisal

        Options appraisal is key to developing the Economic, Commercial and Financial Cases.
        The first stage of options assessment is carried out in the Economic Case and is about
        identifying one or more preferred technical options. The subsequent options assessments
        carried out in support of the Commercial and Financial Cases look at what the best
        contractual arrangements are for delivering the preferred options, and the options
        available for funding the preferred options taking account of affordability. In some
        instances these subsequent option assessments will lead to the revision of the Economic
        Case and the selection of an alternative option which may be lower value but is deliverable
        and affordable.

        Economic options appraisal is carried out in accordance with the requirements of HM
        Treasury’s ‘Green Book’ (Reference 2) and is supported by the application of NDA’s Value
        Framework. Further guidance on options appraisal is provided in Appendix 3, and
        background information on the Value Framework is provided in Appendix 4.

        Note: It is not necessary to present all the options appraisal process and any supporting
        sensitivity analysis within the body of the business case.          Instead the detailed
        assessments should be contained in separate supporting documents and the business
        case should provide a summary of the process and the key conclusions and
        recommendations.

4.0     Documentation and Records

4.1     References

        1. Treasury Business Case Guidance http://www.hm-
           treasury.gov.uk/data_greenbook_supguidance.htm

        2. Treasury ‘Green Book’ http://www.hm-treasury.gov.uk/data_greenbook_index.htm




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          Figure 1 – Relationship between Value Framework, Delivery of Strategy and the Delivery of Tactical Options within the SLCs


                                                                                                                 TOPIC STRATEGY (TS)
                                       SITE STRATEGIC
                                                                                                                 covering strategy level
                                     SPECIFICATION (SSS)
                                                                                                                    business case




                                                                                                Site License Company Gated Programme/Project Development
                                                                                                                         Process
                                                                                                    Gate 0             Gate 1              Gate 2          Gate 3            Gate 4
                                NDA Strategic Guidance 1        Topic Strategy Implementation
                                                                Topic Strategy Implementation
                                                                Topic Strategy Implementation
                                NDA Strategic Guidance 2

                                    HM Treasury Five Case Model For Business Cases
                              Strategic Case -
                                                                Why do programme/project
                              Strategic fit, case for change

                              Economic Case -
                                                                Which options give best value
                              Value

                              Commercial Case -                 How is preferred option
                              Contract Strategy                 acquired – commercial options

                              Financial Case -                  How is preferred option paid
                              Affordability & Funding           for – affordability options

                              Management Case -                 What arrangements will be put
                              Management arrangements           in place to assure delivery

                                HM Treasury’s ‘Green Book’ (Appraisal and Evaluation In
                                                   Central Government)
                              Discounting rules (time value
                              of money)                                                                                                                Preferred
                              Costs                                                                                                                    implementation    Assessment of
                              Income                                                            Quantitative       Initial            Detailed         option refined    value delivery
                                                              NDA Value Framework               View of Value      assessment of      assessment of    against           post
                                                                                                based on           implementation     implementation   commercial,       implementation
                              Business related Benefits and                                     Strategic work     options            options          financial and     and feedback of
                                                                    •   Hazard Reduction
                              Detriments (To be defined by                                                                                             management        lessons learnt
                                                                    •   Environment
                              organisation/business)                                                                                                   case
                                                                    •   Safety
                                                                    •   Socio-economic
                                                                                                                                           ERP
                                                                                                 Approved in            Approved in Principle           Sanction &
                                                                                                  Principle           Work Activities in relation to    Validation of      Review post
                                                                                                 Programme                   programme                 Work Activities   implementation




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                                    Figure 2 – Relationship between Strategy Development, Programme Delivery and Business Case Development




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                                                                      Figure 3 – Information Pyramid




                                                                                                                   COMMERCIAL




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                                    Figure 4 – Changing Focus of the Detail within The Business Case As It Develops




Note: Programme level business cases follow similar pattern to the above but mature in line with the average rate of development of the individual work
packages as depicted in Figure 2.

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                                    Appendix 1 – Business Case Template

General Notes

1.      Business cases should be short, punchy and scaled commensurate with the overall level
        of investment being sought, and its associated risk. Even for large investment decisions
        (£100m plus) cases should not exceed 20 to 30 pages with the first two to five pages being the
        executive summary.
2.      A business case should be a coherent and concise story and is a formal communication from the
        requesting party (SLC, NDA directorates etc) to the NDA demonstrating clear business benefits
        from an investment that is both affordable and demonstrates value for money. It should be a
        summary of the relevant information with references being used to guide the reader to the
        underpinning detail.
3.      The business case should not contain unnecessary duplication of information but must present
        sufficient information to give the sanctioning body the confidence to make a positive decision.
4.      Where things are being requested or assumed that are out of the ordinary then there
        appropriateness will need to be justified.
5.      Diagrams should be used to aid explanation and reduce the length of the document.
6.      As a general rule programme level business cases should deliver clear outcomes of value to
        NDA, where as project/work activity level cases do not on their own. This means that in some
        instances there may be programmes consisting of a single work activity as they deliver value
        directly.




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Project Title:



Business Case

Indicate ( ) the type or level of maturity of this business case


                           Level Of          Doc Reference     Latest Version      Date
                           Maturity

           Programme
           Level
           Business
           Case
           Initial
           Business
           case

           Developed
           Business
           case

           Final
           business
           case


Version No:
Issue Date:




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CONTENTS

                Executive summary
        1       Strategic case
        2       Economic case
        3       Commercial case
        4       Financial case
        5       Management case




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Executive summary

Introduction & summary of work to be carried out, what, why & how much?

This section is likely to be the only element read by senior decision makers and on which an
overall impression is formed and the ‘decision’ effectively made. It can be likened to an ‘elevator
pitch’ and must inform the reader of the ‘what, why, when and how much’. The NDA Executive, Board
and Treasury will want early visibility and understanding of what they get for their money so it must be
made clear that “if you invest this then you get that in return”.

The executive summary should not exceed two to five pages in length and should clearly tell the reader,
based on the level of development of the business case, the following:

•       What level of investment they are being asked to approve and what they will get back in return.
•       What changes, if any, have occurred since the last submission of the business case.
•       What are they being asked to invest in eg outline of technical solution.
•       Why they need to make the investment now and how it fits into the bigger picture in terms of
        programme, strategy, NDA business objectives and overall funding requirements.
•       What the proposed contracting arrangements are and why they are justified and appropriate
•       That the proposed funding requirements are affordable and what if any are the implications of
        these to other work areas
•       That Regulators and key stakeholders are supportive of what is being proposed
•       That the proposals have been subject to an appropriate level of review and that management
        arrangements are in place to assure delivery of the stated outcomes, and manage the key risks
        and opportunities
•       Any health, safety or environmental issues that might arise from the proposal

The executive summary should follow the five case model format with environmental, health and safety
issues being highlighted within the economic case section.

Possible words are:

This BUSINESS CASE seeks approval to invest £…… in …….
This complies with NDA funding guidance, and the cost profiles contained within the Life Time Plan (or
NDA Corporate Plan) for …… and the overall proposed Work Activity fits within the strategic tolerances
detailed within the Site Strategic Specification

Signed: Date:

Senior Responsible Owner
Project



Document Revision Record

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 Version      Business Case                     Record Of Change                   Author          Date
             Eg business case       Strategic case amended from IBC to take
                                    account of xxxx




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1         The Strategic Case
The purpose of this section is to explain and revisit how the scope of the proposed programme or Work
Activity fits within the existing NDA strategies and provides a compelling case for action, in terms of
existing and future operational needs and NDA’s overall strategic mission. As the business case
develops and particular courses of action are agreed this section can be reduced in size and the focus
should shift to highlighting changes arising since the business case was last reviewed.

     In summary it must answer the following questions:

     •   What is the current situation and what is wrong with it.
     •   What additional value and benefits might arise from doing something different
     •   What is required to be done to develop the business case to a point where a decision can be
         made, how long will it take and how much will it cost
     •   Why does the work have to be done now.

    Note: In developing the Strategic Case it is essential that the views of the NDA or SLC central
    Strategy teams (as applicable) are sought and that the data in the Strategic Case is aligned with that
    contained within the Project Assessment Tool (PAT)

1.1       The case for action or change

Existing Situation
This section describes the existing situation with regard to the requirement for the Programme
or Work Activity/investment. Where applicable it should reference the TS, Site Strategic
Specification or PLBC

Note: If applicable – for example, this should reflect the current position contained within the Life Time
Plans or NDA Corporate Plan in terms of technical approach, contract strategy, funding profile, and
timing or the condition of the facility or inventory that is to be remediated.

Business needs

This section provides a detailed account of the issues, problems, difficulties, gaps associated with the
existing situation in relation to NDA’s strategic requirements and the associated strategic risks. It
should also consider the timescales (urgency) over which the issues need to be addressed.

Investment objectives

The investment objectives for this Programme/Work Activity/project are listed below:
These should if necessary be split into two distinct sections:

•         The overall aim of the work programme with respect to NDA’s mission eg remediate a hazardous
          inventory, mitigate strategic risk, reduce near term or long term costs etc, and the perceived
          benefits and outcomes that will arise from the work when compared to the current situation.


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•       The near term objectives in terms of the funding and sanction that is being requested for
        development of the next stage of the business case eg prove concept, complete design etc.

Note: these are crucial to making a compelling case for investment and should be revisited at each
stage of the business case development process where key decisions are reached or major changes
made.

1.2     Programme/Work Scope

This section describes the potential scope for the programme/project to develop the business case in
relation to the above business requirement. In particular it should focus on the work to develop the
business case up to the next review gate.

1.3     Key Risks
Note: This section may be deleted from developed and final business cases as they should be
addressed, as appropriate, within the Economic, Commercial and Management cases.
These are the key high level risks associated with developing the business case and in seeking to
change the current situation.

1.4     Constraints

The programme or project is subject to the following constraints: ……
Detail any parameters or tolerances noted in the TS, Site Strategic Specification or PLBC, along with
other items arising, such as compliance with statutory obligations

1.5     Dependencies

The programme or project is subject to the following dependencies that will be carefully monitored and
managed throughout the lifespan of the Work Activity/Scheme: ……

Note: These should be highlighted from the TS, Site Strategic Specification or PLBC. E.g. the overall
success of the project is dependent on an element of work delivered by another work programme.
2       The Economic Case

In accordance with the requirements of NDA’s corporate guidance (EGG 08), this section of the
business case documents the wide range of options that have been considered in response to the
business objectives identified within the strategic case. As the business case develops and particular
courses of action are agreed this section can be reduced in size and the focus should shift to
highlighting changes arising since the business case was last reviewed.

This section should provide a clear concise summary of the options selection process and be supported
by reference to more detailed options assessment reports as appropriate. It should clearly identify:

•       The overall options considered

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•       The options that are being considered for further evaluation including technical description or
        diagrams.
•       The value they deliver.
•       Justification for the selection of preferred options including reference to supporting sensitivity
        analyses and risk assessments.

Options should be assessed in accordance with the guidance given in Appendix 3 and depending on the
type of business case, and its state of development, it may be appropriate to consider ranges of
outcomes rather than seeking a single answer.

To minimise the amount of text, and aid understanding, diagrams and tables should be used where
practicable. To support selection of preferred options cost benefit graphs of the type shown in Appendix
3 should be provided, along with any non quantified benefits or detriments. Alternatively tabular
representations of impact on value framework attributes can be used.

Suggested headings are:

•     Background/Project History
•     Critical Success Factors
•     Long Listed Options
•     Short Listed Options
•     Preferred Option (s)

3       THE COMMERCIAL CASE
Note: This Section is about commercial options and should clearly justify the selected way forward
taking account of the impact of commercial considerations on the preferred option or options identified
from the Economic Case. It should not be just a statement of this is what is going to be done or simply
repeat generic procurement processes. This is particularly important for programmes and projects which
are coming for re-sanction as a result of cost overruns or breakdowns in commercial arrangements.

The Commercial Case should make reference to and provide a summary of the Programme/Project
Acquisition Strategy and Sub Contract Strategies as required by PCP-17. In particular it should highlight
any contentious issues or variations from normal business. Examples of content for business cases at
different levels of development are as follows:

3.1     Project Acquisition Strategy (usually AiP1 or initial BC)

•       Brief summary and justification of the make vs. buy decision for the project or programme
        including consideration of risk and allocation between the NDA, the SLC and supply chain.
        Summary of options considered and benefits and detriments of each.
•       Brief justification for the proposed split of the work packages including assessment of the impact
        on the value that the preferred options from the Economic Case deliver. Summary of options
        considered and benefits and detriments of each. (Including risk analysis and planned mitigation
        and management for preferred option if known).

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•       Project procurement plan key dates - subcontract strategy availability/ITT issue/Contract
        placement. This can be in the form of a table as for Section 3.2.
•       Proposal for competition and market engagement plans; demonstration of plan for free and open
        competition.

3.2     Subcontract Strategies (usually AiP2 or developed BC)

This section should provide a brief summary of the content of the sub contract strategies and make
reference to the underpinning document (See Appendix 4 for typical content). It should provide an
update of the project procurement plan, as per the table below and justify any significant changes.

Table showing key procurements and dates.

                Task Title            Scope/Brief        Estimated Value      OJEU Publication
                                      Description                                   Date
                                                                             Or other if
                                                                             applicable




3.3     Sanction of Final Business Case

The Commercial Case of the Final Business Case should summarise the overall position with respect to
contracting. It should:

•       Describe how the sub-contract fits with the NDA approved sub-contract strategy.
•       Summarise the tender process e.g. no of compliant bids received and final tender scores;
•       Give the name(s) of the proposed subcontractor(s);
•       State the total value of the sub-contract(s);
•       Summarise the key risks to success;
•       Describe how benefits will be measured;
•       Reference the updated contract management plan;
•       Final incentivisation arrangements – pain gain etc;
•       Demonstrate that appropriate break points are in place to facilitate ‘Termination at Convenience’
        should the need arise




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3.4     M&O Contract – Alternative Incentivisation Arrangements

Highlight if the proposal requires any alternative incentivisation arrangements to those in the M&O
contract.
This could include alternative remuneration tasks, alternative pricing/reward mechanisms for the scope
or parts of the scope covered by this proposal and associated risk transfer. Proposed fees and risk
allocation should be included in supporting economic assessments.
Reference should be made to supporting documents e.g. advanced agreements.

4       The Financial Case

The purpose of this section is to demonstrate how the proposal is affordable, is within NDA and SLC
governance constraints, and to explain what the other financial impacts of the proposal might be to the
NDA. Where there is a mismatch between the funding required by the Economic Case and the
funding available based on existing plans then options are to be presented for closing the affordability
gap. This may lead to alternative options being preferred, work being stopped in other areas or sub
optimal option delivery. In all cases the impact on value is to be assessed as per the initial Economic
Assessment.
This section is to be completed by the SLC, with guidance from the NDA site facing finance
team. In the case of internal NDA proposals, guidance should be sought from the HQ finance
team.

Notes:
•      Costs should be detailed in full in the economic case and should align with the cash flows in the
       Financial case.
•      Total costs should be based on full life time costs which include operation and decommissioning.
•      Add as a foot note here if the NDA will become obligated at any earlier point to spend money.
•      This summary should be prepared under UK GAAP, to highlight any differences between
       accruals and the Cashflow information presented in the discounted Cashflow information shown
       in the economic case.
•      Examples of tables for presenting data are provided below and further examples are provided in
       Appendix 5. The choice of tables to be used should be based on the complexity of the
       programme/project and any issues as a result of previous work sanction.

4.1     Introduction

This case seeks sanction of £xxx to …… This takes the total sanctioned funding on the project to
£xxxx
Provide summary of what has been previously sanctioned on the project and for more complex
programmes and projects provide cost table and outturn diagram of types shown below based on
predicted overall outturn at point of sanction (Examples below are idealised).

Table xxx: Sanction History


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                                                                       1
    Sanctioning                 Sanction            Total Project Range
  Body/Date/Paper         Request   Cumulative      Minimum     Maximum      LTP
     Number                 £k           £k            £k          £k        P80
                                                                              £k




Note:
1. These 2 columns will be used to generate the diagram below




4.2     Overall affordability

Set out why the proposal is affordable, confirm that the proposal can be accommodated by current
funding guidance and explain any specific features of the proposal. This may include options for closing
the funding gap such as:

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•           Realigning the funding profile of the preferred option with the available funds
•           Adopting a different option
•           Stopping work elsewhere to free money

This may require the Economic Case to be revisited and the impact on value assessed. Ultimately the
funding profile in the Economic Case and the requested funding profile must align allowing for
escalation.

Note: Example affordability graph




4.3         Impact on Costs and Income

The funding profile for xxxx is as shown below and has been reviewed and challenged as per the
assurance activities described in the management plan

                                  Prior                                                                              Total
                                              2009/10   2010/11 £   2011/12 £   2012/13 £   2013/14 £   2014/15 £
                                  Spend                                                                              £M
                                                £M         M           M           M           M           M
                                  £M

 Preferred Option

    Capital at Base

    Revenue at Base


    Risk and contingency to P50




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 Total funding profile @ P50
 including escalation

 P80 Risk Allowance




 Total @ P80


Current Lifetime Plan @ P80
including escalation & prior
years spend




4.4      Budget Guidance and Governance

Confirm here that the proposals comply with NDA guidance in respect of budgeting, as set out in FCP01. In particular,
confirm that the NDA definition of capital and resource expenditure has been adhered to and that any income has
been accounted for in line with the NDA’s accounting policies.

4.5      Balance Sheet

Set out here the impact of the proposal on the balance sheet, analysed by year, to enable the reviewer to understand
movements in stock, fixed assets etc over the course of the project. Any additional decommissioning costs should be
highlighted as an impact to AME.

4.6      Dealing with foreign currencies

Where the Programme or Work Activity requires the use of currency other than sterling then the impact
of fluctuations in the currency market need to be considered. Please state what action is proposed, i.e.
to accept the risk, or mitigate it by forward purchasing currencies via HQ finance or to make a request to
NDA that a particular hedging strategy be adopted.

4.7      Off balance sheet impacts & leases

Will the assets underpinning delivery of the Programme or Work Activity be on the balance sheet of the
SLC?
The response to this question should consider FRS 5 in the context of balance sheet or off balance
sheet financing – operating/finance leases for example. IFRIC 4 may need to be considered also, where
assets are used to generate income in specific circumstances.

4.8      Taxation impacts


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Will the proposal result in the SLC or any of its subcontractors obtaining a benefit from R&D tax credits?
If so, how does the NDA benefit?
Would the proposal generate a tax liability for the NDA?
Ensure that any other tax amounts are included as costs, such as landfill tax and irrecoverable VAT.

5.0     The Management Case

This section of the business case addresses how the Work Activity/scheme will be successfully delivered
and provides key dates, milestones etc. The project programme should take account of risks and uncertainty in
a similar way to the financial analysis with P50 and P80 milestone schedules being presented.

In terms of general management arrangements it is not necessary to state standard arrangements that have
already been validated by NDA. Where alternative or novel arrangements are to be applied these should be
clearly stated and justified.

The overall aim of this section is to give the reader confidence that the management arrangements are in place
to ensure the delivery of the proposed benefits.

5.1     Programme and Project Management Arrangements

This section should describe the specific management arrangements that are in place to provide
governance and oversight of delivery. It should state how important the programme/work activity is
based on its PAT score and other factors and how the management arrangements reflect this in terms
of:

•       Sense of urgency
•       Senior management support, leadership and commitment such as attendance at programme
        boards and frequency of meetings
•       SQEPness of team
•       Management of interfaces with other programmes/projects
•       Management of contractors and sub contractors – how are they going to be encouraged to
        perform

5.2     Work Programme

This should show key milestones and dates based on P50 and P80 dates and demonstrate alignment of
these with corporate targets, strategic tolerances or constraints set by third parties. It should also
provide a clear understanding of the critical path for delivery.

5.3     Management of Risks and Opportunities

This section should:

•       Highlight the key risks and opportunities that relate to the work activity/programme and highlight
        in particular any which are Strategic Risks ie break strategic tolerances specified in the Site
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        Strategic Specifications, or threaten corporate objectives.
•       It should state what mitigation or realisation activities are in place and what remains to be done.
•       For Strategic Risks and ones which threaten corporate objectives it should describe any
        contingency measures (Plan B’s) that are being worked on or can be enacted.
•       It should reference the overall risk register for the programme/work activity but should not simply
        repeat this register.
•       It should outline what assurance activities specific to the programme/work activity have been
        done to ensure risks and opportunities have been appropriately captured and addressed and
        what is being done to manage the risks and opportunities as the programme/work activity
        proceeds. This is the management arrangements not specific mitigation activities.

5.4     Assurance Arrangements

This section should describe what assurance activities have been, or will be, undertaken to underpin
technical feasibility, value for money, cost estimating, schedule development, risk provisioning and
contractual models. Where reviews have been completed it should summarise who undertook the
review eg internal peer review, NDA, independent external peer review, OGC etc and highlight any key
issues that were raised and whether these have been closed out.

5.5     Regulator Engagement

This should state the arrangements for engaging with regulators or summarise the arrangements and reference
out to more detailed engagement plans. It should also summarise and reference the salient points arising from
previous engagement and in particular areas of agreement and contention and how these have been
addressed.

5.6     Stakeholder Engagement

This should state the arrangements for engaging with stakeholders or summarise the arrangements and
reference out to more detailed stakeholder plans. It should also summarise and reference the salient points
arising from previous stakeholder engagements and in particular areas of agreement and contention and how
these have been addressed.

5.7     Arrangements for Change Management (if appropriate)
This is about managing organisational change such as work force restructuring, changing of lead
contractors etc and will not be necessary for the majority of programmes and work activities. It
should describe the arrangements that are being put in place to secure buy in, maintain moral,
maintain technical capability, drive cultural change etc.

5.8     Arrangements for Benefits Realisation and Post Investment Appraisal

This section is about describing the arrangements that are, or will be put in place, for measuring benefits
delivery and carrying out post investment appraisal, typically this will include:

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•       Identification of benefits metrics as these may be different but relate to the metrics within the
        Economic Case eg plant delivers design through put. Also these metrics may be different at the
        different points post investment appraisal is carried out.
•       Any up front benchmarking requirements to underpin future demonstration of benefits delivery.
        This is particularly important for soft projects involving cultural change.
•       Identification at points in programme/work activity life cycle that post investment appraisal will be
        carried out eg for a production plant, completion of build, inactive commissioning,
        commencement of operations, during operation etc.




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Appendix 2 – Management and Development of Strategy and Delivery Focussed Business Cases
       and their Interaction with Strategy Control Board and Expenditure Review Panel

Introduction

HM Treasury and the Office of Government and Commerce see the development of the business case
for a particular initiative or course of action as a continuous process. The process starts with a high
level view of what the strategic and business objectives are, and the options for achieving them, and
concludes with a fully costed and implementable solution that has clearly defined and measurable
benefits. To allow the business case to be reviewed at different stages of development, and to prevent
wasted effort, the business case development process can be grouped into five distinct phases, these
being:

    1.   The Topic Strategy (TS)
    2.   The Programme Level Business Case (PLBC)
    3.   The Initial Business Case (IBC)
    4.   The Developed Business Case (DBC)
    5.   The Final Business Case (FBC)

The purpose of this document is to outline the relationship between these iterations of the business
cases and NDAs internal processes for managing strategy development and the delivery of work
activities. An overview of these processes and interactions is provided in Figure 2 (Main Text) and is
described in more detail below.

Strategy Development

NDA manages strategy development though it’s Strategy Management System (SMS). In this system
high level strategic themes eg Spent Fuel Strategy have been identified and these have been further
subdivided into individual topic strategies eg Oxide Fuel Management Strategy. Development of
individual topic strategies is undertaken by dedicated project teams, using a staged review process with
approval to proceed to the next stages of development being obtained through the Strategy Control
Board.

The output from this work is a Topic Strategy (TS) that has been approved by the Strategy Control
Board. This TS describes the strategic options that have been considered at an NDA estate wide level,
identifies the preferred option, the high level life cycle costs and benefits associated with its adoption, its
interactions with other NDA work programmes and the implications for individual Site License
Companies (SLCs). It also identifies how robust the selected strategy and work programme is to
change and from this the tolerances in terms of time, cost and technology within which the strategic
work programme must be delivered.

Following approval of the TS by the Strategy Control Board it is then translated into the individual Site
Strategic Specifications which are agreed with the SLCs, and which form the instruction from NDA to
each SLC to deliver their component of the overall NDA strategy. These site strategic specifications lay
out the individual tolerances within which the SLCs work programmes must be delivered, and if

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challenged for example through programme slippage or cost escalation form the basis for the work
programme being referred back to the Strategy Control Board.

Strategy Delivery

Delivery of the NDAs strategic requirements are carried out by the SLCs on NDAs behalf. NDA provides
governance of this, and approves financial expenditure, through its delegated authorities, with the SLCs
also exercising governance through their individual investment review panels and staged sanctioning
processes.

Programme Level Business Case

The Site Strategic Specifications form the mandate against which the SLCs develop their delivery
business cases for approval by NDA. Upon receipt of a site strategic specification the SLCs develop a
Programme Level Business Case (PLBC) which is presented to the SLCs own sanctioning authorities
and then to NDA for approval in principal. This PLBC identifies the overall programme of work to be
undertaken by the SLC to deliver one or more of NDAs strategic requirements, and contains the
following:

•    A summary of NDA strategic requirements from the Topic Strategy, and the tolerances within which
     the work programme needs to be delivered.
•    The internal and external interfaces around delivery of the work programme
•    Identification and initial evaluation/screening of options for delivering the strategic objectives
•    Recommendations on the preferred high level approach and initial outlining of the commercial
     strategy, financing and management arrangements to deliver the work programme.
•    Identification of the individual work activities (projects) which make up the programme and the
     tolerances for delivery of these in relation to the overall programme.

The PLBC will go through a number of iterations and reviews as it is developed and needs to be
approved ideally before, but no later than submission of the first Work Activity Initial Business Case to
NDA for approval in principal.

Initial Business Case (Work Activity/Project Level)

The PLBC forms the basis for the development of the individual Project (Work Activity) business cases.
These follow a similar structure to the PLBC but provide the next level of detail, and in particular the
contract strategy for undertaking the next stage of development of the Project. This is shown in Figure
A1.1 and best illustrated by considering an example such as what might be the strategy for ILW retrieval
processing and disposal, therefore:

•    The TS and site strategic specification would say that the strategy is to recover the ILW, package it
     in a form suitable for long term storage and final disposal, store the waste and then dispose of it to
     the deep geological disposal facility when it becomes available.



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•    The PLBC may say build recovery plant at each site, recover waste and grout it in special purpose
     boxes which can be stored in an on site ILW store until the deep geological disposal facility becomes
     available and then dispose of the waste to the disposal facility.
•    Each Initial Business Case focuses on just one aspect of the overall programme defined by the
     PLBC and examines the options for its delivery eg approach to building, operating and eventually
     decommissioning of the waste encapsulation plant

As each Initial Business Case is developed its impact on the PLBC should be assessed to determine if
the overall programme tolerances are being maintained.

Each Initial Business Case as it is developed is first sanctioned through the SLCs own internal
processes prior to submission to NDA.

Developed Business Case and Final Business Case

Note: These are the same as the Outline Business Case (OBC) and Final Business Case (FBC) in
OGC/Treasury guidance

Following approval in principal the SLCs refine the Initial Business Case for individual Project (Work
Activities) and this becomes the Developed Business Case (DBC). In developing the Developed
Business Case from the Initial Business Case, through the Final Business Case, the SLCs refine the
detail to first identify a final preferred option and then to provide a robust strategy for delivering the final
outcome including the sub-contract strategy, finance arrangements, management arrangements, and
risk management strategy. Only when all of these arrangements are clearly defined, and a detailed
delivery plan is in place, can the Final Business Case be submitted to NDA for final sanction prior to
delivery.

Throughout the development of the business case from the Initial Business Case to the Final Business
Case it is the responsibility of the SLC to assesses the impact of any changes in timescales, costs,
acquisition strategy, technical scope etc on the Project business case and PLBC. Where such changes
challenge the overall tolerances for the Project or Programme then these must be referred back to NDA
for approval in principal.

If the overall tolerances set in the site strategic specification are challenged then the work programme is
referred back to the Strategy Control Board as this may result in an overall change to NDA strategy.




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Post NDA Sanction

Post sanction of the Final Business Case it is the responsibility of the SLC to measure the delivery of the
work against the Final Business Case and to highlight any challenges to tolerances. These may result
in the Project (Work Activity) and any overarching programme being referred back to NDA.




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                           Figure A2.1 – Relationship between Business Cases




       All business cases must be managed within the overall tolerances set by the Topic Strategy




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                    Appendix 3 - Options Appraisal In Support of the Economic Case

Introduction

Options appraisal is key to developing the Economic Case and is carried out in accordance with the
requirements of HM Treasury’s ‘Green Book’ (Reference 2) and is supported by the application of
NDA’s Value Framework. Further information on the Value Framework is provided in Appendix 4,
and its use in option evaluation is described in the following sections.

Assumptions

1.      All options have the same start point and end point. The start point is the current position and
        the end point is the point at which NDA’s liability has been discharged and any residual liability to
        UK plc accounted for, liabilities will no longer be classified as NDA’s when; they have been sold
        to a third party or the facility has been demolished and the resultant wastes disposed to
        approved disposal facilities etc.

2.      All new facilities will be designed to take account of the requirements for their final
        decommissioning.

3.      All options should be evaluated based on the full life cycle e.g. in the case of emplacing waste in
        grout, interim storing and disposing of the waste, the consequences of making the cement, the
        transport issues and, final disposal impacts should be considered as well as the direct costs eg
        tonnes CO2 produced, radiological discharges etc.

4.      All costs should be estimated/quoted in accordance with the guidance in PCP07 and PCP09.

5.      Costs and benefits incurred prior to the point of assessment should be treated as sunk and
        should not be considered as part of the main appraisal. However sunk costs should be noted
        and may be relevant to the wider consideration applied to the final decision.

6.      Long term sector specific inflation is in line with general inflation and therefore no escalation
        should be applied. Monetary values should be present day values with Treasury Green Book
        Guidance on discounting having already accounted for general inflation.

7.      For the initial assessment of value all options should be based on optimum implementation ie
        affordability should not be taken into account. Affordability is assessed as part of the overall
        business case development through the financial case.




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Option Evaluation Using Value Framework

An overview of the options identification process is shown in Figure A3.1 along with its relationship to the
overall development of the business case and the requirement to engage with stakeholders.

Specific steps in the evaluation process are as follows:

1.      Define NDA strategic need(s) from Strategic Case

2.      Identify options, this can be at the strategic or tactical level, and is best done using a workshop
        approach involving relevant experts, regulators, and the wider stakeholder community as
        appropriate. All options must fulfil the overall strategic need and the do nothing or do minimum
        option should always be considered.

3.      Identify any essential screening criteria; these are constraints or attributes that any option must
        have in order to be credible. Examples of these are: compliance with national and international
        law, contravention of international treaties, no known technology, breaks strategic tolerances.
        Compliance with government policy or specific authorisations should not be used as a screening
        criteria unless the time and cost to achieve change mean that solutions cannot be implemented
        on the required timescale.

4.      Apply screening criteria to reduce options list to credible options.

5.      Develop high level life cycle diagrams for remaining options.

6.      Assess credible options using Value Framework. The level of detail at which the value
        framework is used will be dependent upon whether options are being developed at the strategic
        or implementation level and the position of the business case they are supporting within the
        overall decision (gate) process. Assessment at a Gate 0 will be less onerous than assessment
        prior to the final implementation gate.

Steps to applying value framework are:

•       Review which attributes (see Table A3.1) are affected by the proposed options, the metrics
        should be used as a guide to this assessment. If an attribute is unaffected by any of the options
        or the impact is minimal then it can be discounted from further consideration and the basis for
        this recorded.
•       Review each option against Hazard, Safety, Environment, Cost and Income, using the metrics in
        Table A3.11, across its full life cycle ie for remediation of a waste inventory this would be Design,
        Build, Recover, Package, Store, Dispose, and then Decommission any supporting facilities.
In the case of carbon detriment this should be calculated using the NDA or EA carbon calculator.
•       Apply risk and uncertainty allowances to individual metric values commensurate with the level of
        development of the options. The more developed the option, risk management and assignment
        of risk allowances the lower the level of uncertainty.


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•       Assess the overall timescale for implementation of each phase of the life cycle and then divide
        the individual metric scores for each phase by the duration assuming a linear relationship. If
        more detailed time profiles such as for SED and costs are available then these should be used.

Plot the individual metrics against time for each option – This represents the first stage output
from the Value Framework and can be used to further screen options prior to more detailed
evaluation.

•       Use the monetary conversion values in Table A3.1, for Safety and Environment and combine the
        individual metrics to reach an overall time phased graph for each attribute.
•       Apply discounting based on Treasury Green Book guidance to costs, income, Environment and
        Safety

    Period of years 0–30                                                           31–75                                           76–125                                                   126–200                                                        201–300                                                        301+


    Discount rate                             3.5% 3.0%                                                                            2.5%                                                     2.0%                                                           1.5%                                                           1.0%

•       Show impact on each attribute in graph form following discounting
•       Combine attributes to show overall picture for costs and income against SED, for both
        discounted and undiscounted combined attributes.
                                         Value Framework - Business Model 1- Profile of Reduction in 'Z' Score and Associated Discounted NPV Cost/Benefit Stream


                            2.00E+03                                                                                                                                                                                                                                                                £70,000,000


                            1.80E+03
                                                                          Projected SED Reduction Profile                                                                                                                                                                                           £60,000,000

                            1.60E+03
                                                                          Cumulative Discounted Cost / Benefit
                                                                          Stream
                                                                                                                                                                                                                                                                                                    £50,000,000
                            1.40E+03


                            1.20E+03
                                                                                                                                                                                                                                                                                                                  Discounted Costs




                                                                                                                                                                                                                                                                                                    £40,000,000
                  Z Score




                            1.00E+03

                                                                                                                                                                                                                                                                                                    £30,000,000
                            8.00E+02


                            6.00E+02
                                                                                                                                                                                                                                                                                                    £20,000,000


                            4.00E+02

                                                                                                                                                                                                                                                                                                    £10,000,000
                            2.00E+02


                            0.00E+00                                                                                                                                                                                                                                                                £0
                                       2009
                                              2011
                                                     2013
                                                            2015
                                                                   2017
                                                                          2019
                                                                                 2021
                                                                                        2023
                                                                                               2025
                                                                                                      2027
                                                                                                             2029
                                                                                                                    2031
                                                                                                                           2033
                                                                                                                                  2035
                                                                                                                                         2037
                                                                                                                                                2039
                                                                                                                                                       2041
                                                                                                                                                              2043
                                                                                                                                                                     2045
                                                                                                                                                                            2047
                                                                                                                                                                                   2049
                                                                                                                                                                                          2051
                                                                                                                                                                                                 2053
                                                                                                                                                                                                        2055
                                                                                                                                                                                                               2057
                                                                                                                                                                                                                      2059
                                                                                                                                                                                                                             2061
                                                                                                                                                                                                                                     2063
                                                                                                                                                                                                                                            2065
                                                                                                                                                                                                                                                   2067
                                                                                                                                                                                                                                                          2069
                                                                                                                                                                                                                                                                 2071
                                                                                                                                                                                                                                                                        2073
                                                                                                                                                                                                                                                                               2075
                                                                                                                                                                                                                                                                                      2077
                                                                                                                                                                                                                                                                                             2079




                                  -----Main Works Programme-----                                                    ------------------Care and Maintenance-------------------                                                       ----Dismantle Reactors---- ---Site Clear-




•       Consider if any options affect socio economic issues and add socio economic weighting.



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This completes the value framework analysis unless further sensitivity analysis is to be carried
out against input values to test the robustness of individual options to change and to set
tolerances for future management of the business case.

7.      Options and graphs are presented back to options identification and assessment team and the
        question asked is there anything else based on local, political, or other factors that have not been
        accounted for in the evaluation process that need to be taken account of before a decision is
        made and whether it is felt that these factors are sufficient to change views on what is the
        preferred option.

If no additional factors are applied it will be the least cost option taking account of discounting that
provides the highest rate of SED reduction that will be considered the preferred option for further
development of the business case.

8.      As the business case is developed the value analysis should be revised to take account of
        affordability and commercial issues. These issues may lead to a reduction in option value such
        that another option becomes preferred.

Note: It is essential that metric and attribute data is presented at the different stages of
development to improve the overall level of transparency of the option assessment process.
This will allow stakeholders to understand how the data has been treated and what metrics are
having the greatest impact on the outcome.

Relationship between NDA Business Case Guidance and Existing Regulatory Processes (ALARP,
BAT)

It is recognised by NDA that there is a degree of common ground between the NDA business case
guidance and existing regulatory processes and therefore the opportunity exists, where appropriate, to
combine the processes




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                               Table 1 – Value Framework Attributes and Metrics

  Attribute        Metric           Coverage/Justific     Benefit or     Base Data     Valuation            Comment
                                         ation            Detriment     Requireme
                                                                             nt
 Hazard         Safety And       The SED score            Benefit      Impact on      Compared
 Reduction      Environment      takes account of                      SED and        against
                al Detriment     the physical form,                    profile with   overall option
                Score (SED)      chemical                              time           costs (direct
                                 properties, and                                      cost plus
                                 toxicity of the                       Data           externalities)
                                 stored inventory as                   Source –
                                 well as the                           Calculated
                                 condition of the                      using NDA
                                 facility in which the                 procedure
                                 material is stored                    EGPR02.
                                 and the how much
                                 is known about the
                                 stored inventory.
                                 As such it covers
                                 not only hazard but
                                 safety and security
                                 aspects of the
                                 facility as well.
 Security       None             Security aspects         Not          Not            Not                Statutory
                                 covered in Hazard        Applicable   Applicable     Applicable         requirement
                                 Reduction and in                                                        that sites
                                 costs for keeping                                                       comply with
                                 site compliant with                                                     there site
                                 security plan                                                           security plan
 Safety         Operator         Main impact to           Detriment    Impact on      £50k/manSv         Figures based
                Dose Uptake      workers from NDA                      direct and     for individual     on NRPB
                                 mission. Other                        indirect       doses <            studies and
                                 factors are covered                   worker dose    5mSv/year          Sellafield/NII
                                 in the basic cost of                  uptake                            understandings
                                 complying with site                   Data           £100k/manS         on application
                                 license conditions                    Source –       v for              of cost benefit
                                 and the                               Operational    individual         analysis
                                 requirement to                        dose           doses >
                                 keep all facilities on                budgets,       10mSv/yr           Reduction in
                                 the site within the                   plant                             accident
                                 ‘Broadly Tolerable’                   maintenanc     Intermediate       statistics is part
                                 region of risk                        e schedules    doses to be        of an
                                                                                      scaled.            employer's
                                                                                                         statutory duties
                                                                                                         under health
                                                                                                         and safety at
                                                                                                         work therefore
                                                                                                         covered in
                                                                                                         running costs

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  Attribute        Metric           Coverage/Justific    Benefit or   Base Data        Valuation           Comment
                                         ation           Detriment    Requireme
                                                                         nt
                                                                                                        of site/facility.
                Transport        Transport major         Detriment    Transport       Road =            Based on
                miles            cause of injuries                    miles           0.6p/mile         Department
                                 and fatalities                                       Rail = <          For Transport
                                                                      Data            Road              Statistics for
                                                                      Source –        Marine = <<       probability and
                                                                      Part of         Road              impact
                                                                      individual
                                                                      option
                                                                      assessment
 Environm       Radiological     Radiological            Detriment    Impact on       £25k/manSv        Based on
 ent            discharges       discharges to the                    radiological                      NRPB study
                                 environment are a                    discharges                        data and
                                 key concern to                       measured in                       uplifted by RPI.
                                 stakeholders.                        public dose
                                 Discharges cover                     European
                                 both aerial and                      population
                                 aqueous                              and
                                 discharges arising                   truncated at
                                 from care and                        500 years.
                                 maintenance                          These
                                 activities as well as                should be
                                 those associated                     profiled with
                                 with discrete                        time and
                                 operations                           total.

                                                                      Data
                                                                      Source –
                                                                      Existing
                                                                      discharge
                                                                      authorisatio
                                                                      ns and site
                                                                      models
                Non              The impact of non       Detriment    Tonnes CO2      £25.5/te at       Other
                radiological     radiological            but can be   equivalent      2007 prices       emissions such
                discharges       discharges on the       benefit if   emitted as                        as nitrates,
                                 environment is now      displaces    result of       Escalation of     phosphates
                                 an important issue      another      direct and      2%/year to        and heavy
                                 to stakeholders,        unrelated    indirect        be applied        metals should
                                 and in particular       source of    discharges      thereafter        be considered
                                      .
                                 CO2 These               emissions                                      if they are
                                 emissions arise                      Data                              major
                                 either directly from                 Source –                          contributors to
                                 NDA’s activities or                  Existing                          the overall
                                 indirectly as a                      discharge                         emissions.
                                 result of the use of                 authorisatio
                                 materials and                        ns and NDA                        Indirect

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  Attribute        Metric           Coverage/Justific   Benefit or    Base Data       Valuation        Comment
                                         ation          Detriment    Requireme
                                                                           nt
                                 energy. Both                        Valuation                      emissions
                                 sources of                          Lists (See                     should include
                                 emission need to                    Appendix 3)                    those arising
                                 be accounted for.                                                  from transport.
 Socio -        Impact on        NDA has a              Detriment    Numbers of      Percentage     This is a
 Economic       economy          responsibility to      and          staff and       of local       secondary
                                 take into account      Benefit      contractors     Gross          consideration in
                                 the socio-economic                  employed        Domestic       most decisions.
                                 impact of its                       profiled over   Product        Severance
                                 mission and to                      time.           (GDP)          costs etc would
                                 work with other                                                    form part of the
                                 agencies to try to                  Data                           overall cost of
                                 minimise this                       Source –                       a particular
                                                                     Site Life                      strategy and
                                                                     Time plans                     are included in
                                                                                                    costs.
 Cost           Option cost                             Detriment    Cost            £s             This includes
                                                                     associated                     risks, waste
                                                                     with option                    disposal costs,
                                                                     and cost                       building,
                                                                     profile.                       operation and
                                                                                                    decommissioni
                                                                     Impact on                      ng of ancillary
                                                                     overall LTP                    plant etc as
                                                                     costs and                      well as
                                                                     profile with                   compliance
                                                                     time.                          with the site
                                                                                                    licence
                                                                                                    conditions and
                                                                                                    other legal
                                                                                                    requirements.
                                                                                                     Similarly things
                                                                                                    like difficulty of
                                                                                                    getting
                                                                                                    approvals etc
                                                                                                    should form
                                                                                                    part of the risk
                                                                                                    calculation and
                                                                                                    costs allowed
                                                                                                    for doing
                                                                                                    additional
                                                                                                    underpinning
                                                                                                    and R&D.
 Return         Cash Benefit                            Benefit      Cash benefit    £s
                                                                     associated
                                                                     with option
                                                                     and profile

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  Attribute        Metric           Coverage/Justific   Benefit or    Base Data    Valuation       Comment
                                         ation          Detriment    Requireme
                                                                           nt
                                                                     with time.

                                                                     Impact on
                                                                     overall LTP
                                                                     and profile
                                                                     with time




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                                    Figure A3.1 – Overview of Options Development Process at a Strategic or Delivery Level




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Appendix 4 – Subcontract Strategies and Contract Management Plans (usually AiP2 or developed
                                            BC)

The sub-contract strategy should be written to show a consideration of a range of options and should
describe the benefits, detriments and risks of each.

As a minimum optioneering should be demonstrable for:

•     Pricing strategy e.g. cost reimbursable/target cost/fixed price;
•     Fee models e.g. target cost model why are the proposed pain/gain arrangements the right
      solution;
•     Risk allocation and liability e.g. who is best placed to carry what risk and what is the effect on
      value;
•     Terms and conditions e.g. use of NEC vs. SLC conditions;
•     Procurement route e.g. use of Achilles/open/restricted/negotiated/competitive dialogue
procedure.

The following should be clearly communicated:

•       Scope of the sub-contract, potential for innovation, uncertainties;
•       Critical success factors for the procurement including reference to the stated business case
        benefits;
•       How will competition be designed to optimise Value for Money (VfM) and comply with obligations
        for free and open competition;
•       Market analysis and market engagement;
•       Timescales for acquisition;
•       Tender assessment criteria;
•       Interdependencies and interfaces;
•       Contractual hold points and termination clauses;
•       Consideration of similar historical Contracts and use of Learning From Experience;
•       Identification of any potential IP issues;
•       Identification of any potential TUPE or pensions issues;
•       Flow down approach to be adopted.
Contract management plans should be documented highlighting:

•       Specific and generic risks relating to the sub-contract and plans for mitigation. This should
        include quantified risks and non quantified risks and where applicable the application of optimism
        bias;
•       How the contract will be managed to ensure; affordability; deliverability and value for money and
        to achieve the specified business benefits.




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                       Appendix 5 – Additional Examples Of Financial Data Tables

5       The Financial Case

5.1     Introduction

Impact on costs and income


This case seeks sanction of £xxx to …………… This takes the total sanctioned funding on the project to
£xxxx. (As EGG 08 guidance section 5.1)

Table F1: Sanction History


                                                                        1
      Sanctioning               Sanction            Total Project Range
    Body/Date/Paper       Request   Cumulative      Minimum     Maximum       LTP
       Number               £k           £k            £k          £k         P80
                                                                               £k




Note:
1. These 2 columns will be used to generate the table (EGG 08 guidance 5.1)




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Table F2: High level cost summary, prepared on an accruals basis.

£k                          Prior      2009/10     2010/11      2011/12     2012/13     2013/14       Total
                            Years
Previous Sanction

Value of work requiring
sanction - Base
Risk % Contingency

 Escalation
          2
(See note )
Total value of work
requiring sanction
Less Remaining
Sanction (ref table F3)
Current Sanction
Request at P50
including escalation
Add Previous
Sanction (Cumulative
Sanction)
Future Requirement at
P80
Current Lifetime Plan
at P80 including
escalation

Notes:
1. Project range (Include project range here)
 2. Basis of Escalation (Include basis of escalation here) e.g.: Escalation is built up from an original build of circa
4%. Since the reduction of inflation and RPI levels the project has reduced the amount in line with BCIS tender
indices to the current level.

Table F3: Current Position of Previous Sanction and Spends


                               Total
                                £k
 Sanction to Date

 Spends to Date

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 (Period X 2009/10)
 To date the project
 has delivered: (See
 Note)
 Future spend to
 deliver previous
 sanction scope
 Remaining
 Sanction


Notes:
Examples include: Detail Design, Safety Case, Procurement of long lead items, Key enabling works
Table F4: Internal (SLC) and External Costs

 Deliverables                                           Total     Internal    External
                                                         £k          £k          £k




 TOTAL




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Table F5: Estimated Phased Lifetime Cost of Facility

                                           Estimated cost of proceeding with the scheme
                                           £m                             Notes
 P80 Estimate includes
 actuals to XXXXX (Date)
 and scope to completion of
 active connections.
 Active Commissioning



 Operations totality of costs
 for facility

 Decommissioning
 LTP Allowance



 Cost Range




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