Overview
The diagram below outlines the process the Project Team should undertake to implement the Options Analysis. Unless stated otherwise, each step is required for all Tiers.
Options Analysis process
The following sections detail the requirements of each step that the Project Team must undertake.
Step 1: Identify the Base Case (all Tiers)
The Project Team should identify the ‘do minimum’ or ‘Business-as-Usual’ option that would be expected to take place should the project not go ahead.
The Base Case is not a ‘do nothing’ scenario. Rather, the Base Case needs to represent the realistic activities that will be required if the project is not undertaken (particularly operations and routine maintenance activities).
For more information on identifying a Base Case, refer to the detailed Economic Appraisal Guidelines.
Base Case example
A building is at the end of its useful life and a process is being undertaken to explore the possible strategic options (such as an upgrade, replacement or other changes). The Base Case could be a ‘do minimum’ option that only incorporates the necessary works required to maintain the building’s safety standards.
Step 2: Undertake a strategic solutions analysis (Tier 1 and Tier 2, recommended for Tier 3)
In this step, the Project Team is required to assess the full list of possible strategic solutions that are available to address the problems and realise the benefits the Project Team identified in the ILM and/or Needs Analysis.
The Project Team may have undertaken this strategic solutions analysis prior to the Business Case during the ILM. In this case, the Project Team should summarise the findings of the strategic solutions analysis in this section of the Business Case and include any further detailed analysis in an appendix to the Business Case.
What is the difference between a strategic solution and a project option?
Strategic solutions are broad solutions or approaches that could be undertaken to solve problems and realise benefits. These can be a selection of capital solutions (examples include upgraded or new assets) and non-capital solutions (examples include organisational changes and market-based solutions). During Stage 1 - Develop, the Project Team should have identified initial, indicative strategic solutions.
Strategic solution example 1: A capital strategic solution may include the construction of a new water pipeline to address the problem of inadequate water access and security in a rural community, which is causing severe and sustained water restrictions.
Strategic solution example 2: A non-capital strategic solution may include improving case management processes in a law court to address the problem of growing and changing demand for court services that is causing delays and higher costs for all parties.
Strategic solution example 3: A capital strategic solution may include constructing a new sports centre at a secondary school to address the problem of growing school enrolment resulting in insufficient sporting facilities requiring expansion.
Project options are the possible ways in which a recommended strategic solution can be implemented.
Project option example 1: For a capital strategic solution of a new water pipeline, the project options could consider the location of the water pipeline, the specifications of the water pipeline (particularly its capacity) and the materials used.
Project option example 2: For a non-capital strategic solution of improved case management processes in a law court, the project options could consider the types of systems available, additional staffing requirements and updates to governance arrangements.
Project option example 3: For a capital strategic solution of a new sports centre at a secondary school, the project options could be facilities within the sports centre (such as tennis courts and a swimming pool), the location, format and size of the sports centre and the types of materials used in construction.
When determining the possible strategic solutions to a problem, the Project Team should consider both capital and non-capital options. During Stage 1 – Develop, the Project Team should have identified initial, indicative strategic solutions as ‘assets’ and ‘changes’. If the Project Team has considered strategic solutions other than those they identified in the ILM and/or Needs Analysis, they should identify and assess them in this section of the Business Case.
The Project Team should consider strategic solutions that could manage demand in addition to those that influence supply. The below figure lists several possible strategic solutions that could be considered as part of the analysis. This is not an exhaustive list and other possibilities may exist depending on the problem required to be solved and its context.
Possible strategic solutions (Footnote: Selections from Infrastructure Australia Assessment Framework - Stage 2, 2021. Refer to this link for further examples of strategic solutions that could be considered. )
Once the Project Team has identified a comprehensive list of strategic solutions, it should analyse each solution by assessing the extent to which each strategic solution addresses the problems or realises the benefits identified in the ILM and/or Needs Analysis. The Project Team should clearly articulate and justify this assessment in the Business Case.
Step 3: Identify and analyse project options (all Tiers)
Tier 1 and Tier 2 projects
The Project Team should discuss and identify the project option(s) (often called the shortlist of project options) based on the strategic solution selected.
Where there is a longlist of more than four or five project options, the Project Team is recommended to undertake an initial high-level MCA to identify a shortlist of the more optimal project options. This is not required but, where it does take place, the Project Team should document it within the Business Case. It may be helpful to hold a workshop to undertake this shortlisting process.
The Project Team should identify and shortlist at least two project options in addition to the Base Case.
For Tier 1 and Tier 2 projects, the Project Team is expected to undertake a detailed assessment of each of the shortlisted project options to determine the recommended project option. The detailed assessments should involve analysis of the whole-of-life costs and revenues, an Economic Appraisal (including a CBA and MCA assessment) and a Wellbeing Impact Assessment.
Regardless of the approach taken, the Project Team must provide a robust rationale for the recommended project option in the Business Case. Strong documentation is required for each project option to demonstrate why it is or is not recommended. The Project Team should be able to demonstrate that all project options have been given full consideration, using the best available evidence.
Options workshop (recommended for Tier 1 and Tier 2 projects)
The Project Team is recommended to conduct an options workshop to agree the evaluation criteria for the MCA and then to assess the shortlisted project options against them. The purpose of conducting an options workshop is to ensure that the recommended project option is identified from the shortlist of project options through a robust and informed assessment process.
The workshop should include key Government stakeholders involved directly in the project and those potentially affected by the project, including those responsible for its delivery or operations. Attendees should include members of Treasury. The workshop should:
- Discuss and agree the evaluation criteria to be used in the MCA (see below and the Guidelines on MCA)
- Confirm the project options to be considered
- Evaluate the project options against the evaluation criteria, where possible
- Determine and agree the recommended project options.
Determine a set of appropriate evaluation criteria
The Project Team should use consistent and well-defined criteria to compare and evaluate project options in an accurate and un-biased manner, as described in the MCA Guidelines.
Potential evaluation criteria for Options Analysis are provided below in the Example evaluation criteria -Wellbeing Framework criteria below, which include the twelve domains of the Wellbeing Framework. The Project Team should refer to the Wellbeing Indicators when evaluating the project options against the Wellbeing Framework and, where appropriate, identify if there are any differential impacts on the eight specific community groups listed in the Wellbeing Framework.
For Tier 1 and Tier 2 projects, the Project Team will assess and calculate the monetary value of some of the below evaluation criteria through the CBA undertaken as part of the Economic Appraisal. The Project Team should be careful not to include evaluation criteria in the MCA that are assessed through the CBA, so as not to double count benefits (such as benefits within the ‘Economy’ and ‘Carbon Emissions’ evaluation criteria shown in Wellbeing Framework criteria and Non-Wellbeing Framework criteria tables below). The Project Team should ensure these benefit categories are included where they are not identified and monetised as part of the Economic Appraisal.
Criterion | Description |
|---|---|
Access and connectivity | How will the option assist Canberrans to access and connect to valued places and services needed? |
Economy | What economic impact (short-term and long-term) will the option provide to the Territory? |
Education and life-long learning | To what extent does the option improve equitable access to skills and education through all ages and stages of life? |
Environment and climate | To what extent does the option help create a sustainable, climate resilient and clean environment for Canberra? |
Governance and institutions | To what extent does the option allow Canberrans to be heard and have a say in government processes, and enable collaboration between individuals, communities and Government to ensure better outcomes? |
Health | To what extent does the option improve the health of Canberrans? |
Housing and home | To what extent does the option improve access to secure, suitable and affordable housing for Canberrans? |
Identity and belonging | To what extent does the option provide equal opportunities for all Canberrans, ensure individuals can express their identity, feel a sense of belonging and participate fully in society? |
Living standards | To what extent does the option help provide Canberrans with the financial resources to live life well? |
Safety | To what extent does the option increase Canberrans’ safety and feeling of being safe? |
Social connection | To what extent does the option facilitate connections between friends, families and communities? |
Time | To what extent does the option provide Canberrans with more time to do the things they want and are required to do? |
Criterion | Description |
|---|---|
Aboriginal and Torres Strait Islander Procurement Policy | To what extent does the option provide opportunities and support economic development for Aboriginal and Torres Strait Islander communities? |
Alignment with project objectives | To what extent does the option address the project vision, objectives and problems? |
Sustainability | To what extent does the option meet sustainability goals? |
Carbon emissions (Footnote: This evaluation criterion should only be included as part of the MCA if the Project Team is not able to monetise the carbon emissions as a cost and include it within the CBA, so as not to double count. ) | To what extend does the option meet goals for reductions in carbon emission? |
Digital / innovation | To what extent does the option embrace a digital and innovative mindset? |
Local industry | To what extent does the option support local industry participation? |
Risk | How risky or complex is the option? |
Talent | To what extent does the option provide the opportunity to attract and retain employees with particular talents? |
Timeframe | Does the option resolve the identified problems in an appropriate timeframe? |
Tier 3 projects
For Tier 3 projects, the Project Team is required to identify the project option(s) and use MCA to determine the recommended project option. Refer to the MCA Guidelines for further information on performing an MCA.
The Project Team should then undertake the detailed assessment for the recommended project option, as determined by MCA. These detailed assessments should include Financial Analysis, Economic Appraisal and Wellbeing Impact Assessment.
Step 4: Perform staging analysis (Tier 1, recommended for Tier 2 and Tier 3 projects where relevant)
Step 4 is mandatory for Tier 1 projects, unless the Project Team receive specific authorisation from the Under Treasurer to exclude it. It is also a recommended step for Tier 2 and Tier 3 projects, particularly those where staging is feasible.
Once the recommended project option has been agreed, the Project Team should consider and assess the possible staging approaches that could be undertaken to deliver the project. This is important for the following reasons:
- Staging may be effective in terms of cost, resourcing and time to match expenditure and delivery with the demand for a solution. For example, some stages of a project may be required immediately, with others required only in the longer term
- Staging provides the ability to monitor the project’s delivery or performance over time and implement improvements as needed
- Staging gives flexibility to Government to change course or amend the project as required after monitoring and manage any future risks and uncertainties that may exist
- Where fiscal pressures exist, staging provides further options for commencing key stages of the project before funding is required for the full project.
The Project Team should document clearly the rationale for seeking (or not seeking) a staged approach. If a staged approach is potentially an option, this analysis should consider:
- The various options for staging that may exist and the possible packages for each stage
- Whether significant additional costs or risks would be incurred through a staged delivery
- The implications of the various staging options on realising benefits. For example, would bringing forward or delaying part of the project positively affect the community?
- The cost implications of the various staging options
- Risks or negative consequences that may be mitigated or accentuated through a staged approach, particularly in relation to interface risks or disruption to the operation of the initial stage
- How the project option integrates with other projects and whether staging should be undertaken concurrently with other projects, Programs or Precincts.
The Project Team should document clearly the responses to these considerations, as well as justify and articulate comprehensively the recommended staging approach.
Footnotes: