Short Form Business Casewith guidance for a FCERM change project for Local Authorities, Internal Drainage Boards and other risk management authorities
[Link to GOV.UK Flood and coastal defence: develop a project business case]
This business case template should be used for justifying schemes where the total scheme cost is less than£2 million.
For a flood risk scheme, send us your business case with a completed FCERM 2.
For a coastal scheme, send us your business case with a completed CPA1 and include a copy with a completed CPA2.
The procedures when applying for grant are set out in the Grant Memorandum and you should follow them to make sure that the total cost for approval is eligible for a grant. Once the scheme is approved you are eligible for a grant for the cost you have incurred in preparing your business case. Thiscost should be included in your application.
Exclude the cost of studies if you have previously claimed grant under a separate FCERM7.The whole life cost includes all development and study costs.
The business case describes your application for Flood and Coastal Erosion Risk Grant in Aid (FCERMGiA). It should contain all relevant evidence to satisfy a reader with no knowledge of the scheme that in technical, environmental and economic terms,your recommended investment decisionis correct and deserves public investment.
We have provided this template with advice to help you compile your business case. Within the headings you can vary the content and material you wish to include. Include supporting information in appendices.
The template contains guidance notes. Please delete themfrom the completed the business case.
Contact your local Environment Agency Area Flood and Coastal Risk Manager and Partnership & Strategic Overview teams. They can provide advice and support you to prepare your business case.
Lead Authority:
Project Title:
Short Form Business Case
Version No
Date
BUSINESS CASE APPROVALSHEET
1Review & Technical Approval
Project titleAuthority project reference / EA reference
Lead authority / Date of submission
Consultant
‘I confirm that this project meets our quality assurance requirements, environmental obligations and Defra investment appraisal conditions, that all internal approvals, including member approval, have been completed and recommend we apply to the Environment Agency for capital grant and local levy in the sum of £
Job title / Name / Signature / Date
Authority Project Executive
‘I have reviewed this document and confirm that it meets the current business case guidelines for local authority and Internal Drainage Board applications.’
OBC reviewer
‘I confirm that the project is ready for assurance and that I have consulted with the Director of Business Finance’
Area Flood & Coastal Risk Manager
Assurance sign off - (Tick the appropriate box)
AFCRM Assurance Projects < £500k
Or Projects < £1m (if GiA & Levy <£500k) / NPAS Assurance Projects £500k - £2m
Recommendation for approval / Date
AFCRM or NPAS Chair
Project total as approved (£k) / Version Number
Project total made up of : / Capital Grant (£k)
Levy (£k)
Other Contributions (£k)
2Project Financial approval
Financial scheme of approval / Project total / Name / Signature / DateArea Flood & Coastal Risk Manager / <£100k or <£1m (if GiA & Levy <£100k)
Director of Business Finance / All projects >£100k
Plus:
Area Director / £100k- £1m
Director of Operations / £1m -£10m
3Further approvals (if applicable)
Date sent (or N/A)/ Version number
(if different)
Date approved (or N/A)
Final Comments
For FSoD Coordinator use only:
Business Case
Approval Requested
Include a brief synopsis of the project you propose, the problem it will address and the sums of GiA, Local Levy and other funding that you need.
- Strategic case
In this section, explain the problem in the context of the current situation. Define (preferably tabulate) the households and infrastructure at risk and split into risk bands, very significant, significant, moderate and low, or short or medium term erosion loss. Support this with specific evidence of flooding and/or erosion in the recent past, eg dates, photographs, news cuttings and plans of flooded areas or loss of coastline, and note the importance of assessing the flood depth, not just extent.
Describe the implications of doing nothing. Append an annotated map showing the baseline flood risk (extent and depth, where available) or erosion lines. Describe (preferably tabulate) details of existing defences or other relevant assets including standard of protection (bands of probability), residual life, environmental designation, access issues, maintenance arrangements etc.
Refer to relevant Local Flood Risk Management Strategy and any S19 investigations, Surface Water Management Plan, EA Flood Risk Management Plans or strategies and summarise what they say concerning this specific problem. Refer also to the relevant River Basin Management Plan and summarise any ways the proposal may help to support the achievement of WFD objectives. Depending on the project it may also be useful to highlight links to other local plans/strategies such as Local Development Plans, economic regeneration strategies or green infrastructure plans.
Set out the objectives of the project, which should be SMART (Specific, measurable, achievable, realistic and time bound). Explain the potential constraints on your scheme, such as environmental risks (e.g. biodiversity, historic environment, landscape, amenity), planning restrictions, land owner stipulations, working windows, access, ground conditions and contamination, available funding etc. Please also consider any opportunities for integrating wider social and or environmental benefits as part of your scheme (including the Environment Agency expanded suite of FCRM environmental outcome measures).
Think about any assumptions you make and the effects of them proving to be unfounded. Resist the temptation to state the solution at the start. Please be aware that any project, however small, must comply with environmental and other legislation, so if you are unclear about what this means for your project, please seek advice from your Area Flood and Coastal Risk Manager.
- Economic case
This section is where to explain the appraisal of the options that address the problem described in the strategic case. For all options, consider the technical issues, the environmental risk and opportunities, wider sustainability aspects (e.g. carbon use) and the economic cost and benefit. In the early identification of possible options consider opportunities to work with natural processes.
Always include the do-nothing (no action, maintenance and repair ceases, “walk away”) and do-minimum (minimum action necessary to maintain asset) options and note that you have already explained the implications of the do-nothing in the strategic
case. It is helpful to start with a list of all possible options (the ‘long list’) and then, giving justification, dismiss those that do not warrant further investigation. If options such as SUDs, property flood resilience, temporary defences and natural flood management measures are discounted as individual options, they should be considered in combination with other measures. Confirm the short list of options with reference to any approved strategic stage options.
Undertake a technical assessment of the short list of options to demonstrate the hydraulic adequacy of the comparable options. The analysis of small projects should be proportional to the investment. RMAs may have access to this in-house otherwise seek advice from an engineering consultant or maybe collaborate with another RMA that has the in-house expertise. We do not expect you to spend more than 5% of the project cost justifying the application for grant. Advice on data sources, technical assessment and outputs for projects (based on the total capital value of the project) is provided below.
Advice / Project Value<£150K / £150-£500K / £500K+
Data Sources
(see footnote) / Some or all of the following data sources should be used:
- LLFA Historic Flood Records
- EA Updated Flood Map for Surface Water (uFMfSW)
- Water Company Flood Maps
- EA Flood Map for Planning
- EA Property Points Dataset
- Existing Ordinary Watercourse and/or Main River hydraulic model outputs
- Housing Deprivation Dataset
- Sewer records from relevant Water Company
- Verification of historic flood risk through engagement with local residents and businesses.
Types of data that should be used
- Integrated 1D-2D hydraulic model
- Estimates of erosion from Shoreline Management Plans
Technical Assessment /
- Manual calculations are acceptable, with appropriate sensitivity tests.
- GIS assessment of residential and non-residential properties within 30, 100 and 1000 year surface water flood extents
- Assessment of residential and non-residential damages using industry standard methods like the Multi-coloured Handbook
- Consideration of climate change impacts
- Assessment of surface water storage volumes and/or changes in flow rates for the preferred option(s) using industry standard surface water drainage design software
- Assessment of how changes in surface water storage and/or flow rates associated with the preferred option(s) will reduce flood risk damages
- Creation/update of integrated 1D-2D hydraulic model
- Residential and/or commercial property threshold assessment
- Hydraulic modelling assessment of damages for the ‘Do Nothing’ and ‘Do Minimum,’ and ‘Do Something’ scenarios.
Outputs to Provide as Supporting Evidence for your Business Case /
- Description of appraisal methodology, stating assumptions made
- Estimated number of residential properties better protected from flooding in the Before and After Partnership Funding scenarios for the moderate, significant and very significant flood risk bands*
- More accurate / refined property counts, using the outputs from the technical appraisal to justify the figures
- Completed FCERM economic appraisal spreadsheet (or equivalent)
- Modelling approach technical appendix
*When using theuFMfSW to identify properties at risk and where modelling is not available or disproportionately expensive, use professional engineering judgment validated where possible with historic evidence of flooding to determine the allocation of OM2 numbers to the partnership funding calculator flood bands.
Where there are existing flood risk management assets and a detailed assessment of risk associated with deteriorating asset condition is not available, the ‘Before’ risk band is one band below that inferred from the design standard of the asset once capital maintenance is completed.
Climate Change
Measures designed to reduce flood risk today will become less effective over time due to climate effects that are predicted to increase rainfall intensity and sea level. The Partnership Funding calculator assesses the amount of grant available to each project by comparing the numbers of OM2 and OM3 before intervention with the number after the intervention at the end of the duration of benefit period when climate effects will have reduced the number of outcomes. Where for example,a scheme is proposed to avoid flooding in a 1:30 annual event probability (AEP) rainfall eventby the end of a benefit period of 50 years, the scheme may have to be designed to a 1:75 AEP today to allow for climate effects. This has significant cost implications.
Cost Estimation
The cost of the options could be derived from a plan of the works and a bill of quantities priced using industry standard estimating data and where possible, benchmarked against similar previous work. It is important to consider the constraints when pricing work, eg access to land. An allowance for risk is essential and can either take the form of Optimism Bias calculated using the method given in the Supplementary appraisal guidance, or you can identify the various risks, estimate the most likely and maximum impact on time and cost and then apply a root mean square approach to deriving a contingency (see the supplementary information at the end of the template).
Tabulate the benefits and the costs of each option to compare the benefit cost ratio and the option choice made in accordance with section 8 of the appraisal guidance.Note that the costs and benefits in table 1 are discounted, not cash values. The discount period is your assessment of the lifetime of the assets comprising the scheme. Note that a benefit is a damage avoided. It is important to rank the options in ascending order of benefit. Benefit cost ratio is an expression of value for money. The highest BCR is the best value.
The incremental BCR column compares two options to assess the additional value provided by additional cost, and which should always be greater than unity. The two options must be identified in the “option for incremental calculation” column. The incremental value is the benefit difference divided by the cost difference of the two options. Example values are included in table 1 to demonstrate the calculation. A worked example is shown in the Supporting Information.
Table 1–Option Choice from Economic Appraisal Summary(example values shown to aid understanding)
Option / Present Value costs(£’000) / Present Value damages(£’000) / Present Value benefits
(£’000) / Average benefit: cost ratio (BCR) / Incremental benefit: cost ratio (IBCR) / Option for incremental calculation
1 / Do nothing / 0 / 500 / 0 / n/a / n/a / n/a
2 / Do minimum / 2 / 480 / 20 / 10 / n/a / n/a
3 / Do something 1(5%) / 100 / 200 / 300 / 3 / 2.85 / 2
4 / Do something 2 (3.3%) / 200 / 100 / 400 / 2 / 1 / 3
At this point, you will need to evaluate the environmental impacts (including legislative constraints) and non-monetised benefits of each option e.g. environmental outcome measures. An ecosystem services approach can help to identify and assess potential impacts and benefits and in some cases their valuation. Refer to and summarise any environmental surveys and or assessments which have been used to inform the options appraisal or are planned.
Preferred way forward
Describe how you have selected the preferred option with reference to key criteria e.g. economic (see section 8.3 of the appraisal guidance), environmental, risk, sustainability, carbon footprint etc. Comment on the sensitivity of the option choice to variations in the key assumptions.
- Commercial case
Explain the approach to procurement and how it demonstrates value for money and the benefits over the alternatives considered. Describe the form of contract proposed and how risk will be shared. Confirm compliance with the Public Contract Regulations (if they apply to this procurement) and confirm compliance with your organisations procurement procedures.
All schemes spending grant are expected to demonstrate potential efficiency savings over the initial budget estimate and will be collected by the Environment Agency national programming team.
- Financial case
Financial Summary
Summarise the project costs. Explain how the costs have been derived and how the risk contingency has been calculated.
Table 2 – Preferred Option Financial Summary
1Whole-lifecash cost / 2Total Project cost
(approval)
Cost up to OBC3 / Exc previous applications
Costs after OBC
Salary costs
Cost of Professional Advice
Site investigation and survey
Construction
Supervision
Environmental mitigation4
Land purchase & compensation
Other5(specify)
Risk Contingency (See s.12 of the Grant Memorandum)
Risk or Optimism Bias6
Future cost
(construction + maintenance) / (Cash)
N/a
Optimism Bias on future cost7
Project total cost / 8
Notes
1.This column shows the cash, i.e., undiscounted, values and includes all future costs over the design life including any study costs approved under an FCERM7.
2.The costs in this column are cash values.
3.The whole life cash cost column includes any study costs approved under an FCERM7 and the development cost of the OBC. The Total project cost (approval) column does not include study costs as these have already been approved under an FCERM7. It does include the OBC development cost.
4.The cost of environmental enhancement is contained within the other cost elements and not shown separately.
5.Add further rows as necessary for individual headings. A cumulative miscellaneous cost should not be more than 5% of the total.
6.Note that the allowance for risk and/or optimism bias is part of the project approval but must be claimed separately when needed using the FCERM4 application. See supporting information for further explanation.
7.The allowance for risk and optimism bias applicable to future construction and maintenance is shown separately from current risk and optimism bias to account for uncertainty.
8.This is the value of the project that will be approved and appear on the FCERM2.
Funding sources
State the partnership funding score and how the total project cost is to be funded. Specify the source of all contributions and any conditions and risks attached. Append the partnership funding calculator and letters of agreement. Should the out-turn cost exceed the approval, confirm the source of funding.
Table 3 – Sources of funding and Partnership Funding Score
% / Description / Total £kRaw Partnership Funding score
Funding:
Contributions (list)
Other: (list)
Local Levy
Non GiA contributions
Adjusted Partnership Funding score
Grant in Aid
Project total cost (approval) / 1
1This is the value of the project that will be approved and appear on the FCERM2 (see table 2 note 8)
- Management case
Project and contract management
Explain how you will manage the design and construction stages. Define the governance arrangements using an organisation structure chart and define the roles and responsibilities of key officers.
Schedule
Provide a simple schedule of events that demonstrates the main activities and the associated timescales. This can be a table or a simple chart.
Table 4 – Schedule of main events
Event [examples only included below] / Date DD/MM/YYPlanning permission received
Other (detail as necessary)
Work to be started on site
Work substantially completed by
Outcomes