Roads Service Template 3
Business Case Template 3
Economic Appraisal Pro Forma
(For ICT Expenditure £35,000 to £349,999)
BUSINESS CASE FOR:
Strangford Ferry Ticketing System
User(s) Details:
Name Carrie Teggart
Location Development and Traffic Assessment Section
Roads Service Consultancy
Rathkeltair House
Downpatrick
Tel No. 58167
PC Badge No. ______
(if applicable)
Business Unit RSC
(e.g. Northern, Southern, Eastern, Western, RSC, RSD, RSHQ)
Business Case Approval Levels:
Cost £35,000 - £250,000 - must be approved by the IS Steering Committee
(ISSC) or above
Cost £250,000 - £349,999 - must be approved by the Chief Executive (based on
recommendation from ISSC)
Approved By ______(Name in Capitals)
Signature ______
Grade ______Date ______
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Roads Service Template 3
Table of Contents
Section Page No.
Economic Appraisal What, Why and When? 2
1. Strategic Context 3
2. Assessment of Need 4
3. Objectives & Constraints 5
4. Identification of Options and Option Sift 6
5. Monetary Costs & Benefits 7
6. Assess Risks & Adjust for Optimism Bias 8
7. Weigh up Non-Monetary Costs & Benefits 9
8. Calculate NPVs & Assess Uncertainties 10
9. Management Considerations & Evaluation 11
10. Conclusions & Recommendations 12
Appendices
A. NPV Spreadsheets
(This Economic Appraisal pro forma has been prepared for use on ICT expenditures of 35k to £350k.)
The pro forma is based on the 10 step general appraisal guidance from the NI Practical Guide (2003) to the Green Book (2003). For more detailed guidance on the economic appraisal of ICT investments, you may want to refer to these Guidance documents http://eag.dfpni.gov.uk/pdfs/ni-practical-guide-2.pdf
Economic Appraisal What, Why and When?
Economic Appraisal (hereafter Appraisal) is HMT and DFP's established vehicle for planning and approving publicly funded projects and other public expenditures.
Appraisal is a systematic process for examining alternative uses of resources. It is designed to assist in defining problems and finding the solutions that offer the best value for money (VFM). It is a way of thinking expenditure proposals through, right from emergence of the need for a project to its implementation. The general principles of Appraisal apply to any proposal involving expenditure or resources. DFP requires the principles of Appraisal to be applied, with proportionate effort, to all proposals for spending or saving public money, including EU and IFI Funds, or that involve changes in the use of public resources. For example, Appraisal must be applied irrespective of whether the public expenditure or resources involve: capital or current spending, or both; are large or small; are above or below delegated limits. Appraisal also applies to the public expenditure and resources of NDPB's and Agencies and not just to Departments. Where relevant, ‘Statutory Equality Obligation’ and ‘New Targetting Social Need’ (New TSN), should be addressed as part of the project appraisal.
Good Appraisal leads to better decisions and VFM. It facilitates good project management and project evaluation. Appraisal is not optional; it is an essential part of good financial management which is vital to sound decision making and crucial to accountability to Parliament and the taxpayer.
This Economic Appraisal pro forma has been prepared for use on ICT expenditures of >£35k to <£350k. The pro forma is based on the 10 step general appraisal guidance from the NI Practical Guide (2003) to the Green Book (2003). For more detailed guidance on the economic appraisal of ICT investments, you may want to refer to these Guidance documents.
Other templates exist for (i) ICT expenditures up to £5k and (ii) ICT expenditures of £5k to £35k. Projects involving expenditures above the £500k upper limit require the Business Cases to be submitted to DFP Supply for authorisation. A pro forma is not used for DFP Supply submissions, as a more comprehensive document is required to accommodate all of the required information.
EACH SECTION OF THE ATTACHED ECONOMIC APPRAISAL PRO FORMA MUST BE COMPLETED
1. Strategic Context (Step 1)
This section should describe the background to the project, including its strategic importance. Reference should be made to any relevant Strategies at both a national and local level (e.g. Modernising Government). Any relevant NICS Strategy or initiative (e.g. Reform Agenda) or Departmental Corporate and Business Plans may also be usefully referred to.
BackgroundRoads Service operates a ferry service across Strangford Lough between the villages of Strangford and Portaferry. The route is about 0.75 miles and takes around 8 minutes. The alternative to using the ferry crossing is a 40 mile drive for vehicles or a lengthy journey via Belfast by bus for foot passengers, probably involving 4 different buses.
Roads Service aims to ensure that the Strangford Lough Ferry Service is available for 97% of standard service hours.
In 2010- 2011 the total cost of running the Ferry Service was £2.176M, income from fares was £864K (40%).
The current ticketing system, which uses books of 20 paper vouchers as a means of giving discounts to regular users, requires a lot of administration. The level of service provided to customers is limited as vouchers can only be purchased during office hours or ordered online allowing 5 days for delivery. In March 2010 Amey consulting were commissioned to investigate alternative ticketing systems using new technology. Their conclusion was that an electronic ticketing system would improve customer service and reduce administration.
2. Assessment of Need (Step 2)
Rigorously establishing the need for a project is a fundamental part of good economic appraisal. Please give a detailed description of the project need both now and in the future. It is also important to confirm the continued need for the business that the ICT service is enabling. The deficiencies or problems with the existing service provision should be described. A clear differentiation between existing and new requirements should be provided.
There is an ongoing need for a Ticketing System for as long as the Ferry Service operates. The system of offering discounts to regular customers via multi-journey tickets is well established and is unlikely to change.Strangford Ferry Fares Structure
Vehicle fares are based on vehicle length and include the driver. All other passengers pay the appropriate passenger fare. Discount fares are available to regular customers who buy books of 20 ticket vouchers.
Strangford Ferry Ticket Sales
All tickets are issued on board before or during the crossing. The available methods of payment are by cash on deck, by cheque or credit card in the Ferry Terminal or by pre-paid multi journey voucher.
Multi Journey Voucher
Occasional passengers pay cash on board the ferry for single or return tickets. Regular passengers can purchase books of 20 vouchers at a discount price. The voucher books can be purchased from the Ferry Terminal or Rathkeltair House during office hours or ordered and paid for by phone or online allowing 5 days for delivery.
Group Warrants
Groups of more than 20 passengers can purchase a group warrant, at the discount rate, from the Ferry Terminal.
Existing System
The existing Ticketing system was purchased in 2007 through a Single Tender Action on the basis that thorough research had shown that there was only one potential supplier. Initially 7 ticket machines were purchased and a further 2 purchased in 2009. The expected life of the machines is 15 years.
After an initial warranty period annual maintenance charges were payable. A Direct Award Contract for the annual charges for the year to 31 March 2012 was approved by the Permanent Secretary in May 2011.
The system comprises 9 portable Ticket machines from which data is downloaded after each shift onto a stand alone PC with a proprietary software package. At the end of each shift the purser prints a waybill report from the voucher machine and uses this to reconcile his takings.
The software stores ticket sales data by date, category and shift. It can be used to amend ticket types and fares and run a variety of reports. The most commonly used report is the ST 20 Sales Report which shows all sales from all machines between two specified dates. Ticket sales Reports are used to monitor ferry usage and assess the impact of fare increases. The PC can be accessed remotely by the software supplier for maintenance purposes as required.
The minimum system requirements are as follows:-
· A means of selling single and return tickets for cash on board the ferry
· A means of providing discounted multi-journey tickets
· The system must use the existing fares structure
· Provision of robust ticket machines suitable for use in marine environment and capable of issuing 25 + ticket types
· A means of recording ticket sales per shift for audit purposes. The ticket machine must produce a waybill detailing first and last ticket numbers, sales in each fares category and total takings
· A software package which will store data on ticket sales, analyse data and produce reports on sales of ticket in each category for management information purposes.
The existing ticketing system meets the above requirements but will not be supported after 31 March 2012 without a Direct Award Contract. The new system will be required to meet 2 further requirements –
An alternative to the existing pre-printed voucher books
Managing the voucher books requires an excessive administrative input as each book must be manually checked to ensure that it contains exactly 20 vouchers. Checking books of vouchers, monitoring and auditing voucher stocks, recording sales and ensuring the security of vouchers involves around 40% of an Administrative officer’s time.
A means of purchasing vouchers outside normal office hours
Prior to 2009 some passengers had an unofficial arrangement whereby they could give money to a purser in the morning and collect the vouchers in the evening. Internal Audit advised that this did not comply with Departmental Accounting Procedures and the arrangement was stopped. Since then numerous complaints have been received about the difficulties commuters have buying vouchers. The telephone and online ordering systems are not considered acceptable by some passengers because of the need to allow 5 days for delivery. There is also a grey area about who is liable if vouchers go missing in the post.
Current Departmental Accounting Procedures do not permit re-selling vouchers through other outlets without full payment in advance. To date none of the local businesses has been prepared to purchase a stock of vouchers in advance, probably because this would require an initial outlay in the region of £3,000. There is no financial incentive for businesses to re-sell vouchers. Re-selling would greatly increase the potential for abuse of the discount system by retailers selling ‘cheap’ single ferry vouchers. Given that the multi journey voucher discount is around 40% this could result in a loss of income.
3. Objectives & Constraints (Step 3)
Objectives (or Targets) must be set for the project deriving from the assessment of need. These objectives should be Specific, Measurable, Agreed, Realistic and Timedependent (i.e., "SMART" as recommended in NI Practical Guide (2003) to the Green Book (2003). These objectives may refer to both the enabled business or the ICT that enables the business.
Any constraints involved with the project should also be documented. These may be technical, legal, political or financial in nature. Any associated Outcomes should also be considered.
The main objective of this project is to have a fully supported ticketing system in place by 1 December 2012. Ideally the system will include· A means of selling single and return tickets for cash on board the ferry
· A means of purchasing multiple journey vouchers through retail outlets as well as from the Ferry Terminal
· Robust ticket machines suitable for use in a marine environment
· Software to capture data from ticket machines, analyse the data and run reports and enable auditing of individual transactions
· Maintenance and support for the life of the system (this business case is based upon a proposed 3-year contract with options to extend annually up to a maximum of 8 years)
The current arrangements for ordering tickets by telephone or on-line will be retained.
4. Identification of Options and Option Sift (Step 4)
Comparison of alternative courses of action is at the core of appraisal. The range of options considered should generally be as wide as possible. The options listed should include a baseline (do nothing) option (including any essential investment required to maintain current service levels). Consideration should also be given to any business alternatives to this baseline. The alternative ICT options should consist of various ways of meeting the objectives covering a range of levels of provision. A long list of options may be given initially, before being shortened to a more manageable number. This shortlist, though, should contain the base case plus at least two alternatives. Where options are considered but eliminated at an early stage, the grounds for elimination should be explicitly stated. An option number should be allocated to each option carried forward for further appraisal.
OptionName
/ OptionDescription / Included (I) or
Rejected (R) / Reason for
Rejection / Option
Number
Existing system without maintenance and support
Existing system with maintenance and support provided by a Direct Award Contract
Existing system with maintenance and support provided by a Direct Award Contract and
Customer Account add on
Smart Card System
(as used on some Scandanavian ferries)
Existing system with maintenance and support provided by a Direct Award Contract and
Vending Machines for vouchers
Electronic tagging system
DRD / Translink Integrated Ticketing System / Paper multiple journey vouchers, online ordering of vouchers.
Paper multiple journey vouchers, online ordering of vouchers.
Customers open an account with the supplier and are invoiced at end of month. Ticket machines record customer details from card and details of tickets purchased. System produces invoice at end of month.
New system using ticket machines with card reader / writer. Customers pre-load a card with journeys at discount rate. Ticket machines deduct one journey from the card. Cards can be loaded in Ferry Terminal or in local shops.
System as existing but also vending machines in Ferry Terminal and local shops. Machines configured to sell tickets in batches of twenty only.
Tag is attached to windscreen and is detected by tag reader. Customers open an account with the supplier and are invoiced at end of month.
Automated method for collecting and processing fares for public transportation service providers of various modes of transport. A joint DRD/ Translink project is underway. / I
R
R
I
R
R
R / Included as base case only.
Following market testing an alternative supplier was identified. DAC considered inappropriate under procurement guidelines
As 2 above
Following market testing an alternative supplier was identified. DAC considered inappropriate under procurement guidelines
Requires a fixed price per car regardless of number of passengers which does not fit in with current pricing structure.
The Translink system will not be available until 2015/16. / 1
2
3
4
5
5. Monetary Costs & Benefits band application of Uncertainties (Sensitivity Analysis) (Steps 5 & 8)