Better Business Cases (BBC) - Glossary (EN)

Additionality :  An impact arising from an intervention is additional
if it would not have occurred in the absence of the
intervention.
Affordability :  An assessment of whether the proposals can be
paid for in terms of cash flows and resource costs -
see financial case
Appraisal :  The process of defining objectives, examining
options and weighing up the costs, benefits, risks
and uncertainties of those options before a decision
is made.
Assessments :  Either an appraisal or an evaluation (or both).
Base case :  The best estimate of how much a proposal will cost
in economic terms, including an allowance for risk
and optimism.
Business case :  A management vehicle for scoping and planning
the proposal and documenting the outcome. Often
a requirement of the approval process.
Capital expenditure :  Expenditure on durable assets such as land,
buildings and equipment.
Contingency :  An allowance of cash or resources to cover
unforeseen circumstances.
Cost benefit analysis
(CBA) :  Analysis which quantifies in monetary terms as
many of the costs of a proposal as feasible
(financials), including items for which the market
does not provide a satisfactory measure of
economic value (non-financials).
Cost effectiveness
analysis (CEA) :  Analysis that compares the cost of alternative ways
of producing the same or similar outputs.
Discounting :  A method used to convert future costs or benefits to
present values using a discount rate.
Discounted cash flow
(DCF) :  A technique for appraising investments. It reflects
the principle that the value to an investor of a sum
of money depends on when it is received.
Discount rate :  The annual percentage rate at which the present
value of a £, or other unit of account, is assumed to fall away through time.
Do minimum option :  An option where the public sector takes the
minimum amount of action necessary.
Do nothing option :  The cost of the status quo, often used as a
benchmark for VFM.
Economic appraisal :  See appraisal. This specifically takes into account
the economic costs. Also used as a general term to
cover cost benefit analysis (CBA).
Economy :  A measure of the extent to which the costs
associated with a project, programme or policy are
reduced.
Effectiveness :  A measure of the extent to which a project,
programme or policy achieves its desired
outcomes/outputs.
Efficiency :  A measure of the extent to which a project,
programme or policy's associated throughputs are
increased.
Equivalent annual cost (EAC) :  The constant annual costs which are equivalent
(same present value) to a project's actual costs.
Evaluation :  Retrospective analysis of a project, programme or
policy to assess how successful (or otherwise) it
has been, and to learn lessons for future
improvement.
Expected value :  The weighted average of all possible values of a
variable, where the weights are the probabilities (in
%s).
Five case model :  A systematic framework for the development and
the presentation of the business case over time
(SOC, OBC and FBC).
Internal rate of return :  The discount rate that would give a project a
present value of zero.
Market value :  The price at which a commodity can be brought or
sold, determined by the interaction of buyers and
sellers in a market.
Monte Carlo analysis :  A technique that allows assessment of the
consequences of simultaneous uncertainty about
key inputs, taking account of correlation between these inputs
Net present cost (NPC) :  The discounted value of a stream of future costs.
Net present value (NPV) :  The discounted value of a stream of either future
costs or benefits. The NPV is used to describe the
difference between the present value of a stream of
costs (NPC) and a stream of benefits.
Opportunity cost :  The value of the most valuable alternative uses or
the cost of something in terms of an opportunity
forgone.
Optimism bias :  The demonstrated systematic tendency for
appraisers to be over-optimistic about key project
parameters, including capital costs, works duration
and benefits realisation.
Option appraisal :  The process of defining objectives, examining
options and weighing up the costs, benefits, risks
and uncertainties of those options before a decision
is made.
Options framework :  A systematic framework for the development of
options.
PPP :  Public private partnerships
Public Sector Comparator (PSC) :  A hypothetical risk-adjusted costing by the public
sector as a supplier to an output specification,
generally used in connection with a PPP
procurement exercise.
Required rate of return :  A target average rate of return for a pubic sector
trading body, usually expressed as a return on the
current cost value of total capital employed.
Risk :  The likelihood (measured by its probability) that a
particular event will occur.
Sensitivity analysis :  Analysis of the effects on an appraisal of varying
the projected values of important variables.
Switching values :  The point at which the choice of the preferred
option would switch to another option due to any
uncertain costs and/ or benefits.
Transfer payment :  A payment for which no goods or services are
received in return.
Uncertainty :  A scenario within which it is impossible to attach
probabilities to the range of possible outcomes.
Weighting and scoring :  An appraisal technique for the assessment of
qualitative costs, risks and benefits.
Willingness to pay :  The amount that someone is willing to receive or
accept to give up a good or service.