UK Department of Trade & Industry: Application of valuation and appraisal techniques to DTI policies and projects - invitation to tender

January 11, 2005

London, 10 January 2005

Invitation to tender for DTI supported research terms of reference the application of valuation and appraisal techniques to DTI policies and projects

Background

1. DTI activities involve a combination of programmes and regulations whose aim is to drive up UK productivity and competitiveness to deliver prosperity for all.

2. Quantifying the economic and social impact of programmes and regulations is an essential component of policy appraisal. In order to ensure that specific policies, programmes and projects are rigorously assessed before resources are committed, appraisal and evaluation activities within central government need to be compliant with rules set out in HM Treasury's "Green Book".1 The recommendations contained in the Green Book are used in conjunction with guidance from the Office of Government Commerce (OGC) on business cases and regulatory impact assessments.

3. Appraisal practice is revised and updated in order to meet new assessment challenges and respond to changing circumstances, drawing on previous lessons and reviews from the National Audit Office.2 Individual Government Departments are expected to supplement and integrate the Green Book approach with their own guidance whilst ensuring consistency.

4. DTI is committed to making a sound use of 'state of the art' valuation and appraisal techniques under the wider framework of the Green Book. To this end, we are seeking a better understanding of the applicability of recent developments to areas of DTI intervention.

[...]

Questions to be considered in the Report

23. DTI would like an insightful independent overview of the merits of drawing from a range of techniques to assist in the appraisal of policies, projects and programmes and what drawbacks there might be, particularly on consistency of these approaches. By drawing on the generic types of appraisal that the Department undertakes, the successful tenderer will be required to address the following questions:

- Are there types of activity in DTI that are worth using the more sophisticated and potentially time consuming techniques?

- How compatible are NPV and real options techniques with multi criteria decision analysis?

- Could implementing tighter governance arrangements with NPV analysis be a substitute in some circumstances for real options where there might be benefits from flexibility?

- Many of the programmes that DTI funds, particularly in the business/science area, are joint public/private sector initiatives. The value of real options hinges on the discount rate. Can we successfully reconcile this technique with different funding streams? Does the complexity of real options prevent its wider use in government application?

- Can risk be effectively handled in all techniques and with joint public/ private applications? The Green Book encourages departments to handle risk through optimism bias. Can these approaches be reconciled with the guidance?

- What methods are better suited for a meaningful aggregation of estimated impacts? Can multi-objective criteria be used on a consistent basis across the Department? These questions are not necessarily exhaustive. DTI would like the tenderers to consider whether they would wish to cover further significant areas in the report.

Proposals, project management and timing

24. The project will be managed by a member of the Strategy Unit Performance and Evaluation Team.

25. We would like the work to commence no later than January 2005 with a draft final report to be submitted by mid-March 2005.

26. The proposal should include the schedule of work, laying out clearly what will be produced at each stage. As a minimum, and in view of the time scale required, the deliverables should at least include an initial scoping meeting, a meeting to discuss the draft final report, the final written report followed by a presentation after its completion.

. All reports will be required in electronic form, as will copies of any material used in presentations (e.g. Powerpoint or OHP transparencies). It is expected that meetings will be held at DTI headquarters, 1 Victoria Street, London SW1H 0ET.

28. The proposal should state clearly the methodology to be used, including but not limited to: workplan and specific deliverables, team members, related expertise and other resources. Tenders should include a fixed price for the work, including VAT whenever appropriate identified separately. This should include a breakdown showing daily rates of staff, administration costs and overheads.

29. Bidders should nominate a project manager who will have overall responsibility for the tendering organisation's conduct of the research and who will be responsible for regular liaison with DTI.

30. Written proposals (2 copies) should be submitted to DTI by January 24th, after which we may ask you to present and discuss your suggested approach before making a final decision. An electronic copy should also be e-mailed to the address below.

31. Responses to this invitation should be sent to:
Fernando Galindo-Rueda
Strategy Unit - Performance and Evaluation
Department of Trade and Industry
V544
1 Victoria Street
London SW1H 0ET
Telephone: 020 7215 2107
E-mail: fernando.galindo-rueda@dti.gsi.gov.uk

linkname:Department of Trade and Industry http:///www.dti.gov.uk
News release No.

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