5.8 The relevant costs and benefits to government and society of all options should be valued, and the net benefits or costs calculated. The decision maker can then compare the results between options to help select the best. It is important to avoid being spuriously accurate when concluding from, and presenting the results of, data generated by the appraisal. However, the confidence in the data provided by the analysis will need to increase, depending on the importance or scale of the decision at hand (for instance, depending on how much resource will be committed by the decision).
5.9 In this context, relevant costs and benefits are those that can be affected by the decision at hand. Although they will vary depending on the scope of the proposal, some general principles apply. It is useful early on in the appraisal process to consider widely what potential costs and benefits may be relevant.
5.10 Costs and benefits considered should normally be extended to cover the period of the useful lifetime of the assets encompassed by the options under consideration, although, if the appraisal concerns the contractual purchase of outputs and outcomes (e.g. in PFI), the appraisal period may be different.
5.11 Costs and benefits should normally be based on market prices as they usually reflect the best alternative uses that the goods or services could be put to (the opportunity cost). However, market prices may need to be adjusted for tax differences between options.
5.12 Wider social and environmental costs and benefits for which there is no market price also need to be brought into any assessment. They will often be more difficult to assess but are often important and should not be ignored simply because they cannot easily be costed. Annex 2 provides more information on how to take into account the wider impacts of proposals.
5.13 Cashflows and resource costs are also important in an appraisal, as these inform the assessment of the affordability of a proposal. However, they do not provide the opportunity cost and, therefore, cannot be used to understand the wider costs and benefits of proposals. Proposals are also likely to require resource budgets, so that it is clear how they will be funded, and, ex post, accounted for. Chapter 6 provides more information on resource budgets and the other accounting requirements of appraisals.