Regardless of the process used to narrow down options, the specific initiative(s) which emerge from the assessment of options at Stage 6 - should be analysed using detailed economic cost-benefit analysis reflecting the appropriate stage of initiative development.
In doing so, proponents must:
1. Submit robust and objective Cost Benefit Analysis which is supported by strong evidence. In order to demonstrate that the Cost Benefit Analysis is indeed robust, full transparency of the assumptions, parameters and values which are used in each Cost Benefit Analysis is required. In addition, substantial supporting evidence to demonstrate that the input data underpinning the Cost Benefit Analysis - notably the demand/price forecasts, and capital/operational costs are justified - is also required. Clearly, independent verification of these elements will offer a greater degree of confidence that the data is robust.
2. Consider as many monetised economic benefits and costs as possible.
Developments in Cost Benefit Analysis methodologies mean that direct impacts such as noise, landscape and health can, in many circumstances, be monetised.
All benefits and costs included in the Cost Benefit Analysis should be economic impacts and not simply transfers, second round effects, or financial in nature; all impacts should be incremental; and should all be directly associated with the initiative.7
3. Consider non-monetised benefits and costs. Where impacts cannot be robustly expressed in money units ('non-monetised'), Infrastructure Australia will nevertheless incorporate them into the appraisal process and requests proponents to provide supporting information on the scale of these impacts.
4. Consider both the overall efficiency of an initiative (the combined scale of benefits and costs), as well as its equity and distributional impacts. Efficiency is determined by comparing the benefits and costs of an initiative - it specifically addresses the question: "When all the benefits and costs are combined, will the initiative deliver net benefits (i.e. benefits in excess of costs)?" Equity and distributional impacts relate to who bears the benefits and costs. Thus, to aid its decision making, Infrastructure Australia not only requires the Benefit Cost Ratio as a measure of net benefit, but also a breakdown of who is likely to bear the benefits and costs, and when.
5. Consider issues of risk and uncertainty. Infrastructure Australia is fully aware that the future cannot be predicted with certainty, and that economic growth, individuals' behaviour, oil prices, carbon prices and so on may vary over time. To ensure that the appraisal process is robust to potential changes, Infrastructure Australia requests a series of sensitivity tests of the demand modelling and Cost Benefit Analysis results.
Infrastructure Australia requires proponents to submit detailed appraisal information in support of initiatives reflecting the stage of initiative development. This should provide complete transparency of data, assumptions, and methodologies used; comprehensive supporting evidence to justify assumptions, including independent verification of demand forecasts and costings where possible; and a detailed picture of the results of the appraisal.
For more details on the approach adopted by Infrastructure Australia for transport initiatives, and the information required, please refer to the templates provided online. For other sectors a similar level of detail should be provided using relevant sector practice, in particular those required by independent regulators.
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7 'Wider Economic Impacts' for transport initiatives (the templates define these impacts) may also be considered for certain initiatives in specific circumstances. However, given the infancy of calculating these impacts, it is recommended that proponents discuss the analysis with Infrastructure Australia before proceeding with their estimation.