A1.6 The key steps of defining needs and objectives, identifying alternative options, and assessing their costs and benefits should always be undertaken, no matter how small the proposed expenditure involved. The reason for insisting upon this is that they represent a way of thinking which is indispensable.
A1.7 However, while these steps are always to be followed, discretion may be exercised on the amount of effort required on each of them. For example, it may be unnecessary to spend much time or effort on defining needs and objectives when the concern is simply to replenish stationery and other basic office supplies.
A1.8 It may not always be appropriate to calculate net present values for the smallest of proposed expenditures, particularly where there are no significant recurrent costs or benefits. The other steps of appraisal, such as assessing risk and uncertainty and post project evaluation, should usually be considered even on relatively small expenditure proposals. However, in general there is less likely to be a need for detailed analysis under these steps for small expenditures than for larger expenditures. For instance, although the use of sensitivity analysis is useful for most proposals, there may be no need for it in the case of the smallest expenditures.
A1.9 There is thus a great deal of flexibility in applying appraisal, particularly where small sums are involved. The use of appraisal principles to think through expenditure proposals represents a common sense approach which need not involve a lot of unhelpful bureaucracy.