Guidance

Stage 5: options appraisal

Published 28 March 2017

1. Overview

The options appraisal stage allows a number of different delivery model options to be explored and evaluated against a set of agreed criteria, leading to the selection of the preferred option. This stage can commence once the function of the library service has been clearly defined.

To evaluate the delivery model options, 3 main themes for investigation are used:

• desirability - the degree to which each option meets the strategic objectives and priorities of stakeholders
• viability - the degree to which each option is financially viable and sustainable
• feasibility - the degree to which each option can be implemented

These themes are mapped to specific criteria against which each option is evaluated. This leads to a final recommendation about the preferred delivery model which can then be taken forward to the business case.

2. Why undertake an options appraisal?

An options appraisal provides the opportunity to help councils and library services make an informed and evidence based decision on how to deliver library services. It does this by considering the relative advantages and disadvantages of a number of different delivery model options (including the current way in which the service is delivered).

The methodology helps you to consider the relative desirability, viability and feasibility of the different options, and to answer the following questions:

• are there better ways to achieve your objectives?
• are there better ways to use the resources available?
• is this the best way to achieve the desired outcomes?

An options appraisal can be helpful in the following ways:

• it provides a clear outcome by identifying a preferred model of delivery, which can then be developed in greater detail
• the process can be used to engage with key stakeholders and identify priorities from their perspective
• it can raise difficult and important questions at an early stage

While the options appraisal is important in helping to identify a preferred option, you will not necessarily be able to resolve all of the questions by the end of this stage – this is to be expected.

3. Summary of process

The process of undertaking the options appraisal consists of several important activities. If there are significant time constraints, it is possible for some of these activities to take place in parallel, allowing the process to be completed within a shorter time frame.

Developing a long-list of alternative delivery model options

The range of possible options will be informed by several different sources including:

• the case for change
• the case for externalisation
• any requirements of the particular service functions
• evidence and examples from across the library sector and beyond

Market analysis and assumptions to underpin appraisal

To undertake the appraisal, it is necessary to conduct some analysis of the market within which the delivery model will operate, and to explore other relevant areas. These could be proposed funding levels by the council (including any savings targets), evidence of unmet need and trading opportunities/external funding opportunities.

Developing assessment criteria

Development of a set of criteria, allowing each option to be consistently tested, is most effective when a range of stakeholders are involved. It is not just the criteria themselves that need to be developed, but also an understanding of how important each one is (this is often referred to as the relative weighting) and the definition of good and bad for each option (often known as the scoring mechanism).

Identifying gateway criteria

These are the most important criteria which can be used to quickly identify any options that are unsuitable. Typically 2 to 4 criteria from the full list might be identified as gateway criteria.

Developing a shortlist of options

Applying the gateway criteria to the long-list of options allows you to identify a shortlist of options which can be taken forward and developed in more detail. This means you can target your efforts at the most appropriate options.

Developing propositions for each of the shortlisted options

Each of the shortlisted options should be developed in more detail. This will enable you to consider each option in greater depth.

Objectively scoring each of the shortlisted options

Each of the shortlisted options will then be scored against each of the criteria. You should identify a team representing different perspectives to undertake the scoring, or involve external advisors, to ensure that the assessment is as objective as possible. Record comments and points of discussion during the scoring exercise.

Identifying the preferred option(s) for further investigation

At the end of the options appraisal you will have an overall score for each option. This should be interpreted carefully to identify the preferred option and a rationale prepared which explains why this is the preferred option.

Each of these activities is described in greater detail in the sections below.

Our options were appraised by stakeholders from across the library service and the county council’s corporate team including finance. We also involved an individual from another service area, to provide an alternative perspective.

The process was facilitated as a discussion by the project manager and each person contributed their comments and scoring against a number of criteria. The recommendation of the options appraisal panel was approved by the Project Board (including stakeholders from across the council) and ultimately signed off by the portfolio holder.

Libraries Unlimited

4. Developing longlist of options

Typical delivery model options that might be considered for library services are listed below, and outlined in greater detail in Alternative delivery models. The delivery model options are:

• remaining in house with re-engineering (this should always be included as the status quo)
• Local Authority Trading Company (commonly referred to as a LATC)
• Public Service Mutual (commonly referred to as a PSM or mutual)
• outsourcing (to an existing social enterprise or charity; or to a for-profit provider)
• joint venture (potentially involving ownership and control by a range of stakeholders including (but not limited to) staff, the council, community agencies)

When identifying a long-list of options for delivery of library services, the following aspects should be taken into account:

The strategic case for change

The internal rationale for changing the method of service delivery. This could include factors such as the:

• council’s strategic plan
• desire to deliver improved value for money for council tax-payers
• potential for library services to be delivered in collaboration with additional services

The case for externalisation

The rationale for delivering the services outside of the council, and whether this lends itself to any particular models.

Requirements of particular service functions

Whether there are specific service functions that would suit some models more than others.

Evidence and examples from elsewhere

Library services are increasingly being delivered in new ways and you should consider examples of innovative models being used elsewhere when developing your long-list of options.

The range of options identified are likely to sit along a spectrum of ownership and control which, at one end, will be entirely with the council (for example an in-house service), and at the other end, entirely outside of it (such as an outsourced service).

It’s important to create a long-list that reflects all of the available options to you. This helps you to keep the options appraisal process robust and objective.

5. Market analysis and assumptions to underpin appraisal

You will need to make sure the options appraisal is based on realistic assumptions. Some initial research should be carried out to understand the market context in which the delivery model will operate. The findings from the needs analysis should also be considered at this stage.

It is also important to consider likely future funding levels by the council (including any savings targets), as well as any potential trading opportunities and/or external funding opportunities that may exist.

6. Developing assessment criteria

Using assessment criteria for the options appraisal provides you with a consistent framework to analyse each delivery model option. As outlined in section 1, you should use 3 main themes for investigation - desirability, viability and feasibility.

These 3 themes mean you can develop an options appraisal scoring framework where each area is equally important, even if the number of criteria identified for each is different. For example, it may only be possible to identify 3 criteria to test feasibility, but there may be 10 criteria to test desirability.

Stakeholders may, however, feel that one theme is more important than the others. The process allows you to allocate a greater weighting to one theme.

6.1 Developing the assessment criteria

The development of assessment criteria is often done in a workshop format. This provides an opportunity to engage important stakeholders in the assessment process. Collective thinking and discussion of the 3 themes is likely to bring to the surface any underlying concerns, motivations, or questions that stakeholders have. Some examples of areas that you may wish to cover via the assessment criteria are outlined on the assessment criteria template.

Specific attention needs to be paid to whether the council is in a position to delegate delivery responsibility for statutory services. In the case of library services, councils are able to delegate their statutory functions.

After you have identified your initial set of assessment criteria, it is important to define these further through 2 further steps:

Weighting

A weighting representing the relative importance should be assigned to each criterion. This is usually a number between 0 and 10, with 10 representing an extremely important criterion and 0 representing one that isn’t important. It’s important to develop a range of weightings, making sure that not every criterion is rated of high importance.

Scoring mechanism - what do good and bad look like

A definition to determine a high and low score for each criterion should be created. This is most easily done by envisaging the scenarios that would warrant either an extremely high or extremely low score.

A worked example of this process is provided below for a fictitious libraries service:

Criterion	Weighting	Good	Bad
Ability of option to enable a range of stakeholders (such as staff, Friends Groups and library users) to play a formal role in informing the delivery model’s strategic direction and decision making processes	High – 10 points	Option enables various stakeholders to assume a formal role within the model, enabling them to influence the service’s strategic direction and decision making processes	Option does not enable various stakeholders to assume a formal role within the model, thus not enabling them to influence the service’s strategic direction and decision making processes

7. Identifying gateway criteria

After you have developed the full set of assessment criteria, it is usually relatively easy to identify a small subset of gateway criteria. These are make or break criteria – should an option not meet most or all of the criteria, the option drops out of the appraisal process.

Gateway criteria are applied at an early stage of the options appraisal to refine the list of delivery model options that progress to the main body of the appraisal.

The example provided above would be considered a gateway criterion, as it has been allocated the highest possible weighting of 10 points.

8. Developing a shortlist of options

Having identified gateway criteria, these can be used to rapidly identify a shortlist of options.

This step involves assessing each option against the gateway criteria to determine whether they should progress to the long-list or be discounted at an early stage. This process requires you to assess whether each long-listed option passes or fails each gateway criterion.

Having determined the outcome for all options in the long-list, this will lead to the development of a shortlist of options that are worth further consideration.

9. Developing propositions for each shortlisted option

Having clearly identified a number of shortlisted options that meet the gateway criteria, the next step is to develop propositions for each of these options. You will need to consider a number of important areas. The main characteristics of each option should be outlined, including:

• the required level of council ownership / control over the service
• the intended level of ownership and control from various stakeholder groups, including: staff, friends groups, library users, community groups and any other stakeholders
• the governance structure through which the ownership of the service will be expressed

A high-level financial model should be developed, informed by the proposed function of the library service and market analysis information. You will have already collected some of this during the case for change (stage 2) and case for externalisation (stage 3).

A high-level consideration of the important technical features for each model should be undertaken. These include:

• the anticipated procurement route
• proposed contract management arrangements
• back-office services (such as finance, HR, payroll and legal), in terms of whether the option will be required to purchase these from the council, or whether these can be procured from the open market
• asset transfer arrangements relating to property, equipment and other relevant assets (including maintenance responsibilities)
• staff transfer arrangements
• pensions and redundancy liability transfer arrangements

10. Objectively scoring each shortlisted option

After you have developed a proposition for each option, the next step is to objectively score each option. This can be done in a number of ways. A collaborative process, such as a workshop, which draws on input from a number of stakeholders, is likely to build the greatest level of consensus and promote further buy-in to any potential recommendations.

Each option must be scored against each criterion. This should be done with the previously agreed scoring definitions available for reference. Sometimes the most logical way to structure the scoring is to assess each model against a particular criterion in one go. This can help to make sure that you are applying a degree of objectivity and consistency when looking through a number of models and criteria in a single exercise.

If this process is being undertaken with multiple stakeholders, it may be preferable to ask all stakeholders to individually consider a particular criterion or model, and then to discuss the results as a group before coming to a final consensus on the appropriate score. This helps to avoid ‘group-think’ creeping in.

Once the scoring is complete, the results should be entered into a spreadsheet which uses the pre-agreed weightings along with the scores to calculate a percentage score for each option.

For further information, please refer to the options scoring template (this will download).

11. Identifying the preferred option(s) for further investigation

At this stage, you should have a percentage score for each model. This score can be understood as representing the degree to which each model satisfies the criteria you have chosen. It follows that, at a first glance, the model with the highest score represents the strongest fit with the criteria.

At this stage, it is important not to accept the score that has been generated without asking some further questions. In particular, where a number of options may have scored particularly close to each other, further consideration is warranted. In this instance, differences in scoring between the models should be closely examined to ascertain the precise reason. It may become obvious, for example, that one option has scored well against desirability but negatively against feasibility, with another option reversing these scores. This should then be explored further before deciding on a preferred option.

Should 2 or more options still be scored very closely together, we recommend including both of them within the business case process. This will allow you to further analyse both options, before one of them is identified as the preferred option.

The options appraisal drove the decision-making about our form. The appraisal identified a PSM as our preferred option. Taking this and our function into account, it was clear to all that a community owned cooperative was the best option for us, as we wanted a voice for the community in decision making and freedom from excessive bureaucracy.

Suffolk Libraries IPS

The [next section](https://www.gov.uk/government/publications/libraries-alternative-delivery-models-toolkit/stage-6-business-case covers the sixth stage of the process - development of a business case.