Policy paper

Average annual damages (AAD) - before and after investment

Published 5 April 2022

Applies to England

The Environment Agency collects extra data to show how the capital programme is reducing flood risk. This is a recommendation from the National Audit Office and Public Accounts Committee.

Project teams should include this data in the economic summary tab of the partnership funding calculator 2020. The data required is average annual damages (AAD) for before the investment and after the investment. Providing AAD data for residential properties and non-residential properties is mandatory. If the data is not provided this will affect eligibility for FCERM grant-in-aid.

This data should not need extra analysis over what is normally included within an economic appraisal.

Defra and the Environment Agency will use the data to:

• improve the national understanding of the outcomes of FCERM investments
• report on overall changes in risk
• inform future funding policy considerations

Projects that should provide the extra data

The AAD data is only required when, and after, a business case reaches the outline business case stage. This is set out in the partnership funding calculator 2020.

All projects that can claim FCERM partnership funding should collect the data. If this data is not provided, eligibility for FCERM grant-in-aid funding will be removed.

Some projects may reasonably not have the required AAD data. These include:

• projects using cost effectiveness analysis to address the legal obligations of FCERM
• low cost projects that sustain the standard of service in their location

These projects can put ‘0’ in each of the 4 mandatory cells in the economic summary tab. You should include the reasons for doing so in the business case.

Record the ‘before investment’ AAD value

The project team should establish a baseline scenario for the ‘before investment’ AAD value.

You should use your best judgement when doing this and select the scenario that most closely represents today’s flood risk. For most projects the appropriate scenario for the ‘before investment’ value will be the ‘do minimum’ scenario. This is because this scenario generally provides the most accurate representation of flood risk today.

Using the ‘do minimum’ baseline allows comparison with the ‘after investment’ AAD value. This means the Environment Agency can show how the FCERM capital investment programme has reduced overall flood risk.

The FCERM appraisal guidance defines these scenarios.

Please note the baseline used for the ‘before investment’ may be different to the baseline used for economic analysis. The baseline will depend on the type of project.

Project teams can usually get AAD data from the economic analysis associated with the standard project appraisal process. You should not usually need to do extra work to get the AAD data.

Record the ‘after investment’ value

Use AAD data for the first year of benefit realisation (Gateway 5 – operational review and benefit realisation) for the ‘after investment’ AAD value. Project teams do not need to consider the impact of future changes to risk due to climate change or other factors such as asset deterioration.

Complete the economic summary

Project teams should put the AAD values in the economic summary tab of the partnership funding calculator. Enter it for both categories of residential and non-residential properties. Project teams should include this data from the outline business case stage onwards.

If available, include the ‘before investment’ and ‘after investment’ AAD values for other categories. This could be transport, utilities, agriculture or simply a total.