11. Compare and select the preferred option

This section explains the decision-making processes you need to use to compare your shortlist of options and decide a preferred option. There are 2 different decision-making processes you need to use depending on your project type.

The decision-making process

By this stage you should have a short list of options which all meet your CSFs. You should have also evaluated the contributions they make to your project objectives. Now you must select a preferred option from the shortlist.

Your preferred option should be the one that gives the best balance of project objectives within your CSFs while providing good value for money.

If your appraisal is to inform the early feasibility stages for a possible future FCERM project you would normally only identify an option that offers a potentially affordable way forward. You’re unlikely to have all the data needed to follow the formal decision process in full. You should make your decision guided by the principles of the project type you are most likely to propose.

There are 2 decision processes you can follow to choose your preferred option. You must follow the correct one for your project type. This makes sure you choose the right option for the right reason.

Decision process for project types using cost effective analysis

Decisions using CEA are normally based on identifying the least cost way to achieve the required outcome.

You must use the CEA decision process if your FCERM project is a:

  • legal obligation
  • sustain SOS

There are 4 steps you should follow in the CEA decision-making process:

  1. identifying the cheapest option
  2. considering whether uncertainty affects the leading option
  3. considering if an affordable local choice option
  4. confirming your choice of preferred option

If the local choice option is more costly than the leading option identified in step 2 then you will need to fund the full cost difference using partnership funding. This is explained in the partnership funding arrangements.

You should calculate FCERM GIA based on the national economically preferred option only.

Step 4 confirms your preferred option which is either:

  • the national economically preferred option from step 2 or
  • local choice option with its required funding partnership from step 3

You may need to review your preferred option after the formal consultation process which is required as part of EIA or SEA.

Decision process for project types using cost benefit analysis

The FCERM programme is required to achieve the maximum benefit for taxpayers’ money. You can maximise your project’s value for money by using BCR and then considering the incremental costs and benefits of doing more. This means the benefits of investing in another project elsewhere are used to inform the project decision.

When you cannot reasonably apply this approach to FCERM decisions you should use uses net present social value (NPSV) to identify best value. This is often the case with coastal erosion projects.

You must use the CBA decision process if your project type is a:

  • supported change project implementing an approved local FCERM strategy
  • simple change project where a local FCERM strategy is not required
  • complex change project that produces a local FCERM strategy

There are 6 steps you should follow in the CBA decision-making process:

  1. check you have a range of shortlisted options with average BCRs more than 1
  2. choose a leading option based on reduced AEP or NPSV
  3. decide whether uncertainty affects the leading option
  4. identify the national economic choice
  5. decide whether there an alternative affordable local choice option
  6. confirm your choice of preferred option

If the local choice option is more costly than the leading option identified in step 4 then the full cost difference must be funded by contributions from a funding partnership. This is explained in the partnership funding arrangements.

You should calculate FCERM GIA for the national economically preferred option only.

Step 6 confirms your preferred option which is either:

  • the national economically preferred option from step 4, or
  • the local choice option with its required funding partnership from step 5

You may need to review your preferred option after the formal consultation process which is required as part of EIA or SEA.

All project types

If at any time you think that the national economic option is not actually preferred you must carefully consider the reasons why. You should go back and review the project objectives and shortlisting exercise to confirm those decisions.

You may need to review the options evaluation of impacts, costs and benefits. Your review and any necessary changes must enable a decision on the national economic option.

Inputs to compare and select the preferred option

You will need your shortlist of evaluated options identified in section 8. These must all meet your CSFs, objectives and achieve the needs of your environmental assessment.

Your list must show the costs of each option and any funding contributions.

If your projects use CBA your list must also show:

  • the benefits of each option
  • the BCR
  • the NPSV or the incremental benefit cost ratio (IBCR), depending on your project needs

You should also update your SEP so that you know:

  • what stakeholder engagement is required for this stage
  • how the SEP links to the next stage of the appraisal
  • how to keep stakeholders engaged
  • how to manage expectations

Checkpoints to compare and select the preferred option

If your project uses CBA and there is not an option that has an average BCR greater than 1, you’ll need to consider developing other lower cost affordable options. You may need to review your options shortlist exercise or your objectives.

You should do this before you finalise the appraisal and prepare the appraisal report. You must inform stakeholders of any changes and involve them in further assessments.

If you have not recorded enough information to justify a preferred option you may need to return to previous steps and collect more information. You must inform stakeholders and tell them what will happen next.

Outputs to compare and select the preferred option

To complete this stage of the appraisal process you must have:

  • involved local partners in the selection of and agreed the preferred option
  • justified your choice of option
  • discussed the preferred option with stakeholders, explaining the reasons for the choice
  • updated the SEP to show what you have done

Read the full technical guidance

If you need to understand the full technical content you should see section 11 – compare and select the preferred option in the FCERM technical guidance.