Economic appraisal refers to the analysis and assessment of projects in receipt of public funding under the Public Spending Code (PSC) in Ireland (the Green Book in the UK). The Department of Public Expenditure and Reform (DPER) is responsible for the PSC but since publicly funded projects arise across all government departments then all units of government are required to be familiar with the PSC. Application of the PSC in practice proceeds along and through ‘Stages’ and ‘Decision Gates’, from Strategic Assessment (Decision Gate 0) through Preliminary Business Case (Decision Gate 1 – Approval in Principle) and Final Business Case (Decision Gates 2 and 3 – Pre-Tender Approval and Approval to Proceed) to Implementation, Review and Ex-Post Evaluation.
The Strategic Assessment, Preliminary Business Case and Final Business Case Stages necessitate careful consideration of a proposed project’s objectives and demand, and the business case stages entail both financial analysis and economic appraisal. While the financial analysis is concerned with costs and revenues, the economic appraisal has the aim of also taking account of the wider socio-economic costs and benefits of projects. Depending on the capital cost of a project, different types of economic appraisal are applied, including multi-criteria analysis (MCA) and cost-benefit analysis (CBA), which tend to be the most widely used forms of economic appraisal in practice. The website of the PSC provides guidelines and resources on conducting financial analysis and economic appraisal, and there are template spreadsheets available for conducting financial analysis.
Examples of specific public funding sources necessitating financial analysis and economic appraisal include the Large Scale Sports Infrastructure Fund (LSSIF), the Urban Regeneration and Development Fund (URDF) and the RRDF (Rural Regeneration and Development Fund).