Project Investment Decision Making

Project investment decision making

Business case development

The business case is one of the most important tools used in decision making. A good business case presents a well defined argument of the case for change. The business case provides a means for decision makers to assess the relative merits of competing proposals and to determine whether new investment is justified.

A business case usually consists of a problem statement, development of options to address the problem, evaluation of the options and a recommendation of the preferred option. It usually includes detailed cost estimation, risk analysis, detailed financial and economic analyses, assessment of funding sources and procurement strategies. Other important factors considered in a business case may include consideration of government policy, legislative and regulatory issues.

At NineSquared our approach to business case development is to ensure that the information presented enables robust merit based assessment of the proposed project. As economists, our role is to ensure that the business cases we develop are consistent and transparent so that decision makers can make good decisions to ensure society’s scarce resources are allocated in an efficient manner.

Cost-benefit analysis

There are several methods used in business cases to assess the economic merits of a project, among which cost-benefit analysis is the most widely used. Cost-benefit analysis is the only method that allows comparisons between sectors such as transport, water, electricity, health, education and defence as well as being capable of analysis that takes into account factors such as environmental and other social costs and benefits.

Infrastructure projects often require large amounts of public and private funds. Cost-benefit analysis can assist in determining whether a project is worthy of implementing, and effectively allocate these funds. NineSquared has significant experience helping governments and investors around the world make crucial investment decisions on large scale projects. NineSquared’s diverse range of experience locally and internationally, across multiple sectors ensures that our cost-benefit analysis approach will enable you to make better informed decisions about your investment options.

Project prioritisation

It is common to use performance measures such as benefit cost ratio (BCR), net present value (NPV), internal rate of return (IRR) and payback period for individual projects to form a priority list. However, such an approach may fail to recognise that projects are often interdependent or act as a program or portfolio. Ignoring this can lead to suboptimal results.

Priorities may also change as the funding envelope and budget constraint changes. This can be disconcerting to decision makers, especially as it is almost certain that budget allocations need to respond to changing events.

A properly formed priority list can provide a valuable pipeline of future investment needs. NineSquared has experience developing bespoke investment prioritisation models for our clients, in particular where projects have differing goals and objectives, for example comparing the investment priorities of passenger versus freight projects, or a dam versus a transport project.

Our experts

Please contact one of our experts in business case development, cost-benefit analysis and project prioritisation for more information on our capabilities and experience.

Tom Frost – Director. Tom is an economist who has been consulting to industry and government for almost 20 years. He has extensive experience in the provision of regulatory and economic advice to clients. He has provided advice to clients across Australia and internationally regarding investment in transport infrastructure.

Robin Barlow – Director. Robin has more than 20 years experience working in the transport sector and in government. He has worked for the Commonwealth government as an economist at the Industry Commission and for the Queensland Government where he held a number of senior positions within TransLink.

Steve Richards – Director. Steve is an accomplished strategy, policy and infrastructure advisory leader in the public and private sectors, with extensive and strong experience across both economic and social markets. Steve’s expertise includes team management and leadership, organisational reviews, project leadership and assurance (including Gateway Reviews), business case development, due-diligence, major and complex procurement including Public Private Partnership projects and international development assistance

Selected projects

A selection of recent projects in business case development, cost-benefit analysis and project prioritisation is shown below: