II Program information requirements
The II Program supports the development of strategic business cases that seek to maximise the benefits of Inland Rail. Business cases will contain detailed information covering each of the 16 sections outlined below, from proposed details through to governance, management and outcomes monitoring.
Diagram: II Program gateway process
Projects will be assessed in a gateway process. As a project progresses through the gateway process , a more detailed explanation will be required and developed. Professional business advisors and analysts will be appointed to work with project proponents to gather the required details and develop feasibility studies and strategic business cases. The business cases are ultimately intended to inform the Australian Governments further thinking on Inland Rail.
At each gateway stage, projects will be assessed as to their viability and capacity to move to the next stage. Please note, some business cases may not be viable and will not progress through the gateway process. A more detailed view of the information requirements at each gateway is explained in the II Program Gateway Road Map. To be assessed through Gateway 1, please provide information on the first 5 topics detailed under Gate 1 initial selection.
1. Proposal details
The Proposal Details includes a short title, proponent information, a statement of proposal objective(s), a proposal description and background, and indicative upper and lower cost estimates. The description provides information on the proposed service offering from a customer or user perspective, relevant performance specifications (which may not necessarily be available at the initial stage) and location information. This section also provides a description of the existing infrastructure which the proposal will upgrade, replace or otherwise change. Finally, it reports on the status of the proposal, confirming that construction and related works have not commenced and providing information on any prior relevant studies or investigations.
2. Problem or opportunity definition
Section 2 focuses on identifying and analysing the problem – or alternatively, the constraint on an opportunity – to which the proposed project is a solution. The section analyses the problem: firstly, in relation to its causes; and secondly, in relation to its effects. Separating effects from causes can help ensure that potential solutions address the causes of problems, rather than just the symptoms.
3. Strategic Fit
The strategic fit of a proposal is gauged by how addressing the problem or opportunity constraint will contribute to achievement of one or more of the CLIP or PEP Program Project Principles. It also addresses how the proposal would fit with other Australian, state and local government initiatives; commercial realities; the public interest in progressing the proposal; and assess whether there is a market failure contributing to the supply chain constraint.
Identification of all stakeholders with influence on the project and/or who may be affected by it, together with the level of consultation with the stakeholders, is a central element of the project development process.
Stakeholder consultation links to several areas of the assessment framework. Firstly, it underpins the requirement for statements of support for the proposal in the context of the views of those stakeholders who may be neutral towards the project, or opposed to it. Secondly, it provides a due diligence check on the potential ‘winners’ and any ‘losers’ element of the Benefit-Cost Analysis, making it less likely that key distributional impacts of the project will be overlooked in this analysis. Thirdly, it will support the proposal in meeting any socio-economic and environment regulatory requirements.
5. Options identification and assessment
Best practice business case development requires a thorough assessment of potential alternative solutions to address the identified problem. Importantly, non-infrastructure solutions, such as regulatory reform or demand management through pricing schemes or technology, may provide a more cost effective solution than investment in hard infrastructure. Even where there are no plausible non-infrastructure options, alternative infrastructure solutions, in terms of scale, location or other aspects, should be considered.
Where a proposal involves removing a network bottleneck, filling a missing network link, or realising new opportunities it is likely to facilitate a change in total freight demand and/or a redistribution of activity across the transport network.
The difference in future demand arising from the proposal compared with the ‘business as usual’ or ‘base’ case is important to describe and, in later assessment stages, quantify. The demand changes will relate to the freight task (e.g. volumes, distances and frequency) and to network usage (e.g. train and truck characteristics, service quality, reliability and cost).
For all projects, forward demand analysis, against a background of past trends, will be important for understanding the proposal relative to the alternative base case. Understanding what other influences may drive changes in demand, for example, emerging industries are also important.
For CLIP, demand information requirements are divided into two sections, one relating to freight flows and the other relating to use of the rail network (and road network, where applicable).
Costs should be identified for the entire economic life of the project, or for a specified number of years with a residual value in the final year that takes account of future costs. Capital costs are the main focus, from the viewpoints of possible future program funding and 3rd party co-funding.
However, operating and maintenance costs are also important, as their funding is critical to ongoing financial viability. Costs, like benefits, are measured as incremental to the costs in the base case. The base case is described as a ‘do minimum’ scenario and is not necessarily the same as a "do nothing scenario."
Together with costs, benefits are critical to the Benefit-Cost Analysis, which in turn is the central element of a ‘value for money’ assessment. Any other impacts on stakeholders that would result from the project, for example potential increase in noise nuisance arising from increased train operations, or potential increases in vibration or particulate counts, should also be included in the analysis.
9. Benefit-Cost Analysis and wider economic benefits
Benefit-Cost Analysis (BCA) integrates quantified and monetised costs and benefits to estimate project net benefits and an associated benefit-cost ratio that reflects a ‘whole of society’ perspective. It is important that other non-monetised and unquantifiable benefits and costs, which are not included in the benefit-cost ratio, are analysed as far as possible and presented in an appraisal summary table, so that they are not overlooked by the decision-maker.
A rapid BCA is required for Gate 3 and a detailed BCA is required for Gate 4.
An assessment of the wider economic benefits, particularly with respect to employment, is required to complement the Benefit-Cost Analysis.
10. Funding and financial analysis
Funding relates to how the project is ultimately paid for, whether through revenue sourced from user charging, government taxation revenue, or elsewhere (such as private capital sources).
Co-funding of projects has the potential to reduce the call on Australian Government funding, increase the leverage provided by Australian Government funds and improve the incentive alignment of project owners and (other) funders.
A project financial (viability) analysis is important as it allows estimation of the extent of any viability gap between receipts on the one hand and capital and operating outgoings on the other. In addition, owners and/or third parties including government, may in certain circumstances cover any 'viability gap' between project investment costs and expected revenues. In the absence of co-funding arrangements, this gap will represent the minimum amount that governments must be willing to supply if the project is to proceed.
11. Regional economic impact assessment
Regional economic impact analysis complements Benefit-Cost Analysis. It estimates the project’s impact on the macro-economy (e.g. output) in contrast to the micro-economic or resource allocation focus of Benefit-Cost Analysis. However, the financial value of some projects may be too small for a regional macro-economic impact to be reliably estimated.
12. Potential regulatory requirements
An assessment of the potential environmental and planning requirements that the proposal may trigger is required. The response in this section will determine the level of detail required in response to Section 13 and Section 14.
13. Environment, heritage and planning assessment
New, permanent and durable infrastructure projects under consideration may involve significant interventions with the natural, built and human environments. It is therefore necessary that a wide range of areas are investigated so that impacts, planning approval pathways and risks are identified and understood. These investigations also provide a sound basis, should an environmental impact statement be mandated, if and when the project is approved for implementation.
In contrast to other topic areas, environment, heritage and planning management is not directly addressed in the assessment criteria. However, the outcome of investigations in this area will be critical to identification of project implementation risks should the proposal be taken to the implementation phase. It will also complement information provided by stakeholders, as many of the possible causes of community opposition to projects reside here.
14. Property strategy
Property acquisitions and in some cases property sales and leases are a necessary part of infrastructure project planning. A sound property strategy is important to construction and budget planning, as well as influencing community support for the project. As with environment, heritage and planning management, appropriate coverage of this area will strengthen the assessment of both stakeholder support and project risks.
15. Risk management
Factors such as design and construction skill shortages or the potential for material environmental damage if a project proceeds, can be risks to the successful implementation of a project. In contrast, forecasting discrepancy, such as new market growth that fails to eventuate in response to an infrastructure project, is a risk to the project’s outcomes. It is essential to catalogue risks of both types (implementation and outcomes), how they can be avoided or, as is more typically feasible, mitigated.
16. Governance, management and outcomes, monitoring and evaluation
Project governance and management forms an important part of project assurance and success. Structures and processes for planning, decision-making, accountability and reporting are needed for successful project delivery and outcomes. Accordingly, the assessment framework provides for early planning of project governance, management and outcomes monitoring arrangements. Well-chosen outcome indicators aid post-implementation monitoring, accountability and long term program improvement. Project ‘benefits management’ or ‘benefits realisation’ of this type also assists periodic evaluation of the program as a whole.