2.1. The White Paper `Independence, Wellbeing and Choice' promotes Extra Care housing as an example of good practice which provides a higher quality of life for many older people, supports the delivery of the `Wellbeing Agenda', provides access to additional funding streams and offers cost effective, quality services which ensure that people can live as independently as possible for as long as possible.

2.2. Extra Care housing is an updated model of housing solution designed to meet the demographic needs and aspirations of the twenty-first century where people either rent, own or part-own their own apartment within a scheme of similar units. Extra Care does not replace residential care but adds alternative modern options. It allows couples, where one partner is less able than the other and requires care and support, to stay together living in a safe and secure environment, thus respecting their dignity whilst still ensuring support to, and from, the informal carer. In this way Extra Care Housing supports the modernisation and personalisation agendas. The full model of Extra Care provides people with privacy in their own apartments, shared meeting rooms and facilities, and then access to communal space within a scheme which the local community can use. Examples of successful use of communal areas range from things as diverse as therapy and activity classes, to meeting rooms, to hairdressing, chiropody and wellness facilities, to meals services and of course the outside garden facilities. Often these resources encourage carers and families to remain actively involved with their older relatives and attract involvement that spans the generations. In this way Extra Care schemes can promote and support Lifetime Neighbourhoods. Twenty-four hour care and support is available on-site, to be used progressively by people as their needs increase and hence avoiding early or unnecessary entry to residential care alternatives.

2.3. On 12 December 2006 Cabinet approved the Adult Services Modernisation Strategy. A major strand of this strategy was the proposed development of improved options for accommodation and care through Extra Care housing. That strategic aim was incorporated into the Better Housing Options strategy that was approved by Cabinet on 24^th September 2007. This included the strategic aim of securing through multi-agency partnerships a total of 400 units of Extra Care housing over the next five years.

2.4. The Extra Care housing initiative represents a key component of the Adult Services long-term strategic response to the Personalisation agenda by providing an additional option for clients who wish to remain as independent as possible within their local community.

2.5. Working closely with local stakeholders and based on independent research the County Council has identified Gosport as a priority area for the development of the first new build Extra Care scheme in Hampshire. This will represent the first of a programme of developments in furtherance of the objectives set out in the December 2006 Cabinet report.

2.6. Whilst the overall business case for Extra Care housing has been approved by Cabinet it was also agreed that all the schemes which required capital funding would have their own individual business case. Thus, this report sets out the business case for the development of Extra Care in the Gosport area, analyses the options in terms of overall value for money and recommends a course of action.

3. Aim

The aim of this project is the multi-agency development of 50 new housing units for older people in Gosport that will meet peoples' needs and aspirations in the twenty first century.

4. The key objectives of the project are as follows:

1. To secure the development of 50 new high quality Extra Care apartments within a single Extra Care development for people in Gosport with housing, support and care needs. The scheme will have a mix of 33 single and 17 two bedroom apartments, with plenty of communal space including gardens, restaurant/ café facilities, and meeting rooms. There will be facility for the neighbouring community to use the resources of the scheme.

2. To contribute to the LAA Priorities on Housing and Accommodation and Health and Wellbeing.

3. To work effectively with other partners to maximise funding opportunities.

4. To prepare for the forecast additional demand as a result of the demographic challenge.

5. Executive Summary

5.1. This report acknowledges the principle that the Adult Services department will work with a range of partners and the Housing Corporation to develop a network of new build and remodelled Extra Care schemes across the county. This will enable the department to move its commissioning focus towards Extra Care and away from residential care.

5.2. As part of this strategy, Gosport has been identified by independent needs analysis as being a priority area for the development of Extra Care housing. The priority given to this area is due to the fact that the current pattern of provision requires augmentation and the area has relatively high levels of need; Gosport ranks second amongst the districts on the Index of Multiple Deprivation for Hampshire.

5.3. Strong local consensus exists amongst the main local partners - District Council, Social Landlords, Adult Services and Health, have been working together on social housing partnership projects for many years.

5.4. A recent Gosport Borough survey has also identified a need for 85 units of Extra Care housing over the next 3 years (283 units over 10 years). In general, Extra Care housing needs can be met from either new build or remodelled existing sheltered housing schemes. However, in Gosport there is a lack of either private investment Extra Care initiatives or appropriate current sheltered housing stock that could be remodelled to provide Extra Care. This suggests that in Gosport new build through the multi-agency partnership is the only viable option in the medium term.

5.5. Based on the cost and benefit analysis contained in this report, it is recommended that the best value solution to meet the local demographic pressures is a new build development of 50 units of Extra Care housing. The scheme will cost £9m to build, of which Hampshire County Council's contribution would be £0.750m. This will be funded from the £3.0m capital funds currently set aside in the Adult Services capital budget for the Extra Care strategy.

6. Links to Corporate Priorities

6.1. Local Area Agreement:

The development of Extra Care housing in Gosport meets the following priorities set out in the Local Area Agreement:

· Priority D :Improve access to housing and accommodation

NI 155 Affordable Housing

NI 187 Fuel Poverty

· Priority F: Health and Wellbeing:

NI 142 Promoting Independent Living for Older People

NI 134 Providing information and support to older people to enable them to live independently

6.2. Corporate Priorities:

The development of Extra Care housing in Gosport supports all the corporate objectives as follows:

1. Hampshire safer and more secure for all (Objective. 1)

Extra Care offers older people the safety of care and support available on-site where they live and also the security of tenure that they would not enjoy in residential care.

2. Maximise well-being (Objective. 2)

Extra Care housing promotes independent living and empowers older people who might otherwise have required residential care. Older people living in Extra Care schemes also have access to additional sources of income and tend to retain a greater level of disposable income than those in residential care.

3. Enhance quality of place (Objective. 3)

Extra Care housing offers older people a higher standard of personal accommodation than they would be likely to enjoy in residential care. They also have access to a range of communal facilities that they would be unlikely to have access to otherwise.

7. Equalities

7.1. Gosport is a diverse district and we will ensure that this is reflected in the activities provided through the Extra Care programme. Work will be undertaken with local organisations representing different communities, Equal opportunities monitoring will assess the equal opportunities impact of the programme.

7.2. There is a specific duty to ensure that the programme can demonstrate it engages with all the citizens of Gosport, to ensure that it does not represent the opinions any one particular lobby, voluntary or care group, but will involve all sections of the community though appropriate consultation processes, forums and other means of communication. There is already a healthy culture of such engagement as exampled by the `Spring into Action' event held in Gosport in January 2008. (Note: `Spring' stands for Supporting People Resident in Gosport).

7.3. The consultation processes for this project will involve all sections of the community through forums and other means of communication.

7.4. We will also maximise the local links forged through the Older Persons Wellbeing Strategy to ensure that the design and landscape work takes into account the needs of disabled and older people.

8. Sustainability

8.1. The development of the Extra Care programme in Gosport will contribute to the key themes of the Aalborg Commitments. The specific themes relevant to the Gosport Extra Care strategy are contained in Appendix 1.

9. Link to Departmental Objectives

9.1. Extra Care housing supports the department's overall strategic direction for older people by enabling the majority of people to maximise control over their choice to live in their own homes until the end of their lives.

9.2. Performance priorities

Extra Care services will contribute positively to a range of PAF indicators used to measure departmental performance as grouped by the following Commission for Social Care Inspection Outcome improvements reported within the Adult Information Management Suite monthly:

Outcome 1 - Vulnerable people are treated in a way which maximises wellbeing, independence and inclusion

Outcome 2 - Right care in the right place at the right time for users

Outcome 3 - Vulnerable people are protected

Outcome 4 - Delivering a high quality, cost effective service to the vulnerable people of Hampshire

10. National drivers for change

10.1. There is a plethora of national policies supporting this direction of travel including,

· Lifetime Homes, Lifetime Neighbourhoods. A national housing policy for an ageing society 2008

· More Choice, Greater Voice 2008 DoH

· Homes for the Future. Housing Green Paper 2007

· Our health, our care, our say': A new direction for community Services (2006)

· Delivering Housing for an Ageing Population HOPDEV

· Royal Commission into Long Term Care (1999)

· National Service Framework for Older People (2000)

· Valuing People (2001)

· Valuing People Now (2007)

· Quality and Choice for Older Person's Housing (2001)

· National Health Service Improvement Plan (2004)

11. Option development and short listing of approach

11.1. The overall case for Extra Care housing was accepted by Cabinet in December 2006 and September 2007 for the creation of up to 400 units over the next five years. On that basis the options included in the original appraisal which supported that decision do not need to be repeated here. However in order to justify the application of any capital monies for Extra Care housing in Gosport an appraisal will be undertaken on its capacity to contribute to the overall aims of the strategy, including Value for Money considerations.

11.2. In consultation with local stakeholders the following options have been identified:

11.2.1. Option 1) Rely on market forces:

Effectively this is the "do nothing" option. With this option there would no direct investment in Extra Care housing provision by the Council and the commissioning profile in the area would remain unchanged. The Council would try to encourage the private sector and other local stakeholders to develop Extra Care housing schemes in the area to meet local demand.

Research by an independent consultant has determined that that there is currently no private sector interest in setting up Extra Care housing in this area. Furthermore, to date the private sector in general has not sought to develop Extra Care housing preferring to focus on more lucrative residential and nursing care. As a result, reliance on market forces is not seen as a viable option for Gosport in the medium-term.

11.2.2. Option 2) Conversion of existing sheltered housing schemes:

This option creates Extra Care housing capacity by remodelling existing sheltered housing units and commissioning the night cover required to meet the minimum standards of Extra Care housing.

An extensive review of the existing Sheltered Housing schemes in the Gosport area has revealed that none of the current settings are suitable for conversion into Extra Care housing. As a result, remodelling is not seen as a viable option for Gosport in the medium term.

11.2.3. Option 3) New build Extra Care housing scheme:

Working with a multi-agency partnership of local stakeholders this option will deliver 50 units of Extra Care housing, (17 two bed-roomed and 33 one bed-roomed apartments) with additional resource facilities which are open to the local community in a "state of the art" setting with completion expected in 2010.

This option builds on strong partnerships between Gosport Borough Council and Hermitage Housing, the Registered Social Landlord (RSL) and Adult Services. This option will offer HCC joint nomination rights that will focus on maintaining a healthy mix of high, medium and low clients' needs, which is nationally recognised as a requirement for a sustainable Extra Care culture.

In relation to the number of units in the new build, it is nationally recognised that the optimum size of a new build to produce value for money is in the range of at least 40 units, preferably 50 or more.

It is estimated that the total build costs for this 50 unit development will be approximately £9m. Taking into account contributions from other stakeholders, the HCC capital contribution would be £0.750m (8.3%). It should be noted that total build costs includes Housing Corporation funding of circa £3.6m, which can only be accessed with Hampshire County Council full support to the scheme.

11.2.4. As seen above HCC is a relatively small player in terms of the capital funding for this project. Hampshire County Council Adult Social Care and Supporting People will however fund support and care services to eligible clients therefore the governance arrangements for the scheme will reflect this, for example though the nominations policy and in the contracting for the care and support elements associated with the scheme.

12. Evaluation of Options

In order to undertake the appraisal of the options a set of evaluation criteria have been developed. This evaluation is detailed in the following sections.

12.1. Financial Analysis

12.1.1. This section analyses the financial impact of the various options. As the actual revenue costs and benefits will only be fully realised when the cohort of residents who are moving into the scheme are identified, the costings below are indicative.

12.1.2. Although the purpose of this business case is to approve the capital funding, in order to evaluate the overall value for money of the scheme it is necessary to take into account the revenue implications.

12.1.3. The option analysis at Paragraph 11 identified that of the three options only option 3 represented a viable option in Gosport in the medium term. As a result, for the most part only option 3 will be analysed, though the option 2 will be used where relevant.

12.1.4. Due to the demographic composition of the target local population there are no plans for any of the units in this Gosport scheme to be shared ownership; all will be socially rented, which means that all apartments can be considered for letting under the joint nominations process, of which Adult Services will be part.

12.1.5. The Supporting People funding which has been specifically earmarked for the housing support needs for all residents in the new build option is an essential component of the cost model. For the purpose of this business case, however, the focus will be on the revenue impact on the core client group budgets.

12.2. Capital Investment

12.2.1. The capital investment of £0.750m out of a total of circa £9m for the whole project represents a cost to HCC of £0.015m per unit (compared to a total build cost per unit of £0.180m per unit). This appears to represent a relatively modest investment in return for the additional `state of the art' social housing capacity.

12.3. Cost analysis

12.3.1. An estimate of the impact on cash-flow of option 3, including pay back and return on investment, is summarised in the table below. The full analysis along with the main underlying assumptions can be found in Appendix 2.1 and Appendix 2.2.

Table 2 - Hampshire County Council Cash-Flow Analysis


Cash Flow, Payback Period and Return on Investments

	Costs	Benefits	Net
Year 0	750,000	0	750,000
Year 1 -5	725,398	1,535,432	(810,034)
Total Year 0-5	1,475,398	1,535,432	(60,034)

Payback Period - Years		4.8
Return on Investment after 5 years		104.7%

12.3.2. This analysis indicates that the £0.750m capital investment will be repaid within 4.8 years. This represents a reasonable return for a project with a life of up to 30 years - being the assumed minimum life-span of the building.

12.4. Breakeven and Sensitivity Analysis

Breakeven analysis was undertaken to quantify the margin of safety between the assumptions contained in the model and a position where costs are fully absorbed by the expected benefits. In addition, sensitivity analysis was undertaken to model the impact of changes in the average cost of care and also in the average amount of care required per unit per week. The results are summarised in Table 3 below.

Table 3 - Breakeven & Sensitivity Analysis

	Assumed Averages	Breakeven Point	Margin of Safety
Average Cost of Care	£15 per hour	£32 per hour	£17 per hour
Average Cost Hours per Week	7 care hours	15 care hours	8 care hours

Note: The full breakeven and sensitivity analysis and explanatory notes can be found in Appendix 2.3

12.4.1. This analysis suggests that the costs are more sensitive to a change in the average number of hours as each change of one care hour results in overall additional costs of £21k per annum whereas a £1 increase in care cost per hour equates to an overall increase of circa £10k per annum. However, both factors have a reasonable margin of safety of around 53%, which suggests that the likelihood of the costs matching or exceeding benefits is relatively low.

12.4.2. It is worth noting that a prudent approach has been taken to the reduction of purchasing costs as no reduction has been made for the current care costs of the people with low needs (which represents one-third) even though all residents will have at least some combination of 2-5 hours for their care, housing and support needs on entry to the scheme. As such, it is possible that some of these residents will have current packages funded by Adult Services. For medium and high needs residents it has been estimated that 75% will have funded packages on entry into the scheme.

12.4.3. In this context the definitions of high, medium and low refer to the number of hours of support and care in a Sheltered Housing-Extra Care context. Low is taken as 0-5 hours per week, medium as 5-10 hours and high as over 10 hours of care. Although this is different terminology to the Adult Services eligibility criteria of critical and substantial need, as stated above, most tenants will meet Adult Services eligibility criteria and may already be in receipt of, or eligible for, care packages. Whilst this can only be finally verified at the implementation stage of referral to the scheme it is generally accepted by all the key stakeholders within the Gosport development that recognition of a user's care and support needs must be the defining criteria of entry to the scheme not solely housing need. For clarification it is worth remembering that support is funded through Supporting People and care through Adult Services, so this type of accommodation attracts two separate funding streams.

12.4.4. In this analysis no account has been taken of the expectation that over time entry into an Extra Care model will delay (or even prevent) low and/or medium needs clients requiring a medium and/or high level of support. As a result, there is additional margin in the costings.

12.5. Net Present Value (NPV)

12.5.1. In this analysis no account has been taken of the expectation that over time Net Present Value (NPV) is a required analysis for investments with large capital and ongoing revenue implications for HCC. It is largely a repeat of the cash flow analysis above but discounts (i.e., reduces) future revenue costs and benefits. In doing so it takes account of the principle that a £1 invested today will normally be worth more than £1 received in later years

Table 4 - Net Present Value (NPV)

	Capital	Net Benefit	Net	Cumulative Net
Year 0	(750,000)		(750,000)	(750,000)
Year 1-5		731,463	731,463	(18,537)
Total Year 0-5	(750,000)	731,463	(18,537)	(18,537)

Note: The full Net Present Value (NPV) along with an explanation of the analysis can be found in appendix 2.4.

12.5.2. The NPV analysis suggests that on a discounted basis the£0.750m investment will be repaid in 5.14 years. This represents a reasonable return for a project with a life of up to 30 years - being the assumed minimum life-span of the building.

12.6. Funding analysis

12.6.1. In order for the options to be financially sustainable sufficient funds have to be identified both on a one-off and ongoing basis. The following table summarises the funding streams available for option 3 only as this has been identified as the only viable option.

Table 5 - Hampshire County Council Funding Summary - Option 3

Source	Source	Year 1	Year 2
		£	£
Revenue	Existing Purchased Care Budget & reductions in purchasing costs	145,080	145,080

Total Revenue		145,080	145,080

Capital	Adult Services	750,000	0

Total Capital		750,000	0

Total Identified Funding		895,080	145,080

12.6.2. As indicated earlier in the report (Table 2) the revenue costs associated with this project will be more than offset by the reduction in purchasing costs. This will be generated by the medium and high needs clients not going into residential care and from the lower average cost of Extra Care housing compared to current domiciliary care spend based on a one-third split between the high, medium, and low needs residents.

12.6.3. The capital funding will come from the £3.0m of Adult Services capital budget earmarked for Extra Care housing from the Better Housing Options strategy.

12.7. Benefit Analysis

12.7.1. Whilst the financial analysis is important it needs to be put into the wider context of the National, Corporate and Departmental priorities. The method chosen for this project is Benefit Analysis as it allows comparison of options where factors that do not produce benefits that are tangible are crucial to the overall decision-making.

12.7.2. In terms of 'scoring' each of the benefits was weighted according to its importance. The options were then reviewed against the criteria as either fully meeting the required benefit, partly meeting it, or not meeting it at all. On the basis of this, the options were rated as per Appendix 3.

12.7.3. From this analysis it can be determined option 1, "do nothing" does not meet any of the criteria. Whilst both options 2 and 3 meet all the criteria, option 2 is not viable on this site, option 3 offers more scope to enhance the quality of the user experience. This is because a new build offers the scope to maximise the full benefits of Extra Care housing whilst a remodelling exercise is likely to involve some compromises on typically, for example, communal space or full accessibility.

13. Risk Analysis

13.1. To ascertain the relative risks associated with each of the options an assessment of the probability of risks occurring and their impact and importance was undertaken. As neither option 1 or 2 are seen as viable options in the medium term this analysis focuses on option 3.

13.2. Table 6 - Risk Analysis for Option 3


Risk No	Summary of Risk		Probability		Impact		Importance (P x I)	Containment
1	Development delays	M		M		M		This will be managed by the Gosport project board
2	Demand risk	L		H		M		Strong links with local stakeholders, including care management teams to identify appropriate initial cohort of residents.
3	Build cost exceed estimates	L		L		L		Risk will fall on the Registered Social Landlord

13.3. The risk analysis suggests that although there are some risks associated with option 3, these risks are manageable and should not fundamentally compromise the project.

14. Conclusion

14.1. Following analysis of the options contained in this report it can be concluded that the preferred option is Option 3, namely, to invest £0.75m capital in the new build Extra care scheme in Gosport.

14.2. This option best meets National, Corporate and Departmental objectives, offers tangible improvements in service delivery to service users and leverages £3.6m external funding from the Housing Corporation.

15. Implementation Plan

Table 7 - Key milestone dates:

Workstream	Milestone	Timescale*
Capital Funding
	Seek Housing Corporation Grant Funding	Achieved February 2008
	Seek Hampshire County Council capital funding	May 2008
	Agreement to mechanisms of payment	June 2008
	Payment in two moieties on achievement of a) contract for construction signed b) completion of construction when certificate issued	2008-10 Jan-March 2009 April -June 2010
Existing Building	Existing remaining residents moving to alternative housing	Achieved April 2008
	Boarding up	May 2008
	Demolition	Nov 2008
New Build	Seek detailed planning permission	Achieved Nov 2007
	Tender for contractors	June 2008
	Construction work commence	January 2009
	Construction work complete	June 2010
	Building ready to open	September 2010
Management and services	Agree principle of joint nominations process	Achieved April 2008
	Tendering of joint variable block contracts for care and support	January 2010

*All dates are subject to change dependant on a number of influencing factors.

Appendices

Appendix 1 - Sustainability

Appendix 2 - Financial Cost Analysis

Appendix 3 - Benefit Analysis

Appendix 1 - Sustainability

Sustainability: The development of the Extra Care programme in Gosport will contribute to the following key themes of the Aalborg Commitments:

1. Governance

We are committed to energising our decision-making processes through increased participatory democracy

2. Build participation and sustainable development capacity in the local community and municipal administration

5. Cooperate effectively and in partnership with adjoining municipalities, other cities and towns, and other spheres of government

2. Local Management towards Sustainability

We are committed to implementing effective management cycles, from formulation through implementation to evaluation

1. Strengthen local sustainability processes and mainstream them into the heart of local government.

3. Natural Common Goods

We are committed to fully assuming our responsibility to protect, to preserve, and to ensure equitable access to natural common goods.

1. Reduce primary energy consumption, and increase the share of renewable energies

2. Improve water quality, save water, and use water more efficiently

4. Responsible Consumption and Lifestyle Choices

We are committed to adopting and facilitating the prudent and efficient use of resources and to encouraging sustainable consumption and production

4. Undertake sustainable procurement

5. Actively promote sustainable production and consumption, in particular of eco-labelled, organic, ethical and fair trade products

5. Planning and Design

We are committed to a strategic role of urban planning and design in addressing environmental, social, economic, health and cultural issues for the benefit of all

1. Re-use and regenerate derelict or disadvantaged areas

3. Ensure the mixed use of buildings and developments with a good balance of jobs, housing and services, giving priority to residential use in city centres

5. Apply requirements for sustainable design and construction and promote high quality architecture and building technologies

6. Better Mobility, Less Traffic

We recognise the interdependence of transport, health and environment and are committed to strongly promoting sustainable mobility choices

1. Reduce the necessity for private motorised transport and promote attractive alternatives accessible to all

9.Social Equity and Justice

We are committed to securing inclusive and supportive communities

3. Foster social inclusion and equality

4. Improve community safety and security

5. Secure good quality and socially integrated housing and living conditions

Appendix 2 - Financial Cost Analysis

Appendix 2.1 - Financial Costs and Benefits Summary:


		Option 1		Option 2		Option 3
		One-Off	Recurring	One-Off	Recurring	One-Off	Recurring
Direct Costs
	Purchased Services: Night Cover	0	0	N/A	N/A		145,080
Total Direct Costs		0	0	0	0	0	145,080

Indirect Costs	Staffing	0	0	N/A	N/A
Total In-direct Costs		0	0	0	0	0	0

Total Costs		0	0	0	0	0	145,080

Direct Benefits	Reduction in Purchasing Costs	0	0	N/A	N/A		307,086

Total Direct Benefits		0	0	0	0	0	307,086

Indirect Benefits	Other	0	0	N/A	N/A

Total Indirect Benefits		0	0	0	0	0	0

Total Benefits		0	0	0	0	0	307,086

Net Total Benefits		0	0	0	0	0	(162,006)

Net Total Direct Benefits		0	0	0	0	0	(162,007)

* note: the totals may be subject to rounding differences


Assumptions for Appendix 2.1

Option 1 is the "do nothing" option with no additional costs or benefits
Option 2 cannot be costed as there are no suitable sites in Gosport for remodelling
*For option 3:*
Costs based on average of 10 hours care and support per unit split 7 hours care, 3 hours housing support funded by Supporting People
Benefits relate to avoided costs of residential care for high needs residents and domiciliary care for medium needs residents
Assumed client mix: 33% High; 33% Medium & 34% Low
For the purpose of this business case the benefit of avoided costs as a result of Extra Care housing are as follows: High Needs residents - benefit derived from avoiding residential care Medium Needs residents - benefit derived from avoiding domiciliary care Low Needs Residents - no benefit has been assumed The benefits have been calculated based on the following average weekly costs Extra Care Housing Domiciliary Care Residential Care Weekly cost (gross) Care £108 £142 £337 Support £46 Average weekly Income £13 £16 £117 Net weekly cost to Department £92 £126 £220


Appendix 2.2 - Cash Flow, Payback Period and Return on Investments

	a)	b)	c)	d)
	Costs	Benefits	Net	Cumulative Net
Year 0	750,000	0	750,000	750,000
Year 1	145,080	307,086	(162,007)	587,993
Year 2	145,080	307,086	(162,007)	425,986
Year 3	145,080	307,086	(162,007)	263,980
Year 4	145,080	307,086	(162,007)	101,973
Year 5	145,080	307,086	(162,007)	(60,034)
Subtotal Year 1-5	*725,398*	*1,535,432*	*(810,034)*	*1,319,898*
Total	1,475,398	1,535,432	(60,034)	(60,034)
*note: amounts are rounded to nearest pound
Payback Period - months		58
Payback Period - Years		4.8
Return on Investment after 5 years		104.07%

Notes on Appendix 2.2

Payback: analyses the annual cash flow to indicate how quickly the original capital investment is repaid from the surplus of benefits over ongoing costs.

Return on investment: analyses in percentage terms how much of the original capital investment and ongoing costs are repaid after 5 years as an indicator of the affordability of the project.

Appendix 2.3 - Breakeven and Sensitivity Analysis



Breakeven & Sensitivity Analysis

Cost sensitivity
Cost per model	£145,080
Cost + £1	£154,752
Each £1 increase =	£9,672
Breakeven price	£32
Margin of Safety	£17

Care Hours sensitivity
Care Hrs £ per model	£145,080
Cost + 1 hr	£165,805
Each 1 hour increase in care =	£20,726
Breakeven care hours	15
Margin of Safety	8

Notes on Appendix 2.3

Sensitivity: This analyses how sensitive the costings in the main model is to changes in the key cost drivers. For this project the two key drivers identified are the cost per hour of care and the average number of care hours required on average by each resident.

Of these cost drivers the average number of care hours is more sensitive so that if the number of care hours increases (or decreases) on average by 1 hour it will increase costs by £20,726. In contrast an extra £1 added to the care contract will result in an increase of £9,672.

Breakeven: This identifies the point at which the benefits are fully offset by the costs for the chosen cost drivers, indicating the margin of safety, i.e., the percentage by which the cost driver has to increase by in order to reach breakeven..

The analysis above suggests that for the cost of care the breakeven point is £32 per hour compared to an assumed cost of £15 per hour, .giving a margin of safety of £17. For the average number of care hours the breakeven point is 15 hours compared to the assumed average of 7 hours per resident.

Appendix 2.4 - Net Present Value of Option 3


REVENUE
	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Total
	£	£	£	£	£	£	£
BENEFITS		307,086	307,086	307,086	307,086	307,086	1,535,432
COSTS		145,080	145,080	145,080	145,080	145,080	725,398
Net revenue cashable (cost)/benefit	0	162,007	162,007	162,007	162,007	162,007	810,034
Discount rate @3.5%	1.000	0.966	0.966	0.966	0.966	0.966
Discounted net revenue cost/benefit	0	156,531	151,233	146,114	141,173	136,405	731,456
CAPITAL
	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Total
	£	£	£	£	£	£	£
COSTS	-750,000
Discount rate @ 3.5%	1.000	0.966	0.934	0.902	0.871	0.871
Discounted net capital cost/benefit	-750,000	0	0	0	0	0	0

Net present value analysis of options - capital and revenue

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Total
	£	£	£	£	£	£	£
Net revenue cost/benefit	0	156,531	151,233	146,114	141,173	136,405	731,456
Net capital cost/benefit	-750,000	0	0	0	0	0

Total option cost/benefit	-750,000	156,531	151,233	146,114	141,173	136,405	731,456
Discount rate @ 3.5%	1.000	0.966	0.934	0.902	0.871	0.871
Discounted cost/benefit of the option	-750,000	156,531	151,233	146,114	141,180	136,405	731,463
Cumulative Discounted cost/benefit of the option	-750,000	-593,469	-442,236	-296,122	-154,942	-18,537	-1,505,305

* note: the totals may be subject to rounding differences

Notes on Appendix 2.4

Net Present Value Analysis (NPV): Analyses the annual cash flow to indicate how quickly the original capital investment is repaid from the surplus of benefits over ongoing costs.

The difference between NPV and the Payback analysis in Appendix 3 is that the NPV takes into account the time value of money reflecting the concept that money invested now is worth more than any future benefit.

As a result, it is normal for projects such as this project where a return on investment is expected the payback using NPV will take a longer period than the Payback method.


Appendix 2.5 - Sources of Funding Option 3

	Source	Year 1	Year 2
		£	£
Revenue	Existing Purchased Care budget & future reductions in purchasing costs	145,080	145,080

Total Revenue		145,080	145,080

Capital	Adult Services	750,000	0

Total Capital		750,000	0

Total Identified Funding		895,080	145,080

Notes on Appendix 2.5

Sources of Funding: This table identifies the source of the costs of the project, both one-off capital and ongoing revenue costs.

Capital: To be funded from the £3.0m set aside in the Adult Services capital budget for Extra Care Housing.

Revenue: To be funded from the ongoing revenue benefits derived from the avoidance of clients going into purchased residential or domiciliary care.

Appendix 3 - Benefits Analysis

Ref	Prioritised Benefits	Option 1 Maintain Status quo	Option 2 Remodelling	Option 3 New Build	Commentary on rating
1	Improved 'User Experience'	x	√	√√	New build offers more scope than remodelling to adopt full Extra Care model with communal spaces and full accessibility on a purpose built site
2	Improved outcomes for AS service users	x	√	√√	New build offers more scope than remodelling to adopt full Extra Care model with communal spaces and full accessibility on a purpose built site
3	Improved partnership working	x	√	√	Both option 2& 3 rely on close working relationships with the full range of local stakeholders
4	Improves quality	x	√	√√	New build offers more scope than remodelling to adopt full Extra Care model with communal spaces and full accessibility on a purpose built site
5	Meets departmental objectives	x	√	√	Both option 2& 3 meet departmental objectives around well-being and inclusion
6	Improves Performance	x	√	√	Both option 2& 3 meet help reduce number of clients having to move into residential care
7	Improves customer and resident satisfaction	x	√	√√	New build offers more scope than remodelling to adopt full Extra Care model with communal spaces and full accessibility on a purpose built site
8	Meets corporate objectives	x	√	√	Both option 2& 3 meet all 3 corporate objectives
9	Addresses current and future local demographic pressures	x	√	√	Both option 2& 3 meet current and forecast demographic pressures

Key to Weighted Benefit Analysis:

X Does not meet benefit criteria

√ Mostly meets benefit criteria

√√ Fully meets benefit criteria

This content is archived

1. Document purpose

2. Introduction

3. Aim

4. The key objectives of the project are as follows:

5. Executive Summary

6. Links to Corporate Priorities

7. Equalities

8. Sustainability

9. Link to Departmental Objectives

10. National drivers for change

11. Option development and short listing of approach

12. Evaluation of Options

12.1. Financial Analysis

13. Risk Analysis

14. Conclusion

15. Implementation Plan

Appendices

Appendix 1 - Sustainability

Appendix 2 - Financial Cost Analysis

Appendix 2.1 - Financial Costs and Benefits Summary:

Appendix 2.2 - Cash Flow, Payback Period and Return on Investments

Appendix 2.3 - Breakeven and Sensitivity Analysis

Appendix 2.4 - Net Present Value of Option 3

Appendix 2.5 - Sources of Funding Option 3

Appendix 3 - Benefits Analysis