Table of Contents

1. Document purpose 33

2. Introduction 33

3. Aim 44

4. Key objectives: 44

5. Executive Summary 44

6. Links to Corporate Priorities 66

7. Equalities 77

8. Sustainability 77

9. Link to Departmental Objectives 77

10. National drivers for change 88

11. Option development and short listing of approach 88

12. Evaluation of Options 1010

12.2. Risk Analysis - Option 2 1515

13. Conclusions 1616

14. Implementation Plan 1717

List of Appendices 1818

Appendix 1 - Sustainability Analysis for Option 2 1919

Appendix 2 - Assessment criteria for Option 2 2020

Appendix 3.1 - Financial Costs and Benefits Summary: 2121

Appendix 3.2 - Cash Flow, Payback Period and Return on Investments -Option 2, Tranche 1 2323

Appendix 3.3 - Breakeven and Sensitivity Analysis - Option 2 2424

Appendix 3.4 - Net Present Value of Option 2 2525

Appendix 4 - Benefits Analysis 2626

1. Document purpose

1.1. This document's objectives are to :

_ set out the context for the enhancement of sheltered housing to extra care standards by the provision of night time care remodelling proposal

_ identify the options

_ critically appraise the options

_ identify a preferred option

_ give an overview of the implementation.

2. Introduction

2.1. The White Paper `Independence, Wellbeing and Choice' promotes Extra Care housing as an example of good practice. Extra Care housing 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 a 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 flat within a scheme of similar units.

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 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 through a mix of new and remodelled units.

2.4. The Extra Care housing initiative represents a key component of the Adult Services long-term strategy, including the roll-out of Self Directed Support by providing an additional option for those clients who are unwilling or unable to operate an individual budget but who still want to remain in the community.

2.5. There are two main approaches to Extra Care, namely, remodelling/ enhancing existing sheltered housing schemes and new-build. New build is recognised as the preferred approach for long term provision as it ensures that the building and site maximises the full benefits of extra care including communal space and additional facilities for both residents and the local community, such as, catering and activities. However, a remodelling approach can complement a new-build strategy by providing additional capacity in a relatively shorter period of time and with less capital funding.

2.6. Remodelling can take a variety of forms from low scale adjustments, such as, creating a room for sleep-in staff to facilitate twenty-four hour care to full refurbishment of the fabric of the building. Normally where an existing site has been remodelled without full refurbishment it cannot offer the full range of Extra Care facilities that a bespoke building design. Nevertheless, it will offer as a minimum 24 hour care and, thus, cope with residents with higher care and support needs. In order to differentiate this model from full Extra Care, the term `Enhanced Sheltered Housing' is now widely used and, where appropriate, will be used in this paper.

2.7. The Hampshire approach to Extra Care is both ambitious yet practical. It will aim for a balanced approach, concentrating on new build as the best practice solution to the strategic objectives and supplement that programme by increasing Extra Care capacity through a series of relatively small scale capital and revenue investments into existing Sheltered Housing schemes. This is informed by the experience of other authorities, which has shown that for the most part total refurbishment requires a similar amount of capital investment without necessarily guaranteeing the full flexibility of design that a new build offers.

2.8. This report outlines the options for the enhancement of existing sheltered housing schemes to extra care standards through the provision of night-time care into Enhanced Sheltered Housing and appraises the value for money of these options.


3. Aim

The aim of this project implement by the end of the financial year the first tranche of enhancement of existing high quality Sheltered Housing schemes to extra care standards through the provision of night time care to create 129 individual units of Enhanced Sheltered Housing for older people in Hampshire.

The business case sets out the implications of running two further tranches of similar scale, to indicate the total potential exposure in the first five years.

4. Key objectives:

1. Over the next five years to make better use of the existing high quality sheltered housing stock in Hampshire.

2. Over the next three years to raise the profile of Extra Care housing across the County and to familiarise staff, providers and citizens of the benefits and possibilities of Extra Care.

5. Executive Summary

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


5.2. Departmental expenditure can be reduced by moving away from the more expensive residential care model to a modern cost effective model of care and support for vulnerable older people, which enables them to maintain their independence and quality of life for longer.


5.3. In consultation with key local stakeholders, such as, District Council, Social Landlord, Adult Services, Health, providers and user groups three existing sheltered housing schemes have been identified as being suitable for remodelling into Tranche 1 Enhanced Sheltered Housing. This will create 129 units of Enhanced Sheltered Housing.


5.4. The investment will take the form of pump-priming revenue to fund the introduction of variable block contract for night-time care to top up the existing day care contract in the specific sheltered housing schemes. As a result, the schemes will be able to cope with those clients who have increasing needs for night care but who are otherwise able to live in the community. This will repay the investment within five years by the avoidance of the cost of unnecessary transfers to other forms of residential care. In this way a service area which benefits from an enhanced scheme will be able to repay the pump-priming revenue funding back to the central fund.

5.5. In the early stages when the night-time cover is first put in place it is anticipated that the full capacity of the cover will not be utilised within the sheltered housing scheme due to the mix of existing residents and their needs at the time. Whilst the spare capacity will be minimised via the use of the variable block it will be necessary to develop local outreach support options with the local District Council, housing provider, Health, local voluntary agencies and local service managers to maximise the usage of any spare capacity. This should help ensure that the scheme promotes the Lifetime Homes, Lifetime Neighbourhoods and Carers Support strategies. As the scheme develops and the client base incrementally moves towards a mix of clients with higher needs, the night-time cover capacity will be more fully utilised within the scheme.

5.6. Based on the cost and benefit analysis contained in this report, it can be concluded that the only viable solution to generate Extra Care capacity in the short-term is via the enhancement of existing good quality Sheltered Housing schemes to extra care standards by the provision of night time care.

5.7. The financial logic for the enhancement model can be summarised as follows: using a generic model the proposed pump priming for a tranche of three schemes will total £0.325m for 129 places for the first two years, an average of £1,300 per place per year. The typical residential placement cost which this programme seeks to avoid cost £12,300 per year. Pump-priming is needed because although the capacity to deliver night cover will be immediately available it will only be fully utilised following a transition period during which the additional costs will be incurred in full but the mix of residents will be managed to move closer to the mix of high, medium and low needs typically associated with Extra Care housing. By the start of the third year the pump priming will cease because by that stage it is anticipated that the benefits of avoiding residential care packages will offset the night care costs. That will enable the necessary budget transfers from residential care to Extra Care.

6. Links to Corporate Priorities

6.1. Local Area Agreement:

The development of Enhanced Sheltered Housing meets the following priorities set out in the Local Area Agreement:

Priority D of the Hampshire Local Area Agreement -Improve access to housing and accommodation:

· NI 155 Affordable Housing

· NI 187 on Fuel Poverty

Priority F on Health and Wellbeing:

· NI 142 is Promoting Independent Living for Older People

· NI 134 of providing information and support to older people to enable them to live independently.

6.2. Corporate Priorities:

The development of Enhanced Sheltered Housing supports all the corporate objectives as follows:

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

Enhanced Sheltered Housing 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 (Priority 2)

Enhanced Sheltered Housing promotes independent living and empowers older people who might otherwise have required residential care. Older people living in Enhanced Sheltered Housing 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 (Priority 3)

Enhanced Sheltered 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. Hampshire is a diverse county and we will ensure that this is reflected in the activities provided through the Enhanced Sheltered Housing programme. We will work with local organisations representing different communities, undertake equal opportunities monitoring and assess the equal opportunities impact of the programme.

7.2. We have a specific duty to ensure that the programme can demonstrate that it engages with all the citizens of Hampshire, ensuring that it does not represent the opinions of any one particular lobby, voluntary or care group but will involve all sections of the community in the County Council's consultation processes through forums and other means of communication.

7.3. The consultation regarding the development of night time care will be scheme specific but will involve local stakeholders and will be consistent with the Supporting People Older Persons review and implementation plan. It will need to recognise a geographical equality across Hampshire and to this end it is suggested that there should be a three year plan to reflect not just aspects of local need but also local preparedness and readiness.

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

The Enhanced Sheltered Housing programme contributes to a number of the key themes of the Aalborg Commitments. The specific themes relevant to the remodelling strategy are contained in Appendix 1.


9. Link to Departmental Objectives

9.1. Enhanced Sheltered Housing supports the department's overall strategic direction for older persons by more fully utilising existing sheltered housing schemes through the provision of night-time care. This will prevent admission to residential care and enable the majority of people in the scheme to have the choice to live in their own homes until the end of their lives, unless they require the type of support, such as, some types of nursing or specialist EMI care, which cannot be delivered at home. It will also be an opportunity to link with the reablement service which is taking place in some older person' residential homes run by Hampshire Adult Services. People going through reablement could have the opportunity to consider moving to the enhanced sheltered housing schemes when vacancies arise.

Performance priorities:

9.2. Enhanced Sheltered Housing 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. In order to justify the application of any capital or revenue monies for the enhancement programme an appraisal will be undertaken on its capacity to contribute to the overall aims of the strategy, including Value for Money considerations.

11.2. The following options have been identified:


Option 1) Rely on market forces:

11.2.1. Effectively this is the "Do Nothing" option. With this option there would no direct investment in enhancements for the existing Sheltered 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 Enhanced Sheltered Housing schemes in the area to meet local demand.

11.2.2. Research by an independent consultant has determined that there is currently little private sector interest in setting up affordable Extra Care or Enhanced Sheltered Housing in Hampshire. Furthermore, private sector is currently focusing on the more lucrative traditional residential and nursing setting. As a result, a reliance on market forces is not seen as a viable option for Hampshire in the medium-term given the scale of capacity required.

Option 2) Enhancement of existing sheltered housing schemes

11.2.3. This option creates Extra Care housing capacity through the enhancement of existing sheltered housing units to extra care standards by commissioning the night cover required to meet the minimum standards of Extra Care housing. It does not involve major refurbishment and typically will require no capital or very minor capital works, such as refurbishing a room so it can be used for sleeping-in. If such minor investment is required it is anticipated that it can be accommodated within the Better Housing Options minor works budget set aside for Extra Care Housing.

11.2.4. The sheltered housing settings chosen have been selected following analysis to ensure that they are suitable for remodelling. The criteria by which the schemes were selected is shown in Appendix 2. It is worth noting that most of the schemes chosen were originally constructed with Extra Care in mind, and already have day time care contracts although night cover has never been put in place.

11.2.5. Whilst this approach will not secure all the building design and the service features of the full Extra Care model (communal spaces, on-site catering, and full accessibility), it does offer clients the opportunity to live in the community as independently as possible. It also has the advantage that it is relatively much quicker and cheaper to create capacity compared to a new-build or full refurbishment option.

This approach will involve a rolling programme with 9 schemes being remodelled in tranches of 3 schemes per year. At this stage the schemes identified for tranche 1 are as follows:

District	Scheme	Provider	Capacity
BASINGSTOKE	Abbey Court	Sentinel	51
ANDOVER	Warner Court	HVHS	38
FAREHAM	Downing Court	Fareham BC	40
TOTAL			129

Option 3) Conversion of existing sheltered housing schemes (Full refurbishment):

11.2.6. This option would involve total refurbishment of all or a proportion of an existing sheltered housing scheme including all necessary alterations to the fabric of the building. Typical comparative costs for refurbishing existing sheltered housing schemes show they can be almost as costly as new build so conversion of existing schemes is only to be considered when a building is of already high specification.

11.2.7. The refurbishment option is capital intensive and requires partner funding as otherwise it would be prohibitively expensive for the Council. The other disadvantage compared to the enhanced option is the time required for the refurbishment if it requires major building works. It is likely, therefore, that refurbishments will only be considered in exceptional circumstances where there is partnership funding and the building and associated land allows the full benefits of Extra Care housing to be secured. As a result, this option has been discounted in the medium term.

12. Evaluation of Options

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


· Financial Analysis - covering affordability and return on investment and security of funding

· Non Financial Analysis - covering non-financial benefits and risk management

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. The option analysis identified that of the three options only option 2 (Enhancement of existing sheltered housing schemes) represented a viable option in the short term. As a result, for the most part only option 2 will be analysed though the other options will be used where relevant. The analysis will focus primarily on those schemes that are scheduled for enhancement in year 1 of the programme as they have been subject to more detailed planning. It is reasonable to assume that the results from the year 1 schemes can be transferred to the whole programme providing the individual schemes are analysed using the same methodology.


12.1.3. There is £0.7m Supporting People funding set aside for the Extra Care Housing strategy. This is mainly required for new build schemes as qualifying residents in the existing Sheltered Housing schemes will already be benefiting from Supporting People funding for their housing-related support needs. Accordingly this business case will focus on how the proposal impacts the personal care budgets.


12.1.4. There are no plans at this stage for any of the units to be owner-occupied.


12.1.5. The analysis below assumes that the changes take place at the start of the financial year. A pro rata adjustment will be required if any of the changes take place during the financial year.

Cost analysis:


12.1.6. The incremental costs and benefits of the three options over the first six years of the project are summarised in Table 1. Option 1 (the "do nothing" option) does not incur any additional costs or deliver any additional benefits. Although the revenue costs and benefits are the same for option 2 and option 3, the latter has the additional estimated refurbishment capital costs of £8.3m. This equates to an average build cost of approximately £64,000 per unit. With no partnership capital funding available for this project this capital requirement renders option 3 unaffordable.

Table 1 - Summary Financial Costs and Benefits

		Option 1		Option 2		Option 3
		Year 0 £000s	Years 1-6 £000s	Year 0 £000s	Years 1-6 £000s	Year 0 £000s	Years 1-6 £000s
Direct Costs	Purchased Services	N/a	N/a		1,962	8,300	1,962
Total Costs		0	0	0	1,962	8,300	1,962
Benefits	Reduction in Purchasing Costs	N/a	N/a		(2,094)		(2,094)
Total Benefits		N/a	N/a	0	(2,094)	0	(2,094)
Net Total Cost / (Benefits)		N/a	N/a	0	(132)	8,300	(132)

The full analysis can be found in Appendix 3.1

12.1.7. As the refurbishment option is not viable, and as option 1 does not require any further financial modelling, the rest of the financial analysis will focus on Tranche 1 of the remodelling option (option 2).



Cash Flow


12.1.8. Estimates of the impact on cash-flow of option 2 including pay back and return on investment is summarised in the table below. The full analysis along with the underlying assumptions can be found in Appendix 3.2.


Table 2 - Cash-Flow Analysis for Option 2 (Tranche 1)

The full analysis can be found in Appendix 3.2

12.1.9. This analysis indicates that for option 2 the cumulative benefits generated by avoiding clients having to move into residential care will supersede the revenue pump-priming within in just over five years. This represents a reasonable return for a project of this nature


Net Present Value

Table 3 - Net Present Value Analysis for Option 2 (Tranche 1)

	Cost £000s	Benefit £000s	Net Cost / (Benefit) £000s
Discounted totals Year 0 - 6	1,742,	(1,812)	(70)

Discounted Payback Period - Years

5.52

12.1.10. The Net Present Value (NPV) analysis suggests that on a discounted basis the revenue investment will be repaid before the end of Year 6. This represents a reasonable return for a project of this nature.

The full NPV analysis can be found in Appendix 3.4


Sensitivity Analysis:

12.1.11. Sensitivity analysis was undertaken for option 2 to model the impact of changes in the average cost of care and also in the rate of transition to the optimum resident mix. The results are summarised in the table below - see Appendix 3.2 for full analysis.


Table 4 - Summary of Sensitivity Analysis for Option 2 - Tranche 1

Sensitivity Analysis	Impact of incremental change per annum £
Average Cost of Care	21,900
Average rate of transition to target resident mix	13,800

This suggests that the costs are more sensitive to a change in the average cost per hour as each £1 change in care hour results in additional costs of £21,900 per annum whereas a 1% change in the rate of transition to the target resident mix equates to an overall increase of £13,800 per annum. However, in terms of breakeven for the cost of care there is a reasonable margin of safety of around 87%. The full analysis can be found in Appendix 3.3.

12.1.12. 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 positive margin in the costings.

Funding analysis

12.1.13. In order for an option to be financially sustainable sufficient funds have to be identified both on a one-off and ongoing basis. The funding for tranche 1 of option 2 over the first five years is summarised in the table below.

Table 5 - Funding Summary for Option 2 (Tranche 1)

	Year 1	Year 2	Year 3	Year 4	Year 5	Total
	£000	£000	£000	£000	£000	£000
Revenue Costs	327	327	327	327	327	1635
Source of funding:
Invest to Save	205	152	15	0	0	372
Reductions in purchasing costs	122	175	312	327	327	1263
Total Identified Funding	327	327	327	327	327	1635

12.1.14. As detailed previously in the report the revenue costs associated with this project will be more than offset by clients not going into residential care and from the lower average cost of Extra Care housing compared to current domiciliary care spend. The table above indicates that by the end of year 3 the level of preventative savings will reach a level where the project will start to recoup the pump-priming investment.


12.1.15. Assuming that a further two tranches of schemes similar to the first are undertaken in the following two years the total net funding for the first four years will be £0.978m (with a maximum annual investment of £0.372m). It is projected that repayment of the investment required for the full programme will occur in just over seven years. This is summarised in the table below.

Table 6 - Cash-Flow Funding Summary for full programme - Option 2

Net Cost/(Benefit) impact on cash-flow
	Yr 1	Yr 2	Yr 3	Yr 4	Yr 5	Yr 6	Yr 7	Yr 8
	£000s	£000s	£000s	£000s	£000s	£000s	£000s	£000s
Tranche 1	205	152	15	(125)	(201)	(179)	0	0
Tranche 2	0	205	152	15	(125)	(201)	(179)	0
Tranche 3	0	0	205	152	15	(125)	(201)	(179)
Total Annual	205	358	372	42	(311)	(505)	(380)	(179)
Total Cumulative	205	563	935	978	667	162	47	0

12.1.16. It is not anticipated that this strategy will require any major capital investment. There may, however, be a need for some small scale adjustments to facilitate the higher needs of clients. This will be reviewed on a site-by-site basis and will be funded from the Better Options minor works budget.


12.1.17. As the schemes will be situated in different districts it is recommended that the investment repayment by each district service team is based on the forecast cash-flow for each of the specific schemes.

Non Financial Analysis

Benefit Analysis for Option 2:

12.1.18. 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.


12.1.19. 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 4.


12.1.20. To summarise the results, option 1, "do nothing" does not meet any of the criteria. Both options 2 and 3 meet all the criteria though option 3 offers more scope to enhance the quality of the user experience. This is because a full refurbishment 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.


12.1. Risk Analysis - Option 2

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


Table 7 - Option 2 Risk Analysis Summary

12.1.2. The risk analysis suggests that although there are risks associated with option 2 these risks are manageable and should not fundamentally compromise the project.

13. Conclusions

13.1. Following analysis of the options contained in this report it can be concluded that the preferred option is Option 2.

13.2. Although the full refurbishment option has the potential to score marginally higher in terms of meeting National, Corporate and Departmental objectives, it is not feasible in the short to medium term due to the lack of internal and external capital and the general focus on new-build as opposed to refurbishment. Furthermore there are few properties which would lend themselves to this full refurbishment option even were it to be a preferred one. Finally, this revenue option of night care enhancements offers a route which is more flexible and responsive to change and one that meets expressed need from users, providers and care managers.


14. Implementation Plan

Table 8 - Key milestone dates:

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


List of Appendices

Appendix 1 - Sustainability Analysis (Option 2)

Appendix 2 - Assessment Criteria (Option 2)

Appendix 3 - Financial Cost Analysis (Option 2)

Appendix 4 - Benefit Analysis

Appendix 1 - Sustainability Analysis for Option 2

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

Appendix 2 - Assessment criteria for Option 2

Appendix 3 - Financial Cost Analysis



Appendix 3.1 - Financial Costs and Benefits Summary:

Notes on Appendix 3.2

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 3.3 - Breakeven and Sensitivity Analysis - Option 2

Notes on Appendix 3.3

Sensitivity: This analyses how sensitive the costings in the main model is to changes in the key cost drivers. For this project the key driver identified is the cost per hour of night care. The cost analysed above are the costs relating to the optimum staff mix of waking night staff, which is achieved at year 7.

If the number of care hours increases (or decreases) on average by 1 hour it will increase /decrease costs by £21,900 compared to an annual benefit of £220,674 (at the target mix of client). This represents a margin of safety of 87%. Thus, the breakeven point will only be achieved if the unit cost is almost £9 more than the £16 per hour assumed in the model.

Notes on Appendix 3.4
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 4 - Benefits Analysis

Key to Benefit Analysis:

X Does not meet benefit criteria

√ Mostly meets benefit criteria

√√ Fully meets benefit criteria