Capital Grant Allocations - 2007 Medium Term Planning (MTP)
Publication Context
The Environment Agency commissioned Medium Term Plans (MTP) from all Operating Authorities on 4 July 2007. One of the data elements being collected is the priority score calculated using the method in place for 2005/06. We understand that some Operating Authorities have asked for the guidance on how to calculate a priority score by this method to be made available again and this is reproduced below and will remain available until the close of the MTP exercise . It should be stressed that this is only being made available for the purposes of providing data as part of the Medium Term Planning exercise and that prioritisation of schemes will use information on delivery of the outcome measures.
The priority scoring system
The Department for Environment, Food and Rural Affairs (Defra) provides grant aid to support the implementation of projects that are needed to support the Government's flood and coastal defence policy.
Grant aid is available when proposals for projects to manage flood and coastal erosion risk are shown to be technically, economically and environmentally sound and sustainable, subject to the availability of funds. Guidance on the appraisal of projects for this purpose is contained in the Project Appraisal Guidance (FCDPAG) series published by Defra, and is the subject of regular review. This document is not intended to change or augment any aspect of that guidance, which represents current good practice in practical project appraisal.
Despite large increases in funding provision in recent years, there is still insufficient to support all the capital projects that authorities might wish to promote. The planning and appraisal processes described above identify and confirm the need for projects, but do not confirm their relative priority. There is a need, therefore, for a logical, transparent and equitable system of prioritisation to ensure that the funds available are invested in the most beneficial way.
The prioritisation system described in this document attempts to ensure the equitable distribution of funding supporting the provision of flood and coastal defence solutions. It recognises that whilst it should be possible to undertake a broad brush economic analysis at an early stage in project development, it is not reasonable to undertake a full project appraisal. In addition to economics, it provides a simplified approach to weighting projects to take account of the intangible impacts on people and the natural environment.
The purpose of the priority scoring system is to ensure that the projects with the greatest benefits per unit cost are carried out first and to allow authorities to devote resources to those projects.
Following extensive consultation, the prioritisation system described in this document has been developed to provide a pragmatic approach to the prioritisation of Government funding to support flood and coastal defence initiatives, using the information, tools and guidance that are currently available.
Finally, it must be stressed that authorities are required to demonstrate best value for money in the projects they promote. The priority scoring system is designed to prioritise worthwhile capital expenditure, not to suppress it. Some judgement is required for certain elements of the system and these should be approached in a professional manner that is consistent with the objectivity and transparency of the whole process.
2.1 General Description of the System
The system is based on three criteria:
- economics (2.1.3);
- people (2.1.4); and
- environment (2.1.5).
Because the programme covers a very large range in value of projects put forward for grant aid, each measure is related to the cost of the proposed works so that projects can be ranked according to these ratios thus giving all projects equal weight. For example, a £1m project protecting 200 houses gets the same 'people protection' ranking as a £10,000 project protecting two. From a national perspective, the same number of people will benefit from 100 x £10,000 projects as from the single £1m project for the same investment.
2.1.1 The threshold priority score
Proposed projects must achieve the score threshold in order to be eligible for grant. The threshold is set annually, usually in October for the following financial year and is based upon operating authorities' forward plans as notified to us in our annual exercise.
An exception is made for (the very few) projects designed primarily to maintain the integrity of internationally designated sites (e.g. Special Protection Area (SPA), Special Area of Conservation (SAC) and Ramsar) which are considered outside the prioritisation system. In these cases, there is a legal obligation under the Conservation (Natural Habitats &c) Regulations, 1994, on both operating authorities and the Government to undertake necessary works. These projects will not have to meet the threshold but authorities will be expected to identify them on the annual returns and answer some limited questions on Form LDW 13 to determine that the works proposed do properly fall into this category, that the work is cost effective in terms of the protection required and to provide some assessment of the urgency with which they need to be undertaken.
Studies that are needed to support the development of a strategy or project should be given the same scoring information as the works to which they relate. This includes the cost value - ie the cost to be used in calculating the score will be the eventual cost of the related works (a best estimate) and not that of the study itself. Studies that do not relate to works (for example process studies to inform shoreline management plans) will attract a default total score of 20.
The benefit/cost ratio is the basis of this element. It is assessed using the guidance in the FCDPAG series of guidance documents published by the Department, primarily FCDPAG3. This covers the need for defences as represented by the economic risk (economic damage resulting from flooding or erosion multiplied by the probability of the events causing the damage) compared with the whole life cost of providing the proposed defence. Only those benefits and costs that can be assigned a monetary value are included in the benefit/cost ratio although the guidance encourages a qualitative view of other impacts in the selection of project options. The economic assessment is expected to incorporate supplementary guidance issued to reflect the changes to HM Treasury's 'Green Book' , as well as new assessments of benefits arising from flood or coastal erosion management published by the Flood Hazard Research Centre of Middlesex University .
The economic assessment is the main indicator of both the worthwhileness and urgency of a project because where there is a high probability of loss, either through a natural event or failure of an existing defence, this will have a major impact on the value of the damage avoided by the project.
Clearly there will be a significant level of uncertainty in economic assessments made at a very early stage in project development. Applicants are encouraged to exercise appropriate caution in these early assessments to avoid wasting time and effort on projects, which are subsequently shown not to have sufficiently high priority to qualify for grant funding.
A fundamental principle is that the benefits of a project must at least equal its costs - projects for which this is not true will not be funded by Defra.
The people score recognises that there are often impacts on those living in risk areas that are not reflected in the economic assessment. These should be taken into account in a qualitative manner in the full appraisal, for example when choosing between options, but it is necessary to adopt a simplified standard approach for prioritisation purposes. The focus is on impacts on people as a result of flood or erosion risk at their places of residence, rather than at their places of work.
Ideally the basis of the population adjustment would be the number of residents affected but as this figure is difficult to obtain, the number of residential properties which have their risk of flooding or loss through erosion significantly reduced by the proposed project is used. This number can be obtained from inspection of large-scale maps or from geographical databases of addresses. The number should be adjusted to reflect those effectively outside the risk area, such as properties in the upper levels of blocks of flats in flood risk areas. The base people score is calculated from this number of residential properties per £k of project cost multiplied by a standard adjustment factor. Underlying this thinking is an assumption of average occupancy of housing. Also, whilst there are flooding impacts on residents in upper levels of blocks of flats, such as difficult access, these are assumed to be significantly less than those affecting people who have floodwater in their houses and are exposed to the greatest level of hazard.
Since it is very difficult to estimate the actual risk of injury or loss of life, the basic people score is enhanced for only a limited range of situations where it is reasonable to assume that there is a significantly increased level of risk to public safety. The descriptions of 'Very High', and 'High' risk are defined in section 3.2.
The base people score is further adjusted to reflect the degree of vulnerability within the population at risk. It is recognised that a number of key population characteristics have been identified as indicating particular vulnerability to events, for example:
- The elderly (typically over the age of 75) have a higher incidence of disabilities, including arthritis, making them less able to prepare for and recover from an event;
- Single parent households have less time resource available to them for preparation and recovery;
- The less affluent have fewer financial resources for recovery from an event, and are thought less likely to have access to help.
Data for assessing these factors are not easily available and there is currently no agreed means of combining them into a realistic measure of vulnerability. Therefore the Office of the Deputy Prime Minister (ODPM) measure known as the 'scale of economic deprivation' , which ranks electoral wards based on an assessment of a mix of economic indicators, is used. Whilst the measure is not fully researched for the proposed use, and the terminology is rather emotive, the data is easily accessible via the Internet (see 3.2). It is considered to provide a reasonable indication of the likely location of the above groups for whom higher funding priority is justified on the basis of increased vulnerability exacerbated by lower economic resources.
The score is related to the ranked scale of deprivation by ward that is provided on the National Statistics web site. Recognising that the distribution is not even, the greatest adjustment is applied only to the top or bottom 300 wards with no adjustment to approximately 50% of wards in the middle range. The scale of +2 to -2 is applied so that the overall effect is, theoretically, neutral. Thus wards with a less vulnerable ranking will have their priority reduced whereas those assumed to be more vulnerable will have increased priority.
The environment score is included to give greater priority to those projects that are expected to provide additional benefits to the natural environment. This includes the recognition that Government is committed to the promotion of Biodiversity Action Plan (BAP) targets, which include habitats such as grazing marsh, reedbed and saltmarsh that may be created through appropriate flood and coastal management projects. This is intended to assist achievement of the target that all projects should, at least, maintain the status quo in habitat terms and should, where possible, provide environmental enhancement. Thus additional priority is provided for those projects that support national environmental policy by addressing national BAP targets as well as their primary defence function.
An additional score is included to take account of protection afforded to heritage sites afforded a national heritage classification. Heritage classifications that qualify for increased flood and coastal defence priority score are Grade I, II* or II listing, or classification as a Scheduled Monument.
The following sections 2.2.1-3 detail the derivation of the scores for each of the three elements: Economics, People and Environment. Once calculated, these element scores are summed to arrive at the total priority score for the project, rounded to one decimal place.
Very few projects are expected to score highly in all three categories and the effective range of scores will be significantly less than the theoretical maximum. This will clearly have an influence on the threshold scores that will be applied when prioritising the overall programme. The maximum potential score is 44 although in practice the maximum for most projects will probably not exceed 32.
2.2.1 Derivation of the Economic score
This factor is calculated based on the benefit/cost ratio for the project. The score is subject to a maximum value of 20.
| B/C Ratio* | Score |
| Less than 1 1 to 10.5 Over 10.5 |
0 1 to 20 (on a linear scale) 20 |
| *Relies on the estimated values of PV costs and benefits (see section 3.1). | |
2.2.2 Derivation of the People score
This factor is calculated based on the number of residential properties benefiting from the provision of defences per £k of project cost. It comprises a base score subject to a maximum value of 8 with adjustment for risk to public safety and vulnerability. The maximum value is 12.
| Criteria | Score |
| Base people
score: |
75* x no. of
residential properties / cost (£k) (maximum score is 8) |
| -------------------- | -------------------- |
| Score adjusted for public safety risk mitigated by the project: | Add: |
| 1) if it is in a very high risk area** | 2 |
| 2) if it is in a high risk area** | 1 |
| 3) other areas | No adjustment |
| -------------------- | -------------------- |
| Score is then adjusted for vulnerability of people (based on Government rank of deprivation by ward): | Add: |
| Between 1 (the most deprived) and 300 | 2 |
| Between 301 and 1500 | 1 |
| Between 1501 and 6664 | 0 |
| Between 6665 to 8114 | -1 |
| Between 8115 and 8414 (the least deprived) | -2 |
| -------------------- | -------------------- |
| Maximum total score | 12 |
| *The adjustment factor of 75 is designed to ensure that the full range of values from 0 to 8 is likely to be used. | |
| **See definitions in Section 3.2. | |
2.2.3 Derivation of the Environment score
This factor is based on the designated area maintained by the project plus any net gain of National Biodiversity Action Plan (BAP) habitat due to the project works per £k of project cost. It comprises a base environment score recognising the need for the project to maintain an existing designated area with an adjustment for class of designation, plus an additional base environment score with adjustment for a net gain of area of BAP habitat created by the project. Additional score is added for heritage considerations. The sum of the scores is subject to a maximum value of 12 after any additions for heritage considerations. No score is allowed for a net loss of habitat.
| Criteria* | Score |
| SSSI protected | 25** x area (ha.) x 1.5 / cost (£k) |
| Other designated area protected | 25** x area (ha.) / cost (£k) |
| -------------------- | -------------------- |
| National BAP habitat area net gain | 25** x area (ha.) x 2.0 / cost (£k) |
| -------------------- | -------------------- |
| Total habitat score | Sum of above, range: 0 to +12 (zero if net habitat loss) |
| -------------------- | -------------------- |
| Addition for heritage site protected**** by the project | Add: |
| Grade I or II* (or equivalent) or Scheduled Monument | 2 |
| Grade II or other (or equivalent) | 1 |
| -------------------- | -------------------- |
| Total environmental score | Sum of habitat and heritage scores up to a maximum combined total of 12*** |
| *See definitions in Section 3.3. | |
| **The adjustment factor of 25 used to derive this score is designed to ensure that the full range of values from 0 to 12 is likely to be used after adjustment for designation. | |
| ***It is anticipated that there will only be exceptional cases where both the maximum environment score and the heritage addition will apply but in this case the total will be capped at 12. | |
| ****When the proposed solution involves moving the monument, this is deemed to constitute 'protection' and the monument can still be included in the score. | |
Note: Confirmation by English Nature of the qualifying areas of habitat used for calculating this score will be required at project approval stage. Project planners should recognise the risk of submitting optimistic assessments of environmental area protected by projects that could raise expectations of achieving a priority score sufficient to qualify for grant aid. Early consultation with English Nature is recommended as soon as qualifying areas are envisaged.
3.Data Requirements of the System
The basic data required for the calculation of the scores for each element are described in the following sections.
Guidance on the calculation of the items in the following table is found in FCDPAG3. The most recent guidance should always be used.
| Data Required | Description |
|---|---|
| Present Value Cost | This is the estimated discounted whole life cost of the project under consideration, including capital works, operational costs and maintenance. Where the general costs have been estimated for a strategy or comprehensive project they should be distributed pro-rata between project elements. Costs should be assessed using the latest guidance, taking due account of optimism bias, discount rates and contingencies at the different stages of project development. |
| Present Value Benefits | These are the estimated discounted benefits calculated using the latest guidance (see Annex D) attributable to the proposed investment. The calculation of benefits is crucially dependent on the assumed probability of failure of any existing project. Broad-brush approaches will be appropriate at the pre-feasibility stage. For a project within a strategy or comprehensive project the benefits should be those allocated to the appropriate sector or pro-rata (usually by project cost) where there is a single integrated benefit area. |
| Benefit/Cost Ratio (B/C Ratio) | Present Value Benefits divided by Present Value Costs. |
| Data Required | Description |
|---|---|
| Number of residential properties | This is the number of normally occupied residential properties benefiting from the proposed works. Hotels and similar would be classed as single residences appropriate to resident staff levels to reflect that some staff normally would be in residence. The number should be adjusted to reflect those properties effectively outside the risk area, such as residents in the upper levels of blocks of flats in flood risk areas. For the purposes of this assessment, caravans permanently occupied may be classed as residential properties for assessing the people score. Property not permanently occupied (including holiday homes) should not be included. Where these are part of a strategy or comprehensive project the total number of properties should be distributed pro-rata across the elements of the overall strategy. This should not normally exceed the number of properties at risk in the 1% annual probability (1 in 100 year) event or 50 year do-nothing erosion area. |
| Risk measure | An indication of the
risk to public safety alleviated by the works. For flooding situations: 'Very High risk' covers situations of very fast onset of flooding, where there is little chance of any effective warning, or where deep (>2m) or high velocity flows will be experienced. Without the proposed project there is a high risk of loss of life if an event occurs. 'High risk' covers those situations where without the project there would be fairly fast rising floodwater with practical warning times generally less than two hours. For situations where coastal erosion is the issue: 'Very High risk' should not be applicable. Buildings should have been abandoned on the grounds of public safety. 'High risk' covers situations where there is a recognised probability of failure causing risk to public safety that would require evacuation based on storm forecasts but property abandonment is not considered necessary. All other situations would be regarded as 'normal risk' for the purposes of this system. Where, exceptionally, a proposed project would not significantly reduce the risk then this adjustment should not be applied. |
| Vulnerability measure | This is intended to
adjust for vulnerability of the community and, as a readily available
surrogate, uses the Government indices of social deprivation, available by ward
from the Natrional Statistics website. Some 8,414 wards in England and Wales
are classified using this index, with the most deprived wards given the lowest
rankings and the most affluent wards the highest. It is intended that a
weighted average ranking should be used for those projects that cover a number
of wards. Details of wards and their rank in this index are available at
http://neighbourhood.statistics.gov.uk/dissemination/.
Enter the name of the area or post code and select Ward then Search. Click on Indices of Deprivation and Classification (7 datasets) then Indices of Deprivation for Wards (2000). The value you need is the Rank value for Indices of Multiple Deprivation for Wards, Index of Multiple Deprivation (Areas). |
| Data Required | Description |
|---|---|
| Area of designated habitat protected | The area, in hectares, of designated habitat that will benefit from the proposed project. Both national and local designations are included. To benefit from a project an area of habitat must require the implementation of the project to maintain its status. For example, wetland preservation through positive water level management as part of the project, or reduction of salt-water inundation to freshwater habitats. The existence of a designated area adjacent to the project will not, of itself, justify an entry here. The total area should be divided pro-rata for elements of strategies. It should be noted that English Nature are likely to object to any project where there is an expected net loss of designated habitats. Support from English Nature is required for the claim that project implementation is necessary to maintain the status of the areas of habitat included. |
| BAP habitat area net gain | The area, in hectares, of new habitat that will be created by the project that will contribute towards national Biodiversity Action Plan (BAP) targets. This area is the net gain of new national BAP habitat taking account of any loss of national BAP habitat as a result of project implementation. Support from English Nature is required for the claim that a net gain of national BAP habitat is expected. |
| Habitat designations | International sites that will take a project outside the priority scoring system when they are the primary rationale for the project include: Special Protection Areas (SPAs), Special Areas of Conservation (SACs), Ramsar sites, proposed SPAs and candidate SACs. National sites are Sites of Special Scientific Interest (SSSIs). Local sites include: Local nature reserves and all other sites designated by the Local Authority. |
| Heritage designation | This is used to indicate if a designated heritage site is to be protected by the proposed project, split between grades I and II* sites (or equivalent) and Scheduled Monuments, and those of grade II (or equivalent). This should only be applied where the structure will benefit from the project. It is a "yes/no" indicator for one or more monuments - the number of monuments in excess of one has no effect. |
Page last
modified: 15 August 2007
Page published: 15 August 2007