Understanding the latest Department for Transport TAG changes
Adriana Moreno-Pelayo
Appraisal guidance is constantly evolving, with Government regularly updating the guidance to reflect the latest research, and alignment with the recent Green Book revision. This summary seeks to provide a high level summary of the latest Transport Appraisal Guidance (TAG) changes released in May 2021 by the Department for Transport, which will be incorporated officially into guidance in July 2021. These key changes will be important considerations for Towns as they develop compliant and strong business cases.
Transport schemes have been a key part of many Town Investment Plans, it is important for towns to understand what these changes mean for the Economic Case. This applies to not only pure transport projects, but also those that include landscape or public realm interventions.
The latest changes to the guidance include:
Optimism Bias – the latest guidance provides a clear definition of base costs (excluding risks) to which Optimism Bias should be applied to, with updated values. There is also guidance around accounting for real increases in construction costs and a recommendation that any risk analysis is also undertaken and compared to the application of Optimism Bias, but kept separate, once the project is more advanced (Outline Business Case and Full Business Case stages).
Appraisal period and residual values – while the appraisal period for large infrastructure projects (less relevant for town deal projects) doesn’t change (60 years), long-term projects can now justify a longer appraisal period up to 100 years. A strong rationale needs to be provided in the Strategic Case. The latest guidance also provides standard assumed economic asset lives to inform the appraisal period by project type.
Capturing Local context – these changes to the guidance reflect the latest Green Book changes by recommending that the local context is probably accounted for including recommendations for analytical approaches that include place-based analysis.
Uncertainty toolkit – a new toolkit on how to deal with uncertainty has been published, providing a clear distinction between uncertainty and risk and clear sources of uncertainty. The tool recommends different tools to analyse uncertainty depending on the level of impact of the project.
Landscape monetisation guidance – an overview of the changes that will be reflected in new guidance has been published including an updated step-by-step guide on how to monetise values and updated values based on a recent review of evidence.
The Government recommends that new appraisals incorporate these changes even if they have not been officially published in the guidance documents. Whilst the changes to appraisal period are likely to be more relevant for larger projects with complex phasing, all the other changes are relevant for towns. This translates into a greater focus in capturing local context, aligning more closely the guidance with the latest Green Book, applying changes to values in Optimism Bias and following the latest guidance to monetising landscape benefits. The latest guidance also emphasises the need to account for uncertainty with a variety of tools, to be used in a proportionate way. It is likely that towns will focus around judgement-based, scenarios and sensitivity testing approaches given the scale of the projects.
For more information, please have a look at our short guide summarising key changes.