Business Cases For Infrastructures

This document discusses the five case models for developing business cases for infrastructures, including the strategic case, economic case, financial case, commercial case, and management case. It also explores the contingent valuation method for estimating economic prices. The document provides a SWOT analysis of the five case models and discusses the guiding principles for cost-benefit analysis.

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Running Head: BUSINESS CASES FOR INFRASTRUCTURES
Business Cases For Infrastructures
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BUSINESS CASES FOR INFRASTRUCTURES
1.
Five case models can be said to be an approach for developing recommended business cases
by HM Treasury, government commerce office of the United Kingdom and the national
government of Welsh. Considering individual decision making, most of them are not right but
where everybody follows a similar model or framework the decisions are correct. The five case
models have the advantage of a reduction in the time wasted and the costs incurred to develop
and to approve the developed projects finally (Waller & McKinnon 2013, p. 567). This model is
majorly used for capital schemes which are major which result to the construction of a prominent
structure, for example, the construction of a hospital, school, new roads, and significant
information technology projects. This model consists of five cases which are;
The strategic case
The economic case
The financial case
The commercial case
The management case

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SWOT analysis of the 5 case models;
Strengths
There is the availability of optimal socially training levels which enable the projects to be
able to acquire best-skilled labor. Furthermore, productive and qualified trainees and co-workers
are available. Also, there exists an option of avoiding at any chance irreversible decisions. In
dangerous land terrain, early Precautionary actions live and hence avoiding risks which may be
associated with the type of landscape available. The availability of insurance companies reduces
the luggage of risks through the contractual spread of risks. There exists leading technology
enabling companies to build the best quality project.
Weaknesses
Most of the available information in the construction sector is not perfect; hence projects
may end up failing. Another weakness is that construction projects require a better understanding
of the climate which is uncontrollable. Hence most projects end up being incomplete due to
unexpected climatic change. There exist a lot of risks in the construction industry therefore
making it a weakness for most projects to be completed successfully such risks include; design
and construction risks and financing risk.
Opportunities
Availability of several options including purchase, rent or build option and refurbishing
facilities which already exists. On the other hand, the industry has the opportunity to use
information technology and other improved technology to provide the best quality projects. With

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the increase in knowledge in that field, there exists a risk management technique which helps
project managers to be alert of any risk to be expected. Finally, technology has played a big part
in making the building process more flexible.
Threats
Threats that most projects face include; labor supply and skills scarcity, Fatality of
injuries which may occur during the construction, and finally, the existence of design quality
valuation. Biodiversity is another threat that most of these projects face as they are required to
set the project in the best available land with a concern of biodiversity. The final danger is the
existence of biasness in the project valuation process which might lead to corruption (Britain
2013, p. 23).
2.
The contingent valuation method for estimating economic prices
The contingent valuation method has five main steps whereby the first step is mainly
involved in the definition of the valuation problem. This step includes the determination of the
benefits being valued as well as the relevant population. The second step of this valuation
method involves preliminary decisions making which is majorly concerned of the survey itself.
This includes the means through which the investigation will be conducted whether by emails,
phone calls, internet, in groups or individually. More so this stage involves the consideration of
the sample size, questions to be administered and who will be surveyed. The third step is the
actual survey. This is referred to as the most crucial and challenging part of the whole process.
These steps have several steps whereby it starts with, interviews and then the pre-test of the
survey. The fourth stage of the contingent valuation method consists of the sample design; this

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means sampling from the relevant group of people by the use of standard statistical sampling
methods. The final step of this methodology is the compilation, analysis and the compilation of
the results (Venkatachalam 2014, p. 67).
Typical application of contingent method of cost estimation
 A typical application is a survey for the construction of a dam in a specific region.
Strength of this methodology
 The sample represents then the whole population of the target population hence
saves on survey time.
Weakness
 It is open to biasness.
3.
There exists several guiding principle to the inclusion or exclusion of several individual
costs in cost-benefit analysis. Example of the policies includes; discounting of value and benefit;
this means that a project cost has to be an expression of the equivalent amount of money at a
particular time. The second principle is the definition of a specific study area; this means that the
impact of that project should be a definition of a particular area. The third principle is correct to
address the uncertainties. And finally, the double counting of a cost or a benefit should be highly
avoided (Pearce, Atkinson & Mourato 2016, p. 435). There exist several confusing costs which
include; direct costs/ benefits, indirect costs/ benefits, tangible and intangible costs and benefits
(Boardman, Anthony, David, Greenberg, Aidan Vining, and David Wei 2017, p. 45). Alternative

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frameworks under which the high costs and benefits should be considered include; cost volume
profit analysis and the real rate of return.

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References
Boardman, Anthony E., David H. Greenberg, Aidan R. Vining, and David L. Weimer 2017. Cost-benefit
analysis: concepts and practice. Cambridge University Press.
Britain, G. (2013). The Green Book: appraisal and evaluation in central government: Treasury
guidance. Stationery Office.
Pearce, D., Atkinson, G., & Mourato, S. 2016. Cost-benefit analysis and the environment: recent
developments. Organisation for Economic Co-operation and development.
Venkatachalam, L. 2014. The contingent valuation method: a review. Environmental impact assessment
review, 24(1), 89-124.
Waller, P., & McKinnon, E. 2013. A Social Innovation Investment Appraisal Method and Tool.