SECTION 6
FINANCIAL ANALYSIS
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6.3
Financial Evaluation Process Revised
Following the second Strategy Teams Workshops, the Project Team and the consulting team
recognized that “filling the gaps” in the financial information necessary to evaluate the full
costs of ownership for the top potential strategies was not realistic within the timeframe to
complete the project. The number and variety of information gaps were so large that, while
the consulting team was able to provide industry standard values where needed, it was
agreed that an analysis based almost entirely on industry standards would weaken one of
the key CEAP objectives – a Plan developed by the TeamMembers.
At this point in the project, an alternative method to evaluate project financials was needed.
The discussions that followed captured several important things:
One CEAP objective was to provide a process for the City to begin to think
holistically carbon emission reductions, energy and related financials; this objective
was being met through exposure of the Project Team Members to these concepts
throughout their work to develop the CEAP
Reaffirmed that the use of information that was primarily Raleigh-specific would
provide the basis for the most verifiable, defendable and repeatable analysis of
strategies as well as the most realistic estimates of costs and impacts to City
operations
Additional attempts to obtain information from the Project Teams were not
warranted and a revised method to complete the financial portion of the CEAP was
needed
There is a great need for the City to develop and implement a standardized way to
gather the types of information needed for future financial analyses. This is addressed
in Volume 4 of the CEAP Technical Documentation –
Data Collection Framework for
City of Raleigh Operations”
.
After several strategy sessions, the following process was agreed upon by the City and the
consulting team:
Evaluate key characteristics of total cost of ownership
Conduct business case evaluations (BCE) on two strategies to demonstrate an
evaluation methodology that could be applied by the City when detailed cost
information becomes available
The key characteristics of total cost of ownership were evaluated for the top strategies
resulting from the Prioritization Team’s work and are shown above in Exhibit 12.
6.4
Business Case Evaluations
As described above, the Team supported the application of the BCE concept to the CEAP
financial evaluation process as an alternative approach. The BCE approach provides a
transparent framework for making financially justifiable decisions that can be correlated to
both energy and carbon reduction, and also provides tools to evaluate the tradeoffs between
capital replacement projects versus longer life-cycle replacement projects.
Two of the highest scoring strategies were selected as examples to demonstrate the BCE
process. The process follows a standard format that can be applied by the City staff to