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The Benefit Cost Ratio (BCR) is a tool of industry and government. It is an attempt to estimate the financial benefit generated by every £1 of public investment. It helps to determine the 'value for money' of a project or project option.
Any funding secured from the private sector improves a project's value for money (VfM) by reducing the burden on the public purse.
The Department for Transport requires all rail project proposals in England and Wales to provide an assessment of their Value for Money (VfM). As well as looking at the Benefit Cost Ratio, this also considers whether there are any significant benefits or costs (eg social) which cannot be measured in financial terms.
VfM is categorised as Poor, Low, Medium or High.
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Value for Money
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Benefit Cost Ratio
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Lower Limit
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Upper Limit
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Poor
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<1.0
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Low
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1.0
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1.5
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Medium
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1.5
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2.0
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High
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>2.0
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The DfT expects the overwhelming majority of projects to at least deliver 'Medium' value for money if it is to be progressed.
The approach is slightly different for projects in Scotland.
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