Guidance on the development of Business Cases - March 2016
5 Reporting of Costs in the Financial Case
In economic appraisal, as set out in the Green Book, costs relevant to an economic appraisal are those about which decisions can still be made, in other words, those costs which will be incurred subsequent to appraisal and the decision to go ahead. 'Sunk costs', which are the costs of goods and services that have been committed to prior to scheme appraisal and which are irrevocable, should therefore be excluded in an appraisal. This reflects the principle that evidence should support decisions on spending over which the spending organisation has discretion
To ensure transparency of the full financial impact of projects however, in the Financial Case, it is prudent to separately report full costs, including sunk costs and to explain the difference between the costs included in appraisal and full financial project costs. This could take the form of a simple table setting out the two costs with a brief explanation of why sunk costs are not included in appraisal costs and of other differences, such as the impact of discounting and any difference in the price base.