Website of the Department of Health

The original GEM and guides first published on this site in January 2003 have now been revised (August 2004) to reflect changes in the new edition of Treasury's Green Book (January 2003). The updated documents are below and supersede those previously on this site which have now been removed.

The changes incorporate the Treasury's new discount rates of 3.5% for years 1 to 30 of the appraisal period and 3.0% for years 31 to 75.  The revised GEM also provides a framework for including an adjustment for optimism bias, though the scale of the adjustment for optimism bias needs to be calculated outside the GEM.  Specific guidance on optimism bias has now been added as of November 2004 and can be found below. 

The revisions to the GEM have been undertaken in such a way that users can, if required, easily change this model back to be exactly the same as the previous version.

Many of you will know that the new Treasury 'Value for Money Guidance' was published on 20 August 2004 (see link below). This has significant implications for the NHS and other Government Departments in the way that economic and value for money appraisals are conducted at both OBC and FBC stage and will mean another revision to the GEM in due course. We are still considering the transitional arrangements for the application of the new 'Value for Money Guidance' within the NHS.     

Action

PFI schemes which reached invitation to tender after 31 March 2003 must apply the methodology set out in the new Green Book ie they must use the new discount rate and include an assessment of optimism bias.  Schemes which reached invitation to tender before 31 March 2003 may use the methodology set out in the previous edition of the Green Book.

Please address any comments or general queries on its use to:

Michael Chaplin: tel: 0113 254 5571
Clive Kenny: tel: 0113 254  5241