PROBLEM: The unconstrained and optimised work programmes do not take account of differences in the works and output currencies if the conversion factor between them is not equal to 1. This can lead to an incorrect optimisation, or an incorrect interpretation of the result.

AFFECTS: HDM-4 Version 1.3 & HDM-4 Version 2->2.03

FURTHER DETAILS: The user selects a currency in which the work item costs are defined, a currency for the economic outputs of an analysis, and a conversion rate such that:

WORKS currency * conversion rate = OUTPUT currency

Following the completion of a Programme or Strategy Analysis a user may look at the Unconstrained Programme. This screen shows the capital work items that have been selected for the Unconstrained Budget, together with the cost of the work and the cumulative capital costs.

IT SHOULD BE NOTED THAT THIS IS INCORRECTLY SHOWING THE WORK AND CUMULATIVE COSTS IN THE WORKS CURRENCY AND NOT THE OUTPUT CURRENCY AS IS EXPECTED.

When the user moves on to define a budget, this is defined in the OUTPUT currency. If the conversion rate between the works currency and output currency is not equal to 1, the following problems can result:

1) If the analysis parameters are within the constraints of the EBM32 optimisation method (see note 1) the optimisation will be performed correctly, but when comparing the budget defined and the capital cumulative costs the user must be aware that they are defined in different currencies. If the user is not aware of this it can look as if the budget has been exceeded if the conversion factor is < 1, but this is not the case.

2) If the analysis parameters are outside the limits of the EBM32 optimistion method (see note 1) the internal optimisation method will be used. THIS METHOD CURRENTLY INCORRECTLY ASSUMES THE WORKS AND OUTPUT CURRENCIES ARE THE SAME AND THEREFORE AN INCORRECT OPTIMISATION RESULTS. When comparing the capital cumulative costs with the budget it appears to be within budget, however, because the currency units are not the same, the actual budget may have been underspent (conversion factor < 1) or over spent (conversion factor > 1).

WORK AROUND: Until a correction to the report and internal optimisation method is available, you should take the following steps to work around the problems given above.

1) Be aware that the work programmes are quoting the work costs in WORKS currency units, and not OUTPUT currency units.

2) To ensure that the internal optimisation method is performing the optimisation using the correct budget constraints, enter the budget amounts in WORKS currency units.

Note 1: The size of the analysis must be below the following: Number of sections: 400; Number of years: 20; Maximum number of alternatives for any section: 17; Number of budget periods: 12 (for further details see the HDM-4 Documentation Series, Volume 4, Part G1, Section 6.0)