Better Business Cases

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Better Business Cases Investing for
change Foundation Course
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Foundation Course objectives

• Sufficient awareness to understand
• the background and why we introduced BBC
• what BBC is and when it applies
• the five case model
• the BBC process and its fit with other processes
• where to get support
• planning the business case development approach
• the national evaluation and the way forward
• the types of business cases
• Able to actively participate in further training
• Practitioner Course
• Reviewer Course

3

• 9am Welcome, housekeeping,
  introductions and expectations setting
• 9.15am Background, why, what, and when
• 9.30am The 5 case model, the BBC process
  and its fit with other processes
• 10am Morning tea
• 10.15am Where to get support
• 10.30am The national evaluation and way
  forward
• 10.45am Planning the approach to developing
  the business case
• 11am Types of business cases (Programme
  and project approach)
• 11.45am Top ten lessons learnt, examples and
  questions (Lunch 12 noon)
• 12.50pm Expectations close out and
  evaluation forms

4
Expectations
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Background
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Background

• Original Cabinet capital directive in 2007
  wanting
• visibility to future capital investment
  intentions
• options and confidence that proposal is
• best value and will deliver benefits- confidence
  !
• Treasury response
• Portfolio planning
• Better Business cases

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• Visibility to inform the portfolio

Better Business Cases
Opportunity for greater influence through better
strategy and planning
Projects and programmes underway
10 year view of intentions
Benefits
Individual intentions fit under a wider
lifecycle, that can be influenced and balanced
within constraints before business cases on
programme and projects start to be developed
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State Sector -Balanced portfolio planning of
intentions needing investment
Keep the business running
Grow the business
Transformational change
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Why BBC
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Value of Better Business Cases?

• Decision makers/Investors-confidence !
• Strategic alignment and value for money
• Management-confidence !
• Influencing the direction early
• When submitting to decision makers
• Business case developers-fit for purpose !
• Reviewers- fit for purpose !

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Why one thirds of programme and projects fail?

• Lack of strategic fit
• Lack of senior management engagement
• Lack of stakeholder engagement
• Focus first on funding then value-for-money
• Lack of supply side engagement
• Lack of systematic approach
• BBC mitigates these risks, prior to the
  investment decision

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What is BBC
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What is BBC and what is expected

• What is Better Business Cases?
• Based on UK Government approach
• Common Language to support stakeholder engagement
• Thinking not writing
• Fit for purpose analysis-smart procurement
  consultancy support
• Thinking is challenged and brings coherence and
  cohesion
• Campaign to deliver benefits, not a document to
  get money
• What is expected?
• Effort and engagement depends on scale and risk
  of the project or programme
• 5 case model is the core of BBC

I didn't have time to write a short letter, so I
wrote a long one instead
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When BBC applies
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When does it apply?-Mandated

• 2010
• Cabinet directive for State Sector high
  risk and/or large scale intentions requiring
  capital investment (whether or not self funded)
  and all intentions requiring new funding
• Government Departments
• National Health Board for District Health Boards
• Crown Entities (only if require new funding)
• 2012
• Cabinet directive for all intentions in
  the Canterbury Earthquake Recovery Strategy
  requiring crown investment in projects and
  programmes

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When does it apply? - Voluntary

• 2012
• Auckland Council adopted for Auckland
  Plan capital investments
• 2013
• NZTA adapted for National Land Transport
  Programme across Local Government
• Tertiary Education Commission for
  tertiary education sector borrowings
• Public and private sector organisations
  adopting as good practice
• National NGO Federation to transform
  service delivery
• Auckland Policy Office piloted for
  Better Public Services socio-economic programmes
  (linked to Auckland Plan)
• 2014
• Society of Local Government managers
  for Local Government (non transport)
• MFAT considering for Pacific Island
  Countries
• World Bank considering for developing
  countries

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The 5 case model, the BBC process and its fit
with other processes
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The 5 Case Model
Any business case addresses 5 key questions

1. Is there a compelling case for change?
2. Does the preferred investment option optimise
   value for money?
3. Is the proposed deal commercially viable?
4. Is the spending proposal affordable?
5. How can the proposal be delivered successfully?

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The 5 Case Model
The 5 key elements of good practice business
cases
Compelling case for change - strategic fit
business needs
Strategic
Achievable and can be successfully delivered
Management
Economic
Preferred option optimises value for money
Financial
Commercial
Affordable within available funding
Commercially viable
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The pathway of the phased BBC process can be used
to select which type of business case best
delivers the required decision/s
Planning and scoping
The level of emphasis of each of the five cases
depends on the type of business case
Confirm fit with strategy and need to invest
Confirm case for change, preferred programme,
project tranches, funding
Confirm way forward with short-listed options
(consider non-traditional procurement)
Confirm fit with strategy and the need to invest
Confirm best value for money option, outline
potential deal and delivery plan, assess
affordability.
Confirm supplier offering best value, detailed
commercials, confirm affordability. detailed
management and delivery arrangements
Also the single stage (light) business case
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(No Transcript)
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BBC Process fit with Policy, Programme and
Project management
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BBC Process fit with Procurement process
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Innovation through procurement
Resourcing value-add
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Where to get support
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Where do I get support-on the website ?

• Overview information
• Quick Reference Guide
• Presentation
• Overview booklet
• Scoping document (programme or project approach)
• Detailed information for each type of business
  case
• Scoping document, to agree effort
• Guidance booklets, to understand the standard
• Word Template, to write the business case
• Power point one pager, to present the business
  case
• Links to related processes

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Where do I get support ?

• Executive Intensive sessions on demand (45
  minutes)
• Training (monthly in 5 cities)-book on line
• Foundation Course (4 hours)
• Practitioners Course (Two full days 16 hours)
• Reviewers Course (Full day 8 hours)
• Communities of practice by sector for
  Practitioners supported by BBC Experts
• Endorsed BBC Expert Practitioners and Reviewers
  pilot
• BBC Coach to coach public servants in priority
  public sector organisations

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National evaluation and way forward
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2013 National Evaluation-findings

• Overwhelming agreement that BBC has had a
  positive impact on the quality of business case
  thinking
• Generally fit for purpose
• Process most effective when applied by
  experienced and knowledgeable people
• Organisations wanted help to develop internal
  capability and expertise.
• Range of mechanisms should be considered to help
  organisations address the wider capability gaps
  that have been identified.

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2013 National Evaluation-MoFs view

• Been effective in stopping the rubbish
• Can be bit exhaustive when Ministers want to get
  going
• His level of confidence is growing
• Needs to be aggregation of capability
• Better balance of process and judgment
• Clarify appropriate response when Cabinet
  decision precedes BBC
• All agencies need to see as critical and take
  long term view

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Way forward

• Improve capability of the priority public sector
  organisations
• To launch case studies to website
• To launch communities of practice
• Launched Endorsed Expert Pool pilot
• BBC Coach-to coach public servants to become
  experts
• To pilot BBC Organisational capability trial-for
  internal adaptation
• Piloting 5 case model approach to Strategic
  Policy
• Improve reviewer operating model and capability

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Planning the approach to developing the business
case Right sizing the effort and engagement
the scoping document
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The Goldilocks Zone
Just right
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Use the scoping documents to obtain sponsor and
reviewer agreement on how to apply BBC

• What previous decisions have been made
• Programme or project approach and pathway
• For each type of business case within the pathway
• Right sizing the capacity/capability of the team
• Right sizing the effort and engagement
• Right size the assurance/monitoring
• What decision is being sought

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Business Case Capability
Stakeholder Engagement
Governance
Low
High
Project Management
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Key considerations

• Complete the scoping document at the beginning of
  each phase
• Fill out what you know - update as you know more
• Use the document to support your thinking,
  discussions and recording the agreed way forward
• Involve your monitoring/reviewer function early
• It is a tool to support you not a prescriptive
  template so modify to meet yours and your
  monitoring functions needs

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Types of business cases
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Strategic Assessment
Programme Strategic Assessment
Programme Business Case
Project Strategic Assessment
Indicative Business Case
Detailed Business Case
Implementation Business Case
Single Stage Business Case
Project Strategic Assessment
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Strategic assessment

• Purpose
• Outline the fit with strategy and case for change
• Provide an opportunity for key stakeholders to
• influence the direction
• Either at project or programme level

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Strategic assessment
Strategic

• Strategic Case-Making the Case for Change
• Outline the strategic context
• Outline the case for change and need for
  investment
• Identify the core reason that underpins the
  service need by identifying
• the driver/problem?
• potential benefits?

Senior stakeholders do the thinking together If
state sector intention requiring capital must use
ILM facilitator to run the problems and benefits
workshops For other intentions use other tools
and people which challenge the thinking,
especially for complex problems. Invite business
case writer and reviewer.
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Programme Business Case
Programme Strategic Assessment
Programme Business Case
Project Strategic Assessment
Indicative Business Case
Detailed Business Case
Implementation Business Case
Single Stage Business Case
Project Strategic Assessment
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Programme Business Case

• Purpose
• Confirm the strategic context
• Confirm the case for change
• Recommend a preferred programme approach
• Identify project tranches
• Range of rough order cost estimates and funding
  sources
• Gain early approval from decision makers for
• developing subsequent project-based business
• cases

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Programme Business Case
Strategic

• Strategic Case-Making the Case for Change
• Revisit the strategic context and confirm case
  for change
• Investment objectives, existing arrangements and
  business needs
• Potential business scope and requirements
• Benefits, risks, constraints and dependencies

Senior stakeholders set the SMART Investment
Objectives together in one or more two hour
facilitated workshops, with a BBC Practitioner
(trained) or endorsed BBC Expert Practitioner.
Invite writer and reviewer.
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Programme Business Case
Economic

• Economic Case-Exploring the Preferred Way Forward
• Critical success factors
• Programme options systematically identified and
  assessed by dimension
• Scale, scope and location (what)
• Service solution (how)
• Service Delivery (who)
• Implementation (when)
• Funding (how to fund)
• Identify mix of projects to achieve the
  investment objectives

• Stakeholders do the thinking together in two
  or more two-hour workshops led by a BBC
  Practitioner or BBC Expert Practitioner
• Prepare long list, then
• Assess long list to preferred programme
• Invite Writer and Reviewer

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Programme Business Case

• Commercial case
• Based on the preferred programme the likely
  attractiveness to potential service providers
  (including high level consideration of
  non-traditional procurement)
• Financial case
• Based on the preferred programme determine
• Range of rough order costs and potential funding
  sources
• Management Case
• Outline how the programme is intended to be
  managed

Commercial
Financial
Management
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Indicative Business Case
Programme Strategic Assessment
Programme Business Case
Project Strategic Assessment
Indicative Business Case
Detailed Business Case
Implementation Business Case
Single Stage Business Case
Project Strategic Assessment
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Indicative Business Case

• Purpose
• Confirm the strategic context
• Confirm the case for change
• Recommend an indicative way forward with a
  limited number of short-listed options for
  further detailed analysis
• Indicative cost estimates and funding sources
• For state sector informs annual Government
  budget process for contingency to be set aside

48
Indicative Business Case
Strategic

• Strategic Case-Making the Case for Change
• Revisit strategic context and confirm case for
  change
• Investment objectives, existing arrangements and
  business needs
• Potential business scope and key service
  requirements
• Benefits, risks, constraints and dependencies

Senior stakeholders set the SMART Investment
Objectives together in one or more two hour
facilitated workshops, with a BBC Practitioner
(trained) or endorsed BBC Expert Practitioner.
Invite writer and reviewer.
49
Indicative Business Case
Economic

• Economic Case-Exploring the Preferred Way Forward
• Critical success factors
• Long-list options and initial options assessment
  by dimension (Do min, Do moderate, Do max)
• Scale, scope and location (what)
• Service solution (how)
• Service delivery (who - including non-traditional
  procurement options)
• Timing and staging (when)
• Funding (how much)

• Stakeholders do the thinking together in two or
  more two-hour workshops led by a BBC Practitioner
  or BBC Expert Practitioner
• Prepare long list of options ,then
• Assess long list to short list of no more than 5
  options
• Invite Procurement expert at procurement planning
  stage, writer and reviewer.

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The long list to short list of options (example)
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Indicative Business Case

• Commercial, Financial and Management Cases
  (Outline)
• Recommended preferred way forward, if
  conventional procurement, with three to five
  short-listed options, including a base case
  option
• Provide range of indicative cost estimates for
• each short-listed option and funding sources
• Outline the commercial case
• Outline the management case

Financial
Commercial
Management
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Detailed Business Case
Programme Strategic Assessment
Programme Business Case
Project Strategic Assessment
Indicative Business Case
Detailed Business Case
Implementation Business Case
Single Stage Business Case
Project Strategic Assessment
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Detailed Business Case

• Purpose
• Revisit the case for change and the preferred
• way forward
• Determine the preferred option that optimises
• value for money
• Outline the potential deal
• Assess affordability
• Outline plan for delivering the project

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Detailed Business Case
Strategic

• Strategic Case (Revisit)
• Revisit the indicative business case

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Detailed Business Case
Economic

• Economic case
• Economic assessment of the short-listed options
  (or preferred non-traditional procurement option)
• Intangible benefits and costs
• Risk and uncertainty
• Preferred option and undertake sensitivity
  analysis

Stakeholders identify, weight and score the
short-listed options against any intangible
benefits and costs
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Analysis of the short-listed options
Economic
Option 1 Do Nothing Option 2 Do Minimum Option 3 Preferred Minus Option 4 Preferred Way Forward Option 5 Preferred Plus
Appraisal Period (years) 20 20 20 20 20
Capital Costs (m) 0.0 22.5 23.9 31.6 45.7
Whole of Life Costs (m) 14.4 24.2 49.7 70.7 90.9
Cost-Benefit Analysis of monetary costs and benefits at the Public Sector Discount Rate Cost-Benefit Analysis of monetary costs and benefits at the Public Sector Discount Rate Cost-Benefit Analysis of monetary costs and benefits at the Public Sector Discount Rate Cost-Benefit Analysis of monetary costs and benefits at the Public Sector Discount Rate Cost-Benefit Analysis of monetary costs and benefits at the Public Sector Discount Rate Cost-Benefit Analysis of monetary costs and benefits at the Public Sector Discount Rate
Present Value of Benefits (m) 2 25 75 115 126
Present Value of Costs (m) 7 23 40 52 73
Benefit Cost ratio 0.31 1.11 1.91 2.21 1.71
Net Present Value (NPV, m) (5) 2 35 63 53
Multi-Criteria Analysis ranking of intangible costs and benefits (if any) Multi-Criteria Analysis ranking of intangible costs and benefits (if any) Multi-Criteria Analysis ranking of intangible costs and benefits (if any) Multi-Criteria Analysis ranking of intangible costs and benefits (if any) Multi-Criteria Analysis ranking of intangible costs and benefits (if any) Multi-Criteria Analysis ranking of intangible costs and benefits (if any)
Criteria 1 1 3 3 5 1
Criteria 2 5 2 3 2 4
Criteria 3 3 2 5 1 3
Preferred option Yes
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Detailed Business Case

• Commercial case Preparing for the Potential
  Deal
• Procurement strategy
• Service requirements
• Risk allocation
• Payment mechanisms
• Contractual and other issues
• Financial case Ascertaining Affordability and
  Funding Requirements
• The financial costing model

Commercial
Financial
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Detailed Business Case

• Management case Planning for Successful
  Delivery
• Project management planning
• Change management planning
• Benefits management planning
• Risk management planning
• Post-project evaluation planning

Management
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Implementation Business Case
Programme Strategic Assessment
Programme Business Case
Project Strategic Assessment
Indicative Business Case
Detailed Business Case
Implementation Business Case
Single Stage Business Case
Project Strategic Assessment
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Implementation Business Case

• Purpose
• Identify the supplier that offers the best value
  for money
• Detail the negotiated and commercial and
  contractual arrangements
• Confirm the proposed
• arrangements are affordable
• Organise the detailed management
• and delivery arrangements

61
Implementation Business Case
Strategic

• Strategic and Economic Case (Revisit)
• Revisit the case for change
• Revisit the detailed business case options

Economic
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Implementation Business Case

• Commercial case Preparing for the Potential
  Deal
• Evaluation of best and final offers
• The negotiated deal and contractual
• arrangements
• Financial case Ascertaining Affordability and
  Funding Requirements
• Financial implications of the deal

Commercial
Financial
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Implementation Business Case

• Management case Planning for Successful
  Delivery
• Finalise project management arrangements
• Finalise change arrangements
• Finalise benefit management
• Finalise risk management
• Finalise contract arrangements
• Finalise post-project evaluation arrangements

Management
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Single Stage Business Case
Programme Strategic Assessment
Programme Business Case
Project Strategic Assessment
Indicative Business Case
Detailed Business Case
Implementation Business Case
Single Stage Business Case
Project Strategic Assessment
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Single Stage Business Case

• Includes all five cases
• Level of analysis and detail is lighter than full
  process
• Expectations re level of detail and approach to
  developing the Business Case (workshops etc)
  should be defined in the scoping document.
• Also Single Stage (Light) Business case

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Top ten lessons learnt, examples and
questions