Better Business Cases “Investing for change” Foundation Course

© The Treasury 1

Better Business Cases “Investing for change”

Foundation Course

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Foundation Course objectives

• Sufficient knowledge 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

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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 Examples, top ten lessons learnt, and questions (Lunch 12 noon)

12.50pm Expectations close out and evaluation forms

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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

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

10 year view of intentions

Projects and programmes underway

Benefits

Aligning and balancing with direction (govt priorities)

Better Business

Cases

Opportunity for greater influence through

better strategy and planning

State Sector -Balanced portfolio planning of programmes and projects needing investment

1 2 3 4 5 6 7 8 9 10

1

2

3

4

5

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<$25m $25m to

$100m >$100m<$500m

$500m or greaterImplementation risk = Medium

Implementation risk = High

Implementation risk = Low

BENEFITS

Alig

nmen

t

1 2 3 4 5 6 7 8 9 10

1

2

3

4

5

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BENEFITS

Alig

nmen

t

Keep the business running

1 2 3 4 5 6 7 8 9 10

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2

3

4

5

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BENEFITS

Alig

nmen

t

Grow the business

1 2 3 4 5 6 7 8 9 10

1

2

3

4

5

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BENEFITS

Alig

nmen

t

Transformational change

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Why BBC

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Value of Better Business Cases?

• Decision makers/Investors-confidence!

• Management-confidence!

• Business case developers-fit for purpose

• Reviewers- fit for purpose

• Private sector service providers-early engagement

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Why one third 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 a Better Business Case?• Based on the UK Government BBC approach• Common Language to support stakeholder engagement-way of

thinking and working together• Thinking not writing• Fit for purpose analysis• Smart procurement of consultancy support• The thinking is challenged and brings coherence and cohesion• Campaign to deliver benefits, not a document to get money

What is expected?• Effort and decision making depends on scale and risk of the

project or programme• 5 case model is the core of BBC

What is a better business case and what is expected

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When BBC applies

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When does it apply? - Mandated2010

Cabinet directive for State Sector high risk or large scale capital projects or those requiring funding:

• Govt. Dept’s and Crown Entities

• National Health Board for DHB’s

2012

Cabinet directive for Canterbury Earthquake Recovery investments in projects and programmes

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When does it apply? - Voluntary2012 Auckland Council adopted for Auckland Plan capital investments

and being piloted for socio-economic programmes2013 NZTA adapted for National Land Transport Programme across

Local Government Tertiary Education Commission for tertiary education sector

borrowing Public and private sector organisations adopting as good practice National NGO Federation to transform service delivery 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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Any business case addresses 5 key questions:

The 5 Case Model

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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Management

The 5 key elements of good practice business cases

The 5 Case Model

Financial Commercial

Economic

Strategic

Compelling case for change - strategic fit & business needs

Preferred option optimises value for money

Commercially viable

Affordable within available funding

Achievable and can be successfully delivered

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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

Confirm supplier offering best value, detailed

commercials, confirm affordability. detailed

management and delivery arrangements

Implementation Business Case

S E C F M

Confirm best value for money option,

outline potential deal and delivery plan,

assess affordability.

Detailed Business Case

S E C F M

Confirm way forward with short-listed options (consider

non-traditional procurement)

Indicative Business Case

S E C MF

Confirm fit with strategy and need to invest

Strategic Assessment

Portfolio or programmeS

Confirm case for change, preferred programme, project tranches, funding

Programme Business Case

S E C F M

Project/s (Large scale and/or high risk)


S

Confirm fit with strategy and the need to invest

Single Stage Business Case

S E C F M


SProject/s (Other)

The level of emphasis of each of the five cases depends on the type of business

case

Also the single stage (light)

business case

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Error! Unknown document property name.

BBC Process fit with Policy, Programme and Project management

BBC Process fit with Procurement process

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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)

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)

Webinar Communities of practice by sector for Practitioners supported by BBC Experts

Endorsed BBC Expert Practitioners and Reviewers pilot

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National evaluation and way forward

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2013 National Evaluation-findings

Positive impact on decision making Overwhelming agreement positive impact enabling ‘value

for money’ investment decisions, with confidence

Process most effective when applied by experienced people

Current BBC training will not produce mastery

Strong plea to help develop internally (Governance, writing, modelling, critical thinking,

stakeholder engagement)

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2013 National Evaluation - MoF’s view

• Been effective

• 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

• 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 webinar 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 Policy/Strategy

Provide advice to improve reviewer 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

In the case of fairy tales

Not too hot/not too cold

Just right

In the case of life on planets

Not too close/not too far away

In the case of Better Business Cases

Not enough effort/too much effort

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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 then the type of business case

• Right sizing the capacity/capability of the team

• Right sizing the effort and engagement

• What decision is being sought

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Business Case Capability

Content e.g. service

delivery

Assurance and Decision

Making e.g. monitoring

function

Business Case e.g. Cost/Benefit

analysis, Commercial

advice, Financial modelling etc

Change mgmte.g. stakeholder

engagement

Stakeholder Focus

Subject Matter Focus

Project Management

Governance

Low High

Influence

EmpowerMass Communication

Co-production

High

Pow

er a

nd In

fluen

ce

Change Impact

Stakeholder Engagement

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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 function’s needs

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Types of business cases

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Project Strategic Assessment




Programme Strategic Assessment Programme Business Case

Single Stage Business CaseProject Strategic Assessment

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Strategic assessmentPurpose:• 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 assessmentStrategic Case-Making the Case for ChangeOutline 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 in the driver/problem and benefits (2 hour) workshops . If state sector capital project must use “Investment Logic Mapping” ILM facilitator, otherwise use other tools and people which challenge the thinking. Invite writer and reviewer.

Strategic

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Programme Business CasePurpose:• Confirm the strategic context• Confirm the case for change• Recommend a preferred programme• Identify project tranches• 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 CaseStrategic Case-Making the Case for ChangeRevisit the strategic context and confirm case for changeInvestment objectives, existing arrangements and business

needs Potential business scope and requirementsBenefits, risks, constraints and dependencies

Senior stakeholders set the SMART “Investment Objectives” together in one or more two hour facilitated workshops, with a BBC Practitioner or BBC Expert Practitioner. Invite writer and reviewer.

Strategic

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Economic Case-Exploring the Preferred Way ForwardCritical success factorsProgramme options systematically identified and

assessed by dimension:• Scale, scope and location (what)• Service solution (how)

Economic

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 programmeInvite Writer and Reviewer

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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

rough order costs and potential funding sources

Management Case• Outline how the programme is intended to be

delivered, including project tranches

Commercial

Financial

Management

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Indicative Business CasePurpose• 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

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Strategic Case-Making the Case for ChangeRevisit strategic context and confirm case for changeInvestment objectives, existing arrangements and business

needs Potential business scope and key service requirementsBenefits, risks, constraints and dependencies

Strategic

Senior stakeholders set the SMART “Investment Objectives” together in one or more two hour facilitated workshops, with a BBC Practitioner or BBC Expert Practitioner. Invite reviewer and writer

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Indicative Business CaseEconomic Case-Exploring the Preferred Way ForwardCritical success factorsLong-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 ,then• Assess long list to short list of no more than 5 options Invite Procurement expert re service delivery, industry association re solutions, writer and reviewer

Economic

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The long list to short list of options (example)Reference to SCO1 SCO2 SCO3 SCO4 SOL1 SOL2 SOL3 SOL4 SDO1 SDO2 SDO3 SDO4 IMP1 IMP2 IMP3 IMP4

Description of option Do Nothing Minimum Intermediate Maximum Discrete Integrated Regionally

Integrated Nationally

Regional and

National Network

In house Partially managed (led by

[MINISTRY])

Partially managed (led by

commercial supplier)

Fully outsourced

to commercial suppliers

Phased nationally

by discipline

System phased by

site

System phased by

region

National implementa

tion

Investment Objectives

Full supported netw ork MIMS available for implementation by X

No No Yes Yes No Partial Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Support improved clinical data and management information flow s

No No Yes Yes No Partial Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Improve the functionality and flexibility of the Pathology IT system to meet current and future needs

No Partial Yes Yes No Partial Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Critical Success Factors

Business Need No No Yes Yes No Partial Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Strategic Fit No No Yes Yes No Partial Yes Yes Yes Yes Yes Partial Yes Yes Yes Yes

Benefits Optimisation No No Yes Yes No Partial Yes Yes Yes Partial Yes Partial Yes Yes Yes Yes

Potential Achievability Partial Yes Yes Partial Partial Yes Yes No Partial Partial Yes Partial No Yes No No

Supply-side capability and capability

Partial Yes Yes Partial Yes Yes Yes Partial Partial Partial Yes Partial Yes Yes Yes Yes

Potential Affordability No No Yes Partial Partial Yes Yes No No Yes Yes No Yes Yes Yes Yes

Summary Continued for VFM

Discounted Preferred Possible Discounted Possible Preferred Discounted Discounted Possible Preferred Discounted Discounted Preferred Discounted Discounted

Options progressed to the shortlistAs the CSFs are crucial (not desirable) any options that had a CSF scoring a "No" are discounted

Option Title

Option 0 Do Nothing

Option 1 Intermediate Scope - Regional Option 2 Intermediate Scope - National IntegrationOption 3 Maximum Scope - Regional Integration

Option 4 Maximum Scope - National Integration

Implementation Options

SCO1 Do Nothing

SOL2 Integrated Regionally

SOL3 Integrated Nationally

IMP2 Phased by site

IMP2 Phased by site

SOL2 Integrated Regionally

Scoping Options Service Solution Options

* A capability analysis of the [MINISTRY} will be conducted to see if SDO4 Partially managed (led by [MINISTRY]) is a possibility. Based on present incomplete information this does not appear to be a viable option.

SOL3 Integrated Nationally

SCO3 Intermediate

SCO3 Intermediate

SCO4 Maximum

SCO4 Maximum

Service Delivery Options

IMP2 Phased by site

IMP2 Phased by site

SDO3 Partially managed (led by commercial supplier)*




Refer Note

below

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Indicative Business CaseCommercial, 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

Commercial

Financial

Management

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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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Strategic Case (Revisit)Revisit the indicative business case

Strategic

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Economic caseEconomic assessment of the short-listed options (or

preferred non-traditional procurement option)Intangible benefits and costsRisk and uncertaintyPreferred option and undertake sensitivity analysis

Economic

Stakeholders identify, weight and score the short-listed options against any intangible benefits and costs

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Analysis of the short-listed optionsOption 1: Do

NothingOption 2: Do

MinimumOption 3: Preferred

Minus

Option 4: Preferred

Way ForwardOption 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

Present Value of Benefits ($m) 2 25 75 115 126

Present Value of Costs ($m) 7 23 40 52 73

Benefit Cost ratio 0.3:1 1.1:1 1.9:1 2.2:1 1.7:1

Net Present Value (NPV, $m) (5) 2 35 63 53

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 3Preferred option Yes

Economic

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Detailed Business CaseCommercial case – Preparing for the Potential Deal

Procurement strategyService requirementsRisk allocationPayment mechanismsContractual and other issues

Financial case – Ascertaining Affordability and Funding Requirements

The financial costing model

Commercial

Financial

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Management case – Planning for Successful DeliveryProject management planningChange management planningBenefits management planningRisk management planningPost-project evaluation planning

Management

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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

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Implementation Business CaseStrategic and Economic Case (Revisit)Revisit the case for change

Revisit the detailed business case options

Strategic

Economic

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Commercial case – Preparing for the Potential DealEvaluation of best and final offersThe negotiated deal and contractual

arrangements

Financial case – Ascertaining Affordability and Funding Requirements

Financial implications of the deal

Commercial

Financial

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Management case – Planning for Successful DeliveryFinalise project management arrangementsFinalise change arrangementsFinalise benefit managementFinalise risk managementFinalise contract arrangementsFinalise post-project evaluation arrangements

Management

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• 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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Examples, top ten lessons learnt and questions

ExamplesSector adoption/adaption• NZ Transport Agency- National Land Transport ProgrammeOrganisation adoption• Inland Revenue• NZ Defence ForceInfrastructure projects• Facility• A bridgeInfrastructure programmes• Auckland Transport• Christchurch Horizontal Infrastructure RebuildSocio-economic programmes• Auckland Early Childhood• Auckland Skills

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Top ten lessons learnt1. Think carefully the extent to which BBC is mandated and/or voluntary

2. BBC challenges unclear and/or un-agreed strategy

3. BBC is a thinking stakeholder campaign, with some analysis , not a writing process

4. Programme Business Case challenges strategic and/or operational policy tradeoffs

5. Programme Business Cases challenges quality of governance

6. Up-skill Public Sector so they can smartly procure consultancy support (Some over reliance on big consultancy firms brand)

7. Doing the thinking with a range of stakeholders can take time sometimes under compressed timeframes (and secrecy)

8. Make sure the Reviewer function is strong- say no early

9. Everyone wants to adapt the approach-need to manage that

10. BBC fits within a wider Investment Management System

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Expectations close out

Better Business Cases “Investing for change” Foundation Course

Documents