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© The Treasury 1
Better Business Cases “Investing for change”
Foundation Course
Released by NZ Treasury on 22 January 2015 to APMG for distribution to ATO’s who wish to see the slides that NZ Treasury have used to deliver the NZ BBC
Foundation Course
2
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
© The Treasury 4
Expectations
© The Treasury 5
Background
6
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
7
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 intentions needing investment
1 2 3 4 5 6 7 8 9 10
1
2
3
4
5
6
<$25m $25m to
$100m >$100m<$500m
$500m or greaterImplementation risk = Medium
Implementation risk = High
Implementation risk = Low
BENEFITS
Alig
nm
ent
1 2 3 4 5 6 7 8 9 10
1
2
3
4
5
6
BENEFITS
Ali
gn
men
t
Keep the business running
1 2 3 4 5 6 7 8 9 10
1
2
3
4
5
6
BENEFITS
Ali
gn
me
nt
Grow the business
1 2 3 4 5 6 7 8 9 10
1
2
3
4
5
6
BENEFITS
Ali
gn
me
nt
Transformational change
© The Treasury 9
Why BBC
10
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 !
11
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
© The Treasury 12
What is BBC
13
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
What is BBC and what is expected
“I didn't have time to write a short letter, so I wrote a long one instead”
© The Treasury 14
When BBC applies
15
When does it apply?-Mandated2010
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
16
When does it apply? - Voluntary2012
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
© The Treasury 17
The 5 case model, the BBC process and its fit with other processes
18
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?
19
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
20
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)
Strategic Assessment
S
Confirm fit with strategy and the need to invest
Single Stage Business CaseSingle Stage Business Case
S E C F M
Strategic Assessment
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
21
22
Error! Unknown document property name.
BBC Process fit with Policy, Programme, Project management
BBC Process fit with Procurement process
24
Innovation through procurement
Resourcing
& value-add
© The Treasury 25
Where to get support
26
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
27
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
© The Treasury 28
National evaluation and way forward
29
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.
30
Way forward
© The Treasury 31
Planning the approach to developing the business case
Right sizing the effort and engagement – the scoping
document
32
The Goldilocks Zone
In the case of fairy tales
Not too hot/not too cold
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 life on planets
Not too close/not too far away
In the case of Better Business Cases
Not enough effort/too much effort
In the case of Better Business Cases
Not enough effort/too much effort
33
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
34
Business Case Capability
Content e.g. service
delivery
Assurance and Decision
Making e.g. monitoring
function
Business Case e.g. Economic
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
35
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
© The Treasury 36
Types of business cases
© The Treasury 37
Strategic Assessment
Project Strategic Assessment
Indicative Business Case
Detailed Business Case
Implementation Business Case
Programme Strategic Assessment Programme Business Case
Single Stage Business CaseSingle Stage Business CaseProject Strategic Assessment
38
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
39
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:If state sector intention requiring capital must use ILM facilitator to run the problems and benefits workshopsFor other intentions use other tools and people which challenge the thinking, especially for complex problems. Invite business case writer and reviewer.
Strategic
© The Treasury 40
Project Strategic Assessment
Indicative Business Case
Detailed Business Case
Implementation Business Case
Programme Strategic Assessment Programme Business Case
Single Stage Business CaseSingle Stage Business CaseProject Strategic Assessment
Programme Business Case
41
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
42
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 (trained) or endorsed BBC Expert Practitioner.
Invite writer and reviewer.
Strategic
43
Programme Business Case
Economic Case-Exploring the Preferred Way ForwardCritical success factorsProgramme 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
Economic
Stakeholders do the thinking together in two or more two-hour workshops led by BBC Practitioner or BBC Expert Practitioner :
• Prepare long list of options ,then• Assess long list to preferred programmeBusiness Case team needs to prepare well for the long-list options workshop, esp
“pre-sourcing” analysis of the market re solutions/service delivery optionsInvite writer and reviewer.
44
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
© The Treasury 45
Project Strategic Assessment
Indicative Business Case
Detailed Business Case
Implementation Business Case
Programme Strategic Assessment Programme Business Case
Single Stage Business CaseSingle Stage Business CaseProject Strategic Assessment
Indicative Business Case
46
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
47
Indicative Business Case
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 (trained) or endorsed BBC Expert Practitioner.
Invite writer and reviewer.
48
Indicative Business Case
Economic 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 BBC Practitioner or BBC Expert Practitioner :
• Prepare long list of options ,then• Assess long list to short list of no more than 5 optionsBusiness Case team needs to prepare well for the long-list options workshop, esp
“pre-sourcing” analysis of the market re solutions/service delivery optionsInvite writer and reviewer.
Economic
49
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 f low s
No No Yes Yes No Partial Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Improve the functionality and f lexibility 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)*
SDO3 Partially managed (led by commercial supplier)*
SDO3 Partially managed (led by commercial supplier)*
SDO3 Partially managed (led by commercial supplier)*
Refer Note
below
50
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
© The Treasury 51
Project Strategic Assessment
Indicative Business Case
Detailed Business Case
Implementation Business Case
Programme Strategic Assessment Programme Business Case
Single Stage Business CaseSingle Stage Business CaseProject Strategic Assessment
Detailed Business Case
52
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
53
Detailed Business Case
Strategic Case (Revisit)Revisit the indicative business case
Strategic
54
Detailed Business Case
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
55
Analysis of the short-listed options
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 ($m) 14.4 24.2 49.7 70.7 90.9
Cost-Benefit Analysis of monetary costs and benefits at the Public Sector Discount Rate
Present Value of Benefits ($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 3
Preferred option Yes
Economic
56
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
57
Detailed Business Case
Management case – Planning for Successful DeliveryProject management planningChange management planningBenefits management planningRisk management planningPost-project evaluation planning
Management
© The Treasury 58
Project Strategic Assessment
Indicative Business Case
Detailed Business Case
Implementation Business Case
Programme Strategic Assessment Programme Business Case
Single Stage Business CaseSingle Stage Business CaseProject Strategic Assessment
Implementation Business Case
59
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
60
Implementation Business Case
Strategic and Economic Case (Revisit)Revisit the case for change
Revisit the detailed business case options
Strategic
Economic
61
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
62
Implementation Business Case
Management case – Planning for Successful DeliveryFinalise project management arrangementsFinalise change arrangementsFinalise benefit managementFinalise risk management
Finalise contract arrangements
Finalise post-project evaluation arrangements
Management
© The Treasury 63
Project Strategic Assessment
Indicative Business Case
Detailed Business Case
Implementation Business Case
Programme Strategic Assessment Programme Business Case
Single Stage Business CaseSingle Stage Business CaseProject Strategic Assessment
Single Stage Business Case
64
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