Transcript Better Business Cases Detailed 2012

Better Business Cases
Detailed
2012
© The Treasury
1
Agenda
Overview
• Context: Capital Asset Management
• Why, when it applies, and what is expected
• The 5 Case Model
• The process
• Who is involved early
• Where to get support
UK Lessons Learnt
More about the 5 Case Model
More about the process
Business case deliverables
– Strategic Assessment
– Programme Business case
– Indicative Business case
– Detailed Business case
– Implementation plan
2
Overview
© The Treasury
3
Context: Capital Asset Management
The Capital Asset Management (CAM) Framework was endorsed by Cabinet 2008
•
Better Capital Planning-early visibility of decisions needed
•
Better Business Cases (BBC)-good information to inform decisions
•
Better Monitoring and Assurance
•
Better Reporting
Focussed first on Better Capital Planning, based on Policy and strategy.
Then focused on BBC, adapted from international good practice from:
•
Victoria (Australia) for Investment Logic Mapping for early problem
definition and benefit identification
•
UK for 5 Case Model and staged BBC approach
Currently reviewing Monitoring and Assurance
4
Why better business cases?
Better business cases lead to:
•
better decisions
•
better investments
•
achievement of better outcomes..
Key stakeholders include:
•
Decision makers- better evidence-based assurance value for money
•
Management-early engagement on direction
•
Business case developers-clear expectations and support
•
Reviewers-early engagement and common language
•
Private sector service providers-early market soundings and clearly
specified service requirements
5
Overview: When does it apply?
All capital proposals from Departments, Crown Agents and other Crown
Entities, which meet one or more of the following criteria:
• Access to new Crown funding
• Public Private Partnerships (excluding other Crown Entities)
• $25 million whole-of-life cost (Departments only)
• “High risk” per Risk Profile Assessment (Departments/Crown Agents only)
• Asset disposals with significant
policy decisions
Also being used by the Canterbury
Earthquake Recovery Authority to
Inform investment decisions on the
Recovery Strategy.
Consider using as a good practice
approach to inform decision making
6
Overview: What is expected?
If a proposal requires approval:
• Two-stage process for high risk and/or large scale projects
- Stage 1: Based on the Indicative Business Case
- Stage 2: Based on Detailed Business Case
•
Single stage process for non high risk/low scale
•
Application of the 5 case model
Potential use of Programme Business Case if the project/s are part of a wider
programme
The process is about
thinking not writing
7
The 5 Case Model
Any business case addresses 5 key questions:
1. Is there a compelling case for change?
2. Does the selected option optimise public value?
3. Is the potential Deal achievable and attractive to the market place?
4. Is the spending proposal affordable?
5. How will the proposal be delivered successfully?
8
The 5 Case Model
The 5 key elements of good practice business cases
Applicable strategic fit &
business needs
Achievable –
can be
successfully
delivered
Strategic
Management
Economic
Affordable – within
budget
Financial
Commercial
Appropriate –
optimises
public value
Attractive – to
supply side and
feasible
9
How it works ? (the process)
Programme Strategic
Assessment
Problems
Programme Business Case
Strategic fit.
Benefits
Best public value programme and
mix of projects.
Based on Victoria ILM
Affordable .
Project
Strategic
assessment
Project Detailed
Project Indicative
Business case
Problems
Strategic fit.
Benefits
Best public value
long to shortlist
of 5 options.
Based on
Victoria ILM
Preferred option
attractive to
supply side (nontraditional
procurement),
affordable and
achievable.
Business case
Revisit strategic
fit.
Best public value
option of the
short list. For
preferred option
prepare for the
deal , ascertain
affordability and
plan for delivery.
Stakeholders
do the
thinking
together
Project
Implementation
plan
Revisit strategic
fit and best
public value
option.
Contracting for
the deal.
Ensuring
successful
delivery.
10
Who needs to be involved early?
The Better Business Cases process is most successful when:
•
Agencies engage with central and monitoring agencies (reviewers) in the early
stages of each business case deliverable to ensure the business case will be fit
for purpose. Agreement will be sought on:
– Type of business case
– Timing and nature of decisions required
– Scale and risk of the proposal
– Scope of analysis required for each case-including reviewers
criteria/evidence
– Level of effort and cost for development and assurance
– Scope of the engagement during the development of the business case
Use the scoping document to
secure early agreement
11
Where to get support
Treasury provides the following support:
Products (overview)
http://www.infrastructure.govt.nz/publications/betterbusinesscases
–
Quick Reference Guide
A review is performed
early each calendar
–
Power point presentation
year and a revised
–
Online module (website only)
version published in
July
–
Overview booklet (including scoping document)
Products (detail)
http://www.infrastructure.govt.nz/publications/betterbusinesscases
–
Guidance booklets for each type of business case
–
Templates for each type of business case (word doc’s and A3 presentations)
–
List of agency business case examples (public sector intranet only)
Training (Monthly in Auckland, Wellington, Christchurch from August)
–
One hour Awareness seminar for senior managers
–
Half day knowledge based training “Foundation Course”
–
Full day skills based “Practitioners Course” and Reviewers Course”
–
Communities of practice to exchange experiences with peers
12
Enhancements planned for July 2012
–
Revisit brand so it differentiates between who owns BBC and who can use
BBC,
–
Make guidance more generic and applicable to a wider range of applications,
–
Reinforce importance of investment objectives, options and realistic do
minimum,
–
Redefine the value propositions by stakeholder group,
–
Better demonstrate the flexibility and scalability,
–
Demonstrate how the feasibility study, design, develop etc process aligns ,
–
Place more prominence on early engagement with reviewers (scoping
document),
–
Improve how best to use the workshops to engage stakeholders during
process,
–
Only require first two ILM workshops (problems and benefits) for strategic
assessment
13
UK Lessons Learnt
© The Treasury
14
Lessons from the UK
Lessons from the UK (ctd)
Where we started, some common problems…
• £ billions of invested without effective business cases
• Solution based, not needs based investment
• Retrospective approvals
– spend then ask
• Lack of interrogation
– ask then get
• Budgeting to availability, not need
– get then spend
• Negotiations seen as barrier to delivery – spend then go
• Management of delivery weaknesses – go wrong…
• Sceptical Treasury
• Low value investment
Lessons from the UK (ctd)
The introduction of a structured
methodology to develop and present
business cases (5 Case Model) has
resulted in:
•
•
•
•
•
•
•
Greater strategic alignment
Reduced cost (40%)
Improved efficiency and throughput
Improved outcomes
Lower delivery risks
Better evidenced VfM
Realistic and achievable “do
minimums”
Lessons from the UK continued
• 5 case model in action
Wales: 21st Century Schools Programme
• 22 Local Authorities, 1800 schools
• 20%+ surplus places
• £4Bn+ backlog maintenance
• Drip feed funding to all (whether they needed it or not…)
• Low National government – local government trust
Lessons from the UK continued
• 5 case model in action
Wales: 21st Century Schools
Programme
• One National programme
• Multi-decade £6 billion investment
• Co-owned by Local and National government
• High trust (plan and wait your turn)
Lessons from the UK continued
• 5 case model in action
Wales: 21st Century Schools
Programme
Impact of embedding 5 case model:
•Strong strategic alignment, within
projects, programmes, portfolios
•Rigorous option analysis – ‘do minimums’
•Maximise funding efficiency
•£bns commercial negotiations- milk the
supply chain
•Infrastructure delivery excellence
Lessons from the UK continued
• Key cultural changes
• Strategic clarity
• Shared ownership between stakeholders,
understanding respective roles eg
• Funder
• Deliverer
• Asset owner
• Actively plan, oversee and amend at all
stages
• Understand who benefits and how
• Live within means and get as much as
possible
• Scrutiny, assessment & oversight is an
investment
• Love your delivery chain – maximise the
value of your contracts
• Deliver superbly
More about the 5 case model
© The Treasury
22
The 5 Case Model
Addresses 5 key questions
1. Is there a compelling case for change?
2. Does the selected option optimise public value?
3. Is the potential Deal achievable and attractive to the market place?
4. Is the spending proposal affordable?
5. How will the proposal be delivered successfully?
23
The 5 Case Model
The 5 key elements of best practice business cases
Applicable strategic fit &
business needs
Achievable –
can be
successfully
delivered
Strategic
Management
Economic
Affordable – within
budget
Financial
Commercial
Appropriate –
optimises
public value
Attractive – to
supply side and
feasible
24
The five case model
Strategic Case
Strategic Context
• Organisational Overview
• National Policies & Strategies
• Local & Organisational Strategies
25
The five case model
Strategic Case
Case for change
• Investment Objectives – SMART
• Existing Arrangements – Current arrangements
• Business Needs – Problems
• Potential Scope – Solutions
• Main Benefits – by stakeholder group
• Key Risks – business & service
• Constraints and Dependencies
26
The five case model
Strategic Case
Investment Objectives
• Economy
• Efficiency
• Effectiveness
• Re-procurement
• Statutory Compliance
27
The five case model
Economic Case
• Critical success factors
• Options - Long list
• Options - Short-list
• Identify Preferred Option
• Cost Benefits Analysis (CBA)
• Risk Analysis $
• Sensitivity Analysis
28
The five case model
Critical Success Factors
• Strategic fit
• Business Needs
• Benefits Optimisation
• Supply-side capacity and capability
• Potential Achievability
• Potential Affordability
29
The five case model
Economic Case - Options
Long-list (12) - Preferred way Forward (PSC)
• Investment Objectives
• Critical Success Factors (CSFs), inc. benefit criterion
Short-list (5) – looking for Preferred Option
• Costs, benefits and risks $
• Sensitivity analysis
30
The five case model
Options Framework
• Scope (coverage: who, what, where etc)
• Service Solution - (how: technical)
• Service Delivery - (who: provider)
• Implementation - (when: phasing & time)
• Funding (how: $)
Preferred Way Forward
31
The five case model
Economic Appraisal
• Do Nothing/Min
• Cost Benefit Analysis
• Option 2 – PWF
• Qualitative Benefits
(rank, weight, score)
• Option 3 – Other
• Option 4 - Other
• Preferred Option
• Risk Quantification
(£ or rank/weight)
• Sensitivity Analysis
(switching values etc)
The five case model
Commercial Case
•
Procurement Strategy
•
Scope and related services
•
Risk transfer
•
Charging/payment mechanism
•
Key contractual clauses & length
•
Personnel implications (TUPE)
•
Supplier’s implementation time-scales
•
Accountancy treatment (FRS 5)
33
The five case model
Financial Case
• Capital and revenue requirements
• Net effect on prices
• Impact on Balance Sheet
• Impact on Income and Expenditure Account
• Overall Funding and Affordability
34
The five case model
Management Case
• Project management planning
• Change management planning
• Benefits management planning
• Risk management planning
• Post evaluation planning
35
More about the process
© The Treasury
36
The Process: starting with a capital plan
37
Fit with Portfolio management
Portfolio
definition
Balance
Funders
Plan
Organisation
al energy
Project management
Activities
Governance
Under
stand
Prioritise
Programme management
Plans
Portfolio management
Strategy
Categorise
Organisations
charged with
delivery
Portfolio
delivery
Service
providers
38
Strategic Assessment
Better Business Cases for Capital Proposals Toolkit: Strategic Assessment
© The Treasury
39
Strategic assessment
• What is it for?
• When is it needed?
• What is involved?
• Either at project or programme level
Refer to the BBC Toolkit: Strategic Assessment booklet available on:
http://www.infrastructure.govt.nz/publications/betterbusinesscases/strategic
assessment
40
Strategic assessment
Strategic Case-Making the Case for Change
Action 1: The case for change
• Identify the core reason that underpins the service need by identifying :
- the problem?
- the best strategic response?
- benefits that need to be delivered?
Stakeholders do the
thinking together in
three two hour
workshops led by an
“Investment Logic
Mapping” ILM
facilitator
41
Programme Business Case
Better Business Cases for Capital Proposals Toolkit: Programme Business Case
© The Treasury
42
Programme business case
• What is it for?
• When is it needed?
• What are the actions?
Refer to the BBC Toolkit: Programme Business Case booklet available on:
http://www.infrastructure.govt.nz/publications/betterbusinesscases/programme
businesscase
43
Programme business case
Strategic Case-Making the Case for Change
Action 2: Strategic Context
Action 3: Investment Objectives, existing arrangements and business needs
Action 4: Potential business scope
Action 5: Benefits, risks, constraints and
dependencies
Stakeholders do the
strategic case
thinking together in
a two hour workshop
led by a facilitator.
44
Programme business case
Economic case
• Identifying and assessing the main programme options (key trade offs) for
delivering required services (scope, service solution, service delivery ,
implementation, funding)
Stakeholders do the economic case thinking together in a workshop led by a facilitator
Commercial case
• Likely attractiveness to potential service providers (high level consideration of
alternative procurement)
Management Case
• Based on the preferred programme option determine the mix of projects, the
dependencies, tranches and bundles
Stakeholders do management case thinking together in a workshop led by a facilitator
Financial case
• Determine rough order costs and potential funding sources
45
Project Indicative Business Case
Better Business Cases for Capital Proposals Toolkit: Indicative Business Case
© The Treasury
46
Indicative business case
• What is it for?
• When is it needed?
• What are the actions?
• Refer to the BBC Toolkit: Indicative Business Case booklet available on:
• http://www.infrastructure.govt.nz/publications/betterbusinesscases/indicati
vebusinesscase
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
47
Indicative business case
Strategic Case-Making the Case for Change
Action 2: Strategic context
• Demonstrates alignment with organisation’s, government’s priorities and goals
Stakeholders do the
entire strategic case
thinking together
in a two hour
workshop led by a
facilitator.
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
48
Indicative business case
Strategic Case-Making the Case for Change
Action 3: Investment objectives, existing arrangements and business needs
• Existing arrangements-where the organisation is now
• Business needs-Difference between where the organisation wants to be and where it is
highlighting problems, difficulties and inadequacies and future changes in the demand for
services
• SMART Investment objectives that clearly relate to action 2 and are either about improving
effectiveness, efficiency, or reducing cost, or are for re-procurement ,or to meet a regulation
• Action 7 to assess each of the long list of options against theses investment objectives
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
49
Indicative business case
Strategic Case-Making the Case for Change
Action 4: Key service requirements potential business scope
• Set out the boundaries or limitations
• Highlight the required services
• Forms the basis of the ‘statement of
needs’ or ‘statement of service
requirements’
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
50
Indicative business case
Strategic Case-Making the Case for Change
Action 5: Benefits, risks, constraints and dependencies
• Basis for option selection and evaluation
• Benefits:
- Direct/indirect, monetary/non-monetary and quantitative/qualitative
- Measure against relevant benefits criteria
• Risks :
- Identify sources, impacts and potential consequences
- Emphasis on 20% of risks which will account for 80% of the total risk
• Constraints
• Dependencies
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
51
Indicative business case
Economic Case-Exploring the Preferred Way Forward
Action 6: Critical success factors
• Attributes essential to successful delivery of the proposal
• Crucial and set at a level which does not exclude important options
• Assess each option against these
factors, the investment objectives
and the benefits criteria
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
52
Indicative business case
Economic Case-Exploring the Preferred Way Forward
Action 7: Long-list options and initial options assessment
• Consider all realistic options within each dimension
• Consider the options against the investment objectives and critical success factors
Stakeholders do the
economic case (and
action 6) thinking
together in 2 two-hour
workshops led by a
facilitator and a
procurement expert.
• Prepare long list
• Assess long list to
short list
(Consider inclusion of
industry)
Dimensions
Details
Scale, scope and
location
What levels of coverage are possible?
Service solution
How can services be provided?
Service delivery
Who can deliver the services? Are there
alternative procurement options for the
delivery of public services?
Timing and staging
When can services be delivered?
Funding
How can it be funded? Are there alternative
procurement options funding?
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
53
Alternative procurement relationship spectrum
Distant?
Close?
Immediate
Establishment
Last Minute
Engagement
Early
Short
Duration
Long
Tactical
Approach
Strategic
Deal focus
Poor
Reactive
Low
Rarely done
Separate
Commitment
Information exchange
Openness
Planned
Mutual value
Good
Forward thinking
Trust
High
Risk assessment
Joint
Risk management
Shared
54
The long list of options (example)
Scoping Options
Reference to
Service Solution Options
Service Delivery Options
SCO1
SCO2
SCO3
SCO4
SOL1
SOL2
SOL3
SOL4
SDO1
Do Nothing
Minimum
Intermediate
Maximum
Discrete
Integrated
Regionally
Integrated
Nationally
Regional
and
National
Network
In house
Full supported netw ork MIMS
available for implementation by
X
Support improved clinical data
and management information
flow s
Improve the functionality and
flexibility of the Pathology IT
system to meet current and
future needs
Critical Success Factors
No
No
Yes
Yes
No
Partial
Yes
Yes
Yes
Yes
Yes
No
No
Yes
Yes
No
Partial
Yes
Yes
Yes
Yes
No
Partial
Yes
Yes
No
Partial
Yes
Yes
Yes
Business Need
No
No
Yes
Yes
No
Partial
Yes
Yes
Strategic Fit
No
No
Yes
Yes
No
Partial
Yes
Yes
Benefits Optimisation
No
No
Yes
Yes
No
Partial
Yes
Potential Achievability
Partial
Yes
Yes
Partial
Partial
Yes
Supply-side capability and
capability
Potential Affordability
Partial
Yes
Yes
Partial
Yes
Yes
No
No
Yes
Description of option
SDO2
SDO3
Im plem entation Options
SDO4
IMP1
IMP2
Phased
nationally
by
discipline
System
phased by
site
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Partial
Yes
Yes
Yes
Yes
Yes
Yes
Partial
Yes
Partial
Yes
Yes
Yes
Yes
Yes
No
Partial
Partial
Yes
Partial
No
Yes
No
No
Yes
Partial
Partial
Partial
Yes
Partial
Yes
Yes
Yes
Yes
Yes
No
No
Yes
No
Yes
Yes
Yes
Yes
Partially
Partially
Fully
managed
managed outsourced
(led by
(led by
to
[MINISTRY]) commercia commercia
l supplier) l suppliers
IMP3
IMP4
System
National
phased by implementa
region
tion
Investm ent Objectives
Summary
Continued Discounted Preferred
for VFM
Partial
Partial
Yes
Possible
Discounted
Possible
Yes
Preferred Discounted Discounted
Options progressed to the
shortlist
As the CSFs are crucial (not
desirable) any options that
had a CSF scoring a "No" are
discounted
Possible
Preferred Discounted Discounted Preferred Discounted Discounted
Refer
Note
below
Option Title
Option 0 Do Nothing
SCO1 Do Nothing
Option 1 Interm ediate
Scope - Regional
Option 2 Interm ediate
Scope - National
Integration
Option 3 Maxim um Scope Regional Integration
SCO3 Intermediate
SOL2 Integrated Regionally
SCO3 Intermediate
SOL3 Integrated Nationally
SCO4 Maximum
Option 4 Maxim um Scope National Integration
SCO4 Maximum
SDO3 Partially managed (led by commercial
supplier)*
SDO3 Partially managed (led by commercial
supplier)*
IMP2 Phased by site
SOL2 Integrated Regionally
SDO3 Partially managed (led by commercial
supplier)*
IMP2 Phased by site
SOL3 Integrated Nationally
SDO3 Partially managed (led by commercial
supplier)*
* 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.
IMP2 Phased by site
IMP2 Phased by site
55
Indicative business case
Commercial, Financial and Management Cases (Outline)
Action 8: Recommended preferred way forward, if conventional procurement
• At least three short-listed options, including a base case option
• Provide range of indicative cost estimates for each short-listed option
• Make allowance for optimism bias
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
56
Indicative business case
Commercial, Financial and Management Cases (Outline)
Action 8a to d: Recommended preferred way forward, if alternative procurement is part of the
short-listed options
Action 8a: Joint Ministers approve to proceed with more detailed economic assessment of the
short-listed options
Action 8b: Undertake detailed economic analysis
Action 8c: Approach the market
Action 8d: Recommend preferred option with other
• procurement options for further assessment in DBC
•
proceed to DBC
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
57
Project Detailed Business Case
Better Business Cases for Capital Proposals Toolkit: Detailed Business Case
© The Treasury
58
Detailed business case
• What is it for?
• When is it needed?
• What are the actions?
• Refer to the BBC Toolkit: Detailed Business Case booklet available on:
• http://www.infrastructure.govt.nz/publications/betterbusinesscases/detailedbusi
nesscase
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
59
Detailed business case
Strategic Case (Revisit)
Action 9: Revisit the indicative business case
• Strategic case
- Note changes made to underlying assumptions
• Economic case
- Review the long-list and preferred way forward
- Consider impact of changes to the assumptions
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
60
Detailed business case
Economic case
Action 10: Economic assessment of the short-listed options or preferred alternative procurement
option
• Identify and monetise costs and benefits from Indicative Business Case
• use cost-benefit analysis (CBA), from national perspective, to assess options
Action 11: Intangible benefits and costs
• Identify and explain intangible costs and benefits from Indicative Business Case
• If quantitative and/or, qualitative use multi-criteria analysis (MCA) to assess options
• Or describe those that cannot be monetised or quantified
Stakeholders do the
economic case
thinking together
in a two hour
workshop led by a
facilitator.
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-3561
Detailed business case
Economic case
Action 12: Risk and uncertainty
• Consider using quantitative risk analysis to understand the range of
• uncertainty inherent within the cost/benefit
• analysis
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
62
Detailed business case
Economic case
Action 13: Preferred option and undertake sensitivity analysis
• Identify the preferred option
• Fully involve stakeholders
• Use sensitivity analysis to test robustness of the options analysis
• Make it clear to decision makers the assumptions and sensitivities of the assumptions
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
63
Analysis of the short-listed options
Option 4:
Preferred
Way Forward
Option 5:
Preferred Plus
20
20
20
22.5
23.9
31.6
45.7
24.2
49.7
70.7
90.9
Option 1: Do
Nothing
Option 2: Do
Minimum
Appraisal Period (years)
20
20
Capital Costs ($m)
0.0
14.4
Whole of Life Costs ($m)
Option 3:
Preferred
Minus
Cost-Benefit Analysis of monetary costs and benefits at the Public Sector Discount Rate
Present Value of Benefits
($m)
2
25
75
115
126
Present Value of Costs
($m)
7
23
40
52
73
0.3:1
1.1:1
1.9:1
2.2:1
1.7:1
(5)
2
35
63
53
Benefit Cost ratio
Net Present Value (NPV,
$m)
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
Preferred option
3
2
5
Yes
1
3
64
Detailed business case
Commercial case – Preparing for the Potential Deal
Action 14: Procurement strategy
• Focus on how to procure the required services of the preferred option
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
65
Detailed business case
Commercial case – Preparing for the Potential Deal
Action 15: Service requirements
• Scope and content of the potential deal
• Specify desired outcomes and outputs
• Specify quality attributes and performance measures
• Allow scope for service provider innovations
Action 16: Risk allocation
• Consider how risks are apportioned between the public and private sectors
• Allocate risk to the party best able to manage it
• Incentives for the private sector to supply timely, cost-effective and innovative solutions
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
66
Detailed business case
Commercial case – Preparing for the Potential Deal
Action 17: Payment mechanisms
• Reflect the balance between risk and return
• Relate payment to delivery of service outputs and performance of providers
• Incentivise providers in three stages
1. Pre-delivery stage
2. Operational stage
3. Extension stage
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
67
Detailed business case
Commercial case – Preparing for the Potential Deal
Action 18: Contractual and other issues
• Contractual arrangements for the procurement
• Identify standard form of contract used
• Provide details of the accountancy treatment
• Identify any personnel implications to the investment proposal
Financial case – Ascertaining Affordability and Funding Requirements
Action 19: The financial costing model
• Consider Crown-related cash flows and accounting charges
• Specialist accounting capability required
• Detail the capital and revenue requirements for the preferred option
• Compare prices and quality levels of services offered by providers
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
68
Detailed business case
Management case – Planning for Successful Delivery
Action 20: Project management planning
• Strategy
• Based on best practice programme management principles and project methodologies
• Framework
• Summarise how the project is organised including structure, reporting and governance
• Plan
• Address deliverables, activities, resources, dependencies and reviews
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
69
Detailed business case
Management case – Planning for Successful Delivery
Action 21: Change management planning
• Strategy – assess the potential impact of proposed changes
• Plan – provided for significant change management programmes
Action 22: Benefits management planning
• Management arrangements to ensure that expected benefits are monitored and realised
• Strategy – arrangements for identification of benefits, their planning, modelling and tracking
• Framework – assigns responsibilities for realisation of benefits
• Benefits register – details significant benefits expected as part of the economic case
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
70
Detailed business case
Management case – Planning for Successful Delivery
Action 23: Risk management planning
• Risk mitigation can lower the expected costs
• Strategies:
- Identify risk and put response mechanisms in place
- Create processes to monitor and report risks
- Create an issues log
• Risk management:
- Establish a risk management framework
- Senior management support, ownership and leadership
- Communication of risk management policies
- Embed risk management into business processes
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
71
Detailed business case
Management case – Planning for Successful Delivery
Action 24: Post-project evaluation planning
• Strategy:
- Improves project evaluation
- Determines whether project has delivered improvements and benefits
- Outlines the strategy for both aspects of post-project evaluation
• Framework – management arrangements to ensure that the evaluation takes place
• Plan – timing for post-project evaluation arrangements
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
72
Project Implementation Plan
Better Business Cases for Capital Proposals Toolkit: Implementation Plan
© The Treasury
73
Implementation plan
• What is it for?
• When is it needed?
• What are the actions?
• Refer to the BBC Toolkit: Implementation Plan booklet available on:
• http://www.infrastructure.govt.nz/publications/betterbusinesscases/imple
mentationplan
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
74
Implementation plan
Strategic and Economic Case (Revisit)
Action 25: Revisit the case for change
• Revisit the strategic case – some aspects may have altered
• If not, note in the implementation plan
• If changes have occurred, identify:
- strategic context
- agreed investment objectives
- business needs
- earlier scope and service requirements
- benefits, costs, risks, dependencies and constraints
• If changes are major, effects may require following-up throughout the entire case
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
75
Implementation plan
Strategic and Economic Case (Revisit)
Action 26: Revisit the detailed business case options
• Demonstrate that conclusions of the economic assessment remain valid
• Update business case for any changes
• May impact on ranking and selection of options
• If alternative option is recommended, demonstrate that it offers better value for money
Commercial case – Preparing for the Potential Deal
Action 27: Evaluation of best and final offers
• Include an outline of the assessment of service provider proposals
• Explain any changes
• Record the basis on which the providers were selected and discarded
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
76
Implementation plan
Commercial case – Preparing for the Potential Deal
Action 28: The negotiated deal and contractual arrangements
• Overview of preferred service provider deal
• Explain the:
- service streams and outputs
- implementation timescales
- allocation of risk between the organisation and preferred provider
- underpinning method of payment
- type of contract used and the key contractual issues
- accountancy treatment of the negotiated deal
- personnel implications
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
77
Implementation plan
Financial case – Ascertaining Affordability and Funding Requirements
Action 29: Financial implications of the deal
• Explains the financial implications to the organisation of the negotiated deal
• Layout follows the standard headings for the financial case
• Explain:
- how the charges have been modelled
- capital and revenue implications
- net effect on user charges
- impacts on financial statement
- overall affordability and funding arrangements
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
78
Implementation plan
Management case – Planning for Successful Delivery
Action 30: Finalise project management arrangements
• Revisit and update the project management arrangements
• Support of the design, build and implementation stages
• Latest version of the project plan should be attached
Action 31: Finalise change arrangements
• Revisit and update the change management arrangements and strategy
• Latest version of the change management plan should be attached
• Signed off by stakeholders for the services and indicate customer
Action 32: Finalise benefit management
• Revisit and update the benefits realisation arrangements
• Strategy for realisation of benefits should be revisited and re-affirmed
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
79
Implementation plan
Management case – Planning for Successful Delivery
Action 33: Finalise risk management
• Revisit and update the risk management arrangements
• Revisit the strategy for the management of risks
Action 34: Finalise contract arrangements
• Outline the arrangements in place to manage contract change
• Consider the strategy for managing future contractual change
• Arrangements should be noted in the implementation plan
Action 35: Finalise post-project evaluation arrangements
• Revisit and update the post-project evaluation arrangements
• Record arrangements for future SSC Gateway Reviews at reviews 3, 4 and 5
• Record the arrangements for post-project evaluation
Strategic
assessment
Indicative
business case
Detailed
business case
Implementation
plan
Action 1
Actions 2-8
Actions 9-24
Actions 25-35
80