Transcript Better Business Cases: Investing for Change

Better Business Cases
“Investing for change”
Foundation Course
© The Treasury
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Foundation Course objectives
•
•
Sufficient knowledge to understand the business
case development process and the five case model
Able to actively participate in further training:
– Practitioner Course
– Reviewer Course
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9am
Welcome, housekeeping, introductions and expectations setting
9.20am Overview
9.45am The 5 case model and the process
10 am
Morning tea
10.10am Types of business cases
11am
Where to get support, the national evaluation and way forward
11.20am Examples-lessons learnt
11.40 am Questions and answers based on expectations setting - Lunch
12.30pm Workshop – apply 5 case model
12.50pm Expectations close out and evaluation forms
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Expectations
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Overview
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Background
•
Cabinet
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Visibility of future decisions
Confident investment decisions
Treasury response
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Portfolio management
Business case development
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Visibility to inform the portfolio
Opportunity for greater
influence through
better strategy and
planning
10 year view of
intentions
Better
Business
Cases
Projects and
programmes underway
Benefits
Aligning and balancing with direction (govt priorities)
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
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developed
Visibility to prioritise/balance the portfolio
Why do I need to know about Better Business Cases?
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Decision makers/Investors-confidence !
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Management-confidence !
•
Business case developers-fit for purpose
•
Reviewers- fit for purpose
•
Private sector service providers-early engagement
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Why two thirds of programme and projects succeed?
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Strong strategic fit
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Senior management engagement
•
Stakeholder engagement
•
Focus first on value-for-money then funding
•
Supply side engagement
•
Systematic approach
Differences between programmes and projects
We have built these into NZ version of BBC
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What is a better business case and what is expected
What is a Better Business Case?
• BBC (UK) supported by part of ILM tool (Australia)
• Principles
•
•
•
•
•
•
Campaign to deliver benefits, not a document to get money
Thinking not writing
Stakeholder engagement-way of working together
Fit for purpose analysis
Smart procurement of consultancy support
Challenge, coherence and cohesion
What is expected?
• Depends on scale and risk
• 5 case model
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Who is involved
Sponsor engaging early with reviewer on:
•
type of business case required to support the decision
required
• level of effort and stakeholder engagement required
Key “senior” stakeholders do the BBC thinking together:
• highly influential and highly impacted
• include the writer early
• include the reviewer early
• include supply side early
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When does it apply?
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–
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State sector-capital
Canterbury Recovery
National Land Transport Programme
Auckland Plan
Tertiary Education
Local Government
Good practice
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The 5 case model and the process
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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
Achievable and
can be
successfully
delivered
Affordable within
available funding
Compelling case for
change - strategic
fit & business needs
Strategic
Management
Financial
Economic
Commercial
Preferred option
optimises value
for money
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
Portfolio or programme
S
S
Planning and scoping
Strategic
Assessment
E
C
The level of
emphasis of each
of the five cases
depends on the
type of business
case
M
F
Programme Business
Case
Confirm case for change, preferred
programme, project tranches, funding
Confirm fit with strategy
and need to invest
Project/s (Large scale and/or high risk)
S
S
C F M
Indicative
Business
Case
Strategic
Assessment
Confirm fit with
strategy and the
need to invest
E
Confirm way forward
with short-listed
options (consider
non-traditional
procurement)
Project/s (Other)
S
S
E
C
F M
Detailed
Business
Case
S
E
C
F M
Implementation
Business Case
Confirm supplier offering
Confirm best value
best value, detailed
for money option,
commercials, confirm
outline potential deal
affordability. detailed
and delivery plan,
management and delivery
assess affordability.
arrangements
S E C FM
Strategic
Assessment
Single Stage Business
Case
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How BBC fits with Strategy and Policy
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Scale and risk in the State Sector
Risk (SSC Gateway Risk Profile Assessment tool)
High
Low
High Risk/Small Scale
1. Two stage Cabinet approval
2. Breadth: Five cases and 35 actions
3. Strategic Case: ILM required
4. Economic Case: Moderate level of
CBA/MCA, full sensitivity analysis
High Risk/Large Scale
1. Two stage Cabinet approval
2. Breadth: Five cases and 35 actions
3. Strategic Case: ILM required
4. Economic Case: Full CBA/MCA, full
sensitivity analysis
Low Risk/Small Scale
1. Single stage Cabinet approval
(detailed business case)
2. Breadth: Five cases and some
amalgamation of actions
3. Strategic Case : ILM not required
4. Economic Case: Light level of
CBA/MCA, light sensitivity
analysis
Expected to be only submitted
during the Budget process
Low Risk/Large Scale
1. Two stage Cabinet approval.
Cabinet may agree at Stage 1 to
conditionally delegate Stage 2
approval to Joint or responsible
ministers
2. Breadth: Five cases and 35 actions
3. Strategic Case: ILM required
4. Economic Case: Full CBA/MCA,
light sensitivity analysis
Small
$25m
Scale, Whole of Life costs ($million)
Large
BBC Process fit with Policy, Programme and Project
management
Error! Unknown document property name.
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BBC Process fit with Procurement process
Planning the Better Business Case
Right sizing effort – the scoping
document
© The Treasury
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The Goldilocks Zone
In the case of fairy
tales
In the case of life on
planets
In the case of Better
Business Cases
Not too hot/not too
cold
Not too close/not too
far away
Not enough effort/too
much effort
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 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
Subject Matter
Focus
Stakeholder
Management
Stakeholder
Focus
Governance
Change mgmt
e.g. service
delivery
e.g. stakeholder
engagement
Business Case
Assurance
and Decision
Making
e.g. cost/benefit
analysis
Power and Influence
Content
High
Influence
Coproduction
Mass
Communication
Empower
e.g. monitoring
function
Project Management
Low
Change ImpactHigh
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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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Strategic Assessment
Programme
Strategic
Assessment
Project
Strategic
Assessment
Project
Strategic
Assessment
Programme Business
Case
Indicative
Business
Case
Detailed
Business
Case
Implementation
Business Case
Single Stage Business Case
© The Treasury
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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 Case-Making the Case for Change
Outline the strategic context
Strategic
Outline the case for change and need for investment
• Identify the core reason that underpins the service need
by identifying:
- the problem?
- potential benefits of investing?
Senior stakeholders do the thinking
together in the first 2 two-hour ILM
workshops led by an “Investment
Logic Mapping” ILM facilitator
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Programme Business Case
Programme
Strategic
Assessment
Project
Strategic
Assessment
Project
Strategic
Assessment
Programme Business
Case
Indicative
Business
Case
Detailed
Business
Case
Implementation
Business Case
Single Stage Business Case
© The Treasury
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Programme Business Case
Purpose:
• Confirm the strategic context
• Confirm the case for change
• Recommend a preferred programme and way forward
• Identify project tranches
• 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 do the strategic
case thinking together in one or
more two hour facilitated
workshops, with a BBC Practitioner
or BBC Expert Practitioner
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Programme Business Case
Economic Case-Exploring the Preferred Way Forward
Critical success factors
Programme options systematically identified and
assessed by dimension:
Economic
• Scale, scope and location (what)
• Service solution (how)
Senior stakeholders do the economic case thinking together in two or
more two-hour workshops led by a BBC Practitioner or BBC Expert
Practitioner:
• Options identification workshop,then
• Option assessment workshop
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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 nontraditional procurement)
Financial case
• Based on the preferred programme determine
rough order costs and potential funding sources
Management Case
• Based on the preferred programme, determine
the tranches of projects
• Outline how the programme is intended to be
delivered
Commercial
Financial
Management
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Indicative Business Case
Programme
Strategic
Assessment
Project
Strategic
Assessment
Project
Strategic
Assessment
Programme Business
Case
Indicative
Business
Case
Detailed
Business
Case
Implementation
Business Case
Single Stage Business Case
© The Treasury
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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
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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 do the strategic case
thinking together in one or more two
hour facilitated workshops, lead by a BBC
Practitioner or BBC Expert Practitioner
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Indicative Business Case
Economic Case-Exploring the Preferred Way Forward
Critical success factors
Long-list options and initial options assessment by
dimension:
• Scale, scope and location (what)
• Service solution (how)
• Service delivery (who - including non-traditional
procurement options)
• Timing and staging (when)
• Funding (how much)
Economic
Stakeholders do the economic case thinking together in two or more twohour workshops led by a BBC Practitioner or BBC Expert Practitioner :
• Prepare long list (consider inclusion of industry association), then
• Assess long list to short list
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The long list to short 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
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Indicative Business Case
Commercial, Financial and Management Cases
(Outline)
Recommended preferred way forward, if conventional
procurement
Commercial
• At least three short-listed options, including a
base case option
• Provide range of indicative cost estimates for
each short-listed option and funding sources
Financial
• Outline the commercial case
• Outline the management case
Management
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Detailed Business Case
Programme
Strategic
Assessment
Project
Strategic
Assessment
Project
Strategic
Assessment
Programme Business
Case
Indicative
Business
Case
Detailed
Business
Case
Implementation
Business Case
Single Stage Business Case
© The Treasury
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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 and
assess affordability
• Outline a plan for delivering the
proposed project
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Detailed Business Case
Strategic Case (Revisit)
Revisit the indicative business case
Strategic
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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
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
Economic
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
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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
Commercial
Financial case – Ascertaining Affordability and Funding
Requirements
The financial costing model
Financial
47
Detailed Business Case
Management case – Planning for Successful Delivery
Project management planning
Change management planning
Benefits management planning
Management
Risk management planning
Post-project evaluation planning
48
Implementation Business Case
Programme
Strategic
Assessment
Project
Strategic
Assessment
Project
Strategic
Assessment
Programme Business
Case
Indicative
Business
Case
Detailed
Business
Case
Implementation
Business Case
Single Stage Business Case
© The Treasury
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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
50
Implementation Business Case
Strategic and Economic Case (Revisit)
Revisit the case for change
Strategic
Revisit the detailed business case options
Economic
51
Implementation Business Case
Commercial case – Preparing for the Potential Deal
Evaluation of best and final offers
The negotiated deal and contractual
Commercial
arrangements
Financial case – Ascertaining Affordability and Funding
Requirements
Financial implications of the deal
Financial
52
Implementation Business Case
Management case – Planning for Successful Delivery
Finalise project management arrangements
Finalise change arrangements
Finalise benefit management
Management
Finalise risk management
Finalise contract arrangements
Finalise post-project evaluation arrangements
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Single Stage Business Case
Programme
Strategic
Assessment
Project
Strategic
Assessment
Project
Strategic
Assessment
Programme Business
Case
Indicative
Business
Case
Detailed
Business
Case
Implementation
Business Case
Single Stage Business Case
© The Treasury
54
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
55
Where to get support and
the national evaluation and way forward
© The Treasury
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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
57
Where do I get support-book on line ?
Training programme
(Monthly in Auckland, Wellington, Christchurch)
Bi-monthly Hamilton/Rotorua
– Foundation Course (knowledge-half day) free
– Practitioners Course modules 1 and 2 (skills-2 full
days) cost
– Reviewers Course (skills-full day) cost
Tailored support
– Training for high priority public sector
organisations
– Executive intensive session(45 minutes) free
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2013 2013 National Evaluation and way forward
– Evaluation findings
•
Public Sector Organisations
•
Minister of Finance
– Way Forward
•
•
Improve capability of the priority public sector organisations
–
Add case studies and webinar communities of practice
–
Expert Pool pilot
–
Organisational capability pilot
–
Policy/Strategy pilot
Provide advice to improve reviewer capability
Report to Minister of Finance to test long term plan
59
Examples
© The Treasury
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Examples
Sector adoption/adaption
• NZ Transport Agency- National Land Transport Programme
Organisation adoption
• Inland Revenue
• NZ Defence Force
Infrastructure projects
• Facility
• A bridge
Infrastructure programmes
• Auckland Transport
• Christchurch Horizontal Infrastructure Rebuild
Socio-economic programmes
• Auckland Early Childhood
• Auckland Skills
Questions and answers
based on expectations setting
© The Treasury
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•
•
Questions and answers
Based on expectations setting
Typical questions:
– Governance
– Strategy and policy
– Fit with other models
– Strategic assessment/ILM
– Programmes versus projects
– Organisational capability
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Workshop-applying the 5 case model
© The Treasury
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Workshop
•
•
Strategic Assessment indicates:
– Problem: Existing home too small leading to
increased family tension
– Benefits: Less family tension
Open discussion
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The 5 Case Model
The 5 key elements of good practice business cases
Achievable and
can be
successfully
delivered?
Affordable within
available funding?
Compelling case for
change - strategic fit
& business needs?
Strategic
Management
Financial
Economic
Commercial
Preferred option
optimises value
for money?
Commercially
viable?
66
Expectations close out
© The Treasury
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