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Better Business Cases Detailed 2012

Better Business Cases Detailed 2012. 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

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Better Business Cases Detailed 2012

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  1. Better Business Cases Detailed 2012

  2. 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

  3. Overview

  4. 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

  5. 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

  6. 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

  7. 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

  8. The 5 Case Model Any business case addresses 5 key questions: Is there a compelling case for change? Does the selected option optimise public value? Is the potential Deal achievable and attractive to the market place? Is the spending proposal affordable? How will the proposal be delivered successfully?

  9. The 5 Case Model The 5 key elements of good practice business cases Applicable - strategic fit & business needs Strategic Achievable – can besuccessfully delivered Management Economic Appropriate – optimises public value Financial Commercial Affordable – within budget Attractive – to supply side and feasible

  10. How it works ? (the process) Stakeholders do the thinking together

  11. 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

  12. Where to get support Treasury provides the following support: Products (overview) http://www.infrastructure.govt.nz/publications/betterbusinesscases • Quick Reference Guide • Power point presentation • Online module (website only) • 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 A review is performed early each calendar year and a revised version published in July

  13. 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

  14. UK Lessons Learnt

  15. Lessons from the UK

  16. 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

  17. 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”

  18. 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

  19. 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)

  20. 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

  21. 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

  22. More about the 5 case model

  23. The 5 Case Model Addresses 5 key questions Is there a compelling case for change? Does the selected option optimise public value? Is the potential Deal achievable and attractive to the market place? Is the spending proposal affordable? How will the proposal be delivered successfully?

  24. The 5 Case Model The 5 key elements of best practice business cases Applicable - strategic fit & business needs Strategic Achievable – can besuccessfully delivered Management Economic Appropriate – optimises public value Financial Commercial Affordable – within budget Attractive – to supply side and feasible

  25. The five case model Strategic Case Strategic Context • Organisational Overview • National Policies & Strategies • Local & Organisational Strategies

  26. 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

  27. The five case model Strategic CaseInvestment Objectives • Economy • Efficiency • Effectiveness • Re-procurement • Statutory Compliance

  28. 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

  29. The five case model Critical Success Factors • Strategic fit • Business Needs • Benefits Optimisation • Supply-side capacity and capability • Potential Achievability • Potential Affordability

  30. 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 forPreferred Option • Costs, benefits and risks $ • Sensitivity analysis

  31. 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

  32. The five case model Economic Appraisal • Do Nothing/Min • Option 2 – PWF • Option 3 – Other • Option 4 - Other • Preferred Option • Cost Benefit Analysis • Qualitative Benefits (rank, weight, score) • Risk Quantification (£ or rank/weight) • Sensitivity Analysis (switching values etc)

  33. 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)

  34. 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

  35. The five case model Management Case • Project management planning • Change management planning • Benefits management planning • Risk management planning • Post evaluation planning

  36. More about the process

  37. The Process: starting with a capital plan

  38. Fit with Portfolio management Activities Plans Strategy Governance Categorise Understand Prioritise Portfolio definition Funders Portfolio management Balance Plan Organisational energy Organisations charged with delivery Programme management Portfolio delivery Project management Service providers

  39. Strategic AssessmentBetter Business Cases for Capital Proposals Toolkit: Strategic Assessment

  40. 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/strategicassessment

  41. 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

  42. Programme Business CaseBetter Business Cases for Capital Proposals Toolkit: Programme Business Case

  43. 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/programmebusinesscase

  44. 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.

  45. 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) 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 Financial case • Determine rough order costs and potential funding sources Stakeholders do the economic case thinking together in a workshop led by a facilitator Stakeholders do management case thinking together in a workshop led by a facilitator

  46. Project Indicative Business CaseBetter Business Cases for Capital Proposals Toolkit: Indicative Business Case

  47. 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/indicativebusinesscase

  48. 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.

  49. 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

  50. 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’

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