Better Business Cases “Investing for change” Foundation Course

1. Better Business Cases “Investing for change” Foundation Course

2. 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

3. 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

4. Expectations

5. Overview

6. Background • Cabinet • Visibility of future decisions • Confident investment decisions • Treasury response • Portfolio management • Business case development

7. Opportunity for greater influence through better strategy and planning Better Business Cases Visibility to inform the portfolio Projects and programmes underway 10 year view of intentions 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 developed

8. Visibility to prioritise/balance the portfolio

9. Why do I need to know about Better Business Cases? • Decision makers/Investors-confidence ! • Management-confidence ! • Business case developers-fit for purpose • Reviewers- fit for purpose • Private sector service providers-early engagement

10. Why two thirds of programme and projects succeed? • Strong strategic fit • 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

11. 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

12. 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

13. When does it apply? • State sector-capital • Canterbury Recovery • National Land Transport Programme • Auckland Plan • Tertiary Education • Local Government • Good practice

14. The 5 case model and the process

15. The 5 Case Model Any business case addresses 5 key questions: Is there a compelling case for change? Does the preferred investment option optimise value for money? Is the proposed deal commercially viable? Is the spending proposal affordable? How can the proposal be delivered successfully?

16. The 5 Case Model The 5 key elements of good practice business cases Compelling case for change - strategic fit & business needs Strategic Achievable and can be successfully delivered Management Economic Preferred option optimises value for money Financial Commercial Affordable within available funding Commercially viable

17. 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 Planning and scoping The level of emphasis of each of the five cases depends on the type of business case S S E C M F Programme Business Case Strategic Assessment Confirm fit with strategy and need to invest Confirm case for change, preferred programme, project tranches, funding Project/s (Large scale and/or high risk) S E C F M S S E C F M S E C F M Strategic Assessment Indicative Business Case Detailed Business Case Implementation Business Case Confirm fit with strategy and the need to invest Confirm way forward with short-listed options (consider non-traditional procurement) Confirm best value for money option, outline potential deal and delivery plan, assess affordability. Confirm supplier offering best value, detailed commercials, confirm affordability. detailed management and delivery arrangements Project/s (Other) S E C F M S Single Stage Business Case Strategic Assessment

18. How BBC fits with Strategy and Policy

19. Scale and risk in the State Sector High Risk/Small Scale Two stage Cabinet approval Breadth: Five cases and 35 actions Strategic Case: ILM required Economic Case: Moderate level of CBA/MCA, full sensitivity analysis High High Risk/Large Scale Two stage Cabinet approval Breadth: Five cases and 35 actions Strategic Case: ILM required Economic Case: Full CBA/MCA, full sensitivity analysis Low Risk/Large Scale Two stage Cabinet approval. Cabinet may agree at Stage 1 to conditionally delegate Stage 2 approval to Joint or responsible ministers Breadth: Five cases and 35 actions Strategic Case: ILM required Economic Case: Full CBA/MCA, light sensitivity analysis Low Risk/Small Scale Single stage Cabinet approval (detailed business case) Breadth: Five cases and some amalgamation of actions Strategic Case : ILM not required Economic Case: Light level of CBA/MCA, light sensitivity analysis Expected to be only submitted during the Budget process Risk (SSC Gateway Risk Profile Assessment tool) Low Small $25m Large Scale, Whole of Life costs ($million)

20. BBC Process fit with Policy, Programme and Project management

21. BBC Process fit with Procurement process

22. Planning the Better Business Case Right sizing effort – the scoping document

23. The Goldilocks Zone In the case of fairy tales Not too hot/not too cold 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 Just right

24. 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

25. Stakeholder Management Business Case Capability Subject Matter Focus Stakeholder Focus Governance High Influence Co-production Content e.g. service delivery Change mgmt e.g. stakeholder engagement Power and Influence Mass Communication Empower Business Case e.g. cost/benefit analysis Assurance and Decision Making e.g. monitoring function Change Impact Low High Project Management

26. 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

27. Types of business cases

28. Strategic Assessment Programme Strategic Assessment Programme Business Case Implementation Business Case Project Strategic Assessment Indicative Business Case Detailed Business Case Project Strategic Assessment Single Stage Business Case

29. 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

30. Strategic assessment Strategic Strategic Case-Making the Case for Change Outline the strategic context 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

31. Programme Business Case Programme Strategic Assessment Programme Business Case Implementation Business Case Project Strategic Assessment Indicative Business Case Detailed Business Case Project Strategic Assessment Single Stage Business Case

32. 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

33. Strategic Programme Business Case 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

34. Programme Business Case Economic Case-Exploring the Preferred Way Forward Critical success factors Programme options systematically identified and assessed by dimension: • Scale, scope and location (what) • Service solution (how) Economic • 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

35. Programme Business Case Commercial Commercial case • Based on the preferred programme the likely attractiveness to potential service providers (including high level consideration of non-traditional procurement) Financial case • Based on the preferred programme determine rough order costs and potential funding sources Management Case • Based on the preferred programme, determine the tranches of projects • Outline how the programme is intended to be delivered Financial Management

36. Indicative Business Case Programme Strategic Assessment Programme Business Case Implementation Business Case Project Strategic Assessment Indicative Business Case Detailed Business Case Project Strategic Assessment Single Stage Business Case

37. 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

38. 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

39. 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 two-hour 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

40. The long list to short list of options (example)

41. Indicative Business Case Commercial, Financial and Management Cases (Outline) 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 and funding sources • Outline the commercial case • Outline the management case Commercial Financial Management

42. Detailed Business Case Programme Strategic Assessment Programme Business Case Implementation Business Case Project Strategic Assessment Indicative Business Case Detailed Business Case Project Strategic Assessment Single Stage Business Case

43. 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

44. Detailed Business Case Strategic Strategic Case (Revisit) Revisit the indicative business case

45. Economic Detailed Business Case 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

46. Economic Analysis of the short-listed options

47. Detailed Business Case Commercial Commercial case – Preparing for the Potential Deal Procurement strategy Service requirements Risk allocation Payment mechanisms Contractual and other issues Financial case – Ascertaining Affordability and Funding Requirements The financial costing model Financial

48. Detailed Business Case Management case – Planning for Successful Delivery Project management planning Change management planning Benefits management planning Risk management planning Post-project evaluation planning Management

49. Implementation Business Case Programme Strategic Assessment Programme Business Case Implementation Business Case Project Strategic Assessment Indicative Business Case Detailed Business Case Project Strategic Assessment Single Stage Business Case

50. 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