© The Treasury 1 Better Business Cases “Investing for change” Foundation Course Released by NZ...

© 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)


S

Confirm fit with strategy and the need to invest

Single Stage Business CaseSingle Stage Business Case

S E C F M


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

22

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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


Project Strategic Assessment




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

41


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


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


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

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


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


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)*




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

52


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


Strategic Case (Revisit)Revisit the indicative business case

Strategic

54


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



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


Management case – Planning for Successful DeliveryProject management planningChange management planningBenefits management planningRisk management planningPost-project evaluation planning

Management

59


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


Strategic and Economic Case (Revisit)Revisit the case for change

Revisit the detailed business case options

Strategic

Economic

61


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


Management case – Planning for Successful DeliveryFinalise project management arrangementsFinalise change arrangementsFinalise benefit managementFinalise risk management

Finalise contract arrangements

Finalise post-project evaluation arrangements

Management

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

© The Treasury 1 Better Business Cases “Investing for change” Foundation Course Released by NZ...

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