© The Treasury 1 Better Business Cases “Investing for change” Foundation Course

2 Foundation Course objectives Sufficient knowledge 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 Planning the approach to developing the business case 10.45am The national evaluation and way forward 11am Types of business cases (Programme and project approach) 11.45am Examples, top ten lessons learnt, and questions (Lunch 12 noon) 12.50pm Expectations close out and evaluation forms

© The Treasury 4 Expectations

© The Treasury 5 Background

6 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 programmes and projects needing investment Keep the business runningGrow the business Transformational change

© The Treasury 9 Why BBC

10 Value of 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

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 a Better Business Case? Based on the UK Government BBC approach Common Language to support stakeholder engagement-way of thinking and working together Thinking not writing Fit for purpose analysis Smart procurement of consultancy support The thinking is challenged and brings coherence and cohesion Campaign to deliver benefits, not a document to get money What is expected? Effort and decision making depends on scale and risk of the project or programme 5 case model is the core of BBC What is a better business case and what is expected

© The Treasury 14 When BBC applies

15 When does it apply?-Mandated 2010 Cabinet directive for State Sector high risk or large scale capital projects or those requiring funding: – Govt. Dept’s and Crown Entities – National Health Board for DHB’s 2012 Cabinet directive for Canterbury Earthquake Recovery investments in projects and programmes

16 When does it apply? - Voluntary 2012 Auckland Council adopted for Auckland Plan capital investments and being piloted for socio-economic programmes 2013 NZTA adapted for National Land Transport Programme across Local Government Tertiary Education Commission for tertiary education sector borrowing Public and private sector organisations adopting as good practice National NGO Federation to transform service delivery 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 FinancialCommercial 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 SECFM Confirm best value for money option, outline potential deal and delivery plan, assess affordability. Detailed Business Case SECFM Confirm way forward with short-listed options (consider non-traditional procurement) Indicative Business Case SECMF Confirm fit with strategy and need to invest Strategic Assessment Portfolio or programme S Confirm case for change, preferred programme, project tranches, funding Programme Business Case SEC F M Project/s (Large scale and/or high risk) Strategic Assessment S Confirm fit with strategy and the need to invest Single Stage Business Case SECFM Planning and scoping Strategic Assessment S Project/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

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22 BBC Process fit with Policy, Programme and Project management

BBC Process fit with Procurement process

© The Treasury 24 Where to get support

25 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

26 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) Webinar Communities of practice by sector for Practitioners supported by BBC Experts Endorsed BBC Expert Practitioners and Reviewers pilot

© The Treasury 27 Planning the approach to developing the business case Right sizing the effort and engagement – the scoping document

28 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

29 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

30 Business Case Capability Content e.g. service delivery Content e.g. service delivery Assurance and Decision Making e.g. monitoring function Assurance and Decision Making e.g. monitoring function Business Case e.g. Cost/Benefit analysis, Commercial advice, Financial modelling etc Change mgmt e.g. stakeholder engagement Change mgmt e.g. stakeholder engagement Stakeholder Focus Subject Matter Focus Project Management Governance Low High Influence Empower Mass Communication Co- production High Power and Influence Change Impact Stakeholder Engagement

31 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 32 National evaluation and way forward

National Evaluation-findings Positive impact on decision making overwhelming agreement positive impact enabling ‘value for money’ investment decisions, with confidence. process most effective when applied by experienced people current BBC training will not produce mastery strong plea to help develop internally (Governance, writing, modelling, critical thinking, stakeholder engagement)

National Evaluation-MoF’s view Been effective Can be bit exhaustive when Ministers want to get going His level of confidence is growing Needs to be aggregation of capability Better balance of process and judgment All agencies need to see as critical and take long term view

35 Way forward Improve capability of the priority public sector organisations – To launch case studies to website – To launch webinar communities of practice – Launched Endorsed Expert Pool pilot – BBC Coach-to coach public servants to become experts – To pilot BBC Organisational capability trial-for internal adaptation – Piloting 5 case model approach to Policy/Strategy Provide advice to improve reviewer capability Now part of the State Sector Portfolio Performance function atThe Treasury

© The Treasury 36 Types of business cases

© The Treasury 37 Strategic Assessment Project Strategic Assessment Indicative Business Case Detailed Business Case Implementation Business Case Programme Strategic Assessment Programme Business Case Single Stage Business Case Project Strategic Assessment

38 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

39 Strategic assessment 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 driver/problem? -potential benefits? Senior stakeholders do the thinking together in the driver/problem and benefits (2 hour) workshops. If state sector capital project must use “Investment Logic Mapping” ILM facilitator, otherwise use other tools and people which challenge the thinking. Invite writer and reviewer. Strategic

© The Treasury 40 Project Strategic Assessment Indicative Business Case Detailed Business Case Implementation Business Case Programme Strategic Assessment Programme Business Case Single Stage Business Case Project Strategic Assessment Programme Business Case

41 Programme Business Case Purpose: Confirm the strategic context Confirm the case for change Recommend a preferred programme and way forward Identify project tranches Estimate cost and funding sources Gain early approval from decision makers for developing subsequent project-based business cases

42 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 set the SMART “Investment Objectives” together in one or more two hour facilitated workshops, with a BBC Practitioner or BBC Expert Practitioner. Invite writer and reviewer. Strategic

43 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 Stakeholders do the 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 Invite Procurement Expert, Writer and Reviewer

44 Programme Business Case 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 Outline how the programme is intended to be delivered Commercial Financial Management

© The Treasury 45 Project Strategic Assessment Indicative Business Case Detailed Business Case Implementation Business Case Programme Strategic Assessment Programme Business Case Single Stage Business Case Project Strategic Assessment Indicative Business Case

46 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 Indicative cost estimates and funding sources For state sector informs annual Government budget process for contingency to be set aside

47 Indicative Business Case 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 Strategic Senior stakeholders set the SMART “Investment Objectives” together in one or more two hour facilitated workshops, with a BBC Practitioner or BBC Expert Practitioner

48 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) Stakeholders do the thinking together in two or more two-hour workshops led by a BBC Practitioner or BBC Expert Practitioner : Prepare long list,then Assess long list to short list Invite Procurement expert re service delivery, industry association re solutions, writer and reviewer Economic

49 The long list to short list of options (example)

50 Indicative Business Case Commercial, 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

© The Treasury 51 Project Strategic Assessment Indicative Business Case Detailed Business Case Implementation Business Case Programme Strategic Assessment Programme Business Case Single Stage Business Case Project Strategic Assessment Detailed Business Case

52 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 Assess affordability Outline plan for delivering the project

53 Detailed Business Case Strategic Case (Revisit) Revisit the indicative business case Strategic

54 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 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 Capital Costs ($m) Whole of Life Costs ($m) Cost-Benefit Analysis of monetary costs and benefits at the Public Sector Discount Rate Present Value of Benefits ($m) Present Value of Costs ($m) Benefit Cost ratio0.3:11.1:11.9:12.2:11.7:1 Net Present Value (NPV, $m) (5) Multi-Criteria Analysis ranking of intangible costs and benefits (if any) Criteria Criteria Criteria Preferred optionYes Economic

56 Detailed Business Case 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 Commercial Financial

57 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

© The Treasury 58 Project Strategic Assessment Indicative Business Case Detailed Business Case Implementation Business Case Programme Strategic Assessment Programme Business Case Single Stage Business Case Project Strategic Assessment Implementation Business Case

59 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

60 Implementation Business Case Strategic and Economic Case (Revisit) Revisit the case for change Revisit the detailed business case options Strategic Economic

61 Implementation Business Case 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 Implementation Business Case Management case – Planning for Successful Delivery Finalise project management arrangements Finalise change arrangements Finalise benefit management Finalise risk management Finalise contract arrangements Finalise post-project evaluation arrangements Management

© The Treasury 63 Project Strategic Assessment Indicative Business Case Detailed Business Case Implementation Business Case Programme Strategic Assessment Programme Business Case Single Stage Business Case Project Strategic Assessment Single Stage Business Case

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 65 Examples, top ten lessons learnt and questions

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

67 Top ten lessons learnt 1.Think carefully the extent to which BBC is mandated and/or voluntary 2.BBC challenges unclear and/or un-agreed strategy 3.BBC is a thinking stakeholder campaign, with some analysis, not a writing process 4.Programme Business Case challenges strategic and/or operational policy tradeoffs 5.Programme Business Cases challenges quality of governance 6.Up-skill Public Sector so they can smartly procure consultancy support (Some over reliance on big consultancy firms brand) 7.Doing the thinking with a range of stakeholders can take time sometimes under compressed timeframes (and secrecy) 8.Make sure the Reviewer function is strong- say no early 9.Everyone wants to adapt the approach-need to manage that 10.BBC fits within a wider Investment Management System

© The Treasury 68 Expectations close out