1. © The Treasury 1 Better Business Cases “Investing for change” Overview 2012 August 2012

2. 2 Contents – Background – Most common reasons for programme or project failure – Why do I need to know about better business cases? – When does it apply in New Zealand? – What is a Better Business Case ? – What is expected? – Programmes versus projects? – The 5 Case Model – The process – How does BBC align with other management processes? – Who needs to be involved in developing a Business Case?-the scoping document – Where do I get support ? – What about ongoing development ?

3. 3 Background Better informed decisions on investments In 2007 Cabinet wanted: early visibility of decisions on capital projects over 10 years early visibility of capital project options and the best value for money option confidence that capital investments will deliver the expected benefits From 2008 to 2009 Better Capital Planning approach was developed based on local government good practice effort focussed on better capital planning, to provide visibility of capital intentions over 10 years From 2009 to 2011 Better Business Cases approach was developed based on UK and Victoria good practice, focussed on setting clear expectations and guidance for developing better business cases for capital projects updated for a NZ context providing for programmes and projects.

4. 4 Lack of clear link to the organisation’s key strategic priorities Lack of clear senior management ownership and leadership Lack of effective engagement with stakeholders Lack of skills and proven approach to programme and project management Project not broken down into manageable steps Evaluation of proposals linked to short term affordability rather than longer term value for money Lack of effective integration between the client and suppliers Most common reasons for programme or project failure

5. 5 Why do I need to know about better business cases? Better business cases can lead to: better informed decisions better value for money achievement of better outcomes Key stakeholders and their value propositions: Decision makers- better strategic alignment,value for money and evidence-based assurance Management-early engagement and influence on direction leading to confidence 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. 6 When does it apply in New Zealand? State sector organisations (since July 2010) All capital proposals from state sector organisations which are high risk and/or large scale, are considering Public Private Partnerships, require crown investment or disinvestment with significant policy decisions. Canterbury Earthquake Recovery (Since March 2012) Projects and programmes requiring Crown investment in whole or part. Auckland Plan (Since June 2012) All projects and programmes requiring Crown investment in whole or part. National Land Transport Programme Expectation that programmes/projects will start to undertake BBC process Good practice Significant interest from organisations to use as good practice approach. Please contact betterbusinesscases@treasury.govt.nz if you are considering adopting the Better Business Case process

7. 7 What is a Better Business Case ? The attributes are: A toolkit adapted for NZ from international good practice (UK and Australia) A structured and disciplined way of thinking A step by step approach A way of working together (workshop approach) The supporting principles are: Quality analysis Thinking not writing Fit for purpose effort No surprises Aligned with other management processes

8. 8 What is expected? Application of the 5 case model is “the heart of BBC” The appropriate level of effort expected depends on the scale and risk of the proposal Early engagement with those reviewing the business case to agree whether to take a programme or project approach and which type of business case is required to fit the nature of decision needed: – Confirm fit with strategy and the need to invest – Confirm way forward with short-listed options – Confirm best value for money option, outline potential deal and delivery plan, assess affordability (Investment decision) – Confirm supplier offering best value, detailed commercials, confirm affordability, detailed management and delivery arrangements.

9. 9 Risk/Scale Intensity of effort: Moderate Intensity of effort: Light Intensity of effort: High High Low Small Large RISK (SSC Gateway Risk Profile Assessment Tool) Scale (Whole of Life costs - $Million)

10. 10 Programmes versus projects? Programmes are arrangements to coordinate, direct and oversee a set of related projects and activities are strategic change initiatives that need to be flexible, where there are complex inter-relationships in a dynamic environment can have a lifespan of years and integrates projects to deliver outcomes or benefits that are greater than the sum of the parts A Programme business case describes how the activities and projects within the programme will deliver against the strategic objectives of the organisation Projects are tactical changes that can be relatively well defined and scoped focus more on outputs rather than outcomes

11. 11 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?

12. 12 Management The 5 key elements of good practice business cases The 5 Case Model FinancialCommercial Economic Strategic Compelling - strategic fit & business needs Optimises value for money Commercially viable Affordable within available funding Achievable and can be successfully delivered

13. 13 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

14. 14 How does BBC align with other management processes? The BBC process aligns with the following other processes at programme and project level as follows: Programme Business Case Portfolio and Programme Management (eg Managing Portfolios and Managing Successful Programmes) Programme Assurance (Gateway, Independent Quality Assurance) Project Business Cases Project Management (eg PRINCE2) Public Private Partnerships Strategic procurement including early engagement with suppliers Feasibility, detailed studies, design, develop etc Project Assurance (Gateway, Independent Quality Assurance, Quantitative Risk Analysis)

15. 15 Who needs to be involved in developing a Business Case? Stakeholders who have high influence and/or are highly impacted by the proposal. To ensure a fit for purpose business case is developed the lead organisation should secure early agreement with those reviewing the business case on: – Type of business case – Timing and nature of decisions required – Scale and risk of the proposal – Pathway (ie Programme or project approach) – Right sizing the team – Right sizing the effort – Right sizing the engagement Use the scoping document on the web site to get early agreement and use it to agree any subsequent changes during the business case development process.

16. 16 The scoping document Purpose: Facilitate discussion and agreement on how the Better Business Case Guidance will be applied (between the developer and the reviewer/ monitoring function) Aligning the level of effort and assurance through each part of the business case development process with the scale and risk of the proposal Users: The Developer The Sponsor The Reviewer/Monitor Other Assurance

17. 17 How the BBC guidance can be tailored using the scoping document 1 Which Business Case documents will be completed – the pathway Scoping document used: Programme Cover Sheet Project Cover Sheet 2 What analysis and engagement is appropriate to develop the specific business case Scoping document used: The specific business case scoping document Project Strategic Assessment Indicative Business Case Detailed Business Case Implementation Business Case Project Confirm fit with strategy Agree shortlisted options Approve delegation and funding Approve contracts SECFMSSECFMSECFM Programme Strategic Assessment Programme Business Case Portfolio or programme Confirm fit with strategy Approve affordable/best value programme and projects SECFMS SECFM Single Stage Business Case Project Strategic Assessment S

18. 18 Where do I get support ? Overview information – Quick Reference Guide, Online module, Overview presentation and booklet Detailed information for each type of business case: – Scoping document, to agree effort – Guidance booklets, to understand the standard – Presentation slides, to workshop the thinking together – Word Template, to write the business case – Powerpoint “one pager”, to present the business case Training (Monthly in Auckland, Wellington, Christchurch) – Seminar for senior managers (awareness-one hour) free – Foundation Course (knowledge-half day) free – Communities of practice (wisdom-exchange experiences) free – Practitioners Course modules 1 and 2 (skills-2 full days) cost – Reviewers Course (skills-full day) cost Support – Customised seminar to those considering internal adoption – Access to BBC practitioners to attend workshops that are applying BBC thinking to programmes, especially those that could require Crown investment.

19. 19 What about ongoing development ? – Version 3 released in August 2012 – Interest in adapting/adopting BBC – Need to better align/integrate with other processes and decision making frameworks – Further development for release of version 4 in July 2013