developing better busines cases using the five case model; for better decision making and better...
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APMG International Webinar
Developing Better Business Cases using the Five Case Model; for better decision making and better outcomes
Thursday 4 September 2014 / 14:00 BST (London, UK)
Presenter: Joseph Lowe, HM Treasury, UK Government
Agenda
• Welcome & introduction– Shruti Deshpande, APMG International
• Developing Better Business Cases using the Five Case Modelfor better decision making and better outcomes – Joseph Lowe
Head of Economic Branch, HM TreasuryUK Government
• Q&A
• Further information
• Close
Your presenters…
• Joseph Lowe (Presenter)Head of Economic Branch, HM Treasury.
• Shruti Deshpande (Moderator)Campaign Manager for APMG International, part of the corporate marketing team promoting certifications for APMG
4 Webinar Better Business Cases using the Five Case Model
Better Business CasesUsing the Five Case Model
Thinking in Five DimensionsStructuring real world problems
Accounting for Trade-offs Informing Decisions
5 Webinar Better Business Cases using the Five Case Model
The method delivers:-Better value for moneyMore robust proposalsImproved deliverabilityImproved management and controlTransparency & accountability
Better Business Cases
6 Webinar Better Business Cases using the Five Case Model
This is not just investment approval It is about Business Planning
Strategy Plans for delivery of the vision, mission, long term goals and portfolio.
Programmes Framework for delivery of interventions & policies through and projects
Projects Vehicle for delivery of individual schemes and spending proposals
7 Webinar Better Business Cases using the Five Case Model
Thinking in Five Dimensions What is the Five Case Model
7
Strategic case What is the current situation and the case for change and how does it fit with wider policies.
Economic case What is the public value of this proposal (Net Present Value of social welfare impact)
Commercial case Can a realistic and credible commercial deal be struck?
Financial case What is the cost to the public purse? (Net Present Value of exchequer or budget impact)
Management case Are the proposed delivery plans realistic and robust, and can the proposal be delivered?
8 Webinar Better Business Cases using the Five Case Model
Stages of Project’s Business Case Development 1
Strategic
Outline
Case
TIME
Outline Business
Case
Full Business
Case
Decision to undertake a
thoroughappraisal of the shortlist
Decision to proceed with
OJEU procurement
Decision to contract
Case for change established and a long list considered to
select a shortlist i.e. the preferred way forward
identified.
Preferred option identified by
detailed analysis of the shortlist
Most economically advantageous offer
identified by engagement and
negotiation
Scoping Planning Procurement
9 Webinar Better Business Cases using the Five Case Model
Strategic Outline Case (SOC)
Outline Business Case (OBC)
Full Business Case (FBC)
Confirmed FBC
Procurement Live
Procurement Live
Project Identified
Financial Close
S1 S2 S3 O1 O2 O3 P1 F1 F2 F3 P2 C1 C2 P3
O2
Proc
urin
g Aut
horit
y de
velop
SOC Dep
artm
ent S
OC App
rova
l Point
Trea
sury
SOC A
ppro
val
Poin
tPr
ocur
ing
Autho
rity
deve
lop
OBC Depar
tmen
t OBC
App
rova
l Point
Trea
sury
OBC
App
rova
l Poi
nt
FBC c
onfir
med
to D
epar
tmen
t
Final
Trea
sury
FBC
App
rova
l
Poin
t – FBC
con
firm
ed
Post
pre
ferre
d bi
dder
-des
ign
deve
lopm
ent,
finan
cing
,
plan
ning
Proc
urin
g au
thor
ity d
evelop
FBC
Tend
er /O
JEU is
sued
Prelim
inar
y Fin
al B
ids
Subm
itted
Depar
tmen
t FBC
App
rova
l Point
Trea
sury
FBC
Inte
rim A
ppro
val P
oint
Finan
cial C
lose
SOC OBCFBC
Results Tracker for proposals where procurement involves competitive dialog
10 Webinar Better Business Cases using the Five Case Model
The Five Case Model
Financial
Management
Commercial
Strategic
Economic
Case for changeStrategic fit
Public value
Supply side capacity& a potential Deal
Affordable – within the budget
Achievable – can be successfully delivered
The 5 dimensions are produced together at the same time not in sequence but there
may be many iterations
11 Webinar Better Business Cases using the Five Case Model
Str
ate
gic
Eco
nom
ic
Com
merc
ial
Fin
anci
al
Managem
ent
0102030405060708090
100
SBC, OBC & Full Business Cases (FBC)
Str
ate
gic
Eco
nom
ic
Com
merc
ial
Fin
anci
al
Managem
ent
0102030405060708090
100
SBC, OBC & Full Business Cases (FBC)
Development of the Business Case
Strategic Outline Case
Outline Business
Case
Full Business
Case
SOC , OBC & FULL BUSINESS CASE (FBC)
Management
Financial Commercial
Strategic
Economic
SOC
OBC
FBC
12 Webinar Better Business Cases using the Five Case Model
The Strategic dimension of the case and the Case for Change
ObjectivesExisting Arrangements“Business” Needs Potential Scope Main BenefitsKey RisksConstraints Dependencies
SMART ObjectivesStatus quoProblemsSolutionsOutcomesUnknownsInternal & External
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Step 1 – Long Short List of Options
Consider a long list using Strategic Options Framework
and SWOT analysis to identify the best short list
Options Analysis in the “economic dimension” of the case
Step 2 - Short List Preferred Option
• Detailed Analysis of costs and benefits to society of each Option
Where relevant a further additional analysis of effects on winners and losers in society :- distributional analysis
A two stage Options Analysis to identify best public value
14 Webinar Better Business Cases using the Five Case Model
The Options Framework
Option types • Service Scope (what: is included) • Service Solution (how: to do it)• Service Delivery (who: can do it)• Implementation (when: phasing)• Funding (£) (financial model)
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Critical Success FactorsStrategic fitObjectives to be metBenefits OptimisationSupply-side capacity and capabilityRisk and AchievabilityAffordability
The Options Framework Step 1a high level strategic analysis of long list options
StrengthsWeaknessesOpportunities Threats
SWOT Analysis
Constraints
Dependencies
16 Webinar Better Business Cases using the Five Case Model
WHAT Scope
HOW the solution
WHO can deliver
WHEN
£
The Options FilterIdentifying the Preferred Way Forward
Identify options for Scope
Solution options that meet Scope
Delivery options for best Solution(s)
Implementation options
Funding
17 Webinar Better Business Cases using the Five Case Model
Cost Benefit Analysis Public Value Step 2
• Quantifies in monetary terms as many of the costs and benefits of a proposal as feasible, including items for which the market does not provide a satisfactory measure of market value.
£Value ofAll Social
Costs
£Value of
Total Social Benefits
What’s the balance of costs and benefits to society? i.e. the proposal’s PUBLIC VALUE /Net Present Value
18 Webinar Better Business Cases using the Five Case Model
0
5
10
15
20
25
30
35
40
-80
- -61
-60
- -41
-40
- -21
-20
- 0
0 - 2
0
21 -
40
41 -
60
61 -
80
81 -
100
101
- 120
121
- 140
141
- 160
161
- 180
181
- 200
201
- 220
221
- 240
241
- 260
261
- 280
281
- 300
Cost escalation from decision to proceed (%)from Flyvjberg et al, American Planning Association
Fre
qu
en
cy
(%
)
Review of 258 transportation projects worldwide
Optimism Bias in Appraisal
Costs UnderestimatedCosts Overestimated
Project appraisers’ tendency to be over optimistic: to underestimate costs and works duration, and overstate the benefits that the project will bring.
19 Webinar Better Business Cases using the Five Case Model
Uncertainty Optimism Bias & Risk
UNMEASURED UNCERTAINTY
Strategic Outline
SOC
Outline Business
OBC
Full Business
FBC
Optimism Bias
TIME
Business Case Development
Uncertainty Costs
BenefitsTimescales
Assessed Risk
MEASURED UNCERTAINTY
20 Webinar Better Business Cases using the Five Case Model
Commercial Case
• Procurement Strategy• Outputs and related services• Potential Risk transfer• Charging/payment mechanism• Key contractual clauses & length• Personnel implications (TUPE)• Suppliers’ implementation time-scales• Accountancy treatment
21 Webinar Better Business Cases using the Five Case Model
Financial Case
• Capital requirements• Net effect on prices• Impact on Balance Sheet• Impact on Income and Expenditure Account• Overall affordability and funding
“Evidence of Stakeholder Support”
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Management Case
• Programme and Project Management arrangements• Change Management arrangements• Benefits realisation: plans/register• Risk management: plans/register• Programme & Project Assurance arrangements:
technical, quality, Gateways & healthchecks• Post Evaluation Arrangements (PIR/PER)• Contingency plans
23 Webinar Better Business Cases using the Five Case Model
The Treasury method reduces pointlessbureaucracy and is :-
Proportionate (relating resources to cost and risk) Scalable (thinking model applicable at all levels) Flexible (process adaptable to suit decision) Efficient (productivity gains of 30% to 40%) Effective (all key questions are covered) Best Practice (tried and tested)
Better Business Cases
24 Webinar Better Business Cases using the Five Case Model
25 Webinar Better Business Cases using the Five Case Model
HM Treasury guidance on Training and Accreditation
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Better Business Cases Programme
FOUNDATION
AVAILABLE NOW
PRACTITIONER
AVAILABLE NOW
REVIEWER
AVAILABLE END 2014
Training is available from trained and accredited suppliers, links can be found on the Treasury Green Book web pages, The APMG web site and the Civil Service Learning web site.
27 Webinar Better Business Cases using the Five Case Model
HMT Accredited Trainers Listed on the APMG web site
Further information
• APMG-International website• www.APMG-International.com
• Better Business Cases qualification scheme• www.APMG-International.com/BBC
• The Five Case Model• http://wales.gov.uk/funding/wiipindex/5cmodel/?lang=en
• The Green Book• https://www.gov.uk/government/publications/the-green-book-appraisal-and-
evaluation-in-central-governent
company/apmg-international @APMG_Inter
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