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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

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Supporting slides from APMG International and HM Treasury webinar on the 'Five Case Model' - the UK government's method for developing spending proposals. Also covers an introduction to the supporting APMG training and certification scheme.

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Page 1: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 2: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 3: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 4: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 5: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 6: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 7: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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?

Page 8: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 9: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

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OC App

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evelop

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sued

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ids

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SOC OBCFBC

Results Tracker for proposals where procurement involves competitive dialog

Page 10: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 11: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

11 Webinar Better Business Cases using the Five Case Model

Str

ate

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Eco

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Com

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Fin

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Managem

ent

0102030405060708090

100

SBC, OBC & Full Business Cases (FBC)

Str

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Fin

anci

al

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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

Page 12: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 13: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

13 Webinar Better Business Cases using the Five Case Model

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

Page 14: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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)

Page 15: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

15 Webinar Better Business Cases using the Five Case Model

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

Page 16: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 17: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 18: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

18 Webinar Better Business Cases using the Five Case Model

0

5

10

15

20

25

30

35

40

-80

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-20

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60

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161

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181

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221

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241

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261

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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.

Page 19: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 20: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 21: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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”

Page 22: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

22 Webinar Better Business Cases using the Five Case Model

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

Page 23: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

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24 Webinar Better Business Cases using the Five Case Model

Page 25: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

25 Webinar Better Business Cases using the Five Case Model

HM Treasury guidance on Training and Accreditation

Page 26: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

26 Webinar Better Business Cases using the Five Case Model

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.

Page 27: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

27 Webinar Better Business Cases using the Five Case Model

HMT Accredited Trainers Listed on the APMG web site

Page 28: Developing better busines cases using the Five Case Model; for better decision making and better outcomes

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

Page 29: Developing better busines cases using the Five Case Model; for better decision making and better outcomes