doing the right projects how the five case model can help

1

UNCLASSIFIED

Doing the right projects – how the five case model can help

2

UNCLASSIFIED

Agenda

1. Characteristics of the “right projects”.

2. The five case model and the development of the business case.

3. Identifying the right projects using the options framework filter.

UNCLASSIFIED

JL

3

The right projects!

What are their

characteristics?

UNCLASSIFIED

4

Channel tunnel costs underestimated by £5.2bn

Public Sector - what they aren’t!

UNCLASSIFIED

Jubilee line extension costs underestimated by £1.4bn; project duration understated by 2 years

Millennium

Dome visitor

numbers

overestimated

by 5.5m

Scottish

parliament

10 times

over budget

and late.

5

Avoidable costs with no real benefits

UNCLASSIFIED

JL

6

Average Cost over-run – 45% Average Time over-run – 63%

Average shortfall in requirements – 33%

Survey report by US based consultancy – the Standish Group

Private Sector Project Delivery – the real world!

(in other words a 72% failure rate)

Project Success Rate - 28%

UNCLASSIFIED

7

The right projects:

• Strategic fit & business needs

• Value for money

• Commercially viable - supply-side capacity/ capability & Deal

• Affordable and fundable

• Achievable

• Based on the Five Case Model

UNCLASSIFIED

8

Five Key Questions?

UNCLASSIFIED

8

Strategic case dimension What is the case for change and how does it provide strategic fit?

Economic case dimension What is the option that optimises public value?

Commercial case dimension

Is there a market and can a realistic and credible commercial deal be struck?

Financial case dimension Is it fundable and affordable?

Management case dimension Are there realistic and robust delivery plans in place?

JL

9

Management

Strategic

Economic

Focus of the five case model

UNCLASSIFIED

JL

The 5 dimensions are

produced at the same time

not in sequence

but there may be many

iterations

Commercial Financial

Strategic

planning

Options

Appraisal

Service delivery Financial

management

Project

management

10

UNCLASSIFIED

Different types of Business Case

Programme Business Case

(PBC)

Policies

Programmes

Strategic Outline Case (SOC)

Outline Business Case (OBC)

Full Business Case (FBC)

Major Projects

Novel & contentious

OJEU procurement

Business Justification Case (BJC) Minor spending, pre-competed proposals

JL

11

UNCLASSIFIED

Stages: Business Case Development

Strategic

Outline

Case

TIME

Outline

Business

Case

Full

Business

Case

Decision to undertake further

appraisal of the shortlist

Decision to proceed to

procurement

Decision to contract

Identifies Case for change & preferred way forward

Identifies Preferred option

Identifies most economically

advantageous offer

UNCLASSIFIED

Scoping Planning Procurement

JL

£ Research

12

UNCLASSIFIED

Strategic Case

Strategic Context

• Organisational Overview

• National, Regional, Local and Organisational:

- Policies

- Strategies

- Programmes

- Related projects

Including the use of PPP

JF

13

UNCLASSIFIED

The Case for Change

Objectives

Existing Arrangements

Business Needs

Potential Scope

Main Benefits

Key Risks

Constraints

Dependencies

SMART

Status quo

“Service gap”

Core, desirable optional

Beneficiaries

Business and service

Limitations

“reliance” on other things being in place

JF

14

Investment objectives

• Economy – reducing operating cost

• Efficiency – improving throughput & unit cost

• Effectiveness – improving quality outcomes

• Replacement & re-procurement – business continuity

• Statutory Compliance and Conformance - best practice

UNCLASSIFIED

JF

15

Economic Case

UNCLASSIFIED

Challenge is to avoid gold plating!

JL

16

Economic Case: stage 1 (long list)

• Identify the CSF’s

• Identify the Long list options (12)

• Identify the short list options (min 4)

• Undertake SWOT analysis:

- Investment objectives

- CSF’s

- Status Quo

- “Do Minimum”

- Preferred Way Forward

- Another realistic option

UNCLASSIFIED

17

Economic Case: stage 2 (short list)

• Option 1 - Status Quo

• Option 2 - “Do Min”

• Option 3 - PWF

• Option 4 - Other

• Preferred Option

• Cost Benefit Analysis

• Cost Effectiveness

Analysis (CEA)

• Risk Quantification

• Qualitative benefits

• Sensitivity Analysis

UNCLASSIFIED

18

WHAT

HOW

WHO

WHEN

£

UNCLASSIFIED

The Options Framework filter

Identify options for Scope

Solution options that meet Scope

Delivery options for best Solution(s)

Implementation options

Funding

UNCLASSIFIED

19

Case Study Fictional Example

• The small country of Bangalo has 4 principal cities where economic activity is focused

• Workers travel into the cities each day

• City A is the largest and economically most significant, followed by cities B, C and D respectively

• The Ministry has developed a transport strategy to improve the road network between these cities. This include the use of Private Finance.

UNCLASSIFIED

The Options Framework for long-listing and the Options Filter for selection of the shortlist

JF

20

Case for change

Investment objective: to facilitate economic growth by

reducing travel time between the principal cities of the

country (A, B, C and D) by 20% by 2020.

Output: improved infrastructure - road network

Outcome: increased capacity and reduced congestion

Benefit: reduced cost of travel to end users (public and

business); increased GDP and tax revenues (society)

etc

UNCLASSIFIED

JF

21

Status quo

• Poor quality roads

• Low capacity

• Very congested

• Long journey times

• Flow of workforce into commercial centres

severely limited

Service demand and capacity planning!

UNCLASSIFIED

JF

22 UNCLASSIFIED

Do minimum Intermediate Do maximum

Scope Link up city A with

city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution

Service

Delivery

Implem-

entation

Funding

JF

23



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution

Service

Delivery

Implem-

entation

Funding

UNCLASSIFIED

JF

24



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution

Service

Delivery

Implem-

entation

Funding

UNCLASSIFIED

JF

25



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution

Service

Delivery

Implem-

entation

Funding

UNCLASSIFIED

JF

26 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution

Refurbish existing Refurbish existing +

new route

Completely new

route

Service

Delivery

Implem-

entation

Funding

JF

27 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery

Implem-

entation

Funding

JF

28 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery

Implem-

entation

Funding

JF

29 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery

Local contractor National contractor

International

contractor

Implem-

entation

Funding

JF

30 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery


International

contractor

Implem-

entation

Funding

JF

31 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery


International

contractor

Implem-

entation

Funding

JF

32 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery


International

contractor

Implem-

entation

Funding

JF

33 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery


International

contractor

Implem-

entation

Phased

3 years

Phased

2 years

‘big bang’

1 year

Funding

JF

34 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery


International

contractor

Implem-

entation

Phased

3 years

Phased

2 years

‘big bang’

1 year

Funding

JF

35 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery


International

contractor

Implem-

entation

Phased

3 years

Phased

2 years

‘big bang’

1 year

Funding

JF

36 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery


International

contractor

Implem-

entation

Phased

3 years

Phased

2 years

‘big bang’

1 year

Funding

JF

37 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery


International

contractor

Implem-

entation

Phased

3 years

Phased

2 years

‘big bang’

1 year

Funding capital

Mixed economy Private finance

(PPP)

JF

38 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery


International

contractor

Implem-

entation

Phased

3 years

Phased

2 years

‘big bang’

1 year

Funding capital


(PPP)

JF

39 UNCLASSIFIED



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery


International

contractor

Implem-

entation

Phased

3 years

Phased

2 years

‘big bang’

1 year

Funding capital


(PPP)

JF

40

Options Analysis: Short-list

• Status Quo

• Do Minimum

• Preferred Way Forward

• PWF - Less Ambitious (content, time)

• PWF - More Ambitious (content, time)

Minimum of four options!

41

Preferred

way fwd



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery


International

contractor

Implem-

entation

Phased

3 years

Phased

2 years

‘big bang’

1 year

Funding capital


(PPP) UNCLASSIFIED

JF

42

PWF more

ambitious



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery


International

contractor

Implem-

entation

Phased

3 years

Phased

2 years

‘big bang’

1 year

Funding capital


(PPP) UNCLASSIFIED

JF

43

Do

Minimum



city B

200km

Link up city A with

city B and city C

300km

Link up city A with

city B, city C and

City D

400km

Service

Solution


new route

Completely new

route

Service

Delivery


International

contractor

Implem-

entation

Phased

3 years

Phased

2 years

‘big bang’

1 year

Funding capital


(PPP) UNCLASSIFIED

JF

44

Options framework filter

• Disaggregates problem into basis elements and steps

• Challenges implicate assumptions

• Allows consultation to be undertaken in a structured way

• Transparent & involves end users, stakeholders & technical experts

UNCLASSIFIED

45

UNCLASSIFIED

Commercial Case

• Commercial Strategy (including procurement)

• Scope and related services

• Risk transfer

• Charging/payment mechanism

• Key contractual clauses & length

• Personnel implications (TUPE)

• Supplier’s implementation time-scales

• Accountancy treatment (FRS 5)

JF

46

UNCLASSIFIED

Financial Case

• Capital and revenue requirements

• Net effect on prices

• Impact on Balance Sheet

• Impact on Income and Expenditure Account

• Overall Affordability

• Evidence of Stakeholder Support

JF

47

UNCLASSIFIED

Management Case

• Programme Arrangements

• Project Management Arrangements

• Use of Special Advisers

• Change Management Arrangements

• Benefits realisation: plans &register

• Risk management: plans & register

• Project Assurance: CO:- Gates & Health Checks

• Post Evaluation Arrangements (PIR/PER)

• Contingency Plan

JF

48

Better Business Cases

The HM Treasury/Welsh Government method is:

Proportionate (relating resources to cost and risk)

Scalable (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)

UNCLASSIFIED

JL

49

UNCLASSIFIED

Better Business Cases Programme

The BBC Programme is currently in use in :-

The UK through HM Treasury

Wales through the Welsh government

New Zealand through New Zealand Treasury

The States of Guernsey

Subject of interest to major international organisations,

including World Bank, OECD; and a number of countries,

including: China, Saudi Arabia, Indonesia, Vietnam and

Columbia……

JL

50

“Better Business Cases”

UNCLASSIFIED

FOUNDATION

Basic Understanding

& Overview

for All

REVIEWER

Business Case

Reviewers Master-Class

PRACTITIONER

For Developers of

Business Cases

Two courses are available from over 25

HMT accredited commercial training

providers

One internal course is available

provided by HMT for HMT and CO

colleagues.

51

UNCLASSIFIED

HMT Accredited Trainers Listed on the APMG web site JL

doing the right projects how the five case model can help

Documents