Treasury’s guidance on Better Business Cases for Capital Proposals
What is a Better Business Case (BBC)?
The government wants to improve the quality of analysis and decision making around state sector capital proposals. A new process was developed in July 2010 to assist this through clear rules and expectations. BBC is a structured way that stakeholders can work and think together to provide a business case, with fit for purpose analysis, which gives confidence to decision makers that investing in a proposed programme or project is justified following the five case model.
The five case model
Better Business Cases can lead to:
- Better informed decisions
- Better value for money
- Achievement of better outcomes
When does BBC apply in New Zealand?
All capital proposals from State Sector organisations (since July 2010) which are high risk and/or large scale, are considering Public Private Partnerships require crown investment or divestment with significant policy decisions.
The Southern Delegates Group asks; why wasn’t the BBC applied to the Future Footprint Proposal?
Given the monetary value of the property to be disposed of, the insufficiency of stakeholder engagement and the lack of information contained in the business case, we believe that it is extremely risky that AgResearch has been allowed to develop its business case without being required to meet Treasury’s guidelines… as you can see below, BBC mitigates these risks, prior to the investment decision.
The Five Case Model in more detail
1 - The strategic case
Makes the case for change and outlines the planning context within which the investment will be developed. It demonstrates that the investment proposal is well aligned to any relevant Government, sectoral or regional goals and priorities and reflects the organisational strategy. The strategic case should provide a robust and well-evidenced case for change with a clear specification of the investment objectives and required services. The focus should be on service needs driving the investment, not the other way round.
2 - The economic case
Is intended to demonstrate that a wide range of options for delivering the required services and meeting the investment objectives have been identified and assessed using best practice economic analysis techniques. The preferred option should provide the optimal mix of potential benefits, costs and risks under varying future scenarios. The purpose of the commercial case is to show that the preferred option will result in a transparent, accountable and sustainable procurement arrangement that provides value for money over the contract term.
3 - The financial case
Shows that the preferred option can be funded and is affordable to the organisation and external partners under various future scenarios. Note that an option may offer value for money, yet not be affordable. The converse may also hold.
4 - The commercial case
Should show that the preferred option will result in a transparent, accountable and sustainable procurement arrangement that provides value for money over the contract term.
5 - The management case
Should demonstrate that the preferred option can be delivered successfully using available capability and good practice programme and/or project management processes. This includes setting robust processes in place for project, change, risk and contract management, as well as managing post implementation reviews and realising expected benefits.
The Treasury's Better Business Cases guidance is published on the website of the National Infrastructure Unit.
The National Infrastructure Unit website also highlights the reasons why one third of programmes and projects fail.
- Lack of strategic fit
- Focus first on funding then value-for-money
- Lack of senior management engagement
- Lack of supply side engagement
- Lack of stakeholder engagement
- Lack of systematic approach
The Southern Delegates Group asks – why has AgResearch been allowed to provide inadequate answers that cover these issues and failed to engage with all of its stakeholders until after its plan was submitted?
It clearly did not listen to the recommendations of its Change Management Team – see CMT-Report-for-Future-Footprint-Proposal-copy.pdf
BBC are based on the UK Government BBC approach. They should:
- Use Common Language to support stakeholder engagement, thinking and working together
- Encourage thinking not writing
- Be fit for purpose analysis
- Use smart procurement of consultancy support
- Ensure the thinking is challenged and brings coherence and cohesion
- Campaign to deliver benefits, not to get money