Developing a Business Case Fact Sheet

8/3/2019 Developing a Business Case Fact Sheet

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Inter Agency Policy and Projects Unit

Department of Premier and Cabinet

Project Management

Fact Sheet:Developing a Business CaseVersion: 1.2, November 2008

DISCLAIMER

This material has been prepared for use by Tasmanian Government agencies and Instrumentalities.It follows that this material should not be relied upon by any other person. Furthermore, to the extentthat this material is relied upon, the Crown in Right of the State of Tasmania gives no warranty as tothe accuracy or correctness of the material or for any advice given or for omissions from the material.Users rely on the material at their own risk.


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Page 2 Tasmanian Government Project Management FrameworkProject Management Fact Sheet: Developing a Business Case, Version: 1.2, November 2008

When considering the expenditure of publicfunds, government agencies need toensure that projects and programs relate togovernment and agency priorities and thatthere is value for money. One way foragencies to make decisions about newprojects or programs is to consider aBusiness Case.

The Business Case is the mechanism usedto outline a business issue and seekapproval for a project to resolve the issueand/or seek agreement on a projectsoutcomes. The Business Case is anessential core document. It is thefoundation upon which other projectdocumentation and the resulting projects

are built.

What is a Business Case?

The Business Case is a one-off, start-updocument considered by seniormanagement to assess the pros and consof proposed projects (initiatives), or toassess the options for a project that hasalready had resources allocated. TheBusiness Case presents the businessissue, identifies project options, benefits,costs, risks and defines the scope. Overallthe Business Cases function is to helpgain approval from senior management fora project to proceed to address the statedissue or need and/or to obtain commonagreement on exactly what the project willdeliver.

If approved, the Business Case confirmssupport and/or resourcing for therecommended option (project).

In the case of small, less complex projects,a Project Proposal might be used instead.

Why would you develop a BusinessCase?

A Business Case should be developed to:

define the scope of the business issue

present options and make

recommendations

seek approval for the preferred optionto be pursued as a project

obtain human, physical and financialresourcing for a project

seek additional funding external to theagency, i.e. Budget Committee

seek funding for a cross agencyproject

where resourcing has already beenallocated and the decision to proceedhas already been made by seniormanagement, to document what theproject will accomplish and what thebenefits will be

Where an Agency, Division or BusinessUnit has a number of proposed initiatives(projects), the Business Case is used as atool to assist in prioritising the variousinitiatives. This prioritisation may beachieved by comparing the projectscompeting for funding based upon theirbenefits, costs and risks. This is where theoption of a Portfolio Management approachis useful.

When would a Business Case bedeveloped?

Approval to develop a Business Caseisusually obtained from the SeniorManager/Sponsor. This approval may be aresult of acceptance or approval of apreceding stage such as a Corporate Planfor a Department, Business Plan for aBusiness Unit, Project Proposal, BusinessProcess Analysis Report or FeasibilityStudy.

The Business Caseexpands the proposalsdeveloped in these documents in order to:

clarify the business issues

explore options or possible solutions

recommend the preferred option

seek approval for resourcing for thepreferred option

reach agreement on the scope of theproject


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seek authorisation to proceed to thenext step of the project (usually theProject Business Plan)

In the case of large complex projects this

development might occur in stages, suchas having the scope approved first with theallocation of some funding, before theBusiness Case is developed. BusinessProcess Analysis activities should beundertaken, to obtain clear informationabout what the real nature of the businessissue is, to inform proposed costings, aswell as provide information about existingbusiness processes that may be changedas a result of undertaking the project.

Who is responsible for developingthe Business Case?

The Senior Manager/ Sponsor will appointa project officer to develop the BusinessCase. Often this person will be the ProjectManager for the project when it isapproved. It is their role to obtain theinformation required and to develop thedocument. In the case of a large project aproject proposal or project business plan,

to produce a Business Case may bedeveloped for sign off depending uponproject complexity.

Who has ultimate accountability?

The Senior Manager/Sponsor has ultimateaccountability for the development of theBusiness Caseand has the responsibilityfor ensuring its implementation as a projectonce approved.

Who approves the Business Case?

Approval is dependent on the size of theproject and the internal procedures of theAgency. For smaller projects, approval willusually be obtained from within the Agencyat a divisional or Agency level. Largeprojects may require higher-level approval,for example the Business Case may needto be submitted to Treasury as part of theBudget cycle, and/or to the Tasmanian

Government Inter-Agency SteeringCommittee.

It is up to the Senior Manager/Sponsor todetermine the size of the project and theapproval processes required.

Seeking approval for the Business

Case Development

Developing the Business Case itselfrequires significant staffing resources andmay have a number of other costs,especially if it is a large project. It isessential that Senior Managers accept thecosts and the time that will be required,and are prepared to commit to them.

It may be convenient to treat thedevelopment of the Business Case as a

project in itself so the resources used todevelop it are managed in an optimal way.The project proposal for the business casedevelopment project then can be thedocument that seeks approval for theresources needed for the Business Case.(The Project Proposalmay be used inplace of a Business Case when a smallproject is being considered.)

Planning the development of the

Business Case

In planning the development of yourBusiness Case, there are a number ofadditional activities that you shouldconsider adding to your work plan,including:

Approval process steps - whatapproval processes are required forthe Business Case, including allinternal, whole-of-government and

Budget Committee approvals. Forexample, where a Business Caserequires Budget Committee approval,there is a pre-set time frame that isimmovable. Each financial year, theDepartment of Treasury and Financedetails the current BudgetManagement and Financial ReportingCycle, including deadlines for thesubmission of information. This isavailable from

www.treasury.tas.gov.au.
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Supporting documentation whatsupporting/covering documentationsuch as Briefing Notes, etc need to beprepared, particularly if the BusinessCase requires Budget Committeeapproval.

Interim activities - what action oractivity will be done while the BusinessCase progresses through the relevantapproval stages. You may need toconfirm with the Sponsor/SeniorManager, what action (if any) can beundertaken during this time.

You may wish to document these activitiesin a project brief if it is a larger morecomplex project. By doing this you aretreating the development of the BusinessCase as a project in its own right.

How do you develop a BusinessCase?

Business Casetemplatesfor projects ofvarying size are available on this website.In using these, discard those sections thatare not relevant to your particular projectand add any sections that may be specific

to your project.

In the case of larger projects, refer also toChecklist for Major Business Initiativesavailable from this website. This FactSheet provides the whole of governmentcontext for planning for businessimprovement during the project initiationphase.

If the project involves the development of

infrastructure where private as well aspublic resources are involved, it isadvantageous to be familiar with theGuiding Principles For Private SectorParticipation In Public InfrastructureProvision, available on the Purchasingwebsitehttp://www.purchasing.tas.gov.au/buyingforgovernment. This document also containsan outline of a Business Case for this typeof project.

The following is one way to develop yourBusiness Case. It is recommended that,where possible, you work through thefollowing steps with others beforecompleting the template.

Step 1: Collect relevant information

The Business Case should have enoughinformation to demonstrate that all optionsand issues have been explored fairly andthat the recommendations have beenlogically developed to enable the proposalto be accepted.

You will need to find answers to questionssuch as:

What is the issue? What is theintention? What issue is this projectaddressing? What is the scope of theissue? What are the key businessdrivers?

What has happened before to addressthis problem/issue and what can belearnt from either within your ownagency or from other agencies?

Why is this project a good idea?

How does this project supportGovernments priorities?

How does this project support theagencys priorities?

How does this project supportTasmania Togethergoals orbenchmarks (if applicable)?

Who are the stakeholders?

What resources have been allocated,if this has already occurred?

What other projects are currentlyunderway or planned that may beinterlinked in some way, either withinyour own agency or acrossgovernment?

Much of this investigation should involveextensive consultation with all keystakeholders.
http://www.purchasing.tas.gov.au/buyingforgovernmenthttp://www.purchasing.tas.gov.au/buyingforgovernmenthttp://www.purchasing.tas.gov.au/buyingforgovernmenthttp://www.purchasing.tas.gov.au/buyingforgovernmenthttp://www.purchasing.tas.gov.au/buyingforgovernment


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Step 2: Identify any Assumptions orConstraints

You will normally have some uncertaintyassociated with the proposed project. To

address this issue it is often necessary tomake some assumptions. For example, inelectronic service delivery it is usuallyassumed that some customers wish to,and find it convenient to interactelectronically. Support for assumptionsmay be found by researching experiencesin equivalent industries or geographicalareas.

Constraints are externally imposedrestrictions. These may be in the nature of

legal requirements, resource availability,deadlines, industry standards ororganisational procedures andrequirements.

The assumptions and constraints shouldbe listed to ensure the audience is awareof the framework in which the proposedproject is required to operate.

Step 3: Identify analyse and comparethe options

For any proposed project there are anumber of different options to meet theobjective. Each option has differingbenefits, costs and risks associated.Identify the various business options andthen analyse to the degree necessary to beable to effectively compare the options andarrive at a recommendation.

There should be a minimum of three

options analysed, status quo and at leasttwo other options that will achieve thesame objective, but to different degrees.The status quo option can often bedismissed as the preferred option bydescribing the scenario that may occur if acurrent problem or future problem is notaddressed. For example, it may be asignificant loss in revenue or politicalembarrassment if a current businessprocess fails due to an equipment ortechnology failure.

On the other hand status quo at this stagemay be the recommended option in light ofthe analysis. Status quo does not mean donothing, it means continuing on the currentpath. Beware of simplistic arguments thatdismiss the status quo option because itwill not cater for the sorts of change in thefuture that it has coped with in the past,e.g. the status quo for a softwareapplication should include some ongoingenhancements. Either way it is importantthat those considering the Business Caseknow the implications of maintaining thestatus quo.

In situations where the project has beenagreed and the resources allocated prior to

the Business Case, this identification,analysis and comparison of options shouldstill be completed, as it will reveal possibleissues such as a resource shortfall orinsufficient time available. In these casesvarious ways may be explored to resolvethese issues, for example requestingadditional funds or adjusting the projectscope.

This analysis is a comparison betweenoptions on the basis of the benefits

delivered, their costs and associated risks.It is not intended that this be used tocompare one project with another. Therecommended option becomes the projectif approved.

Key areas to analyse and compareare:

Benefits: This is a high level estimateof the value the particular option willprovide to the key stakeholders. The

benefits may be positive or negative,i.e. benefits or disbenefits, and youcan estimate them asHigh/Medium/Low. The keystakeholders need to be considered,as they are critical to the success ofthe project


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Costs: These include direct, indirectand recurrent costs to provide a fullpicture of the costs associated witheach option. Depending on the size ofthe proposed project, these costsshould be included for the BusinessUnit/Agency concerned and otherBusiness Units/Agencies if affected.Refer to the Department of Treasuryand Finances guidelines for moreinformation athttp://www.treasury.tas.gov.au

Risks: Identify and grade the majorrisks for each option. (Refer to the RiskManagement Sectionin theTasmanian Government ProjectManagement Guidelines) For those

risks with a grading of A or Bdetermine what riskminimisation/mitigation strategy isappropriate and the associated cost.Estimate the resultant grading for therisk once the strategies have beenimplemented and assign a numericalrating to each risk. These ratings aretotalled to provide you with a relativerisk rating for each option and theestimated cost of the risk management

strategies.Stakeholder impact: Identify the keystakeholders that are impacted byeach option. For each of these,describe the area of impact andprovide an indicative rating of theimpact

Issues: Identify any key issues anddescribe how they would beaddressed

Comparing the options can be made easierby using a table to compare one againstanother.

Step 4: Identify the recommended orpreferred option

Based on the previous steps, identify therecommended or preferred option.

Step 5: Work out how to implement therecommended option

Based on the information outlined in Step3 for the recommended option, come up

with a title for the project. Begin to broadlyscope the project that will implement therecommended option and describe how theproject will be managed. Although theimplementation strategy is at a high level, itshould define exactly what the projectshould achieve, the impact on theorganisation, an outline work plan, whatresources are required and how the projectwill be governed. This information will bethe basis for the development of theProject Business Plan for the project

once it has been approved. (For additionalhelp, refer to the Project ManagementFactSheet:Developing a Project BusinessPlan.)

This information is just as important forthose considering whether or not toapprove the Business Case, as it is for theanalysis and comparison of the options.Those with responsibility for the project arevery interested in ensuring that if theproject is approved and resources are

provided, that the resources will be wellspent, the project well managed and willproduce the desired results at the end ofthe project.

Step 6: Document your findings.

Now document your findings in theBusiness Case. For a large, complexproject the identification, analysis andcomparison of the options may be

documented in a stand-alone document,such as a Preferred Option Paper. Oncethe options paper has been consideredand agreed to by the Sponsor, a fullBusiness Case can then be developed.
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What happens next?

Once the Business Case is complete, itprogresses through the relevant approvalstages, depending upon the size of the

proposed project. This approval processcan often take time. The Sponsor/SeniorManager should be in a position to adviseyou of the progress of the decision on theBusiness Case by the decision makingbody.

Tips from Project Managers

Comments have been collected from anumber of Tasmanian Government ProjectManagers who have prepared Business

Cases in the past. Some of theirsuggestions were:

Where possible, it is advantageous tostage the development of an initiativefrom the concept stage to thecompletion of a comprehensive andrigorously developed Business Case.For example, use one budget cycle toprepare and gain approval of thePreferred Option Paper, and in the

following budget cycle complete theBusiness Case based on the approvedpreferred option.

In an environment where there iscompetition within and betweenagencies for funding, the ProjectManager needs to ensure that theperson sponsoring the development ofthe Business Case is selling theproject to the appropriate groupsand/or individuals.

For complex projects with a majorIS/IT component, the developmentapproach should include:

1. mapping the current businessprocesses

2. completing a baseline costing study

3. the adoption of the emerging whole-of-government InteroperabilityFramework

4. alignment between a proposedinitiative and the agencys IT StrategicPlan

Prior to the official commencement of

the development of the Business Casea number of weeks were utilised forundertaking preparatory work. Forexample, the preparation of theconsultants briefs and establishing thequantum of the cost for theconsultancies.

Benefits identification needs to beundertaken at an early stage. Thisassists in the process of firstlyidentifying those that are quantifiableand then in completing the worknecessary to obtain a dollar value.

Where the Business Case involvesbusiness options that involve otheragencies (major external stakeholders)it is invaluable to have one of theirrepresentatives as a team member.

There are often a number of optionsthat are originally identified andanalysed at a high level. This mayidentify one or more options that would

not be acceptable for cost, risk orpolitical reasons. These options canbe excluded from being analysed indetail in the Business Case, providingthe Steering Committee and/orBusiness Case Sponsor haveapproved their exclusion. This cansave wasting time analysing optionsthat, in reality, are not valid options.

Consultants are often used to provideinput into the development of theBusiness Case, where the ProjectTeam lacks the required skills orwhere an independent analysis isbeneficial. It is beneficial for theseconsultants to use the same issuesreporting format and weekly statusreporting format as the team. Thisenables the consultants issues to befed into the project Issues Registerthus avoiding double handling andensuring all issues are addressed. Italso makes it easier for the Project

Team to monitor the consultantsperformance.


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Ideally the Project Team should bephysically located together.

Ensure that at the beginning of theproject, a Communication Plan isdeveloped and approved by the

Project Steering Committee thatcontains a number of key messagesthat can be used throughout theproject to drive the message(s) home.

A number of Business Cases haveencountered problems when aprevious Business Case or earlierreport has recommended or alluded toa particular option that was relevant atthe time. Often the environment andcircumstances change and a Business

Case written at a later time can berequired to argue against a pre-existing (but outdated) view of anorganisational business problem.

There are dangers in attempting to puttoo much precision into costs andratings as at the Business Case stagethese are only estimates e.g. for riskand stakeholder analysis. Costs downto the dollar imply a level of precisionthat is not usually present.

This is often why figures in BusinessCases often appear rubbery whenyou look back at them later. However,they are based on the best availableinformation at the time the BusinessCase was prepared. This can bepartially addressed by includingcosts as ranges, rather thanspecific amounts.

Many risks change or only becomeapparent after the project begins. Thatis why it is important to undertakeanother risk workshop whendeveloping the Project BusinessPlan for an approved project.

The impact on stakeholders and theirdegree of support for a project oftencannot be gauged until they are awareof a more detail than may have beenavailable at the time the BusinessCase was developed. That is why it isimportant to undertake anotherstakeholder analysis when developingthe Project Business Plan for anapproved project.

Where to get additional help

Refer to the Tasmanian GovernmentProject Management Guidelines

The Inter Agency Policy and ProjectsUnit offers further advice andassistance, including a formal Advisoryand Review Service

Contact Project Services [email protected]

Further information and resources areavailable fromwww.egovernment.tas.gov.au

Acknowledgements

This Fact Sheet contains elements of the Tasmanian Government Project ManagementGuidelinesprepared by the Department of Premier and Cabinet.
mailto:[email protected]:[email protected]://www.egovernment.tas.gov.au/http://www.egovernment.tas.gov.au/http://www.egovernment.tas.gov.au/mailto:[email protected]

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