Download Business Case Guidance - FMD Consultants Limited

Prince2™ Documentation
BUSINESS CASE GUIDANCE
Support Guidance
Release Status: FINAL
Author: John Aldridge, FMD Consultants Limited
Date: 01 January 2016
Filename & Version: p2_business_case_guidance_v01
Methodology: PRINCE2® 2009
FMD Consultants Limited assumes no responsibility for the usage of any information contained in this
document and the way it is handled and disclaims all liability in respect of such information and its
provision. Subject to this disclaimer, you may copy and utilise the material contained in the document.
This information is based on OGC PRINCE2™ material. PRINCE2™ is a registered trade mark of the
Office of Government Commerce in the United Kingdom and other countries. All registered trademarks
recognised & accepted.
1. Document Location
This document is stored in the following location:
Filename
p2_business_case_guidance_v01
Location
www.fmdconsultants.co.uk\web
2. Related Documents
Summary of filenames and locations of related documents:
Document Type
Filename/Location stored:
p2_business_case_template_v01
www.fmdconsultants.co.uk\web
Project ID: prince2_2009
Business Case Guidance
Doc Ref: p2_business_case_guidance_v01
Page 2 of 8
Date of Issue: 01/01/2016
3. Contents
1.
DOCUMENT LOCATION ............................................................................................. 2
2.
RELATED DOCUMENTS .............................................................................................. 2
3.
CONTENTS ................................................................................................................ 3
4.
PURPOSE .................................................................................................................. 4
4.1.
4.2.
OF A BUSINESS CASE ...................................................................................................... 4
OF THE PROJECT............................................................................................................. 4
5.
QUALITY CRITERIA .................................................................................................... 5
6.
REASONS .................................................................................................................. 5
7.
OPTIONS .................................................................................................................. 5
8.
BENEFITS EXPECTED .................................................................................................. 6
9.
EXPECTED DIS-BENEFITS............................................................................................ 7
10.
TIMESCALES .......................................................................................................... 7
11.
COST..................................................................................................................... 8
12.
INVESTMENT APPRAISAL ....................................................................................... 8
13.
RISKS .................................................................................................................... 8
Project ID: prince2_2009
Business Case Guidance
Doc Ref: p2_business_case_guidance_v01
Page 3 of 8
Date of Issue: 01/01/2016
General Guidelines:
This document provides a template for the creation of a Prince2 Business Case conforming to
the Office of Government Commerce (OGC) guidelines. It complements the Business Case
Template document which also contains this guidance in the form of comments associated
with each paragraph.
Please note that Section 4, Purpose of the Business Case, does not form part of the OGC
guidelines but has been included to ensure the final document is appropriately focused.
It may be appropriate to delete all guideline comments form the Business Case before it is
circulated for review, at which point reviewers will add their own review comments.
4. Purpose
4.1. Of a Business Case
A Business Case is used to establish why the forecasted effort and time will be worth the
expenditure. It links the proposed investment to the achievement of the department’s
objectives, documents the policy, business and project objectives and options that will affect
both the decision and the investment itself.
The purpose of the Business Case is



To document the justification for the undertaking of a project, based on the estimated
cost of development and implementation against the risks and anticipated business
benefits and savings to be gained.
To obtain management commitment and approval for investment in business change,
through a clearly presented rationale for the investment
To provide a framework for informed decision-making in planning and management of
the business change and subsequent benefits realisation.
The Business Case seeks to establish that the proposed project will:





Meet business need – describing everything that is required
Take forward the most appropriate option - checking that all appropriate options have
been considered before narrowing down the choices for the way forward
Be achievable – demonstrating that the department (and provider, where applicable)
fully understands the implications of implementing the business change and can
support this with appropriate plans for risk management and quality
Be affordable - checking that all relevant costs are included; any likelihood of
significant cost changes over the life of the project; where service provision applies,
any proposed changes in pricing structure over the life of the contract. There should
also be continuing confirmation from within the department that funds are available.
Be a sound commercial arrangement (for external procurements) – value for money
to the department and reasonable return for the provider.
The Business Case is developed at the beginning of the project and maintained throughout its
life, being reviewed by the Project Board at each key decision point. At project closure the
Business Case is used to confirm that the project has delivered the required products and that
the (expected) benefits can be realised by the business in an appropriate timeframe.
The Business Case provides the basis for the Post-Project Review Plan.
4.2. Of the project
The purpose of the project should be given in the Purpose section of the Business Case. This
could for example be a statement about the need for a standardised website or for a unified
system.
Project ID: prince2_2009
Business Case Guidance
Doc Ref: p2_business_case_guidance_v01
Page 4 of 8
Date of Issue: 01/01/2016
5. Quality Criteria
The following quality criteria should be observed:
 The reasons for the project must be consistent with corporate or programme strategy
 The Project Plan and Business Case must be aligned
 The benefits should be clearly identified and justified
 It should be clear how the benefits will be realized
 It should be clear what will define a successful outcome
 It should be clear what the preferred business option is and why
 Where external procurement is required it should be clear what the preferred sourcing
option is and why
 It should be clear how any necessary funding will be obtained
 Includes non-financial criteria as well as financial criteria
 Includes operations and maintenance costs and risks as well as project costs and
risks
 Conforms to the organizational accounting standards such as break-even analysis
and cash flow conventions
 The major risks faced by the project are explicitly stated along with any proposed
responses
6. Reasons
Explain the reasons why the project is required. Ideally this should be linked to the
organisational context and should explain how the project will enable the achievement of
corporate strategies and objectives.
The reasons should be clearly defined in the Project Mandate but they may need expansion
or clarification within the Business Case.
7. Options
A brief description of the different options considered for the project indicating the chosen
option, together with a summary of the reasons for the choice. This information provides
assurance that alternatives were considered.
Consider the following when identifying and choosing the options:
 The option of doing nothing
 Range of options for meeting the project objectives – what is wrong with the status
quo?
 High level benefits and weightings
 Assessment criteria
 Listing of options with a SWOT (Strengths, Weaknesses, Opportunities and Threats)
analysis against meeting business needs, resulting in a preferred option.
 Successive analyses of preferred option in terms of scoping, technical solution,
methods of service delivery, implementation timing and approach
 Key selection criteria - how well an option:
o Meets corporate objectives
o Fits with corporate strategies (name them)
o Achieves a return on investment in terms of economy, efficiency and
effectiveness (not necessarily in cash-releasing terms)
o Makes best use of service provider capability and capacity
o Matches funding and constraints
o Fits with internal skills and resources
o Meets corporate strategies for any areas of external sub-contracting where
appropriate
Project ID: prince2_2009
Business Case Guidance
Doc Ref: p2_business_case_guidance_v01
Page 5 of 8
Date of Issue: 01/01/2016
8. Benefits expected
This section should identify how each benefit that is claimed would be achieved by the
project’s outcome. Benefits are defined as outcomes of change that are perceived as positive
by a stakeholder. Benefits should be valuable to the business, in line with the business
objectives and also be measurable. Each one should be described clearly in measurable
terms.
It is important to define the current status of each benefit in quantifiable terms so that
measurable improvements can be assessed after the project has completed. Consideration
should be given to defining how and when the measurement of improvement can be made.
Benefits Realisation Management (BRM) is the identification of potential benefits, their
planning and tracking, the assignment of responsibilities and authorities and their actual
realisation as a result of investing in business change. Benefits should be identified as part of
the Benefit Realisation Management process. This could start out as a workshop attended by
key stakeholders (users and business owners) ensuring benefits are identified and owned by
the business.
BRM complements and overlaps the Investment Appraisal. While the latter provides the
justification for the investment, BRM allows organisations to plan for and achieve the benefits.
Costs and benefits cannot be viewed in isolation and the BRM process and the overall
investment appraisal should be planned together.
The following is a list of areas where benefits may be identified
Policy or legal requirement
Benefits that enable an organisation to fulfil policy
objectives, or to satisfy legal requirements where the
organisation has no choice but to comply
Quality of service
Benefits to customers, such as quicker response to
queries or providing information in a way the
customer wants
Internal management
Benefits that are internal to the organisation, such as
improving
decision-making
or
management
processes
Process improvement (productivity
or efficiency)
Benefits that allow an organisation to do the same
job with less resource, allowing reduction in cost, or
to do more
Personnel or HR Management
The benefits of a better motivated workforce may
lead to a number of other benefits such as flexibility
or increased productivity
Risk reduction
Benefits that enable an organisation to be better
prepared for the future by, for example, not closing
off courses of action, or providing new ones
Flexibility
Benefits that allow an organisation to respond to
change without incurring additional expenditure
Economy
Benefits that reduce costs while maintaining quality
(often referred to as cost reduction)
Revenue
acceleration
enhancement
or
Benefits that bring increased revenue, or the same
revenue level in a shorter timeframe, or both
Project ID: prince2_2009
Business Case Guidance
Doc Ref: p2_business_case_guidance_v01
Page 6 of 8
Date of Issue: 01/01/2016
Strategic fit
Benefits that contribute to the desired benefits of
other initiatives, or make them achievable
A ‘negative’ way of assessing benefits may be useful as part of the overall justification for the
project. This describes what will happen if the project is not done, e.g.:



Large maintenance costs
Heavy legal penalties for non-compliance with new legislation
Expressed in measurable terms against today’s situation
Or more positively for example,









More effectively integrated systems
Ease of support
Increased system availability
Reduction of paper
Reduction of manual effort
Reduction in duplication of effort
Reduction of data entry
Streamlining of process
Movement of staff to more 'value added' tasks.
A possibility (to give/create an overview) would be to insert the information in the tables below
(see example) if all the information is available.
Two examples of a Benefit Summary Analysis
Description of
Benefit:
Hard Benefits (£) Summary Analysis
How will it be
Who will deliver
When will it
measured:
it:
be delivered:
Reduced operating
costs
Financial Reviews
(2012-2013)
Description of
Benefit:
Soft Benefits Summary Analysis
How will it be
Who will deliver it:
measured:
When will it be
delivered:
Increase in staff
retention. Staff
development reviews.
1 year after the end of
the project – January
2017
Improved staff morale
Director of
Finance
HR/Operational
Heads
June 2013
Financial
Benefits (£):
£250K
recurrent
operating
costs
9. Expected Dis-benefits
A dis-benefit is an outcome perceived as negative by one or more stakeholders. Dis-benefits
are an actual consequence of an activity and should not be confused with risks which may or
may not be encountered. For example, a system developed to improve customer service may
result in staff having less direct contact with customers which in turn means they may become
isolated from customers and their opinions, ultimately decreasing their job satisfaction
10. Timescales
Summary of the Project Plan. If the detailed Plan has not been produced, then an outline of
the timescale should be included and then refined in the Project Plan later on. The Business
Case should be updated with refined timescales when available. There should be sufficient
Project ID: prince2_2009
Business Case Guidance
Doc Ref: p2_business_case_guidance_v01
Page 7 of 8
Date of Issue: 01/01/2016
information on timescales (with appropriate contingency for 'unknowns') to allow the Business
Case to be approved
11. Cost
Extracted from the Project Plan. If detailed costs are not in the Project Plan or the Plan has
not been produced in sufficient details, an outline of the costs should be included and the
Business Case should be updated when detailed costs are available
12. Investment Appraisal
Investment thresholds will normally be defined by Corporate Finance. If this threshold is
reached, an Investment Appraisal should be undertaken by appropriate Finance Officers to
test the assumptions of the project to decide the best financial solution in terms of return of
investment. All the costs will be identified (capital as well as recurring) and the benefits and
risks tested against them.
The Investment Appraisal should also confirm the project is in line with the strategic
objectives of the organisation.
The time spent on the Investment Appraisal should be included in the Project Plan. The
Appraisal should be done immediately after drafting the Business Case, as the latter will be
tested in this process.
The Investment Appraisal approval process needs to be determined and early
involvement with responsible parties should be sought to ensure the process does
not detrimentally impact project timescales.
13. Risks
In order to make the judgment of ‘business justification’, the Project Board needs to
understand not only the benefits and project costs but also the risks which may either
reduce/enhance the benefits or reduce/increase costs.
A summary of the key risks facing the project should be given. Details of how these risks will
be managed should be contained in the Risk Log.
Project ID: prince2_2009
Business Case Guidance
Doc Ref: p2_business_case_guidance_v01
Page 8 of 8
Date of Issue: 01/01/2016