Better Business Cases Overview 2012 The Treasury

Better Business Cases Overview 2012 © The Treasury 1

Agenda • Context: Capital Asset Management • Why Better Business Cases? • When does it apply? • What is expected? • The 5 Case Model • How it works ? - the process • Who needs to be involved early ? • Where to get support? 2

Context: Capital Asset Management The Capital Asset Management (CAM) Framework was endorsed by Cabinet 2008 • Better Capital Planning-early visibility of decisions needed • Better Business Cases (BBC)-good information to inform decisions • Better Monitoring and Assurance • Better Reporting Focussed first on Better Capital Planning, based on Policy and strategy. Then focused on BBC, adapted from international good practice from: • Victoria (Australia) for Investment Logic Mapping for early problem definition and benefit identification • UK for 5 Case Model and staged BBC approach Currently reviewing Monitoring and Assurance 3

Why better business cases? Better business cases lead to: • better decisions • better investments • achievement of better outcomes. . Key stakeholders include: • Decision makers- better evidence-based assurance value for money • Management-early engagement on direction • Business case developers-clear expectations and support • Reviewers-early engagement and common language • Private sector service providers-early market soundings and clearly specified service requirements 4

Overview: When does it apply? All capital proposals from Departments, Crown Agents and other Crown Entities, which meet one or more of the following criteria: • Access to new Crown funding • Public Private Partnerships (excluding other Crown Entities) • $25 million whole-of-life cost (Departments only) • “High risk” per Risk Profile Assessment (Departments/Crown Agents only) • Asset disposals with significant policy decisions Also being used by the Canterbury Earthquake Recovery Authority to Inform investment decisions on the Recovery Strategy. Consider using as a good practice approach to inform decision making 5

Overview: What is expected? If a proposal requires approval: • Two-stage process for high risk and/or large scale projects - Stage 1: Based on the Indicative Business Case - Stage 2: Based on Detailed Business Case • Single stage process for non high risk/low scale • Application of the 5 case model Potential use of Programme Business Case if the project/s are part of a wider programme The process is about thinking not writing 6

The 5 Case Model Any business case addresses 5 key questions: 1. Is there a compelling case for change? 2. Does the selected option optimise public value? 3. Is the potential Deal achievable and attractive to the market place? 4. Is the spending proposal affordable? 5. How will the proposal be delivered successfully? 7

The 5 Case Model The 5 key elements of good practice business cases Applicable strategic fit & business needs Achievable – can be successfully delivered Strategic Management Affordable – within budget Financial Economic Commercial Appropriate – optimises public value Attractive – to supply side and feasible 8

Strategic assessment How it works ? (the process) Programme Strategic Assessment Problems Benefits Problems Based on Victoria ILM Benefits Programme Business Case Strategic fit. Best public value programme and mix of projects. Project Detailed Affordable. Business case Stakeholders do the thinking together Project Implementation plan Project Indicative Business case Based on Victoria ILM Strategic fit. Best public value long to shortlist of 5 options. Preferred option attractive to supply side (nontraditional procurement), affordable and Revisit strategic fit. Best public value option of the short list. For preferred option prepare for the deal , ascertain affordability and plan for delivery. Revisit strategic fit and best public value option. Contracting for the deal. Ensuring successful delivery. 9

Who needs to be involved early? The Better Business Cases process is most successful when: • Agencies engage with central and monitoring agencies (reviewers) in the early stages of each business case deliverable to ensure the business case will be fit for purpose. Agreement will be sought on: – Type of business case – Timing and nature of decisions required – Scale and risk of the proposal – Scope of analysis required for each case-including reviewers criteria/evidence – Level of effort and cost for development and assurance – Scope of the engagement during the development of the business case Use the scoping document to secure early agreement 10

Where to get support Treasury provides the following support: Products (overview) http: //www. infrastructure. govt. nz/publications/betterbusinesscases – Quick Reference Guide A review is performed early each calendar – Power point presentation year and a revised – Online module (website only) version published in July – Overview booklet (including scoping document) Products (detail) http: //www. infrastructure. govt. nz/publications/betterbusinesscases – Guidance booklets for each type of business case – Templates for each type of business case (word doc’s and A 3 presentations) – List of agency business case examples (public sector intranet only) Training (Monthly in Auckland, Wellington, Christchurch from August) – One hour Awareness seminar for senior managers – Half day knowledge based training “Foundation Course” – Full day skills based “Practitioners Course” and Reviewers Course” – Communities of practice to exchange experiences with peers 11

Enhancements planned for July 2012 – Revisit brand so it differentiates between who owns BBC and who can use BBC, – Make guidance more generic and applicable to a wider range of applications, – Reinforce importance of investment objectives, options and realistic do minimum, – Redefine the value propositions by stakeholder group, – Better demonstrate the flexibility and scalability, – Demonstrate how the feasibility study, design, develop etc process aligns , – Place more prominence on early engagement with reviewers (scoping document), – Improve how best to use the workshops to engage stakeholders during process, – Only require first two ILM workshops (problems and benefits) for strategic assessment 12

The Process: starting with a capital plan 13

Fit with Portfolio management Portfolio definition Balance Under stand Funders Plan Organisation al energy Project management Activities Prioritise Programme management Plans Portfolio management Strategy Governance Categorise Organisations charged with delivery Portfolio delivery Service providers 14