SOUTH WEST EMPLOYERS Business Case & Specification Writing Trainer: Date:
Activity 1 - Icebreaker Is a middle child How many points do you have? Plays a team sport _______ another Speaks Likes to eat Japanese food Is wearing pink (1 point) (1 point) Wears glasses Is over 6’ tall Has less than four letters in his/her first name Has a last name that starts with a W Has green eyes (1 point) (1 point) Owns a Vauxhall car Likes classical music Preferred Maths to English in school Knows someone famous Has red hair (2 points) language (2 points) Has more than 2 children Has made a parachute jump Has visited more than 10 countries Has more than 7 letters in his/her first name. Has a birthday in the same month as me (3 points) (3 points) One unusual fact I have found out about someone here is?
Activity 2 - Groundrules • Groundrules help to create a positive and safe learning environment. Discuss and agree a list of between 3 and 5 rules that all participants are comfortable with
Objectives At the end of the session, participants will have knowledge and an understanding of: • The fundamental principles of preparing for and developing a business case and specification: – What is a business case and when is it needed? – Typical business case contents – What is a specification and why is it important? – Types of specification – Special considerations when buying services – Potential issues and challenges and how to manage them •
Sections Introduction to Business Cases 2. Business Case Content 3. What is a Specification? 4. Writing a Specification 1.
What is a Business Case and when is one needed?
Some functions £ A recommendation to decision-makers of a course of action £ An evaluation of a number of identified courses £ Analysis of costs, benefits and risks in pursuing certain courses of action £ An explanation of how a course of action should be implemented £ A communication tool to provide relevant information to people involved in the decision-making process £ A method for innovation, wider-thinking and new practice £ An opportunity to assess what others are doing to compare best practice
Innovation Savings - Think and Do Different Traditional Procurement Supplier Prices Profit 10% Risk Premium 5% Squeeze the profit margin may yield 3 – 5% Target the 90% Might achieve 40% Direct Costs 40 – 50% Demand Challenge Innovate 45 – 50% Overheads Soft market testing Benchmark Change of Use
Why have a Business Case? Assess the situation, what (if anything) is needed? Requirements Evaluate Benefits Investment Appraisal Provide Baseline Mobilise Support Project Structure Compliance Risk Management Secure Resources Secure Budget Stakeholder Buy-In Approval
When is a Business Case required? Where approval is required for expenditure – Often for procurement over the EU threshold – Refer to your local CPRs for further detail • For complex requirements where a project structure is required (eg under Prince 2 or similar project methodology) •
Writing a Business Case will help to. . . • • • Obtain the support of decision-makers Obtain management commitment Gain approval to proceed Ensure fit with policies and strategy Provide a planning and implementation framework Enable monitoring against a stated baseline Ensure benefits are clearly stated and logged/achieved Facilitate risk management Provide resources Initiate a broader project
Be prepared • • Identify stakeholders Determine/analyse options Consider/evaluate risks Identify risk management Assess benefits Determine benefits tracking Undertake financial analysis
Sections Introduction to Business Cases 2. Business Case Content 3. What is a Specification? 4. Writing a Specification 1.
Executive Summary • • • Arguably the most important part A snapshot of the whole business case Highlights the key aspects Enables senior staff to grasp the key aspects One page is ideal – maximum This is what we want you to approve. . . And this is why it is a good idea. . .
Introduction • • • Sets the scene Provides background and relevant history Summarises the business need Explains the current situation This is where we are now. . . Identifies the drivers for change And why we need Relates to strategic goals to change. . .
Project management • • Applicable for major and project related items Project structure Roles Governance Here’s the process that will Decision levels take us through to successful Project plan implementation. . . Outline of resources
Definition, scope and implications • • • Outlines the requirement Examines the broader impact Identifies stakeholders States constraints Analyses dependencies Identifies critical success factors This is what we need to buy and the broader impact. . .
Stakeholder analysis and management Stakeholder Power High Low Internal Keep Satisfied Key Players Minimal Effort Keep Informed Stakeholder Interest High Source: adapted from Mendelow (1991)
Activity 3 – Stakeholder Analysis • Work in pairs or small groups – Using the given contract and identify the relevant key stakeholders. Consider their level of interest and power relative to the contract and plot their position using the matrix approach that we have discussed
Technical considerations Will vary depending on the item being purchased • May include: – Quality • – Sustainability – Storage – Distribution – Operational issues – Training – Systems – Compatibility issues We have considered how the purchase will impact on us operationally. . .
Commercial considerations Determine outcomes • Market considerations • Existing frameworks and collaboration – Soft market testing, opportunities for innovation – • • • Outline specification Sourcing options Contract term Contract type M. I. requirements Implementation timescales And here are the key business considerations which are relevant to the purchase. . .
Additional considerations • Market testing Is the supplier willing to invest? – What opportunities are there for shared responsibility? – Is collaboration possible? – What options are available for innovative practice and original solutions And here is the – way in which we will gain additional rewards, shared responsibility and innovation. . .
Risk analysis • Probability How likely is it that the risk will happen? – High : Medium : Low – • Impact What will be the impact if it does happen? – High : Medium : Low • Risk management and mitigation • Contingency – And we have considered the risks and how they can be managed. . .
Activity 4 – Identifying and managing risks • Work in pairs or small groups – Consider the risk examples provided – Determine the probability of these risks arising and their potential impact if they do arise – Suggest ways that each of the risks can be managed
Financial & resource considerations • • Impact on staff (workload, TUPE) Costs – – • Budget – – – • Phasing Operational Ongoing Whole life Cap. Ex Rev. Ex Shared investment and risk Return and payback – These are the relevant financial aspects. . . And the impact on headcount. . . . Procurement activity is not simply a process – it should add value and produce savings
Investment appraisal techniques Payback Period • Net Present Value • Internal Rate of Return • Accounting Rate of Return •
Breakeven point £ Accumulation of Benefits Total costs Break even point TIME (or production)
Benefits management & realisation Hard benefits • Soft benefits • Measurement • Manage and track • And these are the benefits that the purchase will deliver. . . .
Options appraisal • • • Long list Short list Explain reasons for rejection Financial analysis of options Use SWOT analysis Evaluation criteria A number of options have been considered and evaluated. . . .
SWOT analysis Strengths Opportunities Weaknesses Threats Internal External
Activity 5 – Evaluating options You have been involved in writing a business case and six options have been identified as offering potential solutions • As a group, consider the criteria that you could use as a basis for evaluating each option •
Recommendation Clear • Concise • Supported • Logical • This is the option we recommend. . And why. . . . Ensure you follow local procedures for sign-off
Other content • • • Title page Table of contents Definitions/glossary of terms Bibliography Appendices
Summary of typical content 1. Title page 2. Executive summary 3. 4. Table of contents Definitions/glossary of terms 5. Introduction 6. Project management 7. Definitions, scope and implications 8. Technical considerations 9. Commercial considerations 10. Risk analysis 11. Finance and resource considerations 12. Benefits management and realisation 13. Options appraisal 14. Recommendation 15. Appendices 16. Bibliography
Business case checklist • • • Is the need/requirement clearly stated? Does it fit with strategy, policies and goals? Are the benefits identified? How/when will benefits be realised and measured? Has success been clearly defined? Have all options been identified and evaluated? Is the preferred option clearly supported? Is the funding requirement clear? Have risks been identified and evaluated? Have plans been put in place to manage the risks? Is there a clear recommendation? Does the financial analysis support the recommendation?
Sections Introduction to Business Cases 2. Business Case Content 3. What is a Specification? 4. Writing a Specification 1.
Activity 6 – What is a specification? • Consider and discuss the meaning of ‘specification’
Some definitions • • • A statement describing the characteristics of the supplies or services to be purchased, which the supplier is expected to provide A means of communicating in writing the requirements or intentions of one party to another about a product or service, a material, procedure or a test A standard against which the supplier can be measured A statement of the attributes of a product or service A statement of requirements Most importantly: it is part of your contract with the supplier!
Why is a specification needed? It must not be assumed that the supplier will always precisely understand what is being requested by the purchaser. . . purchasers get what they ask for, but not necessarily what they need
Caveat emptor A computer? Or, a computer?
The main functions of a specification To communicate to a supplier what you expect them to supply • To provide a record against which the goods or services supplied will be measured • A tool to obtain buy-in and commitment from internal stakeholders • A contractual tool to ensure you get what you want •
Activity 7 – Services v Goods • Work in pairs or small groups – Discuss the issues when specifying services (compared to goods, for example, tangibility versus intangibility)
Specifying services • • • Be as objective as possible Define standards and expectations Set measurement criteria Be specific about expectations Some specific considerations about services: – Breakdown the service into measurable milestones – Apply rigorous standards to all aspects of the service – Set performance targets of a ‘good’ service – Check methods of delivery – Ensure you put into place the right monitoring methods
Should suppliers be involved in developing specifications? If so, how?
Supplier involvement Advantages: Considerations: £ Access their expertise £ Conflict of interest? £ Objective check & balance £ Unfair advantages? £ Opportunity for refinement £ Reduces competition? £ Early notice of requirements £ Encourages dependency?
Co-operation & collaboration Writing a specification may need to be a team effort
Activity 8 – Consulting with others • • Identifying individuals in terms of their (stakeholder) interest and influence is sometimes important Discuss who it may be necessary to engage with for large value items. Who could provide valuable information and advice on requirements and considerations for an item of significant expenditure?
General considerations • • • Successful procurement relies on the specification being a true and accurate statement of requirements Specifications must take account of internal criteria, eg budgets Consider that every requirement is likely to add cost The end user should be aware of the content of the specification Judgement and common sense are required when deciding on the content Preparing a specification should be seen as a key part of the procurement cycle
The procurement cycle Define & review need Exit & termination Manage contract performance Manage implementation and transition Develop business case and write specification Implement Planning Determine procurement strategy Contract award Invite Enquiry Pre-qualify suppliers Negotiate? Evaluate tenders Issue RFQ or ITT
Output v Input specifications Functional / Output: Defines the task or desired result by focusing on what is to be achieved rather than the method for achieving the result Technical / Input: Defines the technical and physical characteristics of a requirement eg physical dimension, power input Execution risk is with supplier Execution risk is with the purchaser (The supplier proposes what will do the job) (You tell the supplier how to do it) Balance of risk
Output v Input specifications Functional/Output: Technical/Input: £ Focuses on outputs £ Focuses on inputs £ Details ‘delivery’ £ Details ‘method’ £ Reliant on supplier £ Prescriptive £ Emphasises performance £ Emphasises compliance £ Assigns risk £ Retains risk £ Delegates control £ Keeps control
Outcome specifications
Some golden rules • • Do not get carried away with technical content. Always keep focused on the requirements (the must haves not the would be nice to haves) Keep specifications as simple as possible Ensure technical drawings etc are correct and up to date Clarify the meaning of acronyms and ‘jargon’ When in doubt – explain Avoid specifying brands (unless required) Prepare, prepare
When to develop a specification Is there an existing specification which meets your requirements exactly? Writing new specifications which are not needed can lead to duplication and lack of standardisation, adding unnecessary costs. Consider reusing or adapting a previous specification • However, writing a new specification may help you to improve on previous practice and to encourage innovation. There may also be cost savings to be made if you appraise options rather than simply run with what has been done before •
Re-use of existing specifications Exercise caution – changes may have occurred which could impact on the specification Macro Micro Internal
Activity 9 – PQQ Selection In three groups, prepare your response to the PQQ evaluation activity • First, decide on your evaluation criteria • Secondly, decide on your assessment method (scoring, pass/fail or traffic lights, or some other method) • Thirdly, use the matrix provided to evaluate •
Sections Introduction to Business Cases 2. Business Case Content 3. What is a Specification? 4. Writing a Specification 1.
Writing a specification • • • Preparation and planning are key Arrange the content into a logical form Consider the likely main headings and then add in sub-headings Consider ‘need to have’ versus ‘nice to have’ requirements Everything included in the specification will become part of your legally binding contract with the supplier Does the specification make it absolutely clear what is required? – test it out with colleagues
Structure and layout • There are no fixed rules • Put yourself in the position of the supplier – Is it logical? – Does it make sense? – Is it unambiguous?
Level of detail Will vary with: • The value of the contract • The complexity of the requirement • The potential risks involved
Contents – summary Structure: Considerations: £ Identification £ Standards £ Table of contents £ Legislation £ Introduction £ Regulations £ Background/history £ Glossary Requirements: £ Other documents £ Scope £ Bibliography £ Detailed requirements
On completion • • • Meet internal sign-off authorisation limits Where appropriate, obtain sign-off before proceeding Keep key stakeholders informed Retain the specification in the contract file post-award Use as a reference document for ongoing supplier performance management
Activity 10 – Specification Development • Prepare a specification for an item that adequately details your requirements. This should have sufficient information to allow another group to propose a price to deliver this to you
Objectives At the end of the session, participants will have knowledge and an understanding of: • The fundamental principles of preparing for and developing a business case and specification: – What is a business case and when is it needed? – Typical business case contents – What is a specification and why is it important? – Types of specification – Special considerations when buying services – Potential issues and challenges and how to manage them •
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