Doing the right projects how the five case model can help

Transcription

1 Doing the right projects how the five case model can help 1

2 Agenda JL 1. Characteristics of the right projects. 2. The five case model and the development of the business case. 3. Identifying the right projects using the options framework filter. 2

3 The right projects! What are their characteristics? 3

4 Public Sector - what they aren t! Channel tunnel costs underestimated by 5.2bn Jubilee line extension costs underestimated by 1.4bn; project duration understated by 2 years Millennium Dome visitor numbers overestimated by 5.5m UNCLASSIFIED Scottish parliament 10 times over budget and late. 4

5 Avoidable costs with no real benefits JL 5

6 Private Sector Project Delivery the real world! Survey report by US based consultancy the Standish Group Project Success Rate - 28% (in other words a 72% failure rate) Average Cost over-run 45% Average Time over-run 63% Average shortfall in requirements 33% UNCLASSIFIED 6

7 The right projects: Strategic fit & business needs Value for money Commercially viable - supply-side capacity/ capability & Deal Affordable and fundable Achievable Based on the Five Case Model 7

8 Five Key Questions? JL Strategic case dimension Economic case dimension Commercial case dimension Financial case dimension What is the case for change and how does it provide strategic fit? What is the option that optimises public value? Is there a market and can a realistic and credible commercial deal be struck? Is it fundable and affordable? Management case dimension Are there realistic and robust delivery plans in place? 8 8

9 Focus of the five case model JL The 5 dimensions are produced at the same time not in sequence but there may be many iterations Strategic planning Project management Management Strategic Economic Options Appraisal Financial management Financial Commercial delivery 9

10 Different types of Business Case JL Programme Business Case (PBC) Policies Programmes Strategic Outline Case (SOC) Outline Business Case (OBC) Full Business Case (FBC) Major Projects Novel & contentious OJEU procurement Business Justification Case (BJC) Minor spending, precompeted proposals 10

11 Stages: Business Case Development JL Identifies Case for change & preferred way forward Identifies Preferred option Identifies most economically advantageous offer Scoping Planning Procurement Research Strategic Outline Case Outline Business Case Full Business Case Decision to undertake further appraisal of the shortlist Decision to proceed to procurement Decision to contract TIME 11

12 Strategic Case Strategic Context Organisational Overview National, Regional, Local and Organisational: - Policies - Strategies - Programmes - Related projects Including the use of PPP 12

13 The Case for Change Objectives Existing Arrangements Business Needs Potential Scope Main Benefits Key Risks Constraints Dependencies SMART Status quo gap Core, desirable optional Beneficiaries Business and service Limitations reliance on other things being in place 13

14 Investment objectives Economy reducing operating cost Efficiency improving throughput & unit cost Effectiveness improving quality outcomes Replacement & re-procurement business continuity Statutory Compliance and Conformance - best practice 14

15 Economic Case JL Challenge is to avoid gold plating! 15

16 Economic Case: stage 1 (long list) Identify the CSF s Identify the Long list options (12) Undertake SWOT analysis: - Investment objectives - CSF s Identify the short list options (min 4) - Status Quo - Do Minimum - Preferred Way Forward - Another realistic option 16

17 Economic Case: stage 2 (short list) Option 1 - Status Quo Option 2 - Do Min Option 3 - PWF Option 4 - Other Preferred Option Cost Benefit Analysis Cost Effectiveness Analysis (CEA) Risk Quantification Qualitative benefits Sensitivity Analysis 17

18 The Options Framework filter WHAT Identify options for Scope HOW Solution options that meet Scope Delivery options for best Solution(s) WHO WHEN Implementation options Funding 18

19 Case Study Fictional Example The Options Framework for long-listing and the Options Filter for selection of the shortlist The small country of Bangalo has 4 principal cities where economic activity is focused Workers travel into the cities each day City A is the largest and economically most significant, followed by cities B, C and D respectively The Ministry has developed a transport strategy to improve the road network between these cities. This include the use of Private Finance. UNCLASSIFIED 19

20 Case for change Investment objective: to facilitate economic growth by reducing travel time between the principal cities of the country (A, B, C and D) by 20% by Output: improved infrastructure - road network Outcome: increased capacity and reduced congestion Benefit: reduced cost of travel to end users (public and business); increased GDP and tax revenues (society) etc UNCLASSIFIED 20

21 Status quo Poor quality roads Low capacity Very congested Long journey times Flow of workforce into commercial centres severely limited demand and capacity planning! 21

22 Do minimum Intermediate Do maximum Scope city B city B and city C city B, city C and City D 200km 300km 400km Solution Delivery Implementation Funding UNCLASSIFIED 22

23 Do minimum Intermediate Do maximum Scope city B city B and city C city B, city C and City D 200km 300km 400km Solution Delivery Implementation Funding UNCLASSIFIED 23

24 Do minimum Intermediate Do maximum Scope city B city B and city C city B, city C and City D 200km 300km 400km Solution Delivery Implementation Funding UNCLASSIFIED 24

25 Do minimum Intermediate Do maximum Scope city B city B and city C city B, city C and City D 200km 300km 400km Solution Delivery Implementation Funding UNCLASSIFIED 25

26 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Implementation Funding UNCLASSIFIED 26

27 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Implementation Funding UNCLASSIFIED 27

28 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Implementation Funding UNCLASSIFIED 28

29 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Funding UNCLASSIFIED 29

30 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Funding UNCLASSIFIED 30

31 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Funding UNCLASSIFIED 31

32 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Funding UNCLASSIFIED 32

33 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Phased 3 years Phased 2 years big bang 1 year Funding UNCLASSIFIED 33

34 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Phased 3 years Phased 2 years big bang 1 year Funding UNCLASSIFIED 34

35 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Phased 3 years Phased 2 years big bang 1 year Funding UNCLASSIFIED 35

36 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Phased 3 years Phased 2 years big bang 1 year Funding UNCLASSIFIED 36

37 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Phased 3 years Phased 2 years big bang 1 year Funding capital Mixed economy Private finance (PPP) UNCLASSIFIED 37

38 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Phased 3 years Phased 2 years big bang 1 year Funding capital Mixed economy Private finance (PPP) UNCLASSIFIED 38

39 Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Phased 3 years Phased 2 years big bang 1 year Funding capital Mixed economy Private finance (PPP) UNCLASSIFIED 39

40 Options Analysis: Short-list Status Quo Do Minimum Preferred Way Forward PWF - Less Ambitious (content, time) PWF - More Ambitious (content, time) Minimum of four options! 40

41 Preferred way fwd Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Phased 3 years Phased 2 years big bang 1 year Funding capital Mixed economy Private finance (PPP) UNCLASSIFIED 41

42 PWF more ambitious Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Phased 3 years Phased 2 years big bang 1 year Funding capital Mixed economy Private finance (PPP) UNCLASSIFIED 42

43 Do Minimum Do minimum Intermediate Do maximum Scope Solution city B 200km city B and city C 300km Refurbish existing Refurbish existing + new route city B, city C and City D 400km Completely new route Delivery Local contractor National contractor International contractor Implementation Phased 3 years Phased 2 years big bang 1 year Funding capital Mixed economy Private finance (PPP) UNCLASSIFIED 43

44 Options framework filter Disaggregates problem into basis elements and steps Challenges implicate assumptions Allows consultation to be undertaken in a structured way Transparent & involves end users, stakeholders & technical experts 44

45 Commercial Case Commercial Strategy (including procurement) Scope and related services Risk transfer Charging/payment mechanism Key contractual clauses & length Personnel implications (TUPE) Supplier s implementation time-scales Accountancy treatment (FRS 5) 45

46 Financial Case Capital and revenue requirements Net effect on prices Impact on Balance Sheet Impact on Income and Expenditure Account Overall Affordability Evidence of Stakeholder Support 46

47 Management Case Programme Arrangements Project Management Arrangements Use of Special Advisers Change Management Arrangements Benefits realisation: plans &register Risk management: plans & register Project Assurance: CO:- Gates & Health Checks Post Evaluation Arrangements (PIR/PER) Contingency Plan 47

48 Better Business Cases JL The HM Treasury/Welsh Government method is: Proportionate (relating resources to cost and risk) Scalable (model applicable at all levels) Flexible (process adaptable to suit decision) Efficient (productivity gains of 30% to 40%) Effective (all key questions are covered) Best Practice (tried and tested) 48

49 Better Business Cases Programme JL The BBC Programme is currently in use in :- The UK through HM Treasury Wales through the Welsh government New Zealand through New Zealand Treasury The States of Guernsey Subject of interest to major international organisations, including World Bank, OECD; and a number of countries, including: China, Saudi Arabia, Indonesia, Vietnam and Columbia 49

50 Better Business Cases Two courses are available from over 25 HMT accredited commercial training providers One internal course is available provided by HMT for HMT and CO colleagues. FOUNDATION Basic Understanding & Overview for All For Developers of Business Cases PRACTITIONER Business Case Reviewers Master-Class REVIEWER 50

51 HMT Accredited Trainers Listed on the APMG web site JL 51