Projects are done for a reason, and that is to deliver some benefit. For a project to proceed, the value of that benefit should be more than the cost of doing the project, and this value should remain valid throughout the duration of the project. The start point for a project is often a business case that establishes this value.
The PRINCE2 project method includes Business Case as one of its core themes. In a PRINCE2 project, the business case is what provides the continued business justification for the project. So the business case should be reviewed and updated with current information on costs, risks and benefits so that the project justification can be reviewed during project execution. If at any stage the business case indicates the project is no longer justified, the decision needs to be made whether to proceed or whether to stop the project. Its worth noting that stopping a bad project early is often a better decision than fighting through a bad project (and this fits nicely with the fail fast fail often concept in Lean thinking).
PRINCE2 also provides some specific guidance on how to access the justification, through checking a project is desirable (the cost/benefit/risk balance), viable (the project can deliver the products of the project), and achievable (the products can provide the benefits).
The New Zealand Government uses a Better Business Cases (BBC) approach to its major investment decisions based on the UK Better Business Cases model. Better Business Cases is aimed at better informed decision making, better value for money for expenditure, and achievement of better outcomes. In New Zealand, its the National Infrastructure Unit of The Treasury that overseas the Better Business Cases process.
A business case within the BBC model should provide:
a compelling and clear justification for investing in change
an explicit and systematic basis for decision-making
transparency and accountability for the use of scarce resources to achieve best value
an effective communication tool for engaging stakeholders and providing assurance that the proposed investment optimises value for money compared to alternative spending
priorities, and
a plan for realising expected benefits, and for managing costs and risks
The NZ Better Business Cases process is mandatory for all capital expenditure, lease and asset disposal proposals undertaken by Government departments or Crown entities that require NZ Government Cabinet approval. These requirements are set out in Cabinet Office Circular CO (10) 2: Capital Asset Management in Departments and Crown Entities. However, a number of organisations have also adopted the the model either in full or with modification, including New Zealand Transport Authority, Canterbury Earthquake Recovery Agency (CERA), National Health Board Capital Investment Committee, Tertiary Education Commission along with other education bodies. The acceptance and use of Better Business Cases is still growing with more organisations looking to adopt the approach.
Better Business Cases is structured around the United Kingdom Five Case Model. The five cases addressed within the business case development process are:
strategic case - Is the proposed investment supported by a compelling case for change that fits within the strategic context and meets business needs?
economic case - Does the preferred investment option optimise value for money?
commercial case - Is the proposed deal commercially viable?
financial case - Is the proposed spend affordable and how can it be funded?
management case – Is the proposal achievable and can it be delivered successfully?
The better business cases model also specifies a range of approaches and deliverable's, including when a single versus multi-stage approaches are used, and what the key deliverable's and reviews should be. Anybody undertaken large high risk investments as defined in the Better Business Cases process should contact The Treasury National Infrastructure Unit for advise and support, or visit The Treasury website.
While Better Business Cases is mandatory in certain projects around Government and certain public entities, it also is indicative of good practice outside of the mandatory circumstances. Also, like many other government best practice approaches, following Better Business Cases in the private sector enables access to people trained and experienced in the approach, saving having to 'reinvent the wheel' when it comes to process and training. If nothing else, its not hard to find guidance on the approach via The Treasury website.
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Copyright 2014 Edward Hall. All rights reserved.
Last revised 25 July 2014.