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Outline Business Case

What it is

The Outline Business Case (OBC) identifies the spending option which optimises value for money. 

The key steps of the OBC are to:

  • determine value for money
  • prepare for the potential deal
  • confirm funding and affordability
  • plan for successful delivery

You must have written and signed off the Strategic Outline Case (SOC) before you start this phase.

What to write

The OBC adds more detail to the SOC and introduces new headings. Use these headings and sub-headings to further build your business case.

The Strategic Case

You don’t need to add anything else to this section, but you can update it with any new information if you want.

The Economic Case

You need to add more details to the 'Short-listed options’ section by providing a detailed description of each option. You will also create some new sub-headings. They are:

Net Present Cost and Net Present Value

Show the results of your economic appraisals for each option, including the cost of risk attained.

Economic appraisals focus on public value from the perspective of society and take into account all social, economic, environmental costs and all effects on public welfare.

They fall into 2 categories:

  • Public Sector costs – those falling to the spending organisation (Direct Costs) and those falling to other parts of the public sector (Indirect Costs).
  • Wider Social costs – those other indirect costs falling to other sectors, including the private sector.

Benefits appraisal

Show the results of ranking, weighting and scoring the qualitative benefits for each short-listed option.

The purpose of valuing benefits is to work out if an option’s benefits are worth its costs, and to allow alternative options to be compared in terms of their net social value.

You should always try to quantify benefits, even if they cannot be expressed in monetary equivalent terms.

Risk assessment

Provide a full assessment of risks attained under each short-listed option.

Risks fall into three main categories: business, service and external risks.

There are a number of techniques which can be used to identify the risks associated with programmes and projects. Three commonly used methods are:

  • structured review meetings – these involve the programme and project teams and encourage participation and ownership of the risks by key personnel
  • risk audit interviews – these are conducted by experienced managers and/or advisers, with all those involved in the programme or project teams with responsibility for risk, and
  • risk workshops – these include all members of the programme and project teams and encourage imaginative ideas for the mitigation and management of risk

Sensitivity analysis

Provide results of sensitivity analysis.

Sensitivity analysis involves testing different scenarios to see how sensitive they are to variations in variables like costs, revenues, or external factors.

Preferred option

Explain the recommended option based on the analysis.

The Commercial Case

Potential scope and services

Identify the project’s service streams and required outputs and the scope and content of the potential deal to be made with public and private sector service providers.

Think about:

  • the business areas affected by the procurement
  • the scope of the procurement
  • the required service streams and outputs
  • the stakeholders and customers you’ll need for the outputs

Potential risk allocation

Identify how the service risks of the project are split between the public and private sectors.

Potential charging mechanisms

Identify how the project intends to make payment for its key services and outputs over the expected lifespan of the contract(s).

Consider how best to ‘incentivise’ the service provider(s) to provide Value for Money over the lifespan of the project and its operational phase. This will assist the organisation to deal with the inevitable need for ‘change’ to services and operations in the future and to embed risk transfer and allocation within the charging mechanism for the project.

Potential key contractual arrangements

Outline the contractual arrangements for the project.

Think about:

  • the duration of the contract(s) and any break clauses
  • the roles and responsibilities of the service provider
  • change control (for new requirements and updated services)
  • what to do if parts of the service fail
  • the treatment of intellectual property rights
  • compliance with appropriate regulations such as accessibility
  • arrangements for the resolution of disputes and disagreements between the parties
  • the agreed allocation of risk
  • any options at the end of the contract

Potential personnel implications

Identify any personnel implications for the project.

Public sector organisations must involve their staff and their representatives in a process of continuous dialogue during significant projects involving considerable internal change.

The Financial Case

Potential capital requirement

The following financial statements are required for the project spend:

  • budget statement
  • cashflow statement
  • funding statement

For large, significant and complex projects, a financial model of the proposed expenditure is required. The model will provide an informed ‘best guess’ of the likely impact and outcomes of the proposed project in its early stage of development.

A statement showing the capital and revenue requirements for the recommended project should be prepared. This statement should also indicate the capital sum being requested and, ideally, that the organisation has sufficient income to meet the ongoing costs of the project.

Potential net effect on prices

Public sector investments are difficult to justify if they lead to an increase in prices for the organisation’s services.

The benefits that the proposed deal will deliver and the prices that the organisation will charge as a result will have an impact on competitiveness. Organisations should, therefore, compare and benchmark the prices and quality levels of similar services offered by other providers.

Potential impact on balance sheet

The impact of the project on the organisation’s balance sheet must be assessed. Both the current position and the likely outcome should be recorded in the OBC by a qualified accountant who understands the project and the organisation’s business.

Overall affordability

There are a number of risks that could affect the affordability of the project. The OBC should summarise the results of the risk contingencies and sensitivity analysis which underpin the financial case.

The risks and uncertainties will vary from project to project, but some key questions to consider are:

  • Would the project be affordable if capital costs were to be higher than expected?
  • What if the expected savings were to fall?
  • What if income to the organisation were to be reduced?
  • Is there a robust strategy in place to guard against these outcomes?

The Management Case

Programme and project management

Describe the strategy, framework and plans for successful project delivery using a proven methodology such as Agile.

Summarise the following aspects and capture the key points in a diagram:

  • structure
  • reporting arrangements
  • governance arrangements
  • key roles and responsibilities
  • appointed personnel and any vacancies

The project plan is used to control and track the progress and delivery of the project and resulting outcomes. It describes how, when and by whom a specific project, milestone or set of targets will be achieved.

It is the detailed analysis of how identified project targets, milestones, deliverables and products will be delivered to timescales, costs and quality.

This project plan should typically include:

  • the deliverables or products to be produced
  • the activities required to deliver them
  • the activities required to validate the quality of the deliverables
  • the resources and time needed for all activities and any need for people with specific capabilities and competencies
  • the dependencies between activities and associated constraints
  • when activities will occur
  • the points at which progress will be monitored, controlled and reviewed, including delivery and approval of the business case

Change management

Put in place the strategy, framework and plans required for managing change.

You need to assess the potential impact of the proposed change on the culture, systems, processes and people working within the organisation.

Benefits realisation

Put in place the management arrangements required to ensure that the project delivers its anticipated benefits.

Risk management

Put in place arrangements for managing and mitigating risks during the key phases of the project.

All projects must capture risks within a risk register. This register should indicate how those risks are to be mitigated and managed.

The risk register should be updated and reviewed continuously throughout the course of the project and capture the following information for each risk:

  • Risk number (unique within the Register)
  • Risk type
  • Author (who raised it)
  • Date identified
  • Date last updated
  • Description (of risk)
  • Likelihood
  • Interdependencies (between risks)
  • Expected impact/value
  • Bearer of risk
  • Countermeasures
  • Risk status

Contract management

Describe how you will management the contract.

Post-project evaluation

Describe how you will evaluate the project once it has completed.

What you should have at the end of the OBC phase

Your OBC is complete when you have initial agreement to proceed to the next phase. To get agreement, you need:

  • a revisited and updated OBC long list
  • a revisited and updated OBC short list
  • an economic appraisals for the short-listed options
  • an assessment of risks and benefits
  • a sensitivity analysis
  • a detailed description of the preferred option
  • a first draft of the commercial case
  • a first draft of the financial case
  • a first draft of the management case
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