Treasury's Better Business Cases™ framework supports New Zealand government investment decision-making by providing a common language and a systematic way for stakeholders to think and work together to give decision-makers the information they need to invest with confidence.
Cabinet Office Circular CO(19)6: Investment Management and Asset Performance in the State Services sets out the requirement for using Treasury’s business case guidance (BBC). The requirements apply to the management of investments and both physical and intangible assets by the following types of organisation (agencies):
- all departments (including departmental agencies) as defined by the Public Finance Act 1989 (PFA)
- the following types of Crown entities:
- Crown agents
- Autonomous Crown entities
- Independent Crown entities
- Crown entity companies, including Crown Research Institutes and Crown entity subsidiaries
- companies listed on Schedule 4A of the PFA.
The Circular requires the use of the Treasury business case guidance (BBC) for all significant investment proposals from relevant stake sector agencies. Significant is defined as:
- [having] a high degree of importance in terms of its likely impact on, and likely consequences for, the Crown or the agency or sector, customers or clients, or the capacity of State services agencies to perform their functions; or the government's fiscal strategy; or the government's investment or infrastructure strategy – or –
- any investment proposal that requires Cabinet or Ministerial approval as set out in Annex 1 of the circular, that is:
- high risk proposals – or –
- Any public private partnership (PPP) investment proposals, or any significant innovative or non-traditional approaches to procurement or alternative financing arrangements, even if funded from agency baselines and balance sheets – or –
- investments that require new Crown funding or support – or –
- proposals with whole-of-life costs (WoLC) in excess of $15 million, however funded.
The thresholds for significance for a given agency or sector may vary according to the agency's Investor Confidence Rating.
A business case requests approval to invest money. It outlines the reason for the investment, its costs and its benefits, and the options for delivery.
The business case is the repository for the evidence base in support of a spending proposal or budget bid; the documentation of an agency's thinking and planning. Business cases facilitate transparency, approval, post evaluation, the accountability of public funds and optimisation of public expenditure.
Business cases are required in support of new proposals and spend; they must account for whole-of-life costs, in addition to capital spend. In addition to significant spending proposals, their coverage includes novel and contentious expenditure.
The business planning process provides a framework for the systematic and holistic development of policies, regulations, organisational strategies, programmes and projects.
The process provides synergy and aims to ensure that projects are delivered as part of well‑defined programmes in support of organisational strategies and their portfolios, in accordance with clear policies and regulations; there should be a clear line-of-sight from sector/agency strategic plans or government policy to individual projects.
Policy – to increase cancer survival rates
→ Strategy – early detection
→ Programme – cancer screening
→ Project – improved patient screening registration system
→ Project – new cancer centre
→ Project – outreach framework for GPs
Yes. The BBC process is required for all capital expenditure, lease and asset disposal proposals that require Cabinet approval. This:
- enables decision-makers to make trade-offs about what to fund for the overall benefit of New Zealand
- assures decision-makers that sufficient thinking and planning has been done, so that the project has a good chance of success.
Without a business case, an organisation is simply saying “We have a good idea – give us the money – trust us to deliver.” This is not an approach acceptable to Cabinet.
BBC works for investments that use agile methods – the process allows flexibility within parameters that keep everyone safe and fully supports innovation and optimisation.
For more information: Better Business Cases™ – BBC for agile projects
The Treasury recommends the BBC framework for all types of business cases, regardless of who has the decision rights; the model can be tailored for all sizes of investments. The structured nature of BBC ensures that all key factors have been taken into account. When organisational decision-makers are faced with a range of projects competing for resources, it is much easier to compare cases and prioritise investments if the business case is drafted to a consistent standard.
Ministers may decide policy objectives and the direction of travel. The role of public servants is then to provide advice on the available options for successful delivery through the business case process in accordance with the guidance provided by Treasury.
Delivery of the organisation's strategy and supporting portfolio requires the use of different types of business cases:
Programme Business Cases (PBC) for delivery of transformational change and significant business outcomes.
For further information: Better Business Cases™ for Programmes
Project Business Cases for significant or complex projects, enabling or delivering tangible outcomes.
This requires the use of the Indicative Business Case (IBC), Detailed Business Case (DBC) and the Implementation Business Case (ImBC) for the development of the Project Business Case over time.
Project Business Cases for small scale non-high risk projects. This requires the use of the Single-Stage Business Case (SSBC) which combines the content of the IBC and DBC at a lighter and less rigorous level.
For further information: Better Business Cases™ for small scale non-high risk projects
Managing Successful Programmes (MSP) and Prince2 are the recommended standards for the delivery of programme and projects within the New Zealand public sector. Both of these require a mandate and a programme/project brief before the programme/project starts.
A business case is not a standalone piece of work; it should be one of the outputs of the initiative's feasibility/exploration and planning stages, which will provide much of the business case content.
- Due diligence and research are required to provide the evidence base for intervention and option appraisal.
- Feasibility studies and benchmarking exercises will inform the early business case stages (Strategic Assessment, Programme/Indicative BC) and full studies and market engagement the detailed planning stages (Detailed and Implementation BC).
Each stage in the business case process requires a (generally brief) revisit of the previous stage, particularly if significant time has elapsed since the previous approval. For example:
The Detailed Business Case approval usually comes with conditions and/or cost tolerances; the Implementation Business Case must confirm that these conditions have been met and the tolerances not exceeded. It should also confirm that the preferred vendor option will deliver the expected benefits and that the cost benefit analysis still stacks up.
If there are substantive changes – for instance you’ve been to the market and all vendor offers are twice the funding approved in the Detailed Business Case – you need to consider if the initiative still stacks up. In this case you’re likely to need to go back to Cabinet with an update to the DBC, or to update the Implementation Business Case to demonstrate that the investment is still viable.
In some cases, an investment in the delivery stage may diverge or be predicted to diverge sufficiently from their originally agreed parameters (such as cost, time to deliver or benefits) that the investment needs to go back to Ministers with a renewed investment case. At a minimum, agencies have a responsibility to inform their Minister of the situation and the Minister may be expected to advise their colleagues in accordance with requirements of the Cabinet Manual to elevate issues where Ministers would wish to be engaged on. In some situations, it may be appropriate to submit a business case that advises Ministers on the options, including if the investment is still worthwhile to pursue. If the investment now will require significant additional crown funding or would affect the Government’s financial position to be completed, a business case will be required. Where there is a significant change in the benefits being delivered and there are viable options for Ministers to consider then a business case is appropriate.
The Five Case Model is Treasury's approved standard for the production of public sector business cases. It comprises five dimensions and answers the following key questions:
Strategic Case – Why is this needed? What is the case for change and how does it provide strategic fit?
Economic Case – what is the best choice for optimising value to New Zealand?
Commercial Case – is the proposed deal commercially viable? Who will deliver it?
Financial Case – is the investment proposal affordable? How will It be funded?
Management Case – are the necessary arrangements in place for successful delivery?
The five-case model originated in the United Kingdom. The New Zealand government adopted it in 2010. In August 2018 the G20 adopted this as the standard for all infrastructure projects. Parts of local government in the UK and New Zealand, and parts of the UK private sector have also adopted the model.
For further information: Better Business Cases™: Overview of the Five Case Model
Knock-on effects on other systems across the economy and society should be considered as part of preparing the Strategic Case, while completing the Programme or Indicative Business Case (PBC/IBC). The understanding gained from this informs the long-list analysis and short-list selection.
How does the framework take account of dynamic long-term changes in the way things work and deal with the uncertainty associated with them?
Fundamental structural changes over time should be considered as part of preparing the Strategic Case, while completing the Programme or Indicative Business Case (PBC/IBC). The understanding gained from this informs the long-list analysis and short-list selection.
Analysis of options in the business case must consider unmonetisable factors, including wellbeing benefits. Where these are significant, they must be included in at least one option at the long-list stage of the Programme or Indicative Business Case (PBC/IBC); and, if there are no compelling reasons for exclusion, carried forward into the short-list to appraise whether the additional cost is a price worth paying and provide decision-makers with the opportunity to consider the trade-offs required.
Further information: A wellbeing approach to cost benefit analysis
The public sector discount rate reflects how the government values outcomes that occur in the future relative to those that occur in the present. It is used to value the future costs and benefits of public projects and to estimate the cost of investing in public assets (the capital charge calculation).
For further information: Discount Rates
The spending proposal should be appraised over the expected life span of the service or asset. The business case is required to consider whole-of-life costs (WoLC) – the lifetime of the asset is a critical determinant in the Cost Benefit Analysis (CBA).
For further information: Whole of Life Costs guidance
The scoping document records how the team producing the business case and those reviewing it (Treasury or the agency's Monitoring Agency) have agreed the business case guidance will be used and applied proportionately in compliance with the Treasury guidance. For example, this applies to the type of business case; the use of workshops; the application of optimism bias.
For further information: Better Business Cases – Significant Investment Proposal – Business Case Scoping Document
The key steps and actions for the development of the business case are explained in the Business Case Guidance/Templates. Stakeholder engagement is crucial and for significant spending proposals the use of five key workshops is recommended.
Of these, the first two – Workshop 1 for Making the Case for Change and developing the investment objectives for the proposal and Workshop 2 for Identifying and Assessing the Options, are considered essential.
For further information see the Guidance/Template documents for each business case stage.
Investment objectives are targeted outcomes for the intervention and spend made SMART (specific, measurable, achievable, relevant and time constrained) for the purpose of delivery and post evaluation. The focus should be on the target for service delivery rather than the solution.
No. Investment Logic Mapping (ILM) is a technique to ensure that intelligent discussion and thinking is done up-front, before solutions are identified and before any investment decision is made. It is a technique to ensure the 'story' about any proposed investment makes sense (the 'logic' part of ILM), and to test and confirm that the rationale for a proposed investment is evidence-based and sufficiently compelling to convince decision-makers to commit to invest in further investigation and planning. The workshop approach is also a useful mechanism to ensure key stakeholders have a common understanding of the problem(s) to be solved, initiative scope, purpose and benefits.
ILM can help business case developers and Senior Responsible Owners (SROs) define and validate the business need and the benefits the solution is expected to deliver. Like any early analysis work, the ILM may change/need updating as more information becomes available.
The two-stage process is designed to respect ministerial decision-making rights by providing an opportunity to steer the project early, or to change its direction, or to decide not to continue before too much work has been done. It also avoids agencies doing too much analysis (ie to develop a specific option) before ministers agree the preferred direction for the project.
Unlike the private sector, which generally has pretty straightforward motives and objectives for investing, the public sector has a much broader brief – to make the best decisions for New Zealand as a whole.
Every year, requests for budget funding come to many times the funding available. The two-stage business case process is designed to enable decision-makers, especially Cabinet, to consider, at an indicative stage, a range of proposals from agencies, to broader trade-offs for the benefit of New Zealand, and to prioritise those meeting criteria for further analysis through a Detailed Business Case. This in effect supports portfolio management across all major projects in government.
A wide range of possible options must be considered for the delivery of the spending proposal at the Programme or Indicative Business Case (PBC/IBC) stage.
The recommended approach is an independently and impartially facilitated gathering (Workshop 2) of key stakeholders, including the Senior Responsible Officer (SRO), using a tool and technique called the Options Framework. The long-list of options must be revisited at the Detailed Business Case (DBC) stage.
For further information: Better Business Cases: Using the Options framework for options analysis
The options framework provides a structured approach to identifying and filtering a broad range of options for delivering policies, regulations, strategies, programmes and projects. The framework considers the creation of options as a series of choices to be made in sequence for scope, solution, delivery, implementation and funding.
For further information: Better Business Cases: Using the Options framework for options analysis
The short-list must include at least three options:
- Status Quo: analysis of required costs and likely (dis)benefits if the project does not proceed.
- Do Minimum: a realistic and achievable option that meets the core needs and essential requirements for the initiative.
- The Preferred Way Forward (PWF): more ambitious and less ambitious variants of the Preferred Way Forward may be considered.
Option selection is a balanced judgment looking at the cost-benefit analysis (CBA) which considers value-for-money; wellbeing costs, benefits and trade-offs; the assessment of overall risk (its likelihood, impact and cost); and decisively important factors the benefit of which cannot be readily quantified.
The Preferred Way Forward is identified from the long-list at the Programme or Indicative Business Case (PBC/IBC) stage following Workshop 2 and the use of the Options Framework.
The Preferred Option emerges from appraisal of the short-list at Detailed Business Case (DBC) stage following the use of cost/benefit analysis (CBA) and wellbeing analysis.
Optimism bias is the demonstrated systematic tendency for appraisers to be over-optimistic about costs, benefit and time taken to complete a proposal; this must be estimated at the Programme or Indicative Business Case (PBC/IBC) stage. The value of risk is the cost of mitigation multiplied by the likelihood of its occurrence.
As risks are identified in more detail and their values calculated at the Detailed Business Case (DBC) stage, the allowances made for optimism bias must be reduced accordingly. There should only be a relatively small allowance for optimism bias at the Implementation Business Case (ImBC) stage.
For further information: Techniques to Quantify Risk and Uncertainty
A form of multi-criteria decision analysis (MCDA), making use of a professionally trained facilitator, using swing weighting to guide a team of expert representatives and stakeholders can be useful for considering certain options at the long-list stage and is required for high-risk projects and programmes. This kind of objective, consultative weighting and scoring should only be undertaken by experts and will require several long meetings, if undertaken to the required standards.
Sensitivity analysis provides an analysis of the effects on an appraisal of varying the projected values of important variables. In accordance with the Treasury BBC guidance, it is mandatory to undertake sensitivity analysis on the preferred options at the Detailed Business Case (DBC) and Implementation Business Case (ImBC) stages.
For further information: Approaches to sensitivity analysis
The benefits register should be attached to the Detailed and Implementation Business Cases (DBC and ImBC) and completed in accordance with Treasury Benefits management guidance. The benefits claimed in the economic appraisals must be recorded in full.
For further information: Benefits guidance
Risks should be managed according to robust risk management practices; the current risk register should be attached to the Detailed and Implementation Business Cases (DBC and ImBC). The risks shown in the economic appraisals must be recorded in full.
There is no specified number of pages for a business case. They should, however, be prepared in accordance with the business case guidance and as concisely as possible, with an Executive Summary consisting of 4 to 5 pages. A large number of pages is not an indication of the quality of the business case – keep it simple and keep it short!
There are no established timescales for the production of the business case. The timescales are dependent upon the size and complexity of the scheme; the amount of due diligence and research and planning already completed; and the available resources. Time required for market engagement is often a significant determinant.
For assistance in framing the business case, the first port of call for central government projects is always your agency Vote Analyst. Treasury’s Investment Management and Asset Performance team provides second-tier advice to the Vote teams. They will help you to determine the decision pathway (who needs to approve the business case, based on scale and risk), business case pathway (Programme or Project) and assurance pathway (what assurance is required) appropriate to the project or programme’s scale and risk.
Most of the content of a business case is sourced from agency strategic and long-term planning, and from project planning and analysis work.
External experts can be useful to pull the work together into the business case document, but your organisation must own and drive the process and take leadership.
- Outsource the tasks, not the thinking
- Use outsourcing to improve internal capability.
- Remember that most of the content of the business case is developed through good project planning practice: Project planning → supporting artefacts → business case.
MBIE’s consultant register has individual consultants and organisations that have BBC experience; there may also be consultants your agency works with who can help, or use the procurement process to find assistance.
Internationally-recognised Foundation and Practitioner training is available, with an optional examination and international certification. We recommend key project staff undertake this training so they understand how project management and planning underpin the content of the business case.
Find New Zealand trainers at: https://apmg-international.com/product/better-business-cases
In order to provide quality advice that supports good investment decisions, the IMAP team in Treasury runs a number of programme and project review processes.
Programme and project assurance are essential, and the Gateway framework aligns with the business case development process.
For a project:
- Gateway 1 (Business justification and options) must be undertaken prior to the approval of the Indicative Business Case (IBC).
- Gateway 2 (Delivery Strategy) prior to the approval of the Detailed Business Case (DBC).
- Gateway 3 (Investment Decision) prior to the approval of the Implementation Business Case (ImBC).
- Gateway 4 (Readiness for Service) prior to the in-service date.
For a programme:
- Gateway 0 (Strategic Assessment) must be undertaken prior to completion of the Strategic Assessment process; and at agreed 12-15 month intervals throughout the programme.
- Gateway 1 (Business justification and options) must be undertaken prior to the approval of the Programme Business Case (PBC).
High-risk projects within the programme also require the full suite of reviews (Gateway 1-4). Depending on timing, these are frequently combined with the regular programme Gate 0 (eg, a combined Gateway 0/2).
For further information: Review: Investment reviews
The initiative, Better Business Cases for better outcomes, is a programme jointly owned by the UK HM Treasury and Welsh Government for improving the scoping, planning and delivery of programmes and projects and their supporting business cases.
The programme has delivered the Guides to developing the programme and project business case across the public sector, and a certification scheme for training that has resulted in internationally over 12,000 practitioners being trained to date in the methodology.
The New Zealand Better Business Case framework is aligned with the UK; it has been modified to the extent needed to fit New Zealand Cabinet's mandated two-stage decision-making process. A representative from The Treasury's IMAP team (the kaitiaki of the BBC framework in New Zealand) sits on the International BBC Steering Committee.
Treasury runs occasional BBC overview sessions; email [email protected] to go on the waitlist.
Two courses are commercially available to people developing the business case: the foundation and practitioner courses.
For further information: Better Business Cases support and training
Treasury expects consultants undertaking public sector assignments to be qualified to undertake the work for which they are engaged – including in the Better Business Cases framework.