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Preparing a Business Case

Preparing a Business Case

1          Introduction

To quote the NSW Treasury, “Preparing a rigorous business case is vital to inform Government decision makers that the proposal is necessary, consistent with government priorities, offers value for money and the nominating agency has the capacity to deliver the service delivery benefits outlined. [1]

The business case you prepare as your major assignment will have the characteristics of a business case prepared for government funding. Your proposal is different from the Treasury Guidelines in that your proposal is for a functional service (including staff) not just a capital acquisition. Note: Your assignment is a business case, not a ‘Business Plan’ which may be prepared for an implemented ‘Business Case’.

To read the original Treasury document go  to:

http://www.treasury.nsw.gov.au/__data/assets/pdf_file/0020/12953/tpp08-5.pdf

and retrieve NSW Treasury (2008) Guidelines for Capital Business Cases

Project Guidance: As a ‘rule of thumb’, ‘health promotion’ and ‘high tech’ projects such as the implementation of radiology or pathology equipment are NOT a good idea. Health promotion projects are not recommended because it is hard to identify the benefits.  ‘High tech’ are not recommended because the costs and benefits are usually ‘commercial in confidence’. However, the team to manage installed hardware is OK.

  • Section Headings

The business case will be built up under a number of topic areas. The Treasury Guideline headings are listed below. The content of the topic areas will be considered in turn.

  • Executive Summary
  • Introduction
  • The case for change
  • Analysis of the proposal
  • Implementation of the proposal
  • Content
    • Executive Summary

The executive summary should provide a summarised coverage of:

What is the service need? How many people would benefit from the service?

Who are the key stakeholders

What are the objectives of the proposed service?

What alternatives were considered?

What are the costs to fund the proposal?

What are the key risks associated with the proposal? What may happen if the proposal is not implemented?

How will the service be managed?

What changes need to be managed to make the service function well?

  • Introduction

Purpose of the Business Case – to propose a …..

  • The case for change

2.3.1 What is the service need – and why?

What is wrong that needs intervention? What are the issues that impact on this need? Issues like population growth, change in demographics, in social characteristics, in technology, in public expectation and others may be explored.

Include any cross agency interaction that may be applicable.

How will the program change the situation?

What Government Policy issues does the proposal address?

2.3.2 What are the benefits of the proposal?

What are the key anticipated benefits?

Who benefits? How? When?

2.3.2 How are the stakeholders engaged with the proposal?

(Stakeholders are people who have an interest in the development. They may be the people who provide the existing service, the people who will refer patients to the service, people who will be asked to cover the default situation if the proposed service does not proceed, people who will fund the service, people who will benefit by not funding the existing service, clients/patients of the service, staff who work in the existing service, staff who may work in the new service – etc. The thing to remember is that while there may be an extensive stakeholder analysis in a real proposal, in this assignment the word limit means that there is not space for more than a very brief discussion of stakeholders.)

How have relevant stakeholders been engaged?

  • Analysis of the proposal

2.4.1 What are the objectives?

Objectives must be expressed in results logic or be specific, measurable, achievable, relevant and timely.

2.4.2 What are the alternatives you have considered?

2.4.3 Identify the costs.

Costs here will include any capital costs (cars, buildings or significant equipment) as well as recurrent costs in the form budgets for salaries and wages, goods and services, replacements, maintenance and repairs.

This is a finance assignment. This costing exercise is the core of this assignment.

For your recommended service there needs to be an operational budget that looks at the line items to cover a year of operations.

Salaries and Wages (S&W)

Goods and Services (G&S)

Replacements, Maintenance and Repairs (RMR).

This budget will itemize all major expenses in the body and in the appendix it will show this budget broken up into individual items (x nurses type y at $n) but stationery will be just stationery – not every pencil.

Where there are significant capital items theses should be listed in a separate capital budget (Cars, computers, buildings and software are all examples of capital items).

For alternate options there needs only to be a major headings budget for the year.

Then as you are preparing to show a break even analysis, that is, the operational budget should be presented to show fixed costs and variable costs for the year.

Remember ‘budgets’ include statements of activity (which you will need in the break even analysis) as well as dollars.

2.4.4 Identify non quantifiable factors

These may include public relations, effects on the environment, on social welfare and social capital.

2.4.5 Assess the benefits

These will include benefits to individuals as well as financial returns to the organisation (if any). In a real case where there is a significant capital cost, this would include an economic analysis, but for your project it is not required.

2.4.6 Financial analysis

Calculate the breakeven activity and breakeven income for your service. If the service is delivered free of charge, estimate a dollar benefit to the recipient to use instead of a service fee. (Email the lecturer about your options for estimating income when the service is free at the point of delivery.)

  • Risks

2.5.1 Identify the risks of your proposal and the implicit risk if it does not occur.

2.5.2 What is the impact of these risks?

Consider the probability of the risk, the management strategies to address the risk, whether any additional costs will be incurred and whether any contingency needs to be provided to cover the risks.

  • How will the service be managed?

2.6.1 Describe the governance arrangements for the project

2.6.2 Are there technical standards that need to be addressed? If so, how?

2.6.3 What are the key steps in implementing your proposal?

2.6.4 How will the changes from the present arrangements be managed?

2.6.5 Show how the risks identified above will be managed.

The table shows the method for the calculation of ‘risk exposure’.[2]

Where the risk exposure is ‘very high’ there needs to be a plan to manage the risk. For your proposal the outline of the process is all that is required.

Source: NSW Treasury (2008) Guidelines for Capital Business Cases  page 38

2.6.6 Identify the performance measures that will indicate success for the project?

  • Change Management
    • Document the change management roles and responsibilities that must be in place for the service you propose to function effectively.

In a real implementation change management is a critical part of the implementation strategy. In this assignment the word limit means that there is not room for more than a very brief consideration of change management. None-the-less you should think about the things that need to be managed to successfully implement your proposal.

  • Appendices

Include as appendices all calculations, tables and other evidence needed to support the proposal.

[1] NSW Treasury (2008) Guidelines for Capital Business Cases  Page i,  retrieved from the world wide web August 23, 2009 http://www.treasury.nsw.gov.au/__data/assets/pdf_file/0020/12953/tpp08-5.pdf

 

[2] Ibid page 38

 

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