BUSINESS CASE DEVELOPMENT GUIDELINE Issue No: 5.0 First Published: Aug 1997 Current Version: Aug 2004 Table of Contents USING THIS GUIDELINE................................................................................................2 1. NSW GOVERNMENT REQUIREMENTS FOR ICT BUSINESS CASES...........4 1.1 Procurement policy..........................................................................................4 1.2 Estimating in ICT project business cases........................................................5 1.3 Gateway review process..................................................................................5 1.4 Assessment criteria..........................................................................................5 1.5. Submission requirements................................................................................6 1.6. Monitoring and reporting requirements............................................................8 2. INTRODUCTION TO BUSINESS CASE DEVELOPMENT................................9 2.1 What is a business case?................................................................................9 2.2 Who is the business case written for?.............................................................9 2.3 What is the goal of a business case?............................................................10 2.4 Reasons why ICT business cases may fail...................................................10 2.5. Relationship between ICT projects and Business Process Reform..............10 2.6 Types of business cases................................................................................11 3. CONTENTS OF AN ICT PROJECT BUSINESS CASE...................................12 3.1 Introduction....................................................................................................12 3.2 The Case for Change and Project Purpose...................................................12 3.3 Project Scope.................................................................................................13 3.4 Project Objectives, Planned Outcomes and Benefits....................................13 3.5 Estimates of Resources and Project Plans....................................................14 3.6 Analysis of Alternatives Considered..............................................................15 3.7 Project Appraisal............................................................................................16 3.8 Attachments to the Business Case................................................................18 APPENDIX A – PROCUREMENT MONITORING REPORT OUTLINES......................21 Procurement Options Report.......................................................................................................21 Pre-Tender Estimate....................................................................................................................21 Post Tender Review....................................................................................................................22 APPENDIX B -EXAMPLES OF ICT PROJECT COSTS..............................................23 The Office of Information and Communications Technology is part of the Department of Commerce Address: Level 21 McKell Building 2-24 Rawson Place Sydney NSW 2000 T: (61 2) 9372 8877 F: (61 2) 9372 8299 E:mailto:oict@commerce.nsw.gov.au Business Case Development Guideline Page 1 of 24 Using this Guideline The objective of this Guideline is to: Describe the NSW Government requirements for the preparation and submission of business cases for ICT projects; and • • • Provide guidance in the preparation of a business case for an ICT project. This Guideline assists government agencies prepare a business case that clearly articulates the need to undertake the proposed work and provides a clear justification of the value to the agency and government. The following resources should be used by agencies in preparing a business case for an ICT project: Treasury -NSW Government Procurement Policy Treasury -Economic Appraisal -Principles and Procedures Simplified • Treasury -NSW Government -Financial Appraisal • Treasury -NSW Government -Guidelines for Economic Appraisal • OICT -Quick Reference to Key ICT Strategies, Policies and Directions • OICT -Corporate Services Reform Program Resources • OICT -ICT Business Case Template • OICT -Benefits Realisation Register Guideline • OICT -Acquisition of ICT Guideline • OICT -Project Risk Management Guideline • OICT -Change Management Guideline • OICT -Project Management Guideline • OICT -Information Security Guidelines No. 1, 2 and 3 • OICT -Quality Management Guideline • OICT -Benefits Management Plan Guideline • This Guideline should inform the development of business cases for ICT projects, including business process reform, applications, infrastructure, supporting technologies, information management, and telecommunications projects such as, the acquisition and /or maintenance of telephone, radio and network infrastructure. While the Guideline focuses on ICT project business cases and government requirements regarding preparation and submission of these business cases, the information can be adapted to prepare a business case for any kind of project. The purpose of this guideline is to ensure business cases for investment in ICT and related initiatives directly contribute to wider Government policy priorities, agency Corporate Plans and Results and Services Plans (describing business objectives and service delivery outcomes) and agreed performance accountabilities, and are in alignment with Government ICT strategies and policies. This Guideline assumes that the proposed project(s) is identified as a priority in the agency’s Corporate Plan, Results and Services Plan, asset strategies and IM&T Strategic Plan. It also assumes that agencies have appropriate governance arrangements and project management methodologies in place to support the successful management of the proposed project. Hence this guideline does not provide detailed explanation about these issues and the resource list above should be used to access additional information as required. Page 2 of 24 This Guideline describes the NSW government requirements for agencies preparing business cases to undertake an ICT project. It outlines the government’s Procurement Policy framework and requirements for supporting material and submission of business cases. The purpose and structure of a business case for an ICT project is outlined, as well as an explanation and description of the information required to be presented. The Guideline was developed to assist government agencies to prepare a business case that clearly articulates the need to undertake the proposed work and provides a clear justification of the value to the agency and government of the recommended approach. The Guideline comprises 3 Sections and 2 Appendices: 1. NSW Government Requirements for ICT Business Cases 2. Introduction to Business Case Development 3. Contents of an ICT Project Business Case Appendix A – Procurement Monitoring Report Outlines Appendix B – Examples of ICT project costs Page 3 of 24 1. NSW Government Requirements for ICT Business Cases The NSW Government has adopted a series of strategies for the management and use of information and communications technology (ICT), which streamline Government practices, reduce costs and improve service delivery within Government and to the community and business (See the Total Asset Management Policy, NSW Government Procurement Policy and Key Government ICT Strategies, Policies and Directions for details). NSW Government agencies are required to develop business cases to justify ICT investment proposals, and demonstrate links with wider Government policy priorities, agency business needs and objectives, service delivery outcomes and the Government ICT Strategic Framework. Business cases should follow the Procurement Policy process for ICT projects and demonstrate that the proposal represents the best value for money option compared to the alternatives (including maintaining the status quo). Agencies should ensure that the same rigour and due diligence is applied in preparing its business cases whether they are being submitted for internal decision making and funding allocations or being submitted for consideration by the Budget Committee of Cabinet for Treasury funding. As a general principle, any requirement for additional recurrent expenditure should be met from savings resulting from the project. However, since the achievement of savings usually lags the requirement for project expenditure, there may be a need to utilise interim funding arrangements in order to finance the early stages of a project. It is important that agencies have ongoing contact with their appointed Treasury Analyst to discuss any new funding requirements in the context of their forward budget planning. This is particularly important when preparing an acquisition and financing plan for the project and estimating the costs, benefits and cash flows over the life of the goods or services. 1.1 Procurement policy The NSW Government Procurement Policy is an overarching framework for all government procurement, and is consistent with the Government’s total asset management framework and infrastructure, planning and delivery framework. The policy links with the State budget framework to deliver better budgetary outcomes through agencies’ Results and Services Plans and savings targets. It should be read in conjunction with the Strategic Management Framework, which is designed to assist agencies navigate their way through the government’s range of key planning, budgeting and reporting requirements. The objective of the NSW Government Procurement Policy is to achieve best value for money in assisting the delivery of government services. Value for money is defined as the cost of the procurement, including whole-of-life costs, assessed against the results achieved by the procurement. All business cases for ICT projects must address the requirements in the NSW Government Procurement Policy and Information and Communications Technology Procurement Process. Page 4 of 24 1.2 Estimating in ICT project business cases A business case for any proposed body of work by its very nature contains uncertainties about cost, risk, benefits, business impact and likely success. The most important feature of a business case is having realistic estimates available for decision-making. The cost and benefits estimates used in ICT business cases must show a 3-point spread of probability (or sensitivity) between the ‘most likely’, the ‘best case’ and ‘worst case’ scenarios. There must be clearly defined assumptions used for each estimate to ensure that decisions are based on a complete understanding of all project variables. There are useful resources available on the Office of Information and Communications Technology website to assist in estimating and presenting costs and benefits in business cases. For example, the OICT Guide for Government Agencies Calculating Return on Security Investments provides specific guidance and spreadsheets to assist in calculating and presenting the 3-point probability estimates. 1.3 Gateway review process The Procurement Process Framework includes a 10-phase procurement process with independent Gateway reviews at the end of key phases. A mandatory Gateway Review is required at the business case gate for all Information and Communications Technology projects over $5 million. Reviews at other gates are recommended. Agencies will be required to submit a draft of the business case for the Gateway Review. Following the Gateway Review, the business case may be amended and finalised before formal submission for Budget Committee assessment, or another Gateway Review conducted. This means that the development of the business case may be an iterative process. The business case Gateway Review report, and the agency’s formal response, is required to be included with the final business case when it is submitted for budget assessment. 1.4 Assessment criteria Funding is considered for projects or related groups of projects within an agency’s IM&T strategy, based on an assessment of business need, priorities, value and risk. The business case should demonstrate how this will be achieved through: Contribution to wider Government policy priorities, agency business objectives, Corporate Plans, Results and Services Plans, IM&T Strategic Plans and asset strategies; • • Alignment and consistency with Government ICT strategies and policies; Capacity of an agency to undertake the project; • • • • • Suitability of the selected technology directions; Sound economic and financial analysis; Properly detailed risk assessment; Evidence of consultation with stakeholders to demonstrate that the proposal is addressing a real business need; Page 5 of 24 Relationships with, and value added, to other projects, in accordance with the IM&T strategy; • • • • • • • • • • • All major projects must arise and be managed within the context of an approved ICT Asset strategy and IM&T Strategic Plan; and If new funding of projects is required, the development of their business cases needs to correspond to the budget cycle. ICT projects involving substantial changes to business processes and /or technology may require the business case to include a pilot or prototyping phase as part of the development. In this case, the business case should be prepared for the pilot or prototype phase with an indication of how it will contribute to the whole project. 1.5. Submission requirements As part of the annual budget process, General Government agencies may be invited by the Budget Committee of Cabinet to submit business cases for significant ICT project proposals involving expenditure of $500,000 or more for budget assessment. Treasury will advise relevant agencies of the submission requirements. Business cases must not be submitted for funding consideration unless the nominated Project Sponsor, or Senior Responsible Business Owner (that is, the person who will be responsible for the successful delivery and management of the business outcomes of the project), has approved the business case and has committed to the role and responsibilities of Project Sponsor. The business case therefore must be signed-off by the nominated Project Sponsor before it is submitted. ICT project proposals will require different levels of supporting information to be supplied with the business case depending on the estimated value, risk rating or other criteria determined by Treasury. The following reports are required with the business case prior to submission for budget assessment: Projects not high risk valued between $1 million and $5 million: Economic Appraisal report. Projects valued over $5 million (or any high risk projects): Economic Appraisal report; and Copy of the mandatory Business Case Gateway Review report, and the agency’s response to the report. Agencies submitting ICT project proposals are required to provide an executive summary containing a brief overview of all proposals submitted. The executive summary and all business proposals should be forwarded at the same time as a complete package together with a letter of endorsement from the Chief Executive Officer or Executive Board. The executive summary should include: A brief overview of each project proposal (ie, one paragraph on each); How project proposals link together and their dependencies; How project proposals link to existing ICT projects; How the project proposals support wider Government policy priorities; How project proposals support the agency’s business objectives, Results and Page 6 of 24 Services Plan, asset strategies, IM&T Strategic Plan, and the Government’s ServiceFirst eGovernment Blueprint; How the project proposals will deliver benefits and service delivery improvements; • • • All project proposals must be numerically ranked in order of priority, from highest (priority 1) to lowest. It is not acceptable to use ‘High’, ‘Medium’, and ‘Low’ rankings, and it is not acceptable to allocate the same priority ranking number to multiple projects (eg, three projects ranked as priority 1); and A Funding Bid Summary Table (as per the following template). (Extra cost columns should be included to reflect the investment period of each project proposal). Initial Funding YearNumber of Projects submittedProject Title:Project 1 [Enter project title]Project 2 [Enter project title]Project 3 [Enter project title]Project 4 [Enter project title]Project n [Enter remaining projects]Total$Source*$Source*$Source*$Source*$Source*$Project 1 [Enter project title]Project 2 [Enter project title]Project 3 [Enter project title]Project 4 [Enter project title]Project n [Enter remaining projects]Sub-Total of Capital Costs for all projectsProject 1 [Enter project title]Project 2 [Enter project title]Project 3 [Enter project title]Project 4 [Enter project title]Project n [Enter remaining projects]Sub-Total of Recurrent Costs for all projectsProject 1 [Enter project title]Project 2 [Enter project title]Project 3 [Enter project title]Project 4 [Enter project title]Project n [Enter remaining projects]Sub-Total of Total Costs for all projectsProject 1 [Enter project title]Project 2 [Enter project title]Project 3 [Enter project title]Project 4 [Enter project title]Project n [Enter remaining projects]Sub-Total of Benefits /Savings for all projectsProject 1 [Enter project title]Project 2 [Enter project title]Project 3 [Enter project title]Project 4 [Enter project title]Project n [Enter remaining projects]Sub-Total of Net Costs /Benefits for all projects* Proposed SOURCE of funding BENEFITS /SAVINGS (d)Year 5CAPITAL COSTS (a)RECURRENT COSTS (b)Year 1Year 2Year 3TOTAL COSTS (a + b)=(c)Year 434nSUMMARY INFORMATIONPriority RankingNET (COSTS) /BENEFITS (d -c)=(e)CUMULATIVE (COSTS) /BENEFITSI = Internal fundsT = Treasury fundsKey:S = Saving re-allocationC = Commonwealth fundsO = Other, Please stateNB -If there are more than one source of funds for a project, these must be shown on separate lines in the table.L = Loan fundsFunding Bid Summary Table for all Business Cases submitted by [Insert Agency Name] Finish Date (Month/Year)PROJECT LIST AND PRIORITY RANKINGStart Date (Month/Year)12 Page 7 of 24 1.6. Monitoring and reporting requirements NSW Treasury is responsible for increased monitoring of major capital works in accordance with the NSW Government Procurement Policy. NSW government agencies that have received budget approval and funding for ICT projects are required to provide specific reports to Treasury at key decision points for major ICT projects. The types of reports required and the frequency of reporting is determined by the risk profile (assigned by Treasury) and value of each project. This is structured as follows: Projects not high risk valued between $5 million and $10 million: Procurement Options Report and Strategy and Pre-Tender Estimate prior to calling tenders. • Projects that are rated as high risk and all other projects > $10 million: Procurement Options report and Pre-Tender Estimate to reconfirm business case prior to calling tenders; • • • Post Tender Review report to reconfirm business case prior to contract award; and Material Variation report highlighting major changes to scope, cost and timing after contract award and as they occur. It is important that the likely costs for complying with these reporting requirements are included in estimated project implementation costs and the business case financial analysis. To assist in estimating these costs, an outline of the information required for each type of report is given in Appendix A. Page 8 of 24 2. Introduction to business case development 2.1 What is a business case? A business case is a document that is used to describe a business problem and outlines a proposal (project or program of work) for how it will be addressed or overcome. It must contain a logical and convincing argument that justifies a business decision to spend funds. It is a structured proposal that describes the work to be done and is used as a tool for decision making, as well as a blueprint for what the project will deliver to the business if it is approved. Resources in agencies and government are scarce and investment in ICT related business change initiatives must be justified and demonstrate that they are able to deliver value to the business and community. A business case should demonstrate how the project meets agency business needs and Results and Services Plan outcomes, and why resources should be allocated to this project compared to other initiatives. Business cases are used to explain and justify a proposed ICT investment. Each distinct project requires a separate business case to be developed. ICT projects are usually discrete initiatives that are undertaken by an organisation to meet a business need. They may be complex or simple and have a number of different, but inter-related activities. Projects provide the means by which IM&T strategic plans are implemented. 2.2 Who is the business case written for? A business case is a tool used by many stakeholders depending on its status. In the beginning, the business case is written for the organisation’s decision makers to provide a clearly justified reason for initiating the project and how it will impact on the business. Once approved by the agency’s Chief Executive Officer (or Executive Board) it may be submitted for budget assessment if Treasury funding is sought. Otherwise, the agency’s internal funding priority processes are followed. If the project is approved to proceed and funded, the business case is then used as the key input into the project’s detailed planning stages and communicates to the Project Manager and project team members what approved outcomes must be achieved. During the project’s implementation stages, the business case is used by the Project Sponsor to regularly test that the project is progressing as approved, and to determine if any key assumptions or objectives have changed and whether the business case needs reassessing. Once a project has been completed, the business case is used by the Project Sponsor to compare what has actually been delivered to the business with that approved in the business case. Page 9 of 24 2.3 What is the goal of a business case? The goal of the business case document is to: Communicate a business need and the options for meeting those needs along with the costs and benefits; • • • • • • • • • • • • • • • • Gain approval to proceed and the commitment of resources; Set the project scope and implementation parameters; Establish the success criteria; and Be used to measure project achievements against what was approved. 2.4 Reasons why ICT business cases may fail There are various reasons why well prepared business cases may not receive funding, such as the often competing priorities across Government for limited resources. However, the quality of the business case will determine if it receives support to be considered for funding. Some common reasons why business cases fail to receive support include: Lack of direct involvement and/or endorsement from the CEO, Project Sponsor or executive management; The nominated Project Sponsor does not have a clear understanding of, or commitment to, the business need or business impact of the proposal, and has not endorsed and signed off the business case; Little or no evidence that an identified Government policy or service delivery outcome (and not technology) is driving the proposal; Little or no evidence that the proposal will actually contribute to agency service delivery outcomes (that is, Results and Services Plan) and agreed performance accountabilities; An unconvincing argument for the proposal; Gaps in evidence supporting the arguments; Methodology for analysis is not understood or accepted; Poor financial and/or economic analysis; Risks are not adequately assessed; Cursory and/or biased examination of alternatives; None or limited consultation with stakeholders. 2.5. Relationship between ICT projects and Business Process Reform ICT does not, of itself, deliver business or Government benefits. The benefits come only from changes in work practices and reform of business processes. An agency’s IM&T Strategic Plan identifies the ICT enabled business reform projects and programs it is planning to pursue to support its corporate objectives and business needs. ICT projects are therefore part of wider business reform processes involving some or all of the elements shown in Figure 1. Page 10 of 24 Figure 1: Business Planning and Business Processes The three dark shaded elements in Figure 1 are typically included in the ICT component of reform, which may be either: An integral part of the reform project (eg, a business system) where there is a direct relationship to business benefits; or • • May represent development of infrastructure (eg, information management, information and communications technology or governance) to support current or planned business systems that, in turn, support planned business reforms. Business benefits will arise from changes in work practices as a result of pursuing corporate and business objectives. Hence business cases for ICT projects should be driven by business need and demonstrated by full support by business units and should focus on each element of business process reform, not just on the business systems component. The Guidelines for Electronic Self Service Projects in Personnel and Payroll (Premier’s Department 2001) is a good example of this holistic approach. More detailed information about how to define benefits for ICT proposals can be found in the OICT Benefits Realisation Register Guideline. 2.6 Types of business cases The nature of the business case for ICT projects will vary according to the type of project: Benefits from business process reform projects arise from changes to work practices and service delivery, which may be enabled by business systems, which, in turn, may require the supporting infrastructure components of information, information technology and IM&T governance. The business case must reflect the totality of the business /process reform activity. • • • Most ICT infrastructure projects indirectly enable reforms to work practices in some or all of the agency’s business processes. This is generally achieved through support for new /changed business systems, which in turn support changed work practices. The business cases for these projects need to establish and show the direct or indirect linkage with the changed work practices and their benefits. Projects for corporate applications may directly affect work practices, and create direct benefits. They may also contribute to the effectiveness of business systems. The business cases for these projects need to identify the direct benefits as well as how they contribute to the effectiveness of business systems. Page 11 of 24 3. Contents of an ICT Project Business Case ICT project business cases should contain the following sections /information: 1) Introduction 2) The Case for Change and Project Purpose 3) Project Scope 4) Project Objectives, Planned Outcomes and Benefits 5) Estimates of Resources and Project Plans 6) Analysis of Alternatives Considered 7) Project Appraisal 8) Attachments to the Business Case The contents are discussed in more detail in the following sections: 3.1 Introduction The Business Case introduction is the ‘selling tool’ for presenting the business case to the agency Chief Executive Officer, executive management, and government. It provides a clear and concise outline or ‘big picture’ overview of the whole proposal, the reasons for proceeding with it, what it will cost to implement (capital and recurrent) and how it will directly or indirectly contribute to Government and Agency service delivery outcomes. It should be no longer than 3 to 5 pages in length. 3.2 The Case for Change and Project Purpose The case for change should: Describe the current situation, including problems or deficiencies occurring; and • • • • • It should describe the strategic issues for the Agency and the opportunity provided by the proposed change (i.e. how the agency proposes to address/resolve the need/problem). The project purpose should: Give the basic rationale and justification for making a change – linked to wider Government policy priorities, agency objectives and delivering or supporting better client services; Outline the views of key stakeholders, both external and internal; and Gives a brief description of the overall purpose of the project and justification as to why this project is a priority for the agency, including a description of the causal link between the planned project outcomes and overcoming the current situation. The Guidelines for Electronic Self Service Projects in Personnel and Payroll (Premier’s Department, 2001) are a good example of the thinking that goes into making a case for change. Page 12 of 24 3.3 Project Scope The project scope should: Clearly describe: • • • • • • • • • • • ⋅ What it includes (what is in scope); ⋅ What it does not include (what is out of scope); and ⋅ Relationships with other projects. Describe the extent of the impact that the proposed project implementation will have on existing systems, ICT architectures and applications, business processes, work practices, interactions with clients and suppliers, and any other possible impacts; and Give an indication of the agency’s capability to undertake the project. It must be clear that the agency has (or can acquire) the resources and skills necessary, and can apply the necessary project management and governance disciplines to ensure a successful completion. It should include the agency’s Treasury accreditation status. 3.4 Project Objectives, Planned Outcomes and Benefits The objectives the agency is planning to achieve by undertaking the project must be clearly outlined, by: Stating the specific objectives of the project; What measures of achievement will be used for the project; An analysis of how the project fits with the agency’s: ⋅ Strategic and business objectives; ⋅ Results and Services Plan outcomes; ⋅ Capital Investment Strategic Plan; ⋅ Total Asset Management Plan; ⋅ IM&T Strategic Plan; and ⋅ Operational management arrangements (such as human resource management, financial and asset management, industrial relations, and internal audit processes). A discussion of how the project supports Government priorities, including: ⋅ Wider Government policy priorities, such as improved health outcomes, public safety, improved service delivery, etc.; ⋅ ICT strategic framework (eg, IM&T Blueprint and connect.nsw strategy); ⋅ Corporate Services Reform strategy; and ⋅ NSW Government Telecommunications strategy. Identifying direct and indirect interdependencies with existing systems and other current projects; An analysis of the impact of implementing the project on agency service delivery standards: The specific outcomes to be delivered by the project must be listed and supported by: A description of how the project outcomes will contribute to better business outcomes, and an indication of how achievement of the benefits will be measured or recognised, that is: demonstration of how project benefits contribute to agency business objectives and Results and Services Plan outcomes; A statement of assumptions made and the basis for estimating all claimed contributions, benefits, impacts and outcomes; Page 13 of 24 A description of how the project will improve business processes and service delivery. This should outline current practices and how these will/are expected to change with the implementation of the project; • • • • • • • • • The impact on the business, its people and its services; The impact of not proceeding with the project; and Value added by this project to the outcomes of related agency projects and /or programs. All the benefits expected to be achieved by implementing the project should be described in as much detail as possible, including: 􀂂 The nature of the benefit -whether the benefits are tangible (eg, cost avoidance), intangible (eg, productivity improvement), quantitative (eg, reducing number of work process steps), or qualitative (eg, improved customer service); Estimates of the ‘most likely’ value of benefits that can be achieved, as well as the estimates of the ‘best case’ and ‘worst case’ estimates; Responsibilities for managing the achievement of benefits; Estimates of the timing of the achievement of benefits, and dependence of benefits on project milestones; The Base line measures of performance (a description of performance before the benefits are achieved); The measures to be used to demonstrate that benefits have been achieved. Refer to the OICT Benefits Realisation Register Guideline and Benefits Management Plan Guideline for more detailed information. 3.5 Estimates of Resources and Project Plans Providing realistic estimates of the resources required to implement an ICT proposal is imperative to give decision makers a fair understanding of the commitment that will be required to complete the project. This section must provide: Assessments of, and assumptions underlying, the 3-point estimates (‘most likely’, ‘best case’ and ‘worst case’ scenarios) of: • ⋅ Project resources and costs, including all project activities required to implement new or changed business processes, systems and technology and to manage the change process, staff training, managing /monitoring benefits realisation; ⋅ One-off initial investments; ⋅ Recurrent and whole of life ownership and usage resources and costs; ⋅ Sources of all resources and skills required: o For the project; o For the whole of the life of the new /changed business process, systems and technology, including staff training costs; o To undertake Treasury reporting requirements for funded projects (eg, Procurement Options Report, Pre-Tender Estimate Report, Post Tender Review Report, and project progress reporting.) See Appendix A for details of these reports. Page 14 of 24 It is vital that project estimates include resources for managing the achievement of benefits and post implementation evaluations to determine if the project has achieved its intended outcomes and benefits. A post implementation evaluation demonstrates that an agency is being accountable in regards to the expenditure of capital funds and can assist in the justification of future projects. A Post Implementation Review is designed to assess how well the service outcomes of a particular asset are matched to the actual service needs of an individual agency. A Post Completion Review is intended to compare the actual performance of an asset with the stated objectives of the original brief. An outline should be given of the project’s implementation plan, including: Project duration (include realistic timeframes for all aspects of project implementation, and allowing adequate time for the Business Case Gateway Review (if applicable), other Gateway Reviews (as appropriate), decision and approval processes, and monitoring (if applicable)). The time frame of a project should be no more than three years. This timeframe will allow greater flexibility for an agency to respond to organisational and technological change over the life of the project. It also reduces the level of risk by keeping implementation timeframes manageable; • • • • • • • • Principal project milestones, including the criteria for recognition of milestone achievement. Project modules and staged implementation should be considered to increase flexibility. If a project is divided into distinct modules and stages it becomes easier to make changes to project schedules and to lock in benefits over the life of the project. After the successful completion of a particular stage of a project, a new business case can be prepared to implement later stages of the project. Clear contingency plans with strategies to deal with changes over the life of the project. Examples include developing plans to deal with changes to funding that could effect the implementation of project modules and how interdependencies between project modules will be managed. A discussion about whether a pilot implementation will be used to assess a project’s effectiveness, assist in development of staff training programs and to examine other change management issues that may arise if a project was fully implemented. It will also provide preliminary data to assess the accuracy of cost and time estimates. 3.6 Analysis of Alternatives Considered A detailed and balanced analysis of alternative options and approaches must be provided that discusses: All practical alternative approaches that have been considered, and the characteristics of those alternatives outlined. This should include the cost of the alternative proposals, the advantages and disadvantages of implementing them and justification as to why these are not the preferred implementation options. At least a “base case” alternative must be considered. This is the minimum practicable project /change required to stay in business, meet statutory obligations and achieve Government programs. [Agencies should prepare a ‘contingency plan’ in case they are not successful in acquiring funding. This could be their “base case”.] A “do nothing” alternative is not meaningful. Although preservation of the status quo is a legitimate planning outcome, it will require some resources to be expended to ‘maintain’ services as they are being delivered. Maintaining the status quo should not be confused with a “do nothing” alternative. The “base case” mentioned above is often incorrectly referred to as “do nothing”. Page 15 of 24 Examples of alternative options may include: Partnering with another agency; • • • • • • • • • • Modifying an off-the-shelf package; Contracting service provision to another agency; Host /supplier relationship; Alternative means of delivering the service; Pilot or trial; Partial implementation. 3.7 Project Appraisal The Project Appraisal information is used to demonstrate that the business case and the work proposed to be done is properly developed and justified prior to being considered by the Budget Committee of Cabinet for funding approval. Business case costs and benefits must apply to the whole of the life of the business reform, not only to the period of the project itself; and the economic and financial analysis should demonstrate a sound investment framework. The following information must be provided in this section of the business case with relevant supporting documents included as attachments to the business case. Provide a summary of the following items from the Economic Appraisal in this section and attach the Economic Appraisal report to the business case: ⋅ Demand studies, pricing analysis, surveys; ⋅ Basis for assumptions, methodology -data sources and references; ⋅ Consider a variety of methods that can potentially achieve the main project objective; and ⋅ Weigh up the feasibility of each method based on the following, and other, criteria: Provide a summary of the following items from the Technical /Impact Report in this section and attach the Technical /Impact Report to the business case: ⋅ Use of new or existing technology that is to be implemented, showing how this will actively support business process reform; Provide a summary of the following items from the Financial Appraisal (agency perspective) in this section and attach the Financial Appraisal report to the business case: ⋅ Justification for assumed discount rate; ⋅ Source for cost assumptions (eg, wage increases); ⋅ Data sources, references for assumptions; ⋅ Financial impacts including: the retiring of older assets and associated maintenance savings; ⋅ A sensitivity analysis of the project’s risks and probability assumptions based on a worse case scenario of cost increases and reduced benefits or savings being achieved; and ⋅ Any third-party revenues. Page 16 of 24 ⋅ Cost estimates (with 3-point spread) for all project components, including capital, recurrent and life-cycle costs (examples of the types of costs that may arise in an ICT project are given in Appendix B); ⋅ A Cost /Benefit Analysis is required for all ICT proposals, including a comparative analysis with each identified alternative option. The cost /benefit analysis should extend for a long enough period to ensure that cyclic or long term influences are taken into account. Provide a summary of the cost /benefit analysis in this section and attach a detailed cost /benefit analysis to the business case. Refer to the OICT Cost /Benefit Analysis Template for the required format. Provide a summary of the following items from the Financial Impact Statement in this section and attach the Financial Impact Statement to the business case: • • • ⋅ Agency financial impact; ⋅ Financial impact on other agencies; and ⋅ Preliminary accounting treatment – impacts on Statement of Financial Performance and Statement of Financial Position. Governance Arrangements and Management Approaches: ⋅ Provide a summary of the Project Governance arrangements to be established to implement the proposal. This should address roles, responsibilities, accountabilities and reporting structures across all aspects of a proposal’s implementation. Attach the details of specific roles and responsibilities to the business case. Provide a summary of the following items from the Risk Assessment in this section and attach the Risk Assessment and Management Plan to the business case: ⋅ The Risk rating of the project; ⋅ The major risk treatment strategies and valuation (if appropriate): ⋅ Information sources including, probability and impact of certain risks occurring or not occurring or not occurring on similar projects. (Refer to the OICT Project Risk Management Guideline for more information) Provide a summary of the following items from the Benefits Realisation Register in this section and attach the Benefits Realisation Register and draft Benefits Management Plan to the business case: • ⋅ Benefits to be delivered including timetable, cashflows (where appropriate), accountability; and ⋅ Measurement methodology. (Refer to the OICT Benefits Realisation Register Guideline and OICT Benefits Management Plan Guideline for more information) A Business Case Gateway Review Report is required for all ICT proposals over $5 million. If a business case Gateway Review has been done, provide a summary of the following items in this section and attach the Gateway Review report, and the agency’s response to the review, to the business case: • ⋅ A summary of the findings of the Gateway Review report; and ⋅ A summary of the agency’s response to the review. Page 17 of 24 3.8 Attachments to the Business Case There are 8 attachments identified in this section that should be included with the business case if required. Other Attachments can be included and indexed to the business case as appropriate. ATTACHMENT 1 – ECONOMIC APPRAISAL REPORT The following documents (available on the Treasury website) outline the requirements for Economic Appraisals: Economic Appraisal -Principles and Procedures Simplified • NSW Government -Guidelines for Economic Appraisal • ATTACHMENT 2 – TECHNICAL IMPACT REPORT ATTACHMENT 3 – FINANCIAL APPRAISAL REPORT The following document (available on the Treasury website) outlines the requirements for Financial Appraisals: Treasury -NSW Government -Financial Appraisal • ATTACHMENT 4 – FINANCIAL IMPACT STATEMENT ATTACHMENT 5 -GOVERNANCE ARRANGEMENTS AND MANAGEMENT APPROACHES This needs to include information on: Roles, ownership, responsibilities and reporting mechanisms for the Project Sponsor, Project Director, Project Manager, IM&T Steering Committee and Project Steering Committee; • • • • Project management responsibilities and mechanisms. The Project Sponsor should be an appropriate senior Responsible Business Manager (not the IT Manager). Ownership of Projects rests with the appropriate Business units; Accountabilities for project outcomes. It is strongly recommended that this is the responsibility of the relevant Business Manager sponsoring the project; Responsibilities for monitoring and auditing achievement of project outcomes and business benefits. It is strongly recommended that this is the responsibility of the relevant Business Manager sponsoring the project. This includes reporting on benefits realisation over the life of the project and upon completion. Project benefits need to be related to business and program objectives (see the Benefits Realisation Register Guideline and Benefits Management Plan Guideline for more detailed information); Project Management approaches and methods to be used (see Project Management Guideline); • • Quality management approaches to be taken both within the project and during the whole life cycle (see Quality Management Guideline); Page 18 of 24 Security management approaches to be taken both within the project and during the whole life cycle (see Information Security Guidelines No.1, 2 and 3); • • Change management approaches and methods, particularly for implementation and on-going management of changes to work practices, re-skilling and other workforce changes (see Change Management Guideline); Communication management approaches to be taken to gain stakeholder input into the project and to report on project progress (see Change Management Guideline); • • • Contract procurement and relationship management approaches and methods; and Benefits realisation approaches and methods (see Benefits Realisation Register Guideline) and management of benefits realisation (see Benefits Management Plan Guideline). ATTACHMENT 6 – RISK ASSESSMENT AND RISK MANAGEMENT PLAN Managing risk is one of the major processes of Corporate Governance and all its aspects including ICT Governance. Risk management is a core discipline that assists managers at all levels to make correct and informed decisions. Risk management is a process for organised assessment and control of risks. It involves the identification, analysis and evaluation of the risks presented by the system being acquired and the activities to acquire it, and the development of cost-effective treatments for those risks. It applies to projects and programs of all sizes. See the OICT Project Risk Management Guideline for more detailed information regarding the assessment of project risk. The objective of project risk management is to apply a systematic process to cost-effectively reduce the effects of uncertainties that compromise project or business objectives. All projects have risks and cost-effective management of risk is essential if a project is to achieve its business outcomes. These typically include cost, schedule, quality and the fulfilment of functional and non-functional requirements. Risk management starts at the inception of a project. This means risk must be addressed at the planning stage when the project’s scope and justification are documented in the business need proposal and the initial business case. The risk assessment in the business case must include identification and assessment of all likely project, business and life cycle risks. The risk assessment must include a risk management plan for managing the risks and must document treatment strategies, confidence of treatment, and the assessed residual risk (see the OICT Project Risk Management Guideline). ATTACHMENT 7 – BENEFITS REALISATION REGISTER Benefits Realisation is the practice of ensuring that projects or programs produce the projected benefits claimed in the project’s cost /benefit analysis. The Benefits Realisation Register is prepared in conjunction with the cost /benefit analysis for a business change investment proposal (business case). The cost /benefit analysis will identify the high level benefits that are planned as an outcome of the project. The development of the Benefits Realisation Register helps to analyse the planned value of the benefits to the organisation and may also help to identify additional benefits. Page 19 of 24 The Benefits Realisation Register, developed as part of a project business case (see the OICT Benefits Realisation Register Guideline), is a structured way to document the benefits expected from an ICT project, assign responsibility for achieving the benefits, and show how the benefits contribute to achieving the agency’s strategic and corporate objectives, Service Delivery Plan and Results and Services Plan outcomes. The benefits realisation process must be effectively managed once a project is approved. This is because many ICT project benefits are the result of reforms in business processes that are enabled by the project or technology, rather than being directly attributable to a successful implementation of the project itself. The OICT Benefits Management Plan Guideline should be used to assist in the process of managing the achievement of project benefits once a project has been approved to proceed. A draft Benefits Management Plan should be prepared as an attachment to the business case. ATTACHMENT 8 – BUSINESS CASE GATEWAY REVIEW REPORT AND AGENCY RESPONSE -REQUIRED FOR PROJECTS OVER $5 MILLION Page 20 of 24 Appendix A – Procurement Monitoring Report Outlines The following information is provided by Treasury as a guide only to agencies about the detailed information that is required in each type of report. It is intended to assist agencies in estimating the costs to meet monitoring and reporting requirements should a business case be approved by the Budget Committee of Cabinet. Procurement Options Report The Procurement Options report is required prior to tender and should contain the following details: Contracting methodology to be pursued based on an analysis of the risk, cost, benefits and value for money aspects of pursuing the various procurement methods. Analysis may take into account: • • • • • • • • 􀂂 The success or otherwise of previously used contracting methods; 􀂂 The technical expertise of the Department, particularly in the case of alliances; and 􀂂 Analysis of whether to use an input or output specified contract. Proposed procurement process: 􀂂 Steps in approaching the market and justification (for example, one or two stage tender); 􀂂 Governance arrangements: o Roles and responsibilities and reporting procedures for the project team; o Probity plan; and o Tender evaluation process. Project delivery timetable, highlighting key dates. Development approval process and consenting authority. Treasury /Treasurer approvals that may be required (for example, under PAFA). Pre-Tender Estimate The Pre-Tender Estimate report is required prior to tender and should contain the following details: Detailed specification of the project, including: 􀂂 Any service specifications and requirements; 􀂂 Any material specifications; 􀂂 Design drawings; and 􀂂 Explaining consistency and inconsistency with a Budget Committee of Cabinet approved project. Specify how the risk allocation under the proposed contractual arrangement has been taken into account. Explain any variation on estimate provided to the Budget Committee of Cabinet . Page 21 of 24 Post Tender Review The Post Tender Review report should contain the following details: Tender Evaluation report; • • • • • • Reconciliation between tendered cost and pre-tender estimate, including explanation for variations; Commercial arrangements: 􀂂 Final Risk Allocation, illustrating any departures to that previously advised; 􀂂 A contract summary if different from standard Government Information Technology Conditions (GITC), highlighting: o Obligations of each party; and o Default, termination and step-in rights. Accounting treatment; Project delivery timetable; and Explain any variation on costs and benefits. Page 22 of 24 Appendix B -Examples of ICT project costs The ICT project business case should encompass all one-off and recurrent costs for the life of the project and during the life of the business process, system or facility that is being obtained or changed by the project. Categories of cost may include some or all of the following, depending on the nature of the project: Direct project costs: Project space, facilities, materials and tools; • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Project staff; consultants, contractors; Other internal resources required to advise on, or support, the project. Acquisition costs: Real estate and office fit out; Equipment (fax, printers, photocopiers); Initial hardware, software licences; Gateway Reviews; Procurement Options Report; Pre-Tender Estimate; Tender costs; Post-Tender Review. Implementation costs: Implementation services and facilities; Project management and administration; Staff replacement; Loss of productivity; Training (both in the use of new systems /technology as well as business program change training); Quality process; Documentation and manuals; Gateway Reviews; Marketing and publicity; Benefits realisation and measurement (over the life of the project and on completion); Post implementation review. Whole of life ownership costs: Service and operating costs; Lease and rental costs; Outsourcing costs; Annual maintenance /licences; Upgrade and replacement of facilities; Staffing costs; On-going training and support (both in the use of new systems /technology as well as business program change training); Cost of finance. Page 23 of 24 Social and environmental costs: Loss of social amenity; • • • • • Loss of or lowered standards of service; Loss of employment or deskilling; Lowered community standards of health, safety, security; Costs passed on to public. Page 24 of 24