What is a business case?
In the NI public sector, departments must prepare business cases in line with the Department of Finance’s NI Guide to Expenditure Appraisal and Evaluation (NIGEAE), Managing Public Money NI and related Dear Accounting Officer letters.
Business cases should set out the options and justification for the proposed expenditure ensuring the proposal is sound and represents value for money. The business case is then approved at the appropriate level internally or forwarded to DoF Supply for approval (if the estimated costs exceed delegated limits - the limits set by DoF for in-house approval of expenditure).
All public sector programmes and projects require a business case. Departmental finance branches have an important role in co-ordinating the onward submission of business cases to DoF Supply, having assured themselves on relevant affordability issues.
Purpose of a business case
Business cases provide the justification for an investment of public money. A business case must be produced for all public sector expenditure, but with levels of effort and detail in proportion with the scale of proposed investment. They should be seen as living documents, regularly revised and updated to reflect the latest position.
The business case in its fullest form has three major iterations as illustrated below, but not all investments will require all three versions prepared separately. For smaller project expenditures, an outline business case (which is developed and refined) may fulfil all the requirements necessary for formal approval.
Strategic outline case (SOC)
The SOC is a first cut at describing the proposal in a business case format. Some information may not be available at this early stage but as much as is available should be documented. An SOC can be a useful decision making tool in assessing viability and allowing senior managers to prioritise where scarce resources should be directed.
There is no formal DoF approval required at SOC stage but it may be useful to give DoF sight of the SOC for information.
Outline business case (OBC)
The OBC represents a substantial piece of work in terms of structure and detail. All of the areas highlighted in the NIGEAE and related DAO letters should be addressed, providing a comprehensive analysis of options and a preferred option identified.
If estimated expenditure is above delegated limits, formal DoF approval is required.
Full business case (FBC)
The FBC usually only applies where a contract is involved and short-listed bidder responses are being analysed and documented. This final iteration provides more robust information on objectives, costs, benefits, risks, assumptions and other estimates.
The FBC is particularly informed by the outcome of the procurement process. Additional requirements exist for private finance initiative (PFI) or public private partnership (PPP) projects.
If the OBC has been formally approved by DoF, approval of the FBC will normally be required.
Business case guidance
Business case production should be guided by the procedures set out in the organisation. For the NI public sector this is the NIGEAE, related Dear Accounting Officer letters and best practice in programme and project management.
For a programme it provides an aggregation of information from other parts within the programme and from project level. For a project, it may be informed by the project brief.
Business case roles and responsibilities
The main roles and responsibilities relevant to programme and project management business cases are:
- senior responsible owner - owner, responsible for ensuring that the business case is treated as a living document; the SRO is ultimately responsible for ensuring that the programme or project meets its objectives and realises projected benefits
- programme manager or project manager - usually given responsibility for production of the business case and for co-ordinating relevant business side input
- economists - are important in reviewing the quality of draft business cases before approval; DoF economists provide expert input on behalf of DoF Supply during the formal approval process
- finance branches - business cases must go through the relevant finance branch before submission to DoF for formal approval with regard to affordability; finance branches are also involved in business cases requiring lower level approvals
- DoF Supply - is the equivalent of HM Treasury in NI and formal approvers of all business cases exceeding delegated limits
- programme board or project board - sign off for all business cses and approval of internal business cases falling below delegated limits