Business case management is the function concerned with developing, communicating and maintaining the business case. Its goals are to:
- summarise context and delivery in a single document;
- explain the desirability, achievability and viability of the proposed work;
- develop the primary document that will be used to support a ‘go/no go’ decision at all gates in the life cycle;
- update and maintain the business case throughout the life cycle.
Unlike most other delivery functions there is no procedure to describe the development of the business case. This is adequately covered by activities in the Praxis process model.
All projects and programmes must have a business case that demonstrates the value of their objectives.
In the identification process an outline business case is incorporated into the project or programme brief that is used by senior management to assess whether to give the go-ahead for the definition process. A detailed business case is prepared during the latter process and then used to decide whether full approval for the work should be given.
Once approved, the business case must be kept up to date, reflecting approved changes. In this way, it can be used as the primary document at gate reviews (e.g. at the end of a tranche or stage) to determine if the work should continue.
A business case typically includes sections on the:
- context – the background of the project or programme and why it is needed;
- delivery summary – a top level view of the stakeholders, scope, schedule, finance, risk, resource and change involved;
- justification - an explanation of why the work should be undertaken.
Justification comprises three tests, i.e. is the work:
Desirable: this is determined from requirements management which demonstrates that the objectives of the work are required by the stakeholders.
Achievable: benefits management defines achievable benefits, solutions management specifies achievable outputs and planning establishes the practicality of the work (within any time and resource constraints).
Viable: investment appraisal assesses the financial return on investment and risk management assesses the exposure to risk in performing the work.
The business case is owned by the sponsor, who has ultimate accountability for ensuring that the benefits are achieved.
Projects, programmes and portfolios
A business case must include a value of benefits as well as the costs of producing the output but some projects are only concerned with delivering an output.
If the project is performed by a contractor on behalf of a client, the assumption is that the client has assessed the value of the benefits and agreed a price for the output with the contractor. The contractor’s business case will be based simply on the profit element of the contract whereas the client’s business case will be based on the cost of the output and the value of the benefits. Where the two partners in the project have different business cases this can be a source of conflict. Each party must be realistic and understand the driving factors in each other’s business case.
Where the project is delivering an output from which business-as-usual or a parent programme will realise benefits, the business case may not have been produced by the project manager. However, the project manager will probably be responsible for updating the business case and ensuring that plans for realising benefits remain achievable and viable.
Programmes are usually broken down into tranches and it is useful to have a business case for each tranche. This ensures that each tranche can be justified in its own right and if a programme needs to be terminated early, the completed tranches will have produced a financial return. If the first tranche of the programme is fairly short, it also ensures that stakeholders see some early benefits or ‘quick wins’ as they are sometimes known. This helps promote stakeholder commitment which may wane if the first benefits take a long time to materialise.
Problems affecting one project in a programme may have a knock effect on the business case of another. As part of the delivery process, the programme management team must monitor the effect of interdependencies between business cases.
Since a portfolio is not a stand-alone enterprise, but rather a collection of programmes, projects and business-as-usual elements, the portfolio does not require its own business case. The programmes and projects within it each have their own.
The co-ordination of business cases within a programme or portfolio is far easier if there is consistency of approach. In more complex environments, guidance should be provided on how all the component business cases will be structured and the preferred techniques to be used. This is particularly important when preparing financial appraisals that will be consolidated.
In a structured portfolio the component business cases are derived from the strategic objectives that the portfolio is designed to achieve. The portfolio management team will then use the business cases to categorise, prioritise and balance the portfolio in line with the strategic objectives during the portfolio management process.