5 case business model single stage case ……………………………….. primary care resource...

5 Case Business Model Single Stage Case

………………………………..

Primary Care Resource Centre

Version No:1 DRAFT

Issue Date: ………… 2013

5 Case Business Model Single Stage Case …………….. Primary Care Resource Centre Version 1.2 Date:

2

Version History

Version Date Issued Brief Summary of Change Owner’s Name

Version 1


3

Key Acronyms

Term / Acronym Definition

AEC Annual Equivalent Costs

AOF Annual Operating Framework

BCUHB Betsi Cadwaladr University Health Board

BJC Business Justification Case

BRP Benefits Realisation Plan

CDM-C Construction (Design & Management) Co-ordinator

CHC Community Health Council

CIM Capital Investment Manual

CPG Clinical Programme Group

CRB Cash Releasing Benefit

CSF Critical Success Factor

DCF Discounted Cash Flow

DV District Valuer

EqIA Equality Impact Assessment

GEM Generic Economic Model

GMP Guaranteed Maximum Price

GP General Practitioner

NHS National Health Service

Non CRB Non Cash Releasing Benefit

Non QB Non Quantifiable Benefit

NPV Net Present Value

PER Project Evaluation Review

PID Project Initiation Document

PIR Project Implementation Review

PPE Post Project Evaluation

QB Quantifiable Benefit

SCP Supply Chain Partner

SOBC Strategic Outline Business Case

SRO Senior Responsible Officer

TOR Terms of Reference

TUPE Transfer of Undertakings (Protection of Employment)

VAT Value Added Tax

VFM Value for Money

WAG Welsh Assembly Government

WG Welsh Government


4

Contents Page

Version History 2 Acronyms 3 1. Executive Summary 1.1 Introduction 1.2 Strategic Case 1.3 Economic Case 1.4 Commercial Case 1.5 Financial Case 1.6 Management Case 1.7 Recommendation 2. Strategic Case 2.1 Introduction Part A: The Strategic Context 2.2 Organisational Overview 2.3 Business Strategies 2.4 Other Organisational Strategies Part B: The Case for Change 2.5 Investment Objectives 2.6 Existing Arrangements 2.7 Business Needs 2.8 Potential Business Scope & Key Service Requirements 2.9 Main Benefits Criteria 2.10 Main Risks 2.11 Constraints 2.12 Dependencies 3. Economic Case 3.1 Introduction 3.2 Critical Success Factors 3.3 Long Listed Options 3.4 Scoping Options 3.5 Service Solution Options 3.6 Service Delivery Options 3.7 Implementation Options 3.8 Funding Options 3.9 The Long List: Inclusions & Exclusions 3.10 Short Listed Options 3.11 Economical Appraisal 3.12 Qualitative Benefits Appraisal 3.13 Risk Appraisal 3.14 Preferred Option 3.15 Sensitivity Analysis 3.16 Confirmation of the Preferred Option 4. Commercial Case


5

4.1 Introduction 4.2 Required Services 4.3 Potential for Risk Transfer 4.4 Proposed Charging Mechanism 4.5 Proposed Contract Length 4.6 Proposed Key Contractual Clauses 4.7 Personnel Implications (including TUPE) 4.8 Procurement Strategy & Implementation Timescales 4.9 FRS5 Accountancy Treatment 5. Financial Case 5.1 Introduction 5.2 Impact on the Organisations Income & Expenditure Account 5.3 Impact on the Balance Sheet 5.4 Overall affordability 6. Project Management Case 6.1 Introduction 6.2 Project Management Arrangements 6.3 Outline Project Reporting Structure 6.4 Outline Project Roles & Responsibilities 6.5 Outline Project Plan 6.6 Use of Special Advisors 6.7 Arrangements for Change & Contract Management 6.8 Arrangements for Benefits Realisation 6.9 Outline Arrangements for Risk Management 6.10 Outline Arrangements for Post Project Evaluation 6.11 Framework for Post Project Evaluation 6.12 Management of the Evaluation Process 6.13 Gateway Review Arrangements 6.14 Conclusion 6.15 Recommendation


6

Appendices


7

OBC Estates Component Annex

1. Executive Summary of the Estate implications of the Business Case 2. Estates Investment Objectives 3. Summary of Trust Estates Strategy

▪ The Existing Estate

- Existing Estate Site Plans

▪ Current Estate Performance (identifying data collection date) ▪ Estate Performance Improvement Targets ▪ Proposes Changes to the Estate ▪ Capital Investment Programme ▪ Land and Property Disposal and Acquisition Programme

4. Proposed Project Estate Options (minimum 1:500 scale) 5. Preferred Option Development Control Plan (minimum 1:200 scale) 6. Project Design Principles 7. Project Details 8. Site ownership status 9. Planning Permission Status 10. Quality Assurance and Standards Compliance

▪ AEDET ▪ BREEAM

11. Statement of Sustainable Development Commitment 12. Capital Costs and Projected Cash-flows (See OBC1- 8 forms) 13. Inflation calculations 14. Whole Life Cycle Cost Assessments 15. VAT Recovery Strategy 16. Assessments of Estate and Facilities Revenue Implications compared with

the base option

▪ Capital Charges ▪ Energy ▪ Rates ▪ Rent ▪ Water and sewage


8

▪ Maintenance ▪ Security ▪ Cleaning ▪ Linen and laundry ▪ Car Parking ▪ Waste disposal ▪ Photocopying ▪ Telecommunications ▪ Portering ▪ Postal Services ▪ Commissioning ▪ De-commissioning

17. Comparison and reconciliation of functional content and capital costs with

SOBC


9

1. Executive Summary

1.1 Introduction

The purpose of this Strategic Outline Business Case (SOBC) will determine the

development of the model of services to be provided in …………………….

The capital cost of the preferred option is estimated at £………… (at BIS PUBSEC

Firm Price Index 173 inclusive of VAT at 20%).

1.2 Strategic Case

1.2.1 The Strategic Context

The strategic drivers supporting this business case / investment for the

…………. are detailed below:

▪

In addition, the business case fits well within the local organisational

strategies outlined below.

▪

1.2.2 The Case for Change

1.2.3 Investment Objectives

Based on the information detailed in the Case for Change the following

Investment Objectives for this project are as follows:

▪ Investment Object 1

▪ Investment Objective 2




1.2.4 Potential Business Scope and Key Service Requirements

The options within these ranges are considered within the economic case.


10

Minimum Intermediate Maximum

Potential

Business

Scope

Key Service

Requirements

1.3 Economic Case

1.3.1 The Long List: Inclusion and Exclusion

The long list of options was developed and categorised under the headings of

Scope, Technical Solutions, Service Delivery, Implementation and Funding.

A summary of inclusions, exclusions and possible options are detailed in the

table below:

Options Finding

1 Scoping

1.1 Do Nothing

1.2 Minimum Scope

1.3 Intermediate Scope

1.4 Maximum Scope

2 Service Solution

2.1 Do Nothing:

2.2

2.3

2.4

2.5

3 Service Delivery

3.1 In House

3.2 Outsource

3.3 Strategic Partnership


11

4 Implementation

4.1 Big Bang

4.2 Phased

5 Funding

5.1 Public Funding (Single

Scheme / Separate

Funding)


Funding / Phased Scheme)

5.3 Private Funding

1.3.2 Short Listed Options

Option 1 Option 2 Option 3 Option 4

Scope

Solution

Service Delivery

Implementation

Funding

1.3.3 Indicative Economic Costs

Undiscounted

(£ms)

Net Present Cost

(Value) (£ms)

Option 1: Do Minimum, No Change

Property & Opportunity Costs

Capital Costs (per OB forms)

Less: VAT (net)

Capital Costs (net VAT)

Lifecycle Costs

Optimism Bias & Risk Register


12

Capital Sub-total

Revenue Costs

Total Costs

Less: Cash Releasing Benefits

Costs Net Cash Savings

Non Cash Releasing Benefits

Total

Undiscounted

(£ms)

Net Present Cost

(Value) (£ms)

Option 2:



Less: VAT (net)


Lifecycle Costs


Capital Sub-total

Revenue Costs

Total Costs




Total

Undiscounted

(£ms)

Net Present Cost

(Value) (£ms)

Option 3:



Less: VAT (net)


13


Lifecycle Costs


Capital Sub-total

Revenue Costs

Total Costs




Total

Undiscounted

(£ms)

Net Present Cost

(Value) (£ms)

Option 4:



Less: VAT (net)


Lifecycle Costs


Capital Sub-total

Revenue Costs

Total Costs




Total

Option appraisal conclusions: ▪ Option 1 – this option ranks …… ▪ Option 2 – this option ranks …...


14

▪ Option 3 – this option ranks ……

▪ Option 4 – this option ranks ……

1.3.4 Overall Findings: The Preferred Option

Summary of overall results

Evaluation Results Option 1 Option 2 Option 3 Option 4

Economic Appraisals

Benefits Appraisal

Risk Appraisal

Overall Ranking

Overall conclusions ……

1.4 Commercial Case

1.4.1 Procurement Strategy

1.4.2 Required Services

1.4.3 Potential for Risk Transfer

Potential Allocation Risk Category

Public Private Shared

Design Risk

Construction Risk

Transition & Implementation

Risk

Availability & Performance Risk

Operating Risk

Revenue Risks

Termination Risks

Technological Risks


15

Control Risks

Residual Value Risks

Financial Risks

Legislative Risks

Other Project Risks

1.4.4 Proposed Charging Mechanisms

1.4.5 Proposed Contract Lengths

1.4.6 Proposed Key Contractual Clauses

1.4.7 Personnel Implications (including TUPE)

1.4.8 Implementation Timescales

Milestones Target Date

1.5 Financial Case

1.5.1 Summary of Financial Appraisal

The indicative financial implications of the proposed investment are as

follows:

Year … Year …. Year …. Year … Year … Year ….

£ £ £ £ £ £

Capital

Revenue


16

Total

Funded by:

Existing

Additional

Total

1.5.2 Overall Affordability and Balance Sheet Treatment

1.6 Management Case

1.6.1 Project Management Arrangements

1.6.1 Programme Management Arrangements

Name Title

1.6.2 Outline Project Reporting Structure

Betsi Cadwaladr University Health Board

Investment Decision Maker

Project Owner / Senior Responsible Officer / Chair Programme Board

……………..

Project Director

Project Board

Reference

Group


17

Project Manager

BCUHB User Groups

� Clinical

� Stakeholder

� Estates

Supply Chain Partner

TBC

Project Manager

(BCUHB Advisor)

TBC

Costs Advisor

(BCUHB Advisor)

TBC

� Architects TBC

� M&E Design TBC

� Structural Engineer TBC

� CDMC TBC

1.6.3 Outline Project Plan

The key dates and milestones associated with the project are detailed in the

table below:


1.6.4 Benefits Realisation and Risk Management

Main Risk Counter Measure


18

Strategic

�

�

�

Model of Care

�

�

Economic

�

Design

�

�

Equipment

�

�

Project Specific

�

�

�

1.6.5 Gateway Reviews Arrangements / Post Project Evaluation

Arrangements

1.6.6 Conclusions

1.7 Recommendation

It is recommended that the Welsh Government give approval to the Strategic Outline

Business Case for £…………….


19

2. The Strategic Case

2.1 Introduction

The purpose of this Strategic Outline Business Case (SOBC) will determine the

development of the model of services to be provided in the …………………..

The capital cost of the preferred option is estimated at £…………… (at BIS PUBSEC

Firm Price Index 173 inclusive of VAT at 20%).

The annual revenue …………….

2.1.1 Structure and Content of the Document

The Strategic Outline Business Case has been prepared using the agreed

standards and format for business cases, as set out in the NHS Executive

Capital Investment Manual and other current guidance. This approved format

is the Five Case Model, and comprises the following key components:

▪ The Strategic Case section - this sets out the strategic context and

the case for change, together with the supporting investment

objectives for the scheme

▪ The Economic Case section - this demonstrates that the organisation

has selected a preferred way forward, which best meets the existing

and future needs of the service and is likely to optimise value for

money (VFM)

▪ The Commercial Case section - this outlines what any potential deal

might look like

▪ The Financial Case section - this highlights likely funding and

affordability issues and the potential balance sheet treatment of the

scheme

▪ The Management Case section - this demonstrates that the scheme

is achievable and can be delivered successfully in accordance with

accepted best practice

The purpose of this section is to explain and revisit how the scope of the

proposed project or scheme fits within the existing business strategies of the

BCUHB and to provide a clear and compelling case for change, in terms of

the existing and future operational needs of the organisation.


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Part A: The Strategic Context

2.2 Organisational Overview

2.2.1 Local Geography and Demography

2.2.2 Population Profile of ……………

2.2.3 Social Deprivation

2.3 Business Strategies

2.4 Other Organisational Strategies

Part B: The Case for Change

2.5 Investment Objectives

The provision of SMART criteria has been considered as part of the SOBC process

in the development of the investment objectives. The investment objectives for this

project are as follows:

Investment Objective 1 �





2.6 Existing Arrangements

This section describes the existing situation with regard to the investment – the

status quo. The existing arrangements are as follows:

Existing Cost (£) Total (m)

Current (Revenue)

Capital (Book Value)

2.7 Business Needs


21

This section provides a detailed account of the problems, difficulties and service gaps

associated with the existing arrangements in relation to future needs.

2.7.1 The Local Case for Change

2.7.2 The Risks of Doing Nothing

2.7.3 Involvement of Stakeholders

2.7.4 Public Consultation

2.7.5 Proposed Service Model

2.8 Potential Business Scope and Key Service Requirements

The options within these ranges are considered within the economic case.

Minimum Intermediate Maximum

Potential

Business

Scope

Key Service

Requirements

2.9 Main Benefits Criteria

This section describes the main outcomes and benefits associated with the

implementation of the potential scope in relation to business needs. :

▪ CRB: Cash Releasing Benefits (e.g.: avoided costs)

▪ Non-CRB: Non-Cash Releasing Benefits (e.g.: staff time saved; economic

benefits)

▪ QB: Quantifiable Benefits (e.g.: achievement of targets)

▪ Non-QB: Non-Quantifiable or Qualitative Benefits (e.g.: improvement in staff

morale)

Investment Objectives Stakeholder

Group

Benefit Summary

Benefit Criteria

Investment Objective 1:

Patients

QB:

Non QB:

CRB:

Non CRB:


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Health Board

Staff: clinical /

administration

QB:

Non QB:

CRB:

Non CRB:

Health

Community /

Others

QB:

Non QB:

CRB:

Non CRB:


Group

Benefit Summary

Benefit Criteria

Patients

QB:

Non QB:

CRB:

Non CRB:

Health Board

Staff: clinical /

administration

QB:

Non QB:

CRB:

Non CRB:


Health

Community /

Others

QB:

Non QB:

CRB:

Non CRB:


Group

Benefit Summary

Benefit Criteria

Patients

QB:

Non QB:

CRB:

Non CRB:


Health Board

Staff: clinical /

administration

QB:

Non QB:

CRB:


23

Non CRB:

Health

Community /

Others

QB:

Non QB:

CRB:

Non CRB:


Group

Benefit Summary

Benefit Criteria

Patients

QB:

Non QB:

CRB:

Non CRB:

Health Board

Staff: clinical /

administration

QB:

Non QB:

CRB:

Non CRB:


Health

Community /

Others

QB:

Non QB:

CRB:

Non CRB:


Group

Benefit Summary

Benefit Criteria

Patients

QB:

Non QB:

CRB:

Non CRB:

Health Board

Staff: clinical /

administration

QB:

Non QB:

CRB:

Non CRB:


Health QB:


24

Community /

Others

Non QB:

CRB:

Non CRB:

2.10 Main risks

The main business and service risks associated with the potential scope for this

project are shown below, together with their counter measures.

Main Risk Counter Measure

Design

Development

� Supplier

� Specification

� Timescale

� Change management and project

management

Implementation Risks

� Supplier

� Timescale

� Specification and data transfer

� Cost risks

� Change management and project

management

� Training and user

Operational Risks

� Supplier

� Availability

� Performance

� Operating cost

� Project management

Termination Risks

2.11 Constraints


25

The project is subject to the following constraints:

2.12 Dependencies

The project is subject to the following dependencies:


26

3. The Economic Case

3.1 Introduction

In accordance with the Capital Investment Manual and requirements of HM

Treasury’s Green Book (A Guide to Investment Appraisal in the Public Sector), this

section of the SOBC documents the wide range of options that have been considered

in response to the potential scope identified within the strategic case.

3.2 Critical Success Factors

The Critical Success Factors (CSF’s) shown within the SOBC were as follows:

Critical Success Factors Description

1. Strategic case and business

needs and requirements

(Strategic Case)

� How the option meets and supports

the over-arching aims of local and

national strategy / legislation

2. Value for money (Economic

Case)

� Maximise the return on the required

investment in terms of the economy

� Minimise associated risks

3. Capacity and capability

(Commercial Case)

� How the option delivers the required

level of service and functionality

4. Affordability (Financial Case) � The delivery of the project within the

ascribed capital and revenue envelope

5. Potential achievability (Project

Management Case)

� Will be delivered within agreed

timescale

� Will deliver an operational, fit for

purpose facility

� Satisfies the level of skills required to

deliver the project successfully

3.3 The Long-Listed Options

The long list of options was generated by the workshop in accordance with best

practice contained in the Capital Investment Manual. The Workshop was held on

…………………. 2013 and members of the workshop are detailed below:


27

Name Title

The long list of options was developed and categorised under the headings of Scope,

Technical Solution, Service Delivery, Implementation and Funding as follows:

3.4 Scoping Options

In accordance with the Treasury Green Book and Capital Investment Manual, the do

nothing / status quo / do minimum has been considered as a benchmark for potential

Value for Money (VfM). An infinite number of options and permutations are possible;

however, within the broad scope outlined in the strategic case, the following main

options have been considered:

▪ Option 1.1: Do Nothing

▪ Option 1.2: the Minimum Scope

▪ Option 1.3: the Intermediate Scope

▪ Option 1.4: the Maximum Scope

3.4.1 Option 1.1: Do Nothing

There will not be a ………………….

Advantages Disadvantages

Nil capital funding required

There will not be a ………….

3.4.2 Option 1.2: Do Minimum



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The Do Minimum Option offers minimal change to service delivery / provision

- unable to fulfil recommendations of …………

3.4.3 Option 1.3: Intermediate Scope

This intermediate option allows for changes to current services provided in

line with the …………….


This option would provide a ……………….

3.4.4 Option 1.4: Maximum Scope

The Maximum Option allows for ………………..


This option would provide a whole system approach to the delivery of primary

/ community based services within the locality – thus enable multi-agency /

cross partnership working (health, Social care and third sector) in line with the

recommendations of the ………………

3.4.5 Overall Conclusion: Scoping Options

The table below summarises the assessment of each option against the

investment objectives and CSFs.

Reference to: Option 1.1 Option 1.2 Option 1.3 Option 1.4

Description of Option: Do Nothing Minimum Intermediate Maximum

Investment Objectives

1


29

2

3

4

5

Critical Success Factors

1 Strategic case / business


(Strategic Case)

2 Value for Money

(Economic Case)

3 Capacity and Capability

(Commercial Case)

4 Affordability (Financial

Case)

5 Potential Achievability

(Project Management

Case)

Summary

Options Finding

Scope

1.1 Do Nothing

1.2 Minimum Scope


1.4 Maximum Scope

3.5 Service Solution Options

3.5.1 Introduction

This range of options considers the technical solutions in relation to the

preferred scope. The range of technical solution options are detailed below:


30

▪ Option 2.1: Do Nothing: There will not be a ………..

▪ Option 2.2:

▪ Option 2.3:

▪ Option 2.4:

▪ Option 2.5:

▪ Option 2.6:

3.5.2 Option 2.1: Do Nothing:


Implementation of this option

3.5.3 Option 2.2:.



3.5.4 Option 2.3: Under this option



3.5.5 Option 2.4: Under this option: .



31


3.5.6 Option 2.5: Under this option:..


Implementation of this option will

3.5.7 Overall Conclusion: Service Solutions Options

The table and narrative below summarises the assessment of each option

against the investment objectives and critical success factors.

Reference to: Option

2.1

Option

2.2

Option

2.3

Option

2.4

Option

2.5

Option

2.6


1

2

3

4

5


1 Strategic case /

business needs and

requirements

(Strategic Case)

2 Value for Money

(Economic Case)

3 Capacity and

Capability

(Commercial Case)

4 Affordability (Financial

Case)


32

5 Potential Achievability

(Project Management

Case)

Summary

Options Finding

Scope

2.1

2.2 �

2.3 �

2.4 �

2.5

2.6

3.6 Service Delivery Options

3.6.1 Introduction

The following range of options considers the technical options for service

delivery in relation to the preferred scope and solution. The range of service

delivery options are detailed below:

3.6.2 Option 3.1: In House

This option describes the services delivered by the BCUHB, and managed by

the BCUHB.


3.6.3 Option 3.2: Outsource

This option describes the service being delivered by an organisation outside

the BCUHB.



33

3.6.4 Option 3.3: Strategic Partnership

This option describes a strategic partnership arrangement for the provision of

services between the BCUHB and other organisations (e.g.: consideration of

a strategic partnership agreement with an outside organisation to help in the

provision of services)




investment objectives and critical success factors

Reference to: Option 3.1 Option 3.2 Option 3.3

Description of Option: In House Outsource Strategic

Partnership


1

2

3

4

5


Strategic case / business


(Strategic Case)

Value for Money

(Economic Case)

Capacity and Capability

(Commercial Case)

Affordability (Financial

Case)

Potential Achievability

(Project Management


34

Case)

Summary Preferred Discounted Discounted

Options Finding

Service Delivery

3.1 In House

3.2 Outsource


3.7 Implementation Options

3.7.1 Introduction

The range of options gives consideration for implementation in relation to the

preferred scope, technical solution and method of service delivery. The range

of implementation options are detailed below:

3.7.2 Option 4.1: Big Bang

This option assumes that all the required services could be delivered within

the initial phase(s) of the project


3.7.3 Option 4.2: Phased

This option assumes that the implementation of the required services would

be phased






35

Reference to: Option 4.1 Option 4.2

Description of Option: Big Bang Phased


1

2

3

4

5




(Strategic Case)

Value for Money

(Economic Case)


(Commercial Case)


Case)


(Project Management

Case)

Summary

Options Finding

Implementation

4.1 Big Bang

4.2 Phased

3.8 Funding

The range of options considers the choices available for funding and financing the

scheme in relation to the preferred scope, technical solution, method of service


36

delivery and implementation. The ranges of funding options available are detailed

below:

3.8.1 Option 5.1: Public Funding (Single Scheme / Separate Funding)

This option describes the funding arrangements as separate and procured

and managed as a single project.


3.8.2 Option 5.2: Public Funding (Single Funding / Phased Scheme)

This option describes a single funding arrangement and procured and

managed as a single project with a phased programme for delivery.


3.8.3 Option 5.3: Private Funding





Reference to: Option 5.1 Option 5.2 Option 5.3

Description of Option:


1

2

3


37

4

5




(Strategic Case)

Value for Money

(Economic Case)


(Commercial Case)


Case)


(Project Management

Case)

Summary Preferred Discounted Discounted

Options Finding

Funding


Scheme / Separate

Funding)


Funding / Phased

Scheme)

5.2 Private Funding

3.9 The Long List: Inclusions and Exclusions

The long list has appraised a wide range of possible options.

Options Finding

1 Scoping

1.1 Do Nothing


38

1.2 Minimum Scope


1.4 Maximum Scope

2 Service Solution

2.1

2.2 �

2.3 �

2.4 �

2.5

3 Service Delivery

3.1 In House

3.2 Outsource


4 Implementation

4.1 Big Bang

4.2 Phased

5 Funding

5.1 Public Funding (Single Scheme /

Separate Funding)

5.2 Public Funding (Single Funding /

Phased Scheme)

5.3 Private Funding

3.10 Short Listed Options

The preferred and possible options identified above have been carried forward into

the short list for further appraisal and evaluation. All the options that were discounted

as impracticable have been excluded at this stage. On the basis of this analysis, the

recommended short-list for further appraisal within this BJC is as follows:



39

Scope

Solution

Service Delivery

Implementation

Funding

3.11 Economic Appraisal

3.11.1 Introduction

This section provides a detailed overview of the main costs and benefits

associated with each of the selected options. Importantly, it indicates how

they were identified and the main sources and assumptions. Each of the

short listed options have been reconciled in a cost benefit analysis to identify

which of the options provides the greater benefits for the least cost.

Methodology The benefits associated with each option were identified during a workshop held on …… with the stakeholders and customers for the scheme. A list of participants is attached at Appendix….

Description, sources and assumptions The benefits identified fell into the following main categories. In each case, the sources and assumptions underlying their use are explained. A more detailed explanation for each benefit line is attached to the economic appraisals in Appendix ……

Note: benefits fall into different categories which require different treatment within the OBC appraisals supporting the economic and financial cases – the distinctions are shown in the table below.

Table…..: Main Benefits

Type Direct to Organisation(s) Indirect to Organisation(s)

Quantitative (or quantifiable)

Measurable- for example, £s or numbers of transactions

As shown

Cash releasing These are financial benefits – for example, avoided spend, reduced cost etc

As shown


40

The above are accounted for in the financial case appraisals

The above are NOT accounted for in the financial case appraisals

Non cash releasing These are economic benefits – for example, opportunity cost of staff time etc

As shown

All of the above are accounted for in the economic appraisals

All of the above are accounted for in the economic appraisals

Qualitative (or non quantifiable)

Non measurable –for example, quality improvements such as patient well being, improved morale etc

As shown

Subject to weighting and scoring – see below

Subject to weighting and scoring – see below

3.11.2 Estimating Benefits

The following table outlines the benefits where a monetary value has been

identified to date and included within the economic appraisal at SOBC / OBC

stage.

Estimated Benefits (pa) £ms Benefit Type Description


Quantitative Assumed falls within cash

releasing or non-cash

releasing categories

Reduction in indirect costs by

reducing number of sites e.g.:

estates and facilities costs

Cash

Releasing

Benefits

Sub-total

The above analysis is included within the financial case appraisal

Benefits in general overheads

where there by reducing

number of sites

Non-cash

Releasing

Benefits

Sub-total

All of the above are accounted for in the economic case appraisal


41

3.11.3 Estimating Costs

Methodology Costs were estimated by ……in accordance with ……

Description, sources and assumptions The costs identified fell into the following main categories. In each case, the sources and assumptions underlying their use are explained. A more detailed explanation for each cost line is attached to the economic appraisals in Appendix ... Note: special consideration should be given to the use of ‘optimism bias’ at OBC stage. Transfer payments (VAT and capital charges etc) should not be included.

Costs falling to other public sector organisations should be included.

3.11.5 Net Present Cost Findings

The detailed economic appraisals for each option are attached at Appendix …... together with detailed descriptions for costs and benefits, and their sources and assumptions. (If applicable) The short-listed options have been risk-adjusted to account for the ‘risk retained’ (in £s) by the organisation under each option.

The following table summarises the key results of the economic appraisals for each option:

Table …: key results of economic appraisals

Undiscounted (£)

Net Present Cost (Value) (£)

Option 1 : Do Nothing / Do Minimum / Status Quo

Capital

Revenue / Current

Risk retained

Optimism Bias

Total Costs

Less Cash Releasing Benefits


Non-Cash Releasing Benefits

Total

Undiscounted Net Present Cost


42

(£) (Value) (£)

Option 2 : Reference Project / Outline Public Sector Comparator

Capital

Revenue / Current

Risk retained

Optimism Bias

Total Costs




Total

Undiscounted (£)


Option 3 : Reference Project / Outline Public Sector Comparator (more

ambitious)

Capital

Revenue / Current

Risk retained

Optimism Bias

Total Costs




Total

Undiscounted (£)


Option 2 : Reference Project / Outline Public Sector Comparator (less ambitious)

Capital

Revenue / Current

Risk retained

Optimism Bias

Total Costs



43



Total

3.11.6 Option Ranking

The results are summarised and shown in the following Table:

Table ….: summary of results

Option Description Ranking

NPC (£s) Cash Benefit

Non Cash Benefit

Cost Net Cash Savings

Cost Net All Savings

1

2

3

4

5

3.11.7 Option Appraisal Conclusions

The key findings are as follows:

Option 1 – do nothing/do minimum/status quo

This option ranks…..

It provides ……

Option 2 – reference project/ outline PSC


It provides ……

Option 3 – reference project/ outline PSC (more ambitious)


It provides ……

Option 4 – reference project/ outline PSC (less ambitious)

This option ranks….. It provides ……

The results are summarised and shown in the following table:


44

Option NPC (£ms) Ranking

Option 1: Do Minimum, No Change

Option 2:

Option 3:

Option 4:

3.11.8 Option Ranking

Therefore Option ……………. is ranked the preferred Option.

3.12 Qualitative Benefits Appraisal

A workshop was held on …………………….. to evaluate the qualitative benefits

associated with each option. Workshop attendees included:

Name Title

3.12.1 Methodology

The appraisal of the qualitative benefits associated with each option was

undertaken by:

▪ identifying the benefits criteria relating to each of the investment

objectives

• weighting the relative importance (in %s) of each benefit criterion in

relation to each investment objective

• scoring each of the short-listed options against the benefit criteria on a

scale of 0 to 10

• deriving a weighted benefits score for each option

3.12.2 Qualitative Benefits Criteria

The benefits criteria were weighted as follows for each investment objective:


45

Criteria Sub Criteria

�

�

�

�

�

3.12.3 Weighting of Criteria

The workshop weighted the above criteria using the weighted pair’s method

(Appendix ………). The weightings given to each of the criteria are shown

below:

Criteria Weighting

Quality of Care (including Clinical Safety)

Deliverability

Accessibility

Sustainability

Interdependencies

Total 100.00

3.12.4 Qualitative Benefits Scoring

Benefits scores were allocated on a range of 0 - 10 for each option and

agreed by discussion by the workshop participants to confirm that the scores

were fair and reasonable. The scoring exercise was held, without knowledge

of the weightings, in order to prevent any bias in the scores allocated.

A score of zero indicated that the option failed to satisfy the criteria in any

respect. A score of ten indicated that the option satisfied the criteria perfectly.

Results of the benefits scoring against each option are attached at Appendix

…


46

Score Evaluation

10 Could Hardly Be Better

9 Excellently

8 Very Well

7 Well

6 Quite Well

5 Adequately

4 Somewhat Inadequately

3 Badly

2 Very Badly

1 Extremely Badly

0 Could Hardly Be Worse

The scores assigned to each option are shown below and further detail of the

scoring are included within Appendix …..

Criteria Option 1 Option 2 Option 3 Option 4 Option 5

Total

Rank

3.12.5 Analysis of Key Results

The results of the benefits appraisal are shown in the following table:

Benefit Criteria &

Weight

Weight Option 1 Option 2 Option 3 Option 4 Option 5

Raw ® & Weighted R W R W R W R W R W


47

(W) Scores

Investment

Objective 1

30

Investment

Objective 2

25

Investment

Objective 3

20

Investment

Objective 4

15

Investment

Objective 5

10

Total 100

Rank

3.12.6 Sensitivity Analysis

The methods used were:

a. Equal weighting

b. Exclusion top ranked criteria

c. Switching values

Results of Switching Values – Benefits Appraisal

3.13 Risk Appraisal

The risks associated with the project have been quantified.

Name Title

3.13.1 Methodology

Risk appraisal has been undertaken and involved the following distinct

elements:

▪ identifying all the possible business and service risks

• assessing the impact and probability

• calculating a risk score


48

3.13.2 Risk Scores

The workshop assigned the risk scores shown in the following table on the

basis of participants’ judgment and assessment of previous procurements. A

more detailed assessment of the individual risks is shown in the risk register.

The range of scales used to quantify risk was as follows:

• low equals 2

• medium equals 3

• high equals 5

The risks and implementation issues of a capital project of this nature have

been identified, weighted, and action plans developed in a risk register in

Appendix ……..

Risks have been reviewed during the term of the SOBC development by the

Project Team to confirm:

▪ the likelihood of the risk occurring

▪ the potential impact

▪ the risk implications, including potential costs

The probability multiplied by the impact score gave the risk ratings low,

medium or high as shown in diagram below.

Likelihood

Consequence /

Impact

Almost

certain (5)

Likely (4) Possible

(3)

Unlikely

(2)

Rare (1)

Catastrophic (5) H H H M H

Major (4) H H M M H

Moderate (3) H M M L L

Minor (2) M M L L L

Insignificant (1) L L L L L

Score

Low Risk 1-5


49

Medium Risk 6-14

High Risk 15-25

3.13.3 Optimism Bias

…………

3.14 The Preferred Option

The results of investment appraisal are as follows:

Evaluation Results Option 1 Option 2 Option 3 Option 4

Economic Appraisal

Rank

Benefits Appraisal

Rank

Overall Ranking

Option ………… emerges clearly as the preferred option in terms of the economic

and benefits appraisals.

3.15 Sensitivity Analysis

The methodology used was based upon the analysis supported via the Generic

Economic Model. Analysis has been considered where there could be a potential

impact on the ranking of the preferred option and the NPC calculation.

The methods used were:

a. scenario planning

b. ‘switching values’

3.15.1 Results of Scenario Planning

Appendix …(SENISITIVITY) provides a summary of the outputs of the

Generic Economic Model.

3.15.2 Results of Switching Values


50

The impact of switching values has been completed using the GEM against

Option ……….. as the preferred option.

The assessment has been considered and is summarised in the following

table:

For Option 2 to Change

Ranking:

Option 3 Option 4

Initial Capital Outlay

Ongoing Revenue

3.16 Confirmation of Preferred Option

The preferred option remains Option ………..


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4. The Commercial Case

4.1 Introduction

The commercial case outlines the negotiated arrangements in respect of the

preferred option outlined in the Section 3: Economic Case. The preferred option

being Option …………………

4.2 Required Services

4.3 Potential for Risk Transfer

Potential Allocation Risk Category

Public Private Shared

Design Risk

Construction Risk

Transition & Implementation

Risk

Availability & Performance Risk

Operating Risk

Revenue Risks

Termination Risks

Technological Risks

Control Risks

Residual Value Risks

Financial Risks

Legislative Risks

Other Project Risks

4.4 Proposed Charging Mechanisms

4.5 Proposed Contract Lengths

4.6 Proposed Key Contractual Clauses


52

4.6.1 Contractual Arrangements

4.6.2 Contract Type

4.7 Personnel Implications (including TUPE)

4.8 Procurement Strategy & Implementation Strategy

4.8.1 Procurement Strategy

4.8.2 Implementation Timescales

It is anticipated that the implementation milestones will be as follows:


4.9 FRS5 Accountancy Treatment


53

5. The Financial Case

5.1 Introduction

The purpose of this section is to set out the indicative financial implications of the

preferred option (as set out in the economic case section) and the proposed deal (as

described in the commercial case section). Strategic Outline Business Case Cost

Forms are enclosed at Appendix …

5.2 Impact on the Organisation’s Income and Expenditure Account

The anticipated payment stream for the project over its intended life span is detailed

below.

Year

2012 /

2013

Year

2013 /

2014

Year

2014 /

2015

Year

2015 /

2016

Year

2016 /

2017

Year

2017 /

2018

Year

2018 /

2019

Total

£000s £000s £000s £000s £000s £000s £000s £000s

Preferred Way Forward: Option ……..

Capital

Revenue

Total

Funded By:

Existing

Additional

Total

5.3 Impact on the Balance Sheet

5.3.1 Capital Charges and Impairment Calculation

Current

Cost

Cost of

Preferred

Option

Variance

£000s £000s £000s

Capital Costs

Build


54

Equipment

Total

Capital Charges Assessment (using Capital Cost)

New Build (60 years)

Equipment (10 years)

Total

Capital Charges Assessment (with impairment factored)

Build (45 years)

Equipment (10 years)

Total

Impairment Calculation Cost of Preferred

Option

£000s

Capital Sum (build)

Floor area

Value per m2 (£s) (build)

Using Holywell Value per m2 (build)

Potential Impairment (v/m2)

As a %

Potential Impairment £000s

Potential Value after Impairment £000s

5.4 Overall Affordability

5.4.1 Summary Revenue Costs


Total Total Total Total

£000s £000s £000s £000s

Direct Costs


55

Indirect Costs

Overheads

Total (before Capital Charges

Capital Charges

Total (with Capital Charges)

Variance to Do Nothing Option 1

The following table provides an indication of the level of savings required to

provide sustainability in the future and this is equated against the level of

return in percentage terms against the capital outlay. It should be noted that

this sustainable saving would also be required for existing service costs.

Year 1 Year 2 Year 3

Proposal at SOBC stage for Preferred Option:

Capital Outlay

Projected surplus/(deficit) against existing costs

Return on Investment (as %)

Required return on investment for sustainability:

Surplus required to cover 4 to 5% per annum

Require return on investment for sustainability

(as %)

5.4.2 Review of Current Costs

5.4.3 Review of Preferred Option Costs

Cost of Preferred Option


56

6. The Management Case

6.1 Introduction

This section of the SOBC addresses the achievability of the scheme. Its purpose is to

set out the actions that will be required to ensure the successful delivery of the

scheme in accordance with best practice.

6.2 Programme Management Arrangements

6.2.1

6.2.2

6.2.3 A Project Board has been established to ensure the successful

delivery of the project and will be chaired by the SRO. The Project Board

membership includes:

Name Title

6.3 Project Management Arrangements

The project will be managed in accordance with PRINCE 2 methodology.

6.3.1 Project Reporting Structure


57

Betsi Cadwaladr University Health Board

Investment Decision Maker

Project Owner / Senior Responsible Officer / Chair Programme Board

Project Director

Project Board

Reference

Group

Project Manager

BCUHB User Groups

� Clinical

� Stakeholder

� Estates

Supply Chain Partner

TBC

Project Manager

(BCUHB Advisor)

TBC

Costs Advisor

(BCUHB Advisor)

TBC

� Architects TBC

� M&E Design TBC

� Structural Engineer TBC

� CDMC TBC

6.3.2 Project Roles and Responsibilities

6.4.3 Project Director


58

6.4.4 Project Manager

6.5 Project Plan

The key dates and milestones associated with the project are detailed in the table

below:


6.6 Use of Special Advisors

Specialist Area Adviser

6.7 Arrangements for Change and Contract Management

6.7.1

6.8 Arrangements for Benefits Realisation

6.9 Arrangements for Risk Management


59

6.10 Arrangements for Post Project Evaluation

6.10.1 Introduction

6.11 Framework for Post-Project Evaluation

6.12 Management of the Evaluation Process

6.13 Gateway Review Arrangements

6.14 Conclusions

6.15 Recommendations

References

▪

IDENTIFICATION OF KEY RISK AREA

Operating Costs

Capital

Availability

Design

Construction

Option Evaluation and

Risk Assessment

Option Evaluation and

Risk Assessment

5 case business model single stage case ……………………………….. primary care resource...

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