LGDC local government delivery council

developing the business case

repo

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contents what’s the rationale for the paper? 41

who should read this paper? 52

what is the purpose of a business case? 63

building the business case 84

identifying benefits: learning from past FOSS projects 175

using the business case in implementation 307

key parts of a business case 216

further reading 318

1 what’s the rationale for the paper? 2

• Developing a business case remains a challenging task for many local authorities (see “Common Shortcomings and Pitfalls” below)

• Moreover, FOSS projects are multi-party and multi­disciplinary and the process of developing the business case needs to engage officers from very different backgrounds

• The participation of procurement and financial officers is essential, but insufficient

• Existing guidance focuses on developing business cases in a single organisation or a partnership between similar organisations, whereas FOSS projects can involve numerous different agencies. FOSS projects can include local authorities, PCTs, the Police, the Pensions Service, Jobcentre Plus and voluntary organisations

• FOSS projects are citizen centric and their business cases require a balanced approach that encompasses but goes beyond financial efficiencies.

• We are facing into recessionary conditions in which local authorities:

• Need to do more with less financial resources

• Face social pressures that will increase demand for services and create challenges that can only be addressed through partnership.

Current challenges

“Almost three-quarters of councils are anticipating increases in council tax and rent arrears as the recession and rising unemployment affects household incomes.”

“Unemployment is likely to increase; recent estimates suggest that 1.4 million people could be unemployed in 2009. The demand for housing benefit and council tax benefit is likely to rise in the medium term.”

“Increases in unemployment coupled with a fall in the value of housing will combine to increase the number of people losing their homes.”

“There is growing concern in the social care sector that the downturn will lead to more family breakdowns, with more children being taken into care, and increase in demand for residential places for the elderly, increased drug and alcohol abuse and an increase in demand for financial advice.”

“Crunch Time? The Impact of the Economic Downturn on Local Government Finances” Audit Commission, pages 41-44.

who should read this paper?

The guidance is written principally for local authority officers tasked with developing a business case for a front office shared project (see box), although the content can be helpful to their partners.

The guidance assumes that:

• Local authority is taking the initiative and demonstrating leadership in driving the project forward, and that local authority officers are in the convening or orchestrating role

• The partners have developed sufficient trust, understanding and shared vision to instigate a project and are ready to develop a business case.

For advice on initiating and managing collaborative partnerships, see “Real Collaboration” IDeA/PAS, October 2007, available from www.pas.gov.uk.

The projects featured in the Front Office Shared Services programme typically involve multiple partners from across the public and third sectors, joined-up services to better meet the needs of the local customers and communities. FOSS projects can share resources, buildings, technology infrastructure, personnel, knowledge and skills and increasingly use the governance structures provided by LSPs and LAAs. Consequently, FOSS projects are citizen-centric, multi-agency, multidisciplinary, collaborative and transformational.

Common Shortcomings and Pitfalls to Avoid Issues arise when the Business Case:

• Isregardedonlyasadocumentforunlockingfunding,andis subsequently shelved and ignored

• IsnotalignedwiththeLocalAuthoritiesoverarchingstrategy, or the links to outcomes are not made explicit

• Failstoinvolveorgainongoingcommitmentfromstakeholders

• Focusesononearea suchastechnology attheexpenseof processes, people or skills

• Failstoquantifyallthepotentialbenefits,whoisaccountable for delivering them, and how they are measured

• Ignoresrisks,orfailstoanalysetherisksadequately

• Failstopresentthekeyinformationclearlyorcredibly

• Isusedonlytotrackprojectcosts,ratherthanthedelivery of benefits.

These shortcomings are symptoms of how business cases are often assembled. Problems arise when,

• Theprocessofdevelopingabusinesscaseisunder-resourced, with insufficient time and energy devoted to the process

• ResponsibilityforDevelopingabusinesscasebecomesafringe activity for an officer who is already busy

• Theteamthatpreparesthebusinesscaseisunbalanced,with personnel drawn only from finance or procurement.

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3 what is the purpose of a business case?

A business case has many purposes. A good business case:

• Directs management attention to the key questions

• Provides a focus and a vehicle for consultation and collaboration across organisations

• Structures the thinking process, and makes the assumptions, information and conclusions explicit

• Provides leaders with key information to convince stakeholders to give support and commitment

• Documents the options that have been considered

• Makes the decision-making auditable

• Indicates the trade-off between the costs associated with delivering the new capability and embedding the changes to realisable benefits and the value to the organisations.

After the decision to proceed and invest has been taken, the business case supports successful delivery by assessing the impact of:

• Changed context and drivers

• Proposed revisions to target outcomes

• Revised benefits and cost estimates

• Newly identified risks and issues.

Why collaborate?

As the FOSS programme has demonstrated, the reasons for partnering and collaborative working are many and varied. However a common ingredient in all of the programmes and projects featured is that the partnership produces a win:win scenario for all parties. In short, collaboration enables outcomes to be achieved that would otherwise be impossible.

Typical benefits include:

• Meeting local drivers and priorities as identified in Local Area Agreement (LAA)

• Gaining economies of scale - sharing the cost of space, systems and staff

• Leveraging the experience, knowledge, know-how, and relationships of a multitude of players

• Sharing the costs and risks of delivering improvement

• Strengthening the case for external funding

• Improving productivity and accessibility levels

• Reducing duplication – staff, systems and property

• Reducing unnecessary customer contact

• Reducing staff turnover and sickness levels.

“The Business Case presents the optimum mix of information used to judge whether or not the programme is desirable, viable and achievable.

“Managing Successful Programmes”, Office of Government Commerce, page 106.

Is it a project or a programme?

Although the initiatives featured can vary greatly in scale and scope, for the purposes of this paper we shall treat FOSS as requiring a “programme” of work as FOSS initiatives commonly include some of the following:

• A project developing or adapting physical facilities

• A project to collect and analyse data from customer insight and citizen engagement activities

• A project re-designing service delivery comprising new roles, skills, processes and management practices and structures

• A project delivering shared or joined-up information systems and infrastructure.

FOSS initiatives also require partnership management capacity most appropriately delivered by a Programme Management Office. However, many of the approach and practices recommended here can also apply to projects.

The amount of effort required to develop a business case derives from:

• The scale of the prospective investment

• The nature of the project and the degree of innovation

• The contribution the project makes to the achieving desired outcomes.

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Figure 2. Key functions and activities

Business case study Key function Involving

Mandate Initiates the decision from Senior stakeholders to sponsor an initial assessment of a projects potential

Stategic Connects initiatives to plans and strategies for service improvement

Full Determines likely benefits, risks and resources such initiatives would involve

Final Confirms contracts, specification and partners by which delivery will take place

Post project Evaluates the performance and process by which the initiative was realised

Source: Adapted from ODPM’s e-Capacity Building Programme 2006

4 building the business case?

The two key lessons for avoiding the pitfalls and shortcomings identified earlier are for local authorities and their partners to build the business case for FOSS programmes:

• Iteratively and incrementally

• Collaboratively and inclusively.

The stages outlined below, of building a business case need to be iterative. (mapped to OGCGateway Reviews).

Figure 1. The stages in business Case development

Draft, Outline Business Case

More detailed options appraisal based on detailed

but indicative data on costs, benefits, risk.

(Gateway 2)

Full Business Case

All the information needed to support

a decision and commit funding

(Gateway 3)

Final Business Case

Revisited throughout the life of the

service to ensure the expected benefits are being achieved

(Gateways 4 & 5)

Reviewing Current State

Identifying Benefits Stating Objectives

Appraising Options Modelling Costs Registering Risks

Using the Case in Implementation

Mandate

Enough information to decide on the way forward

(Gateway 0)

Granting the Mandate Assigning the SRO

Assembling the Team

Aligning with Strategy Outlining the Case Making it ‘Easy to Use’

Brief Strategic Case

Enough information to decide whether to proceed or revisit the scope, includes initial view of the costs, benefits and risks of options

(Gateway 1)

As the business case moves through these stages the teams are building and accumulating detail. The business case may begin as a one page mandate and become a 100 page document. The objective is to build up the content into a document that can gain approval

and support project delivery and a real benefits realisation process. (See “Key Parts of a Business Case” below).

Though the Gateway Review process is intended for major procurement projects, we include it here as the “frame

of reference” as is widely recognised by Procurement and Finance Officers.

The key functions of each stage are outlined opposite:

The process also needs to be collaborative and inclusive. Although much attention focuses on the text of the document, rather than the process of gaining in-put and buy-in, ultimately the content derives from the contributions (data, information and knowledge) from a wide range of stakeholders, and the success of the resulting project or programme depends on the commitment of participants (see “Engaging Stakeholders” below).

As a rule of thumb, 80 per cent of the time should be spent working with stakeholders, and 20 per cent assembling the document.

The following questions are explored at each stage of business case development:

strategic fit - how well does the proposed way of meeting the requirement support the authority’s objectives and current priorities? Does the scope need to change?

options - has a wide range been explored, including innovation and/or collaboration with others? How do they compare in terms of benefits, costs and risk?

achievability - can this project be achieved with the authority’s current capability and capacity (such as, taking into account other projects with a high priority that must be delivered at the same time)?

value for money - can this be obtained from proposed sources of supply such as current suppliers? Does the project need to be made attractive to a wider market?

affordability - is the budget available to deliver what is required? If not, can the scope be reduced or delivery extended over a longer period of time; or funding sought from other sources?

A minimal and detailed business case template can be downloaded from the OGC at http://www.ogc.gov.uk/documentation_and_ templates_business_case.asp.

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Granting the mandate

As a first step, a project or programme requires an official mandate. The mandate is a brief document authorising further investment in a proposal.

The mandate is typically issued by a Chief Executive or Corporate Director with the support of appropriate Elected Councillors. For multi-agency collaborative projects led by Local Authorities, the mandate may use input from LSP or LAA partners.

The mandate can be a one­to-two page document, summarising the:

• Context and drivers for the project

• Relevant parts of the corporate strategy

• Scale and scope of the services covered

• Potential approaches to delivery

• Expected benefits.

The mandate may also indicate prospective governance arrangements (i.e. the composition of a Steering Group and appointment of a Senior Responsible Officer).

Assigning a senior responsible officer

In practical terms, day-to-day responsibility for the delivery of the business case should rest with a programme manager (or project director), supported by a small project team with the relevant skills and expertise to carry out the detailed work.

The initiative requires the support of a Senior Responsible Officer (SRO), who will have overall responsibility and authority for ensuring delivery. The SRO should be someone with the requisite influence to get things done, and should sit on the project’s Steering Group or Sponsorship Group.

Partnership projects may have difficulty selecting an SRO for the overall programme and business case.

Where financial investment underpins the viability of the programme, the organisation with the largest financial stake usually nominates the SRO to own the overall business case.

For an outline of roles and responsibilities, see “Managing Successful Programmes”, OCG, (page 111).

The Programme Board for the development of London Borough of Greenwich’s Eltham Centre comprises:

• Deputytothe Chief Executive

• FinanceController

• AssistantDirectorChange Management

• HeadofLibraries

• SeniorHousingOfficer

• ProgrammeManager (construction)

• ElthamCentreManager

• ITProjectManager

• Twoseniormanagersfrom Greenwich Leisure Ltd

• PrincipalandVicePrincipal of the Community College.

Assembling the business case team

The business case team will typically be lead by the programme or project director, with a project manager conducting most of the interviews and workshops and assembling the documents.

The business case will likely call on input from:

• Councillors

• Senior Executives

• Service Managers

• IT Managers,

• Business Improvement Managers and Analysts

• Financial Managers and

• Procurement Managers.

As the business case process progresses, the participation and contribution of various people changes. For instance, the Chief Executive is relatively heavily involved in the early stages of case development, such as granting the Mandate and placing the programme or project in a strategic context. Whereas he/she will be much less involved in the more detailed work in the later stages, such as negotiating with a preferred supplier, or gathering information to set a baseline for calculating a more detailed Return on Investment (ROI).

For an outline of how different participants contribute to the business case process, see CLG’s “Business Case Guidance” pages 63 – 66).

The LB Greenwich’s Programme Management Team is staffed by officers but works like a consultancy. The tasks are many and varied, and could entail:

• Developingcustomer service targets with the Customer service division, and

• Developingaprotocol between the front and back office

• Agreeingbuilding specifications with architects

• Classroomconsultations with school children about the Eltham Centre, to

• Organisingresident consultation over service standards, parking regulations, opening hours, noise from the Centre and healthy eating provision

• Workingwithprivate and public partners to fund developments in building construction and service provision.

Using an internal team is both more cost-effective than external consultants, and ensures the authority retains the knowledge and the relationships that accumulate.

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Using consultants

Local authorities should be mindful that, if you engage external assistance to create the business case, you need to ensure that the project partners retain ownership of the outputs. The Business Case needs to be cast in the language and priorities of local outcomes and services - the project cannot risk being perceived as being “done” to service managers and staff.

Engaging stakeholders

As the team begin to build the business case, their principal activity will be to engage stakeholders.

The whole business needs to understand the “rationale for change”, and gaining the participation of key stakeholders - including manager, customer, members and staff - is critical to delivering a successful outcome.

The team needs to reach these stakeholders and to get them on board.

The team needs to understand stakeholders well enough to know their expectations from the business case and the level of detail they want and need (see ‘Making the Business Case Accessible and’ “Easy to Use” on page 14).

The overarching objective is to make presenting the case to the decision-making body a formality because their questions are answered before their approval is requested and people already support the case. Ideally, the business case team should be seeking “advocacy”, not just “permission”.

Stakeholders with an indirect interest or who will be impacted by the change need to be identified and considered, and a strategy for managing their engagement and consultation developed.

As a first step, the business case team should:

• Identify the key executives and councillors who could make or influence the decision

• Distinguish strategic from tactical support

• Consider one-to-one briefings to understand and respond to their concerns

• Map the stakeholders’ position and motivation.

Aligning the business case with strategy

The rationale for commissioning programmes and projects should derive from a strategic planning process. To kick the business case process off, the team should conduct workshops to verify and make explicit the links with overarching:

• Goals

• Outcomes

• Strategies

• Plans.

This activity contributes to the brief, strategic business case.

Outlining the business case

At this stage, as an organisation you are in a position to populate the strategic business case. The strategic business case comprises four to five pages of the overall project or programme brief but addresses many of the key areas covered in the full business case, albeit using high-level and emerging information. The strategic case is brief and high level, checking vision and benefits against costs, risks and issues, and providing a realistic view of an organisation’s capability, capacity and culture.

If the partnership is seeking funding from an external body, there may be specific eligibility criteria. Authorities should seek dialogue as early as possible with potential sources of funding to assess the level of support available as this may influence the affordability and viability of the project.

The strategic business case should cover:

Vision express the vision for the project as strategic objectives, and required outputs and outcomes

Scope establish what is “fundamental” to achieving the projects’ objectives and what is “desirable” and could be sacrificed for affordability

Benefits articulate the anticipated benefits of the project, from the beneficiaries perspective

Risks highlight risks and issues that may impede successful delivery

Options present scenarios for the SRO to consider

Costs estimate the costs of the project and the new service using readily available data, assessing value for money over the project life-cycle

Timescales - identify key milestones for tracking progress

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Making the business case accessible and “Easy to Use”

Assuming the preceding steps gain approval to proceed, the team now embarks on a full business case. The full business case needs to be a user-friendly document. Unfortunately, business cases are often intimidating preventing officers accessing and “using” them readily.

The team preparing the business case should:

• Avoid overloading stakeholders with information and jargon

• Ask the question “Does the user need to know this information at this point?”

• Make judicious use of space in the main text, and employ the appendices for supporting detail

• Use the language of local public services, and avoid technical terminology where possible

• Break-down the information into a easily navigable structure, using successive level of detail, for example:

• Summaries of chapters

• Aggregations for performance measures

• An Executive Summary positioned near the front, but written last.

Moreover, business case should make no assumptions about what people will understand, or how they will interpret the document. The team should remember that the business case will be circulated and read by people who have had little contact with the process or those that have contributed to it.

London Borough of Hackney produced a business case template to be used by strategic service delivery partners wishing to deliver shared services from local authority premises.

Using a common template means that although the rationale for participating in a project may differ greatly according to the different structures and priorities of the agencies involved (i.e. the case for a PCT will differ from the Police), the business cases from all the participants have a consistent structure and appearance and support sharing, mutual comprehension and use.

The template is available from the IDeA FOSS website at http://www.idea.gov.uk/ foss

Developing business cases at Essex County Council

“We use a clear corporate process for project management, with clear gateways that need to be passed. The process includes peer review by colleagues and the formal presentation of a business case. A pro-forma is used to help project sponsors condense complex information and ideas into a 6-7 page summary addressing critical factors such as costs, benefits, risks, and outcomes.

You need to combine an open and rigorous process that covers all the relevant technical detail for a project as complex as this with a ‘can do’ attitude to solving problems and getting the project off the ground.”

Steven Lee-Foster, Senior Regeneration & Policy Manager Project, Essex County Council

Identifying benefits

Extensive consultation is needed to develop a shared understanding and identify all the benefits. There are several approaches that can help the team do this:

• Use council and / or LSP and LAA priority outcomes as a reference framework, and map benefits to outcomes

• Use a framework for identifying benefits (see “Identifying Benefits: Learning from Past FOSS Projects” below)

• Interview people close to problems (i.e. at process boundaries), or those with knowledge of how things go wrong e.g. those responsible for customer complaints

• Facilitate benefits brainstorming workshops

• Compare with experience of other FOSS type projects.

HM Treasury’s Green Book provides a helpful structure for identifying and understanding different types of benefits (see box “Benefits Identification”).

Authorities may also wish to use the “mietool” a spreadsheet tool commissioned by the Regional Improvement and Efficiency Partnerships and the Department for Communities and Local Government (see box “Measuring Efficiency and Improvement with mietool”).

Authorities may also find models basedonPublicValueorthe Balanced Scorecard helpful to structure their exploration of benefits. See “A Strategic Performance Measurement and Management in Non-Profit Organizations” by Robert Kaplan, 2001 and “A Rejoinder and an Alternative to “Strategic Performance Measurement and Management in Non-Profit Organizations” by Robert Kaplan” by Mark Moore March, 2002.

The team should also be conscious of how the business case supports Benefits Realisation after project delivery. Hence, the team should:

• Be specific about the sources of the benefits and document any underlying assumptions

• Work in conjunction with service managers to develop estimates and projections that managers can commit to

• Be clear what the impact will be for the customer, and how that will be evaluated

• Be clear about how and when benefits will be measured.

It is vital to the success of the project that the team clearly communicates the benefits of the project.

The team should take each group of stakeholders (i.e. customers, members, senior officers, customer service advisors and partners) and articulate the benefits in terms of the outcomes relevant to them.

Measuring improvement and efficiency with “mietool”

mietool is designed to: Help you measure the efficiency impacts of projects and to provide data for the new efficiency Performance Indicator.

Help you plan and measure the improvement value of your projects, both to your authority and to your community,

against all 198 new national Performance Indicators.

mietool is available to all local authorities free of charge, For further information, see: http://www.lcpe.gov. uk/latestnews/mietool_ measuring_improvement_ and_efficiency.asp

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Benefits Identification

The ‘golden rule’ is that all benefits must be quantified (in £s) prudently, wherever possible; and that the economic appraisals should take these into account from the perspective of society and the public and private sectors, as well as the organisation.

The benefits for investments typically fall into four main categories:

• Cashreleasingbenefits(CRB).Thesebenefitsreducethecostsoforganisationsinsuchawaythat the resources can be re-allocated elsewhere. This typically means that an entire resource is no longer needed for the task for which it was previously used. This can be staff or materials.

• Financialbutnon-cash-releasingbenefits(non-CRB).Thisusuallyinvolvesreducingthetimethata particular resource takes to do a particular task; but not sufficiently to re-allocate that resource to a totally different area of work.

• Quantifiablebenefits(QB).Thesebenefitscanbequantified,butnoteasilyinfinancialterms for example,‘reducedtravellingtimeforcustomers’.TheextenttowhichQBsaremeasuredwilldepend on their significance. However, as a general rule every effort should be made to quantify benefits financially wherever possible.

• Non-quantifiable(non-QB).Thesearethequalitativebenefits,whichareofvaluetothepublic sector but cannot be quantified. For example, an increase in staff morale as a consequence of less form filling.

See HM Treasury’s Public Sector Business Cases Using the Five Case Model: a Toolkit, Pages 38-39. See also Main Benefits Criteria page 20-21.

http://www.hm-treasury.gov.uk/d/greenbook_toolkitguide170707.pdf

identifying benefits:learning from past FOSS projects

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The following list of benefits is based on a review of all the business cases collected from FOSS projects over the past three years. The lists represent a hybrid from over 30 studies, and will help those developing a business case for a FOSS project to explore all the potential benefits.

Financial benefits

Although FOSS projects are often not chiefly motivated by financial gain, the FOSS projects studied over the last three years help generate the following financial benefits. These benefits often comprise both a cashable and a non-cashable element.

By developing new facilities and co-locating with partners, local authorities can:

• Avoid costs of maintaining a backlog of older buildings and associated long term liabilities

• Avoid costs of adapting older buildings for DDA requirements

• Generate revenue from sales of older buildings

• Generate revenue from leasing space to partners

• Share running costs

• Share staff and reduce number of staff required

• Reduce travel time and mileage for staff

• Avoid costs through joint procurement and project management costs

• Enhanced negotiating position

• Enable partners to close offices while maintaining and enhancing the local presence

• Maximise benefit from land use.

By collaborating with partners, local authorities can:

• Reduce the duplication of effort, such as collection of customer information

• Better plan staff resources and increase staffing capacity to better meet demand

• Enable early intervention and low-level preventative action, leading to less need for more intensive core services at a later stage

• Attract additional external funding.

If you just give a budget manager a target budget that requires reductions that will be achieved, but it won’t necessarily change anything about what they do.

The imperative to focus on the efficiency can put a brake on the imagination or a wider collective response. Savings will be achieved, but not the reappraisal of options which can lead to a real and lasting service transformation.

Brian Grady, Head of Commissioning and Procurement, Children and Young People’s Services, Devon County Council

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Customer benefits

FOSS projects typically produce the following benefits for customers.

Increased service usage, as customers:

• Access a wider range of services at the first point of contact

• Access additional benefits entitlements

• Access joined up related services designed around specific customer groups needs, e.g. supporting older people.

Increased customer satisfaction, FOSS projects typically:

• Increase convenience and accessibility

• Simplify services and make services easier to use

• Improve the service delivery environment

• Reduce customer travel time and mileage

• Release latent demand (due to increased service quality, people call in with enquiries they would not previously have made).

Improved quality of life, by joining-up services around customer and producing a better outcome.

For further information on evaluating benefits from the perspective of the customer and the community, see “Social Return on Investment” below.

Organisational benefits

Local authorities report that the citizen-centric, multi-agency work they have pursued as part of their FOSS efforts has helped them to:

• Enable progress against performance indicators, particularly those around the LAA

• Join-up the response of multiple agencies to specific needs

• Increase networking between staff

• Improve dialogue between services, and reduce boundaries between professions (e.g. reduce the risk of children falling between the gaps between agencies)

• Enable integrated service delivery between service providers in the building

• Facilitate faster decision-making

• Reduce duplication between teams and authorities

• Collect all the necessary information from the customers at the first contact

• Improve sign-posting and referral processes to reduce waste and free resources for more valuable activities

• Decrease process times

• Reduce the underlying causes of ‘avoidable contact’ and therefore increase productivity levels

• Increase capacity to handle demand

• Create multi-disciplinary roles

• Redeploy staff to high value-adding activities

• Increase opening hours

• Educate and migrate customer to more cost-effective channels

• Create career paths and opportunities for staff

• Improve the working environment and improve morale

• Save travel time and mileage costs

• Improve management information

• Work with customers to generate understanding of their values, perceptions, preferences and constraints

• Share information about customers’ values, perceptions, preferences and needs between partners.

Political benefits

Local authorities report that FOSS projects typically:

• Provide a foundation for partnership working

• Provide the means for more working across agencies and boundaries

• Provide the means of progressing LAA priorities

• Provide the means of pursuing the place-shaping agenda

• Develop the capacity to tackle emerging agendas (economicdownturn etc)

• Generate recognition from constituents for beinginnovative and responsive in meeting their needs

• Produce more energy-efficient and environmentally-friendly buildings, and set a positiveexample to the community

• Provide a foundation and focal point for town centre regeneration.

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Figure 3. Modelling Social return on Investment at Maidstone Borough Council

Based on New Economics Foundation (nef) methodology – Benefit Take Up at MBC

INPUT OUTPUT OUTCOMES IMPACTS

Resources invested Direct and tangible Changes to people Outcomes less in activity (for each products (direct) (longer term) an estimate of service)

Staffing Number of additional benefit

Ongoing increase in available weekly

what would have happened anyway

(1 FTE £28,696) claims received income through Benefit take up

Cost for use of facility £47 X 251 days = £11,797

benefit awarded within MBC visiting partnership / number of visits completed X number of existing new claim interviews

Take Up Activity = 88%

= additional take up £545 / 926 = £588 X2600 =

£40,493 X 88% = £1,528,800

£35,634

SROI = 43/1 monetary value of impact £1,528,800 investment £35,634

20 21

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Social Return on Investment at Maidstone Borough Council

Maidstone Borough Council (MBC) is beginning to use a “Social Return on Investment” (SROI) model to try to give a financial measure to the outcomes their initiatives produce for customers. MBC are participating in the Gateway programme delivered in partnership with Kent County Council. The intention is to go beyond measures that are typically internally focused such as “percentage of benefits claims processed in 10 working days” towards measures that reflect the difference improvements make to customers lives.

Measuring the financial value of outcomes can be challenging, as the methods and evidence are only now being developed. For example, the New Economic Foundation (nef) conducted research that demonstrates how self-esteem has an enormous impact on a young person’s life in terms of achievement, life chances and social mobility. However, there is an absence of sound methods for measuring self-esteem and quantifying it in financial terms.

Ironically, since measuring established indicators is straightforward, decision-makers tend to consider them credible – although at best they have only an indirect bearing on the lives of customers. Thinking about outcomes can be harder than more traditional abstractions such as processing times, but may be more relevant and produce more insight and lead to greater public value.

key parts of a business case

Executive summary

One key component of the Full Business Case is the Executive Summary. The purpose of the executive summary is to provide a high level of understanding of the organisation, current performance, strategic objectives and the proposed transformation.

The executive summary should clearly outline how this project will help the organisations involved deliver their shared agreed ambitions, and should clearly articulate the vision for improved outcomes for local customers and their communities (for example how it will help them deliver their LAA priorities). The executive summary should ideally no longer than three to four pages.

The executive summary functions as a stand-alone document, It is suitable for a reader who knows either nothing or a great deal about the project. The key headers are summarised in Appendix 3.

Strategic context and business need

This chapter should provide answers to the following questions:

• What business issues does the initiative address?

• What is the rationale or need for the initiative?

• What contribution will the initiative make to broader strategies?

• How it will help deliver improved outcomes?

The chapter will refer to existing and emerging strategies, including the priority outcomes the Local Authority and its partners signed up to in the Local Area Agreement.

Evidencing stakeholder sponsorship

Provide evidence of stakeholder support and approval. Set out the approval process required for the case, the governance arrangements to support it, details of the commitment of members to funding the project, and evidence of the support of key stakeholders (both members and officers).

• Quotes

• Offers of budget

• Offers of staff

• Offers of customer insight.

Reviewing current state

The Business Case Team should take stock of the current circumstances, i.e. the ‘as is’ arrangements, as these form the backdrop (and possibly the drivers) for the proposed project.

The review should cover:

• Current service costs and budgets

• Organisational structures and management responsibilities

• Existing contractual arrangements and time scales

• Standards of services vis-à-vis performance targets

• Premises or assets used to provide the service

• Customer perceptions and feedback.

The teams should also take the opportunity to comment on:

• Local issues or priorities requiring special attention or consideration (e.g. level of computer literacy of local population)

• Service challenges (e.g. retention and recruitment issues),

• The condition of infrastructure assets (e.g. essential IT systems and programmes to refresh / replace them) and

• Risks associated with the existing service assets/infrastructure.

Any approach to costing should be fit-for-purpose and proportionate to the needs of the exercise. CLG has produced guidance on costing services intheir report “Delivering Efficiency: Understanding the Cost of LocalGovernment Services”. The guidance outlines how Activity Based Costing methods can help local authoritiesunderstand current and prospective process costs, and can be used in conjunction with National Process Improvement Programme (NPIP). See: www.communities.gov.uk/ publications/localgovernment/ costlocalgovernmentservices

Customer perspective

At this point, an effective business case would highlight:

• Any evidence of user orpublic perceptions of the services in scope

• How these perceptions have developed over time, and

• How they reflect demand for better quality, easier access (e.g. improved self help in use of information) or more efficient services.

Engaging our stakeholders

We wanted to stimulate a major and transparent transformation of our commissioning of services supporting parents and carers of children with special needs. We spend £30 million per year on these services, and we took our full budget book out, showed the parents and carers and asked for their views.

The energy we released and the evidence base that emerged was remarkable. The message was that families and carers are unbelievably resilient. They don’t need us to get involved in many of the things we may think are priorities. They want more self-directed support and a lot more empowerment.

So we started to delegate funding to community level: to families and through children’s centres. This takes some courage – parents may not want the services on offer.

And the evidence we have got back from improved engagement or devolving power to communities or to young people is improved outcomes and improved efficiencies. Communities are great supporters of efficiency! They are very aware of spend and hate to see waste!

You need to engage with your community to harness their sense of public value, and quite possibly reappraise what you mean by “efficiency”.

Brian Grady, Head of Commissioning and Procurement, Children and Young People’s Services, Devon County Council

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Stating objectives

The team need to state the objectives clearly, as the objectives are the basis for the appraisal of the project and delivery options.

Hence, a key focus of the project team’s work is to ensure the partners are committed to the stated objectives and the vision for improved outcomes for service users. To draft these objectives, it can be productive to work backwards from the outcomes the partners are seeking to deliver for customers.

Figure 3. From Objectives to Outputs

STRATEGIC OBJECTIVES The Authority needs to assess its strategic objectives and consider current performance against them. E.g. if the objective is to combat social exclusion, how effectively does the Authority consider that it is tackling the issues?

OUTCOMES The Authority needs to assess the outcomes required to improve its performance against its strategic objectives. E.g. in the case of social exclusion, will delivering benefits to vulnerable elements of society more quickly improve performance against the objective?

OUTPUTS At this stage, the Authority needs to consider service outputs required to achieve outcomes. E.g. in benefits delivery, is current performance adequate and what standard is needed to achieve the required outcomes?

Articulating outcomes, outputs and inputs

Since a business case will be discussed in terms of inputs, outputs and outcomes, it is worth differentiating between these terms to make the distinctions clear. See also Figure 3 “Modelling Social R eturn on Investment at Maidstone Borough Council”.

Input: The resources and activities that go into a project or service, including money, time, facilities, equipment and training etc. Inputs answer the question “What goes into the services you provide?”

Output: The end-point goods or services that are produced by a given process or activity. This could be a new building, a new information system, or staff with new qualifications or knowledge. Outputs answer the question: “What tangible evidence is there that your project or service was delivered?”

Outcomes: The projected, positive and long-term change in the state, health, condition or status of an individual or group served by an agency or partnership. Outcomes must be considered achievable by a particular project or service. They need to be within the project’s sphere of influence.

Outcomes typically answer the questions:

• What will be different for those served once they have received the project (or partnerships) outputs?

• What is your project’s or agency’s ultimate vision for success?

For clarity of thinking, articulate an outcome from a future point in time, from the perspective of the person enjoying the benefit, as if the new state has been accomplished. For example “Older people enjoy easy access to a range of relevant services over one roof.”

A clear understanding of outcomes and objectives helps to specify outputs, and clearly specified outputs will in turn helps determine the criteria for evaluating project and delivery options (of costs and affordability etc).

“Describing objectives in terms of outcomes, outputs and required levels of performance, rather than in terms of inputs and resources that the project requires, tends to open up a wider range of solutions and promotes flexibility and innovation in service delivery.”

4ps

“Without clear objectives, options will be ill-defined or over-looked, incorrect weighting applied to costs and benefits, and risks and uncertainties not examined thoroughly.”

4ps

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Appraising options

The business case needs to evaluate alternatives, such as not doing the project. To start, the team should generate a long-list of potential options that - to a greater or lesser degree - satisfy the service objectives. The team can then reduce this to a short­list of two or three for more detailed evaluation.

Presenting a base case - the “do nothing” or “do minimum” option - can help overcome inertia since it is likely to have higher costs and lower benefits associated with it than the preferred option.

The criteria for evaluating the projects should derive from the rationale for the projects and the stated objectives. These could be:

• Integration of services, removal of gaps

• Improving productivity and standards of service

• Increasing customer satisfaction

• Reducing the costs of support systems and processes, eliminating duplication

• Improving transparency for users.

The most attractive option will be that which represents the best trade-off between costs and benefits, and will enable you to assess whether or not to invest in change.

The Cabinet Office has produced a Business Case Financial Checklist as part of the Shared Services Toolkit available from:

http://www.cio.gov.uk/ documents/ss/toolkit/ business_case/bc_fin_ checklist.pdf

Evaluating delivery options

The project options describe what you want to do. The next step is to decide how you want to do it - the delivery options. These identify the route to transformation.

The criteria for evaluating delivery options include:

• What are the implementation costs?

• What is the required investment, and sources of funding?

• What are the potential savings?

• Given the costs and the saving, is the project affordable?

• What are the risks and barriers to service delivery and continuity?

• What are the improvements in process efficiency and quality of service?

• What are the improvements in accessibility, inclusion, satisfaction and local growth?

• How feasible and practical is the option?

• What are the timescales for the option?

• What legal or statutory requirements need to be met?

• How much support from stakeholders will the option get?

• Does the option deliver value for money?

Modelling costs

A critical part of appraising both project and delivery options is estimating their costs. Costs must be estimated based on the specified outputs and the desired new service standards – the future costs, not the current service costs.

Furthermore, the business model must be sustainable. Base cost estimates on a realistic estimate of the equipment, assets and premises that need to be replaced, and consider the whole life of the project.

Cost estimates can be built using input from:

• Service officers

• Financial officers

• External technical and financial advisors

• Benchmark data from the Audit Commission and CIPFA

• Data from prospective partners.

Record the source of data, and make the assumptions behind estimates explicit (supply of new skills, or costs of technologies).

For example, to recruit the best customer service staff, you may need to poach them from the private sector – and pay market rates. There may be a time-lag. In contrast, the costs of some technologies, such as the hardware components in the remote monitoring kit used as assistive technology in social care is falling continuously year-on-year.

Provide ranges of estimates, rather than single points. Avoid implying false precision, as it may merely prompt questions that may undermine the case.

For an overview that identifies all the costs of a programme, including both the costs of transformation and the costs of operating a new service, see page 109 of Managing Successful Programmes by the OGC.1

Recommending a preferred project

The “way forward” is the preferred project and the preferred delivery options. It outlines what you are going to do, and how you are going to go it.

Communicating the benefits

More on the subject on identifying and communicating benefits see “Benefits Frameworks”.

1 Insert Table 10.1 of page 109 of MSP

Registering risks

The business case should describe major risks, and how they will be managed. Risks can be evaluated according to “Impact” and “Likelihood”.

Alternatively, the teams can apply scenarios - “best”, “worst”, and “most likely” – and assign probabilities 0.6-0.9. For further information on managing risk, see the OGC’s “Management of Risk” best practice guidance available at www.ogc.gov.uk/ guidance_management_of_ risk_4441.asp

Legal perspective

The business case team should summarise the legal powers on which the project is relying. While procurement law is often not the barrier it is perceived to be, local authorities should seek legal advice before assuming that collaboration between local authorities does not require compliance with procurement regulations.

For a summary of a range of legal model for perusing shared services, see CLG’s “Structures for Collaboration and Shared Services: Technical Notes”.

Governance and reporting structures

The case should conclude by outlining the member and chief officer approval processes, monitoring and governance arrangements, the delegations and reporting arrangements.

Authorities should also build in a process of formal benefit realisation into the governance arrangements. Such arrangements help to develop the organisations “corporate memory” and clearly demonstrate the benefits of the project / programme.

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There must be clear agreed accounting treatment Checklist for Assessment of Business Cases.

Is risk identified and managed and allocated ? Is there a risk allocation table?What if any are the personnel implications and is TUPE applicable ?

Financial Case: (Financial Appraisal) Focus on affordability; is full budget funding secured and budgeted by all parties ? What are the impacts on income/expenditure a/c and on balance sheet if applicable ? Are potential cost over runs provided for are the any contingent liabilities? Any guarantees ?

Management Case (programme or project management)Is the proposal practically deliverable and what are the delivery plans ? Are there clear delivery dates and detailed milestones ? Does the proposal require programme or project management techniques ?Is there a contract management plan ? Change management requires a change management plan !If in a controlled environment such as ICT use of PRINCE 2 is mandatory ! Does the plan include clear arrangements for OGC Gateway peer reviews ? Is there a contingency plan with arrangements & provision for risk management ? There should be a benefit realisation table and plan.Does the plan include monitoring arrangements (who when how and costs) ? Does the plan include post implementation evaluation arrangements (including whowhen how and costs)?

Notes on NPV calculation key issues (if in doubt, consult an economist)Correct discount rate (3.5% real). Figures in real terms/constant prices at base year, sunk costs excluded. Opportunity costs of already-owned assets included. Residual values included. Double counting avoided.Transfer costs / benefits excluded. Uses only economic resource costs (payment good/service). Financing items/sources excluded. Second round effects included (e.g. only genuine job creation). Tax/subsidy treatment must be non-distorting between options.

Checklist for Assessment of Business Cases.

What stage has the case reached, is it at the ;- Strategic Outline; Business Outline or Full Business Case stage ?Does the case include all the elements of the 5 case model, i.e.:-Strategic; Economic; Commercial; Financial; Management ?Is the information in each element complete enough for the stage reached ? Is the case Green Book compliant ?

Strategic Case: (the case for change) should cover rationale, background, policy context and strategic fit. Are there clear SMART objectives in terms of outcomes and aredependencies, constraints and risks identified ?

Economic Case: (Economic Appraisal) Is there a reasonable range of options in the long & short lists ? Is ruling out of potential promising options clearly justified ? Are all economic costs and benefits clearly calculated for each year covered by the proposal with NPV calculated correctly (see over) ?Is distributional analysis needed, who benefits, who pays ?Are all costs and benefits quantified, if not is this justified ?Are there any decisive unquantified cost/benefits and are they clearly explained ? Are there appropriate sensitivity analyses, including worst case scenario ?Are results of each option presented clearly including do nothing/minimum option? Are risks, constraints and dependencies identified and managed ? Is optimism bias properly included and aligned with risk ? Are wider impacts assessed e.g. sustainability, competition, regulatory impact.? Is there a Benefits register; benefits realisation (delivery) plan ? If PFI involved is tax properly treated and is risk transfer clearly achieved ? Is best VfM = max NPV and if not do unquantified benefits justify the cost ?Exchequer impact calculated separately and not included in NPV!Are monitoring and evaluation costs included ?

Commercial Case: Is the proposal commercially feasible / deliverable ? What procurement is required; goods, services, land, buildings ? What is the procurement strategy ? What are the key contractual issues ? There must be clear contractual key milestones and delivery dates

Figure 4. Checklist for Assessing Business Cases

Checklist for Assessment of Business Cases.

What stage has the case reached, is it at the ;- Strategic Outline; Business Outline or Full Business Case stage ? Does the case include all the elements of the 5 case model, i.e.:-Strategic; Economic; Commercial; Financial; Management ? Is the information in each element complete enough for the stage reached ? Is the case Green Book compliant ?

Strategic Case: (the case for change) should cover rationale, background, policy context and strategic fit. Are there clear SMART objectives in terms of outcomes and are dependencies, constraints and risks identified ?

Economic Case: (Economic Appraisal) Is there a reasonable range of options in the long & short lists ? Is ruling out of potential promising options clearly justified ? Are all economic costs and benefits clearly calculated for each year covered by the proposal with NPV calculated correctly (see over) ? Is distributional analysis needed, who benefits, who pays ? Are all costs and benefits quantified, if not is this justified ? Are there any decisive unquantified cost/benefits and are they clearly explained ? Are there appropriate sensitivity analyses, including worst case scenario ? Are results of each option presented clearly including do nothing/minimum option? Are risks, constraints and dependencies identified and managed ? Is optimism bias properly included and aligned with risk ? Are wider impacts assessed e.g. sustainability, competition, regulatory impact.? Is there a Benefits register; benefits realisation (delivery) plan ? If PFI involved is tax properly treated and is risk transfer clearly achieved ? Is best VfM = max NPV and if not do unquantified benefits justify the cost ? Exchequer impact calculated separately and not included in NPV! Are monitoring and evaluation costs included ?

Commercial Case: Is the proposal commercially feasible / deliverable ? What procurement is required; goods, services, land, buildings ? What is the procurement strategy ? What are the key contractual issues ? There must be clear contractual key milestones and delivery dates

There must be clear agreed accounting treatment Checklist for Assessment of Business Cases.

Is risk identified and managed and allocated ? Is there a risk allocation table? What if any are the personnel implications and is TUPE applicable ?

Financial Case: (Financial Appraisal) Focus on affordability; is full budget funding secured and budgeted by all parties ? What are the impacts on income/expenditure a/c and on balance sheet if applicable ? Are potential cost over runs provided for are the any contingent liabilities? Any guarantees ?

Management Case (programme or project management) Is the proposal practically deliverable and what are the delivery plans ? Are there clear delivery dates and detailed milestones ? Does the proposal require programme or project management techniques ? Is there a contract management plan ? Change management requires a change management plan ! If in a controlled environment such as ICT use of PRINCE 2 is mandatory ! Does the plan include clear arrangements for OGC Gateway peer reviews ? Is there a contingency plan with arrangements & provision for risk management ? There should be a benefit realisation table and plan. Does the plan include monitoring arrangements (who when how and costs) ? Does the plan include post implementation evaluation arrangements (including who when how and costs)?

Notes on NPV calculation key issues (if in doubt, consult an economist) Correct discount rate (3.5% real). Figures in real terms/constant prices at base year, sunk costs excluded. Opportunity costs of already-owned assets included. Residual values included. Double counting avoided. Transfer costs / benefits excluded. Uses only economic resource costs (payment good/service). Financing items/sources excluded. Second round effects included (e.g. only genuine job creation). Tax/subsidy treatment must be non-distorting between options.

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using the business case in implementation 7 8

The business case should be treated as a living document that serves multiple purposes and adds value through the entire project life cycle.

During the project, the business case guides delivery by reminding the team of the rationale for change and the desired benefits. The business case should be used to communicate the rationale and ensure a common shared understanding.

The business case can also be used to introduce people to the project. Discontinuity of personnel is a common feature of partnership working. New executives often want to make their mark and change things. The business case can be used as an induction into the project, to present its genesis and intent.

Project teams need to accept that initiatives rarely succeed “as planned”, and need to be ready to respond. Threats to project delivery include:

• Scope creep

• Schedule slippage

• Staff churn.

The business case can also support decision-making during implementation. The business case provides a context for project decisions, and the framework for the considering options. When faced with a decision, project delivery teams should ask themselves “What will this decision do to our ability to achieve benefits?”

Given these challenges, the business case should be reviewed and re-accepted at key delivery milestones – and at a minimum every six months. Projects teams should ask:

• Is the project/programme still affordable?

• Is the outcome still achievable?

• Does the project/programme still demonstrate value for money (benefits versus costs)?

• Is the chosen option still the optimal way of delivering the desired outcomes?

Throughout implementation, the business case should be refreshed, updated, and improved. The team should seek ways of building in new learning and observations to improve the business case. The business case should be tuned and optimised by taking advantage of most recent data available and the teams growing understanding of the possibilities.

The team should also review the business case at delivery sign-off to ensure the outputs are aligned with the original drivers. The business case can also be used to track the realisation of benefits. The case can be the basis for comparing how well the new service is performing compared to what the business case is committed to delivering.

The benefits information in the business case should be used to set performance metrics and targets, and in job descriptions and evaluations. The case also provides the criteria for a formal project audit one to two years after delivery.

further reading

4ps

Corporate & transactional Services Procurement Pack

http://procurementpacks.4ps. gov.uk/guidancesectionaspx? ppid=3&hsub=1&pp=CATSS

Audit Commission

“Crunch Time? The Impact of the Economic Downturn on Local Government Finances” Audit Commission

Cabinet Office

Toolkit for Migration to Shared Services

http://www.cio.gov.uk/ shared_services/toolkit/tools/ biz_case.asp#1

Communities and Local Government

Delivering Efficiency: Understanding the Cost of Local Government Services

www.communities.gov.uk/ publications/localgovernment/ costlocalgovernmentservices

Business Case Guidance

http://www.idea.gov.uk/idk/ aio/6055977

Structures for Collaboration and Shared Services: Technical Notes

www.communities.gov.uk/ publications/localgovernment/ structurescollaboration

Improvement & Development Agency / Planning Advisory Service

Real Collaboration

www.pas.gov.uk/pas/core/ page.do?pageId=46132

HM Treasury

Public Sector Business Cases Using the Five Case Model: a Toolkit

www.hm-treasury. gov.uk/d/greenbook_ toolkitguide170707.pdf

The Green Book: Appraisal and Evaluation in Central Government

http://www.hm-treasury.gov. uk/data_greenbook_index. htm

Office of Government Commerce

Business Case Documentation and Templates

http://www.ogc.gov.uk/ documentation_and_ templates_business_case.asp

Managing Successful Programmes by OGC, published by TSO

Management of Risk by OGC, published by TSO

Regional Improvement and Efficiency Partnerships

Measuring Efficiency and Improvement with mietool

www.lcpe.gov.uk/ latestnews/mietool_ measuring_improvement_ and_efficiency.asp

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CabinetOffice

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