6. BUSINESS CASES

Why is a business case required?

6.1 A business case, or options appraisal, is required to ensure that a robust assessment is carried out before a project or major piece of expenditure is embarked upon. RoS is guided in this area by the Treasury “Green Book”, which sets outs guidance on business cases and on the wider “economic appraisal” including e.g. Regulatory Impact Assessment.

6.2 The purpose of the Green Book is to ensure that no policy, programme or project is adopted without first having the answer to these questions:

• Are there better ways to achieve this objective?
• Are there better uses for these resources?

The Green Book is a best practice guide for all central departments and executive agencies, and covers projects of all types and size. It aims to make the appraisal process throughout government more consistent and transparent.

6.3 The process described below sets out how business-casing is to be applied in RoS. The approach takes account of the size of the proposed change so that the effort is appropriate for the size of the project or proposed expenditure. It should be noted that in addition to the business case procedures, it is a requirement of the planning process that costs and benefits are reviewed and the latest position forwarded to the planning team in the form of a BIA (Business Impact Analysis)

When is a business case required?

6.4 A business case is required when large value, new or non-routine expenditure is identified. Initial evaluation should be carried out by a Team Leader or Manager to ensure that there is a business benefit to the required expenditure. The relevant Director then either approves the commencement of business case preparation or rejects the proposal.

6.5 Large value is defined as expenditure in excess of £100,000 or an increase of more than 20% on an annual budget heading, if the increased expenditure is more than £50,000. Non-routine means expenditure which is either a one off or is less frequent than annual.

6.6 Business cases are required for the Change Programme projects as follows:

• in respect of a proposed project
• in respect of change requests to existing projects
• in respect of large budget variations on existing projects

6.7 Non-discretionary expenditure does not require a business case even when it exceeds £100,000 because it is expenditure that must be incurred. However, it still requires approval through the routine budget process.

6.8 If there is uncertainty on whether a business case is required, then Finance and Business Planning is able to provide advice.

What comprises a business case?

6.9 A business case is comprised of details on the context and drivers for the proposed expenditure, usually three possible options (including ‘do nothing’), cost benefit analysis, evaluation of the non-monetary aspects, risk assessment, impact on the Change Programme (if appropriate) and a recommendation. There may be occasions where only two options are presented and the reasons for this should be noted in the business case.

6.10 A representative of the Director will produce the business case with the assistance of the Management Accounting team (MAT). MAT’s role is to provide technical advice and assistance but also to act as a neutral party in the assessment of the options and to ensure the process is applied. As per Treasury Green Book advice, adjustment should be made for optimism bias. This will typically be done through sensitivity analysis carried out by MAT.

b There are two business case templates, a short version and a full version. The version used depends on the scale of the expenditure and the length of time the expenditure relates to. One-off payments within a Director’s authorisation levels are likely to be covered within a short business case. Expenditure above £500,000 or which will relate to a period of more than one year should be covered by a full business case.

6.12 The business case should demonstrate that the proposal contains valid business benefits in line with the RoS’s aims and objectives. Where it relates to the Change Programme it should not overlap with another project. If the case is for a new project, then a Project Initiation Document (PID) must also be completed.

Business case approval

6.13 All business cases must be reviewed and impact assessed. Consideration must be given to procurement issues, financial issues, value for money, technical and legal aspects, the effect on budgets and targets and any interdependencies with other RoS activities. For this purpose a process has been established with sign off by Finance together with Strategic Partnership Managment, Programme Office and Procurement where appropriate; others can be co-opted as required. If necessary, the reviewers can request a meeting with the Director’s representative who compiled the case to seek clarification. The responses from this consultation should be added into the business case.

6.14 For projects the business case is then sent to the Partnership & Change Group (PCG) for approval. PCG comprises the Director of Information, the Finance Director, the Registration Director and the Strategic Partnership Manager. They evaluate the business case and will either reject it, request additional information or clarification, approve it to proceed (if the expenditure is below £500,000 and it is not a new project requiring EMT approval), or recommend it for approval by the EMT.

6.15 The EMT will consider any business cases that cannot be approved by the PCG. EMT will evaluate the business case and either reject it, request additional information or clarification, approve it to proceed (if the expenditure is below £1,000,000 and does not impact on the ability to meet financial targets), or recommend it for approval by the Board.

6.16 Where the business case relates to a new project, the EMT will also be authorising project initiation, assigning an SRO, approving the PID and assigning the budget.

6.17 If the business case has come to the Board i.e. it exceeds £1,000,000 or will impact ability to meet financial targets, then the Board will carry out similar evaluation to the EMT but at a higher level of authorisation.

6.18 The agreement of a business case is not the end of the process – we aim to revisit business cases at appropriate stages to assess whether they have delivered the business benefits that have been forecast and to update them in the light of changing circumstances. Significant projects are also subject to Gateway Review.

6.19 In summary, business cases require: to be prepared; to be reviewed and impact-assessed by the designated RoS team (whose approval or concerns must be included in the business case); and to be approved (or otherwise) at the relevant level within RoS. The financial authority limits for business case approval for each body are:

• PCG upto £500,000
• EMT upto £1,000,000
• Board unlimited, subject only to any constraints on RoS.