Buying innovation – approach for budgets and business cases
NSW Government agencies often expect buyers to have a confirmed budget, funding source and project mandate (or business case) before approaching the market. This practice helps ensure:
- suppliers do not waste time participating in a tender that doesn't lead to a purchase
- buyers do not waste time preparing market-facing documentation and/or assessing proposals that might not lead to a solution that can be bought or implemented
- for ICT/digital solutions, agencies can confirm that proposed technology fits in with enterprise architecture and digital strategies
- agencies can determine whether buying something new is the right approach to meet project objectives and thus identify the best-suited sourcing methods.
A buying project that is open to innovation should attract a range of solutions. Finalising a budget or business before narrowing down those solutions would be very difficult. It is therefore important that, when buying innovation, agencies align their budgeting and business case milestones with the stages of procurement.
Strict budget or business case requirements can hamper the ability to find new and innovative solutions. It is therefore important that requirements are tailored to support innovation.
This page guides buying teams on how to approach budgets and business case requirements for multi-stage procurements. It also guides agencies to support their buying teams while satisfying agency and supplier objectives.
When to set a budget and business case
The NSW Government Business Case Guidelines help determine which projects require a formal business case. Agencies may also have their own internal guidelines. Most agencies require a business case (sometimes referred to as a 'project mandate') before approaching the market or approving the release of funds. Some require it before buying teams can engage procurement support.
Business case development should happen after Market research and alongside Iteration planning, during the Discover phase. Having market insights ensures an informed decision to approach the market, as opposed to using an existing solution. Developing a business case at the same time as iteration planning ensures there is alignment between procurement stages and project or funding gates.
Organisations can reduce investment risk by supporting a staged approach to budgets. Buying teams should ensure funding is available for at least one testing stage before approaching the market, such as for a Proof of Concept, and should ensure suppliers understand which stages are funded and which might be subject to future decisions.
Who to involve
NSW Government business case guidelines cover many of the stakeholders involved in creating a business case. Expand the boxes below to learn more about the roles that are most relevant to innovation procurement.
Early engagement with approvers including financial delegates can save delays when it comes time to approve a budget and business case. They may need to endorse the investment of more time and resources into challenge framing and a multi-stage strategy for the procurement. They may also need to approve allocation of time, money and resources into trials or other ways of testing solutions to reduce risk. Consulting with these decision-makers when developing a business case can help achieve buy-in at a senior level.
Innovation buying teams should seek procurement advice before a business case is locked in and approved. Some procurement teams prefer to get involved after a business case is approved, however business cases often include elements that need procurement input or have procurement effects, such as:
- whether to build or buy a solution
- insights from market research covering the types of solutions available, their maturity and the capability of suppliers
- whether to approach the market with technical specifications for a known solution, or a challenge statement that is outcomes-focused and open to a range of solutions
- stages and stage gates to narrow options and release funds, which may include testing and may need to align with procurement activities
- proposed testing or trial options and compliance with public sector obligations around value for money, competition, fairness and transparency.
Advice from risk, probity or governance experts ensures a fair, transparent, defensible and robust process is built into all supplier-facing activities. Their involvement depends on the scale, complexity and sensitivity of the business case and adopted procurement method. As a general rule, the earlier their advice is sought, the better they are able to help identify and mitigate risks.
There is a risk of perceived unfairness where the availability of future funding depends on a successful business case, and the business case will incorporate findings from early procurement stages. These kinds of experts can help identify and plan for that risk, including through the design of stages and stage gates, and transparent supplier communication.
Service designers bring skills in mobilising teams, designing stages and facilitating collaborative input. These can help set up for success in the otherwise complex process of business case development. Service designers tend to have workshops or artefacts that help to bring experts together and frame a compelling business case.
In NSW Treasury's Gateway Review process, Gate 0 (also known as the strategic assessment or go/no-go decision point) focuses on whether a proposed project's need is appropriately defined and evidenced before allocating resources for a full business case. It's a crucial step to ensure projects are strategically aligned and justified before significant investment. For Gate 0 business cases which focus on problem definition, service designers can help shape and frame a problem.
ICT experts and digital strategists can provide advice and direction on solutions that might solve a particular challenge. These could be from an existing catalogue from another agency, a future roadmap or their understanding of what is available in the market. They can help drive market research to explore and narrow down options. They can also help define requirements and constraints as part of a challenge statement.
Buy-in from these experts may help ICT governance bodies (such as Architecture Review Boards) consider staged approvals to business cases, focusing first on the problem, then on the options coming back from a market approach. These experts and governance bodies can also ensure the business case considers the following:
- consistency and standards
- best practices
- risk mitigation
- alignment with business goals
- quality assurance
- knowledge sharing and learning.
Setting a budget and/or business cases before a procurement
Managing budget and business cases in a way that enables innovation requires an agile or iterative approach. It also requires a clear understanding of the objectives behind existing budget and/or business case rules. The management approach can then be adapted for innovation while still protecting the objectives. For agencies that usually require a full budget or business case before starting a procurement, a key driver is to support informed decision-making for suppliers and buyers.
Suppliers are more likely to participate in a tender and invest in preparing a proposal when they receive clear and transparent information about:
- the duration of the engagement
- the scale of the final opportunity
- whether the opportunity is funded
- the minimum requirements or mandatory criteria
- how likely they are to succeed.
Buyers from the public sector can make an informed decision to invest in and implement a solution put forward by the market because it has confidence in:
- how well the solution solves the problem
- the ability of the supplier to meet government requirements
- the capability of the supplier to implement the solution
- the commercial viability of the supplier and/or solution
- the value for money of the solution.
Both groups' objectives can be achieved in a way that enables innovation by adopting a staged approach to budgets and business cases and ensuring transparency with suppliers.
Getting started
Resources
Estimate Total Contract Value (TCV), gain approval to spend and get proof of funding.
Focus on a strong case for change to support a market approach.