Staged approach to business cases
Build a case for change in a way that aligns with procurement stages, focusing first on the problem and benefits of solving it, and later on solutions and costs.
A stage-based approach to business cases
Having an approved business case (sometimes called a project mandate) gives both buying teams and suppliers confidence that an initiative can proceed. There are three distinct stages involved in building this confidence:
- the case for change
- strategic alignment, including with digital strategies and enterprise architecture
- costs and benefits of investment.
In some agencies, buying teams will need a business case (or equivalent) approved before they can commit funds or approach the market. Regardless of whether it is required, a well-documented business case can help drive project success. For innovation, however, aiming to have a complete business case too early can introduce significant risks.
Focus on a strong case for change to support a market approach
Agencies can support innovation by approaching business cases in a staged way. The NSW Business Case Guidelines identify three stages, which can act as a guide for how to approach business cases. These guidelines are useful regardless of whether a project exceeds the threshold to require them. The stages are:
- Strategic assessment: a short document which identifies the problem or opportunity, establishes that addressing the problem or opportunity is a government priority and supports the decision to invest in preparing a business case.
- Preliminary business case: tests the case for investment and narrows down options to a shortlist for detailed examination in a full business case. It may be used to seek funding to prepare a full business case for large or complex projects.
- Full business case: identifies a preferred option and supports a government investment decision. This may be subject to conditions and further approvals on a case by case basis.
See how these business case stages align with innovation procurement stages
Before approaching the market, buying teams should have an approved 'problem definition' regardless of whether it is required by the agency. Seeking approval or endorsement is a useful way to round out stakeholder consultation, ensuring there is an opportunity to review the problem definition and the benefits of solving it. It's a chance to get a shared understanding that the problem is worth solving before time and resources are committed to the market approach.
Approval of 'problem definition' would generally unlock 'seed funding', which is used to analyse options and refine the case for change. When buying innovation, market research and the challenge-based market approach uncover the options, and the seed funding covers testing stages that help narrow down solutions.
There are risks to innovation outcomes when project teams are pushed into detailed and complete business cases without a market approach. Firstly the project team is more likely to jump to conclusions about potential solutions, missing the latest technology or expertise in the market. Secondly the market approach is likely to be more solution-focused and less open to innovation. As a result, the risk of the end solution not adequately solving the problem is higher.
Focus on digital strategy alignment to narrow down the options
After a market approach, once proposals have been received, buying teams should engage ICT subject-matter experts in evaluating solutions. Part of the evaluation should include an assessment of how proposed solutions fit within:
- the existing enterprise architecture and systems already in place
- existing agreements
- the forwards-looking digital strategy.
Some agencies have a formal governance structure to confirm alignment of proposed ICT solutions. Sometimes buying teams must have the approval of the governing body to implement new technology or even before approaching the market. Where this is the case, the governance process should be adjusted for innovation, given the final solution is unknown.
Contributions of ICT subject-matter experts and/or governing bodies should consider adapting to facilitate innovation as follows:
- Before the market approach: Endorse the problem statement and case for change, become familiar with the initiative and contribute to market insights.
- Once initial proposals are received: Advise how the proposed solutions might fit into enterprise architecture and digital strategies. Advise on or approve the design of testing stages to ensure the right information is requested of suppliers. May endorse solution shortlisting.
- Once detailed information has been obtained from suppliers and the preferred solutions tested: Formally assess and approve a purchase and implementation.
Before the final implementation, the buyer can weigh all benefits up against actual costs to determine whether implementation should proceed. They can be confident in the fact that the business case is based on the latest market expertise and the most effective way to solve a problem.
A staged approach to evalauting benefits and costs
When buying innovation over multiple procurement stages, evaluation during the initial approach should focus on achieving benefits. At these early stages, cost should either not be assessed, not be heavily weighted or focus only on the testing stage that follows. With this in mind, it can still be helpful to request indicative costs or commercial model information to:
- help allocate budget
- determine overall affordability.
A full value for money assessment should occur later in the process, when there is a shortlist of solutions the buying team is confident can solve the problem well. Read more about staged evaluation.