Blog: Setting up for success – early actions to put public sector business cases on the path to approval

In time for the 2024 UK Real Estate & Infrastructure Investment Forum (UKREIIF) in Leeds, Accelar’s Michael Samways provides his insights on successful case-making.

Business cases are crucial for demonstrating the viability and worthiness of a project. Whether it's a large capital investment or a community-based initiative, all projects need to prove their value for money, added value, viability, and deliverability to secure approval for public investment.

In the world of public sector projects, a business case isn't just a static document— Treasury guidance defines a business case as a management tool that develops alongside the proposal for a project or program. It's a living document that consolidates the findings of research and analysis, providing transparent support for decision-making.

For larger projects this is realised through a three-stage approach to developing a business case which is aligned to governance and the decision-making process.

Stage 1 is the Strategic Outline Case (SOC). This is essentially the scoping stage which sets the foundation for the business case. A robust SOC will confirm the strategic context of the proposal, make a robust case for change and provide stakeholders and decision makers with an early indication of the proposed way forward including outline costs and an assessment of risks.

Stage 2 of business case development is the Outline Business Case (OBC). This phase marks the transition into detailed planning, where the groundwork laid in the Strategic Outline Case (SOC) is further refined. The key outcome for the OBC is to identify a preferred option that optimises Value for Money, sets out the likely costs, including any market engagement that may have been undertaken, and to demonstrate affordability against the economic benefits by setting out the Benefit Cost Ratio or BCR.

Stage 3, the Full Business Case (FBC). The Full Business Case is usually completed during the procurement phase and is the final opportunity to ensure that the project is financially viable, operationally feasible, and strategically aligned. It is the point of the investment decision and is normally submitted for approval when the final price is available and the contract, or contracts, are ready for signing.

When it comes to preparing public sector business cases, HM Treasury’s Green Book provides the framework for compliance. This framework, known as the five-case model, ensures that decisions about the use of public funds are made responsibly and with careful consideration of costs, risks, and the wider context for investment decisions.

So, what are the five cases?

Strategic Case: This case considers the objectives and long-term strategic goals that the proposed project or program aims to achieve.

Economic Case: Here, the focus is on assessing the economic impact of the proposed project or initiative, ensuring that it delivers value for money and includes all of the wider or secondary benefits such as carbon reductions or public health benefits.

Commercial Case: This case evaluates the feasibility of the project from a commercial perspective, considering factors such as market demand and competition. The commercial case also sets out the strategy for procurement and delivery of the project.

Financial Case: The financial case examines the affordability of the project, ensuring that it can be funded within available budgetary constraints of the department or authority.

Management Case: Finally, the management case outlines the governance and management arrangements for the project, ensuring effective oversight and accountability.

By adhering to the five-case model and developing comprehensive business cases, policymakers can make better informed decisions that prioritise the efficient and effective use of public resources, as well as ensuring that projects are maximising the opportunity to deliver wider government policy.

This five-case model and its staged approach to developing business cases, aligned with the decision-making process, does help to ensure that the investment of public funds is done in a more transparent and systematic way. However, it is not without its challenges for those at the coal face of developing and managing the submission of business cases.

Our team at Accelar has many years of successfully developing business cases and supporting our clients to secure public investment. We are currently and have recently managed and contributed to five-case model business cases for local authorities, combined authorities and government departments on a range of projects from transport and civic infrastructure schemes, to housing retrofit investments.

This experience has given us an insight into some of the challenges faced in developing successful business cases and guiding them through governance and the approval process.

A key issue is a robust approach to identifying and managing risks. In the last two and half year’s inflation has had a significant impact on the affordability and value for money of many projects and in particular for business cases that are part way through the approval process. The increasing cost of materials, energy and labour has seen costs rise and BCR’s fall from initial projections in strategic and outline business cases.

In our experience there are two key approaches to avoid this happening. Firstly, developing a comprehensive and costed risk register from the outset and throughout, can ensure that risk budgets are robust. For example, inflation may impact certain materials or stages of the project more than others and this can be fully factored in. Early market engagement can certainly help with this.

Secondly, ensuring that the full range of potential economic benefits is identified as early possible can help with the design and decision-making process and ensure that the BCR is maximised. We would recommend that workshops to identify economic benefits and integrate them from the beginning and throughout the project, will pay dividends in value for money terms during the later stages of business case approval.

Another key challenge is around the integration of the different cases required in the 5-case model.

The greater the complexity of a project the higher the likelihood of a business case having multiple authors covering different elements. This can and frequently does, lead to a combined document that comes across as disjointed and in some case contradictory.

Ensuring that a ‘one-team approach’ is taken to the development of a business case can avoid individual cases being written in a silo. Developing a strategy that identifies points of alignment that are regularly reviewed with the team preparing the business case can be a real help to ensure the final document is coherent. This may include for example aligning the strategic objectives with the economic benefits being modelled and the key performance indicators set out in the management case.

By taking these suggested measures into account during the project and business case development process you will not only help to expedite the Q&A process and the investment decision, but also help to deliver better projects that are maximising the economic and social benefits and ultimately, better public investment decisions which is in all of our interests.