Reference no: EM132311093

1. Part 1 Problem
[For output proposals the full business case is likely to be the first presentation of the proposal to government. Given this, the Stage 1: Conceptualise guideline may assist in characterising the ‘problem' for the purpose of this Part.

For asset proposals this Part should revisit and confirm the currency of the analysis of the problem in the earlier strategic business case (strategic assessment or preliminary business case). This will involve re-presenting the information from the strategic business case, reassessing its validity and further substantiating the existence of the problem with evidence where appropriate. The intent is to strengthen the case for the problem, and briefly outline any significant changes since the strategic business case.
Remember that a ‘problem' can include a service need, issue, or lost opportunity. For further information on populating this Part for asset submissions see the Stage 2: Prove guideline.]

1.1 Background
[Describe the context and background necessary to set the scene to introduce the problem and benefits from addressing the problem. Outline the existing service related outputs, existing asset base and resource commitments including lapsing status. This might include a discussion on the need for government intervention and role of government, current service funding, service distribution and levels, and underlying drivers of those services. This section may also introduce providers and stakeholders relevant to the problem. ]

1.2 Definition of the problem
[Explain in plain English and in less than one page the problem(s) needing to be solved. Present the cause of each problem, who is affected, and how they are affected. Describe the nature of the problem for example whether it is immediate, transitory, ongoing or escalating. ]

1.3 Evidence of the problem
[Provide the evidence of both the cause and effect of the problem. Evidence might include:
• demand forecasts with assumptions;
• key performance indicators (KPIs) on current performance levels; and/ or
• facts/examples of the problem.]

1.4 Timing considerations
[Describe why the problem needs to be solved by government at this time, noting any connections to long-term planning documents. Explore whether the problem is suited to a staged response. Explain the implications of delaying a response to the defined problem such as:
• physical or capacity limits will be reached
• significant reductions in the level of service (quality/quantity) will be experienced
• failure to meet specific government commitments or legislative requirements
• requirement for urgent action at additional cost due to asset failure, system overload etc;
• lead time for investment to become operational; and
• any critical dependencies with related service requirements.]

1.5 Consideration of the broader context
[Explain whether similar needs or opportunities exist either inside or outside your organisation that might be addressed together with this proposal. For example, benefits of a wider sectoral approach, integration opportunities, pilot studies in other sectors that may impact the type of response.]

2. Part 2 Benefits
[For asset proposals this Part should revisit and confirm the currency of the analysis of the benefits in the earlier strategic business case (strategic assessment or preliminary business case). This will involve re-presenting the information from the strategic business case, reassessing its validity and further substantiating the evidence of benefit delivery where appropriate. The intent is to strengthen the case for the benefits, and briefly outline any significant changes since the strategic business case.

For agencies using the Investment Management Standard to map benefits, note that not all benefits identified as part of an investment logic mapping process will be suitable for inclusion in an economic evaluation of an investment proposal. Economic evaluations focus on welfare impacts on society rather than agency specific impacts and transfer benefits. Economic benefits which would be suitable for inclusion in economic evaluations are typically specific, tangible, and able to be monetised and can be linked unambiguously to an investment or activity. DTF can provide case-by-case guidance to agencies on this issue as needed.]

2.1 Benefits to be delivered
[Explain the key benefits that flow if the problem is solved. (These can be drawn from the investment logic map and benefit map if available.)
List key high-level economic, social and environmental benefits the initiative will deliver. Any dis-benefits or negative consequences resulting from addressing the problem must be outlined clearly.]

2.2 Importance of the benefits to Government
[Show how this investment will help to advance the government and/or organisation to meet its objectives. This might include reference to the size and timing of those benefits.
Describe how this initiative connects to government priorities and the department's corporate, strategic and long term planning documents.]

2.3 Evidence of benefit delivery
[Define the measures and key performance indicators that will show whether the benefits have been delivered. These benefits provide evaluation criteria and objectives for the development and selection of interventions and options.
Details of baseline, interim and target measures, dates for the KPIs and the person/position responsible for delivering the benefits should be included in an appended benefit management plan or equivalent, which has been updated to reflect the recommended option. Reference or include the benefits management map.
Where appropriate (as an alternative to a Benefit Management Plan) an evaluation strategy/framework should be included or attached. ]

2.4 Interdependencies
[Identify key interdependencies critical to benefit delivery. For example reliance on other projects or decisions. These interdependencies may require a level of flexibility to be built into the proposal.]

3. Part 3 Strategic response
[For asset proposals this Part should revisit and confirm the currency of the analysis in the earlier strategic business case. This will involve re-presenting the information from the strategic business case, reassessing its validity and further substantiating the evidence, feasibility and assessment of the strategic options analysis process. The intent is to strengthen the case for the preferred ‘strategic response', and briefly outline any significant changes since the strategic business case.

3.3 Recommended strategic option
[Present the recommended strategic option, summarising the response and the rationale behind its selection. For example, the recommended option may have been selected because it provides a level of flexibility required to deal with uncertainty surrounding the problem. ]

4. Part 4 Project options analysis
[Accuracy of data used to compare project options should be sufficient to robustly compare options. Analysis of project options requires a level of accuracy consistent with ‘concept estimates' (at a minimum) of capital costs, cash flows and ongoing output or operating costs. A concept estimate is an approximation of the probable cost of a program or project based on available verifiable information. The level of accuracy used to present estimates should reflect the scale and complexity of the investment. The level of analysis should provide sufficient information for an effective comparison of the project options and to demonstrate that an adequate range of options have been considered. The methodology used should be consistent across all options. Indicative costs should be supported by evidence and defensible.

The tables in this section are a guide only and should be used, modified or not used as appropriate. Projects which are HVHR should provide more detailed information to support assessment of robustness.

In characterising the project options and considering their impacts, agencies should address sustainability investment opportunities of project options. For example where significant operational savings can be derived through specific approaches. The focus should be to identify up-front sustainability investments in areas of need and which are likely to deliver a good investment return.
Further information

For more information on completing this section see the:
• Stage 2: Prove guideline.
• Technical guideline: Sustainability investment guidelines for Victoria's public assets.]

4.1 Project options considered
[Expand each of the ‘strategic interventions' included in the ‘strategic response' into several more detailed potential project options, including a ‘base case' and at least one ‘market based solution'. Aim for a maximum of around five. Refer to the Stage 2: Prove guideline for an explanation of the base case and market based solutions.
Describe the method and rationale used to select the project options
Describe project options, including:
• scope
• asset and output options (or combinations);
• at least one market-based solution where possible;
• potential for 3rd party revenues;
• critical assumptions or constraints (or windows of opportunity) of each option;
• outline any project options considered but not evaluated and state rationale for non-consideration; and
• at a high level, the extent to which each of the feasible options conforms to Government and relevant agency legislation, policies, standards and strategies.]

4.2 Stakeholder identification and consultation
[At a broad level, provide an overview of the likely relative impact on key stakeholders of the various project options, and outline their position in relation to the project.]

4.3 Social impacts
[Outline the social impacts and opportunities of the proposal and identify any significant social issues specifically relevant to particular project options (i.e. differentiating between the project options).]

4.4 Environmental impacts
[Provide a high-level overview of the relative environmental impact analysis of the options including specific actions required to meet all relevant legislative requirements and identified likely community concerns.]

4.5 Economic impacts
[Provide a high-level overview of all significant economic impacts and opportunities of the options. ‘Economic impacts' in this case refers to impacts on key economic variables, such as value-add, productivity, workforce participation, unemployment and others.

This could be done in a qualitative manner (e.g. by describing possible changes and their likely order of magnitude), or through actual economic modelling to come up with robust quantitative estimates. The later should only be done where the magnitude of the project warrants this additional effort.

There is a wealth of data available from the Australian Bureau of Statistics and other sources, which can assist in this endeavour - particularly when providing qualitative descriptions of possible impacts.

Where the magnitude of the project warrants providing quantitative estimates, then Computable General Equilibrium (CGE) modelling is recommended. Like all modelling, this needs to be based on robust assumptions/inputs that are transparent in order for it to be seen as reliable.]

4.6 Overall evaluation of socio-economic and environmental impacts
[The expected socio-economic and environmental impacts of the project options need to be assessed and consolidated within a robust framework that appropriately captures and weighs these impacts. The assessment of socio-economic and environmental impacts is very important because it effectively outlines what the Government would be ‘purchasing' for its investment (in terms of the net benefits to society).
The preferred methodology for integrating social, economic and environmental impacts is a cost-benefit analysis (also known as an ‘economic evaluation'). This may be combined with a multi-criteria analysis for impacts that are unsuited to the cost-benefit analysis framework, such as where benefits are difficult to monetise,. These tools should enable all key impacts to be captured in the assessment.]

4.6.1 Cost benefit analysis (economic evaluation)
[Identify welfare impacts on society, both costs and benefits, for each project option - these impacts include both market and non-market specific impacts in the areas previously described as social, environmental and economic. Describe the methodology to be used; in general this will be a net present value assessment at an aggregate level relative to the base case. Quantify and monetise costs and benefits at the level of accuracy of ‘concept estimate' to ‘developed concept estimate'. Note that the level of accuracy should be determined based on the scale and complexity of this investment. Assumptions should be provided to justify estimates used.

Once costs and benefits have been estimated, agencies should discount impacts back to present values and rank the project options. Note distributional impacts, while an important factor for government decision-making, are not included in the headline results (e.g. the net present value) of the economic evaluation (which addresses welfare impacts to society as a whole).

For further information on completing this part see Stage 2: Prove guideline.
Outline the outcome of the economic analysis.]

4.7 Financial analysis
[Provide an estimate of the capital and whole life (output) costs of the project options and describe the process by which the estimate was derived (e.g. workshop, previous project). Costings for this section of the full business case are at ‘concept estimate' level at a minimum, and not extensively detailed, but should consider whole-of-life differences between options over an appropriate period. They need to be a reasonable evidence-based realistic estimates but are not intended to be comprehensively constructed from first principle. They need to provide sufficient detail to allow the Net Present Value (NPV) comparison of options.

The analysis should allow decision-makers to consider the option that will deliver the best outcomes in line with government objectives, including Budget considerations, and will have a demonstrable effect on output/service delivery performance.]

4.8 Risk comparison
[Risk assessment here is high level and needs to be sufficient to enable relative comparison of options.
Describe risk assessment process for the project options analysis, which may include a risk workshop. Risks identified should consider the financial, economic, social and environmental analyses.

Provide a summary of key risks which are critical to differentiate the success of the investment in relation to the project options considered. Significant uncertainties may warrant a different approach to the investment to incorporate flexibility to manage the uncertainty.

To assist in identifying the key risks to consider, the following is a (non-exhaustive) list of risk categories: Change in law/policy; commercial; commissioning; completion/construction; contractual; demand; economic; environmental; financial; implementation; investment planning; management; obsolescence; operations; organisational; political; private sector; regulatory technological; residual value; upgrade.]

4.9 Integrated analysis and options ranking
[This section summarises at a high level the relative merits of the options considered. Details in this section are expected to be at a conceptual level only.

To the extent that costs, benefits and risks have been quantified and valued robustly, the preferred option is typically the one with the highest, risk adjusted, NPV.

As the headline result of the economic evaluation does not include distributional impacts or where a project option has significant intangible (or non-monetised) benefits, these impacts can out-weigh the difference in NPV between alternative options. This can alter the choice of the preferred option and these trade-offs need to be clarified for decision-makers. Multi-criteria analysis (MCA) can be a useful tool to do this.

Selection of options can be affected by the risk/uncertainty assessment. Further, where the NPV of an option is subject to significant uncertainty, it can be difficult to distinguish between alternatives. A low risk, low NPV option may be preferred to an alternative with higher but more uncertain net benefits. The level of uncertainty may suggest that flexibility needs to be built into the recommended approach, for example allowing decisions to be made progressively as more information becomes available.

In a summary table, provide an integrated assessment of financial and non-financial impacts to arrive at a ranking of project options. Where a multi-criteria analysis is included in the integrated assessment, outline the relative weighting of the financial and non-financial components.

See two alternative examples of possible financial and socio-economic analysis summary tables below. Note, choose which table of these two options is most appropriate to your integrated analysis. Do not fill out both.]

5. Part 5: Deliverability of recommended solution

[The full business case is the first time departments are asked to address the information required in Part 5 and speaks to the question: ‘Can the solution really be delivered?', this section is a key part of the full business case and should put forward a rigorous case clearly justifying why the recommended solution is the most effective and actionable solution.

This section should include confirmation of the above analysis in the light of detailed costing and scoping of the recommended solution as well as additional detailed information relating specifically to the deliverability of the recommended solution, as specified below.

To avoid duplication, refer to earlier sections where appropriate.
This section should also justify why the recommended solution is preferred in relation to each component of the analysis.]

5.1 Details of recommended solution
[Clearly state which project option (which may comprise one or a number of projects) is the Recommended Solution, addressing the rationale for its selection in light of the integrated assessment, stating its details (including objectives and a project scope statement).
If a major asset is required, provide a brief summary of the design and specifications to the extent they have been developed. Note: detailed designs are not expected at this stage, however departments must provide enough information on scope to support a rigorous costing.

Provide details on output requirements associated with changes proposed to service delivery including VPS and non VPS staffing implications.

Where appropriate include a summary of key elements of the design feasibility study which demonstrates the long term vision for the preferred option in the broader urban/environmental context. Provide a ‘Design Intent Statement' to demonstrate the intended level of design quality and identify what design aspects of the project need special consideration.

Provide information on preferred sequencing or staging of the project solution and justify why staging/ sequencing is required or desired.
Describe significant broader impacts specific to the implementation of the Recommended Solution. Indicate locational details and service area impacts.

Outline how the solution is consistent with, or addresses, public interest issues such as equity, access etc.]

5.2 Commercial and financial

5.2.1 Procurement
[Outline the procurement options analysis - method and process, showing ranking of options against criteria used to selected recommended procurement strategy.

Detail the recommended procurement strategy for this investment, justifying why it is the best value-for-money option, for example due to its capacity to include flexibility or better manage risk. This should be balanced with the related issues of time, cost, whole of life value and quality.

Outline the organisation's experience and capability to deliver the preferred procurement method as well as key risks and contractual issues. (Include strategy to address deficiencies where appropriate for example intention to engage expert help.)

Formulate adaptations to the preferred procurement method to ensure that quality and good design are embedded in the process. The Office of the Victorian Government Architect can provide advice on the selection of procurement models and potential adaptations and the design, site utilisation etc.

If a PPP procurement approach is being proposed the Partnerships Victoria Group at DTF can advise on the additional details required.
If project alliancing is being considered, full business case requirements are different, please contact DTF Commercial Division for further advice or consult the National guidelines.]

5.2.2 Risk assessment and management
[Provide a detailed risk assessment of the recommended solution, outlining key risks and management strategies.]
Risk Management strategy
[Describe risk] [Outline strategy for management]

Table X: Key risks to the success of this investment
[The risks may highlight the need for a flexible approach to the investment. For example where the uncertainties may be resolved at a point in time (e.g. success or failure of a pilot study) and flexibility can be built in to allow an informed decision at this time (whether to proceed with the full investment). This section should describe ‘desired flexibility' and ‘circumstances which make flexibility desirable.'
Provide an overview of proposed arrangements for ongoing risk monitoring and management. Include appendix with risk management strategy and risk register.]

5.2.3 Detailed costing and economic evaluation
[Provide a detailed overview of the costing for the Recommended Solution, including capital TEI and output costs. Include budget cash flow over a relevant period for both capital and output amounts.

The project budget estimate including: base cost estimate, base risk allocation and contingency should be based on a project scope statement at the preliminary design estimate level.

Identify the impact on output funding and the breakdown of operating costs to key components such as staffing, maintenance, depreciation, CAC etc. This detail should extend over a reasonable period of years to allow a whole of life costing perspective.
Attach appropriate tables in the appendices, refer Appendix B for example tables.
Departments should consult with DTF to agree costings before submitting the business case for Budget funding consideration.

For Asset projects:
Refer to the Investment Lifecycle's Project Budget Guideline which provides specific guidance on development of the project budget. The tables below are based on that guidance and may be modified to incorporate appropriate details.]

Attachment:- Business case template.rar