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Business Case

One of the principles on which the PM4SD model is based is Continuous Business Justification. Projects should start and continue to be desirable, viable and achievable, and with a justification that the investment needed is worthwhile. A project must deliver fit for purpose products, which are “value for money” (or “added value” for non-profit organisations.).

The decision making process is based on this continued justification, as any assessment prior to a decision or authorisation being given will be centred on the validity of the Business Case and the justifiable need for resources. In the PM4SD spectrum this justification must also be supported by the continued Sustainability of the project outcomes. Therefore, the scope of the Business Case in a PM4SD project covers a time span beyond the project into the benefit realisation and maintenance environment.

The Business Case gives the Project Board and the project stakeholders a clear idea of what the project will deliver, not necessarily from a output/product point of view but from an objective or outcome perspective. This should result in the project being evaluated according to its contribution towards the achievement of corporate strategies, Programme objectives or any other higher level milestones the Organisation is trying to achieve. The Business Case provides the means to measure the project in business/strategic terms by contributing information to evaluate the relationship between its costs and expected benefits. Furthermore a business case will provide a summary of the major business risks that might prevent the project from successfully achieving its objectives and an indication of alternative solutions that have been considered before the decision to go ahead is taken.

It is important to note that although in a classic Customer/Supplier environment a Business Case is essentially driven by financial factors, not all projects define their business justification in financial terms. A Business Case can also refer to a specific non-economic (yet measurable) need for a strategic, political, cultural or social change to take place. For example, a humanitarian aid project is not driven by the financial benefits expected but by the need to achieve a measurable improvement of living conditions for those in need.

When calculating and establishing the business case details for a project the measurability of the factors should be considered:

  1. Can costs be quantified?
  2. Can the benefits be defined in measurable and achievable terms?
  3. Have any collateral effects of the project on the environment, local communities, businesses etc. been taken into consideration? How do these affect the sustainability of the project?
  4. What are the major risks arising from this project? What are the costs to mitigate the threats and what would it cost if they occur (and similarly for opportunities)?

By answering these questions with the help of assorted stakeholders the PM should prepare, and continue to update, the justification for the project.

As this justification must be maintained for the entire duration of the project, we can state that the Business Case is a dynamic document which is subject to ongoing reviews and updates to reflect the actual status of the project and the most accurate forecasts at any time, particularly when a decision making control point is approaching.

In defining the approach to calculating, developing and maintaining a Business Case, the PM should differentiate between Outputs, Outcomes, and Benefits. The best way to express the differences between these three “deliverables” is by giving an example:

A project output is the project’s product e.g. a brochure outlining the tourist resorts available in a particular country;

An outcome is the result of the permissible change allowed by the use of the output e.g. promoting the country using the brochure would be the outcome;

The benefits are all the measurable improvements derived from a successful outcome e.g. any increase in the number of tourists choosing that particular country would constitute the measurable benefit from the promotion of the country made possible by the creation of the brochure.

Once this fundamental difference is clear, the task of preparing a Business Case should take place. When considering all the factors impacting a business justification for the project the PM will seek the aid of the Project Board for the definition of aspects such as:

  • The strategic objectives for undertaking the project,
  • The expected benefits,
  • The available resources in terms of funding available or requested,
  • The nature of the business case itself – is this a commercial context or a not-for-profit one?
  • The context/environment for the project
  • The sustainability objectives driving the decision for the continued investment.

The Business Case should answer/address these points. The business case is developed during the Project Direction and Project Initiation Process and is maintained throughout the entire project. The Project Executive is responsible for providing the Project Mandate and a draft version of the business case during the starting stage of the project, prior to its inclusion in the project brief. The Project Brief will help the project board in deciding if all restrictions have been lifted and all agreements are in place to authorise the project’s initiation.

The PM will update and develop a more complete and detailed version of the Business Case during the Project Initiation process for insertion in the PID. This will be the first baseline version of a complete business case showing the project expected costs, benefits, dis-benefits, investment arrangements, and major risks.

This first Business Case version will provide a summary of the reasons for undertaking the project provided earlier by the Executive and a summary of the different solutions considered prior to choosing the current one. Once the business case is finalised, it will need to be authorised as part of the PID whenever the Project Board needs to Authorise the project to continue (an activity that takes place as a result of the processes Stage Definition and Planning).

The Business Case is then subject to ongoing reviews and updates during the project, resulting in many versions being created along the project to reflect fluctuations in costs and benefit valuations. These constant reviews and updates allow for a more efficient monitoring of the project progress as they take into account all aspect of project performance that might have a direct impact on the commercial, benefit, and sustainability aspect of the Business Case. For example, one of the many activities carried out by the PM during the Stage Control and Product Delivery process is to review the status of the ongoing stage to ascertain the impact the project is having on the various objectives; during this review the Business Case is thoroughly examined to ascertain how the project is affecting the Commercial Agreements and Benefit forecasts, and where needed it is updated with up-to-date actuals and new forecasts are calculated.

Another important review point for the business case is the Stage Definition process where the PM will review and update the Business Case with actuals derived from the current stage and the new forecasts taken from the planning of the following stages; this step is particularly important as it is on the basis of a solid Business Case that the Project Stakeholders will follow and make decision on the continuous fitness for purpose of the project’s solution and the effective continuous sustainability of the project’s benefits in the long run.

Project progress and performance can be checked against the investment objectives stated in the Business Case. The Business Case will have to be verified and updated if necessary any time the Risk and Issue Management procedure is implemented, and any time a review of the Project, Stage, or Work Package performance provide data which might have an impact or be different from that previously forecasted.