Better Business Cases – Are They?

Funnel to illustrate process of creating a final business case from a template

Formal, standardised business cases used to be common only for larger investments. Now, NZ state sector agencies use the Better Business Cases (BBC) format for smaller, internal and less-visible proposals. The current investment threshold is $15m in whole-of-life costs. BBC must be used for any new Crown projects. It is also mandatory for anything deemed high risk.  

Benefits of the Approach

This is generally a good thing. Decision-makers can view different, often competing proposals in a consistent format. It adds work to getting a proposal off the ground but avoids doing more expensive work later. You can stop work on uneconomic or unrealistic ideas before you’ve actually tried to build them. The point of business cases is that you can’t do everything. Making your business units put their proposals up in a formal, consistent format helps you choose between them more objectively.  

In short, good, consistent business cases force more practical thinking to occur earlier in the lifecycle of the investment. They help to connect the idea and the investment decision with a common evaluation process.  

The Challenges of Better Business Cases

So, here’s the problem. BBC is challenging for many people. If they have no experience of the dimensional analysis component, preparing the economic case is a big ask. It’s fair to say that most people in state sector agencies have limited knowledge about contracts or procurement, so the commercial case can be daunting. It can be difficult to engage with someone in the finance team to identify and describe funding options. The agency may or may not have a PMO which could advise about the delivery information needed for the management case. In many cases this is overlooked.

These challenges mean that many agencies need to bring in consultants to help prepare their business cases, at least at first. We’ve helped many of our clients get investment proposals over the line using BBC. It’s worth remembering that executives and board members will likely be the only people to review the case (unless something goes wrong). They may also struggle with some of these areas when making their decision. The Treasury created the BBC format based on the Victorian State Government and UK Government models. The people who complete and consider smaller business cases don’t work in the Treasury.

How to make Better Business Cases better

Is all of this helping New Zealand? Yes. Anything which encourages more practical thinking about options and risks before investing public funds has to be a good thing. Some of the pre-BBC business cases we’ve seen were very poor. They were simply funding requests for ideas. Is BBC perfect? No. Its focus is too economic, some sections are clunky and repetitive. Even the indicative template asks for information unlikely to be available at such an early stage (before going to market). Most good BBCs I’ve seen added several sections up front, just to find a place to actually describe the idea. I think BBC lost something in translation from the large-scale infrastructure investment environment where it originated. There are four ways to improve the BBC process for smaller projects:

  1. Create space at the start of the Business Case to explain the idea in plain English.
  2. Simplify the advice to those initiating projects on how to complete the financial case, management case, and commercial case. Provide simple starting points.
  3. Provide exemplar sections of Business Cases for reference in each organisation
  4. Encourage concise Business Cases that only say what needs to be said. Adding more detail at an early stage may add bulk but not insight.

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