South West Employers

South West Employers Business Case & Specification Writing Trainer: Date:

Activity 1 - Icebreaker How many points do you have? _______ One unusual fact I have found out about someone here is? ____________________________ (5 points)

Activity 2 - Groundrules • Groundrules help to create a positive and safe learning environment. Discuss and agree a list of between 3 and 5 rules that all participants are comfortable with

Objectives • At the end of the session, participants will have knowledge and an understanding of: • The fundamental principles of preparing for and developing a business case and specification: • What is a business case and when is it needed? • Typical business case contents • What is a specification and why is it important? • Types of specification • Special considerations when buying services • Potential issues and challenges and how to manage them

Sections • Introduction to Business Cases • Business Case Content • What is a Specification? • Writing a Specification

What is a Business Case and when is one needed?

A recommendation to decision-makers of a course of action An evaluation of a number of identified courses Analysis of costs, benefits and risks in pursuing certain courses of action An explanation of how a course of action should be implemented A communication tool to provide relevant information to people involved in the decision-making process A method for innovation, wider-thinking and new practice An opportunity to assess what others are doing to compare best practice Some functions

Profit 10% Traditional Procurement Squeeze the profit marginmay yield 3 – 5% Risk Premium 5% Target the 90%Might achieve 40% Soft market testing Demand Challenge Innovate Benchmark Change of Use Supplier Prices Overheads 45 – 50% Direct Costs 40 – 50% Innovation Savings - Think and Do Different

Why have a Business Case? Assess the situation, what (if anything) is needed? Requirements Evaluate Benefits Investment Appraisal Provide Baseline Mobilise Support Project Structure Compliance Risk Management Secure Resources Secure Budget Stakeholder Buy-In Approval

When is a Business Case required? • Where approval is required for expenditure • Often for procurement over the EU threshold • Refer to your local CPRs for further detail • For complex requirements where a project structure is required (eg under Prince 2 or similar project methodology)

Writing a Business Case will help to . . . • Obtain the support of decision-makers • Obtain management commitment • Gain approval to proceed • Ensure fit with policies and strategy • Provide a planning and implementation framework • Enable monitoring against a stated baseline • Ensure benefits are clearly stated and logged/achieved • Facilitate risk management • Provide resources • Initiate a broader project

Be prepared • Identify stakeholders • Determine/analyse options • Consider/evaluate risks • Identify risk management • Assess benefits • Determine benefits tracking • Undertake financial analysis

Executive Summary • Arguably the most important part • A snapshot of the whole business case • Highlights the key aspects • Enables senior staff to grasp the key aspects • One page is ideal – maximum This is what we want you to approve............ And this is why it is a good idea............

Introduction • Sets the scene • Provides background and relevant history • Summarises the business need • Explains the current situation • Identifies the drivers for change • Relates to strategic goals This is where we are now............ And why we need to change............

Project management • Applicable for major and project related items • Project structure • Roles • Governance • Decision levels • Project plan • Outline of resources Here’s the process that will take us through to successful implementation.....

Definition, scope and implications • Outlines the requirement • Examines the broader impact • Identifies stakeholders • States constraints • Analyses dependencies • Identifies critical success factors This is what we need to buy and the broader impact.....

Stakeholder analysis and management High Internal Keep Satisfied Key Players Stakeholder Power Minimal Effort Keep Informed Low Stakeholder Interest High Source: adapted from Mendelow (1991)

Activity 3 – Stakeholder Analysis • Work in pairs or small groups • Using the given contract and identify the relevant key stakeholders. Consider their level of interest and power relative to the contract and plot their position using the matrix approach that we have discussed

Technical considerations • Will vary depending on the item being purchased • May include: • Quality • Sustainability • Storage • Distribution • Operational issues • Training • Systems • Compatibility issues We have considered how the purchase will impact on us operationally.....

Commercial considerations • Determine outcomes • Market considerations • Existing frameworks and collaboration • Soft market testing, opportunities for innovation • Outline specification • Sourcing options • Contract term • Contract type • M.I. requirements • Implementation timescales And here are the key business considerations which are relevant to the purchase.....

Additional considerations • Market testing • Is the supplier willing to invest? • What opportunities are there for shared responsibility? • Is collaboration possible? • What options are available for innovative practice and original solutions And here is the way in which we will gain additional rewards, shared responsibility and innovation.....

Risk analysis • Probability • How likely is it that the risk will happen? • High : Medium : Low • Impact • What will be the impact if it does happen? • High : Medium : Low • Risk management and mitigation • Contingency And we have considered the risks and how they can be managed.....

Activity 4 – Identifying and managing risks • Work in pairs or small groups • Consider the risk examples provided • Determine the probability of these risks arising and their potential impact if they do arise • Suggest ways that each of the risks can be managed

Financial & resource considerations • Impact on staff (workload, TUPE) • Costs • Phasing • Operational • Ongoing • Whole life • Budget • CapEx • RevEx • Shared investment and risk • Return and payback • Procurement activity is not simply a process – it shouldadd value and produce savings These are the relevant financial aspects...... And the impact on headcount........

Investment appraisal techniques • Payback Period • Net Present Value • Internal Rate of Return • Accounting Rate of Return

Breakeven point Accumulation of Benefits £ Total costs Break even point TIME (or production)

Benefits management & realisation • Hard benefits • Soft benefits • Measurement • Manage and track And these are the benefits that the purchase will deliver........

Options appraisal • Long list • Short list • Explain reasons for rejection • Financial analysis of options • Use SWOT analysis • Evaluation criteria A number of options have been considered and evaluated........

SWOT analysis Weaknesses Strengths Internal External Opportunities Threats

Activity 5 – Evaluating options • You have been involved in writing a business case and six options have been identified as offering potential solutions • As a group, consider the criteria that you could use as a basis for evaluating each option

Recommendation • Clear • Concise • Supported • Logical This is the option we recommend.... And why....... Ensure you follow local procedures for sign-off

Other content • Title page • Table of contents • Definitions/glossary of terms • Bibliography • Appendices

Title page Executive summary Table of contents Definitions/glossary of terms Introduction Project management Definitions, scope and implications Technical considerations Commercial considerations Risk analysis Finance and resource considerations Benefits management and realisation Options appraisal Recommendation Appendices Bibliography Summary of typical content

Business case checklist • Is the need/requirement clearly stated? • Does it fit with strategy, policies and goals? • Are the benefits identified? • How/when will benefits be realised and measured? • Has success been clearly defined? • Have all options been identified and evaluated? • Is the preferred option clearly supported? • Is the funding requirement clear? • Have risks been identified and evaluated? • Have plans been put in place to manage the risks? • Is there a clear recommendation? • Does the financial analysis support the recommendation?

Activity 6 – What is a specification? • Consider and discuss the meaning of ‘specification’

Some definitions • A statement describing the characteristics of the supplies or services to be purchased, which the supplier is expected to provide • A means of communicating in writing the requirements or intentions of one party to another about a product or service, a material, procedure or a test • A standard against which the supplier can be measured • A statement of the attributes of a product or service • A statement of requirements • Most importantly: it is part of your contract with thesupplier!

It must not be assumed that the supplier will always precisely understand what is being requested by the purchaser........ ......purchasers get what they ask for, but not necessarily what they need Why is a specification needed?

Caveat emptor A computer? Or, a computer?

The main functions of a specification • To communicate to a supplier what you expect them to supply • To provide a record against which the goods or services supplied will be measured • A tool to obtain buy-in and commitment from internal stakeholders • A contractual tool to ensure you get what you want

Activity 7 – Services v Goods • Work in pairs or small groups • Discuss the issues when specifying services (compared to goods, for example, tangibility versus intangibility)

Specifying services • Be as objective as possible • Define standards and expectations • Set measurement criteria • Be specific about expectations • Some specific considerations about services: • Breakdown the service into measurable milestones • Apply rigorous standards to all aspects of the service • Set performance targets of a ‘good’ service • Check methods of delivery • Ensure you put into place the right monitoring methods

Should suppliers be involved in developing specifications? If so, how?

Advantages: Access their expertise Objective check & balance Opportunity for refinement Early notice of requirements Considerations: Conflict of interest? Unfair advantages? Reduces competition? Encourages dependency? Supplier involvement

Co-operation & collaboration Writing a specification may need to be a team effort

Activity 8 – Consulting with others • Identifying individuals in terms of their (stakeholder) interest and influence is sometimes important • Discuss who it may be necessary to engage with for large value items. Who could provide valuable information and advice on requirements and considerations for an item of significant expenditure?

General considerations • Successful procurement relies on the specification being a true and accurate statement of requirements • Specifications must take account of internal criteria, eg budgets • Consider that every requirement is likely to add cost • The end user should be aware of the content of the specification • Judgement and common sense are required when deciding on the content • Preparing a specification should be seen as a key partof the procurement cycle

Define & review need Exit & termination Manage contract performance Develop business case and write specification Manage implementation and transition Determineprocurement strategy Contract award Invite Pre-qualify suppliers Negotiate? Evaluate tenders Issue RFQ or ITT The procurement cycle

Output v Input specifications Functional / Output: Defines the task or desired result by focusing on what is to be achieved rather than the method for achieving the result Technical / Input: Defines the technical and physical characteristics of a requirement eg physical dimension, power input Execution risk is Execution risk is with supplier with the purchaser (The supplier proposes (You tell the supplier how to do it) what will do the job) Balance of risk

South West Employers