Options appraisal, the business case & procurement

1. Options appraisal, the business case & procurement Duncan Wood-Allum

2. Definitions An Options Appraisal is described as “The process of defining objectives, examining options and weighing up the costs, benefits, risks and uncertainties of those options before a decision is made.” (Source: HM Government: Green Book).

3. Definitions A Business Case presents clearly information necessary to support a series of decisions. These decisions, over time, increasingly commit an organisation to the achievement of the outcomes or benefits possible as a result of investment in business change. Early decisions focus on whether the investment is justified in value for money terms assessing: benefits, strategic fit, achievability, affordability, options and commercial aspects. (Source: Office of Government Commerce 2008).

4. Definitions Procurement is defined as “the process of acquiring goods, works and services, covering both acquisition from third parties and from in-house providers. The process spans the whole life-cycle from identification of needs, through to the end of a services contract or the end of the useful life of an asset. It involves options appraisal and the critical 'make or buy' decision”. (Source: National Procurement Strategy for Local Government, October 2003).

5. Discussion - Option appraisal & procurement. Are your current services and activities aligned effectively to clearly defined local needs and desired outcomes? How would you go about identifying and considering delivery options for meeting needs and achieving the defined outcomes? How would you translate your requirements into effective working relationships with a delivery partner or range of delivery partners? What are you doing now to position yourself as a delivery partner in other commissioning processes going on around you?

6. Appraising options for meeting needs Needs Resources Review Service delivery Users Business case development Priorities communities Monitoring Delivery Delivery options Procurement

7. Options appraisal Typically, an options appraisal is used to assist Councils take the right decisions by ensuring that no policy, programme or project is adopted without first answering these key questions: Are there better ways to achieve our objectives? Are there better uses for the resources available? Is this the best way to achieve our desired outcomes?

8. Options appraisal Key benefits: You achieve clarity on desired outcomes for your services. You have an objective, independent, transparent and open assessment that would stand up to internal / external scrutiny. You understand the nature and level of risk relating to the chosen option. You can select an optimal ‘best value’ solution.

9. Options appraisal Key consequences of not conducting an effective appraisal: You may not achieve value for money. You may face a challenge. You may negatively impact on your Comprehensive Area Assessment. You may experience unforeseen financial, service and operational impacts. You may be at risk of a legal challenge by a supplier. You may be saddled with a poor solution for a significant period of time. Critically, you decrease your chances of achieving your desired outcomes / solution.

10. Establishing the strategic need Establish the range of resources available. Establishing the key outcomes and objectives you want to achieve in terms of meeting the strategic need.Establish your ‘do minimum’ or “baseline” position.Establish your organisation’s position on risk transfer. Develop your evaluation criteria for the long and short listing process. Identify the full range of options, which may be available to deliver your desired outcomes and objectives.Create a short list from a high level option appraisal.Evaluate fully the short-listed options against the evaluation criteria. Progressing the preferred option. 10 key steps • Establishing the strategic need. • Establish the range of resources available. • Establishing the key outcomes and objectives you want to achieve in terms of meeting the strategic need. • Establish your ‘do minimum’ or “baseline” position. • Establish your organisation’s position on risk transfer. • Develop your evaluation criteria for the long-and short-listing process. • Identify the full range of options, which may be available to deliver your desired outcomes and objectives. • Create a short-list from a high level option appraisal. • Evaluate fully the short-listed options against the evaluation criteria. • Progressing the preferred option.

11. Establishing the strategic need Establish the range of resources available. Establishing the key outcomes and objectives you want to achieve in terms of meeting the strategic need.Establish your ‘do minimum’ or “baseline” position.Establish your organisation’s position on risk transfer. Develop your evaluation criteria for the long and short listing process. Identify the full range of options, which may be available to deliver your desired outcomes and objectives.Create a short list from a high level option appraisal.Evaluate fully the short-listed options against the evaluation criteria. Progressing the preferred option. Supplier types In house Third Sector Social Enterprise (created from an in house operation) Third Sector Social Enterprise (already existing) Private Sector Operator Private Sector Operator with Social Enterprise Model (Hybrid) Mixed economy

12. Business Case High level business case Outline business case Implementation Strategic business case Full business case Benefits evaluation The development of a business case runs in parallel to the commissioning process.

13. Establishing the strategic need Establish the range of resources available. Establishing the key outcomes and objectives you want to achieve in terms of meeting the strategic need.Establish your ‘do minimum’ or “baseline” position.Establish your organisation’s position on risk transfer. Develop your evaluation criteria for the long and short listing process. Identify the full range of options, which may be available to deliver your desired outcomes and objectives.Create a short list from a high level option appraisal.Evaluate fully the short-listed options against the evaluation criteria. Progressing the preferred option. Procurement – who’s involved? • Project Sponsor • Lead Member • Project Director / Manager • Key partners / stakeholders • Finance (including audit) advice • Legal advice • Procurement advice

14. Establishing the strategic need Establish the range of resources available. Establishing the key outcomes and objectives you want to achieve in terms of meeting the strategic need.Establish your ‘do minimum’ or “baseline” position.Establish your organisation’s position on risk transfer. Develop your evaluation criteria for the long and short listing process. Identify the full range of options, which may be available to deliver your desired outcomes and objectives.Create a short list from a high level option appraisal.Evaluate fully the short-listed options against the evaluation criteria. Progressing the preferred option. Procurement – other skill sets • Project management. • Building surveying. • Cost management. • Development monitoring. • Business planning / benchmarking. • Performance management. • Consultancy regarding output / outcome specifications. • Legal advice regarding management agreements and contracts. • Other specialist advice.

15. Establishing the strategic need Establish the range of resources available. Establishing the key outcomes and objectives you want to achieve in terms of meeting the strategic need.Establish your ‘do minimum’ or “baseline” position.Establish your organisation’s position on risk transfer. Develop your evaluation criteria for the long and short listing process. Identify the full range of options, which may be available to deliver your desired outcomes and objectives.Create a short list from a high level option appraisal.Evaluate fully the short-listed options against the evaluation criteria. Progressing the preferred option. Soft Market Testing Can generate interest from the market Be clear on what you want to achieve and that it is achievable Used to refine elements of the business case Enables you to ascertain when it would be best to approach the market formally. It may be necessary to first build the capacity of the potential market

16. Establishing the strategic need Establish the range of resources available. Establishing the key outcomes and objectives you want to achieve in terms of meeting the strategic need.Establish your ‘do minimum’ or “baseline” position.Establish your organisation’s position on risk transfer. Develop your evaluation criteria for the long and short listing process. Identify the full range of options, which may be available to deliver your desired outcomes and objectives.Create a short list from a high level option appraisal.Evaluate fully the short-listed options against the evaluation criteria. Progressing the preferred option. Competitive Dialogue

17. Supplier considerations Understand the true costs of providing your service You will need to ensure you will have the capacity to demonstrate the achievement of outcomes in your approach Have you fully considered the performance management implications in the contract? Make sure the contract is well thought through and protects the interests of both parties

18. Are your current services and activities aligned effectively to clearly defined local needs and desired outcomes? 1.

19. How would you go about identifying and considering delivery options for meeting needs and achieving the defined outcomes? 2.

20. 3. How would you translate your requirements into effective working relationships with a delivery partner or range of delivery partners?

21. 4. What are you doing now to position yourself as a delivery partner in other commissioning processes going on around you? For example, health, older people, children & young people?