- Foreword and Introduction
- 1: Putting projects in context
- 2: Entity arrangements
- 2.1 Strategic alignment
- 2.2 People and culture
- 2.3 Effective governance
- 2.4 Common APS Requirements
- Summary for entity arrangements
- 3: Individual project proposals
- 3.1 Clarifying the concept
- 3.2 The business case
- 3.3 Approving the project
- Summary for individual projects
- 4: Project implementation
- Quick reference card
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Tips for PDF and HTML versions [0.5MB]
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Outcomes and cost
Better Practice results: Executive involvement improves the relevance to decision-makers of the statement of outcomes and costs, and their reliability.
“At its most basic, in the business case the project sponsor is saying to the decision-maker: If you give me these resources, I will deliver these outcomes. You want to make that kind of offer as clearly and as correctly as you can.”
The statement of proposed outcomes and costs for the project is the heart of the case being put to the decision-maker. The main reason for the detailed work in developing the business case – such as requirements analysis and risk analysis – is to support a clear and definite statement of the planned outcomes and costs.
It is important that the project sponsor ensures that the statement of outcomes, timeframe and costs in the business case:
- focuses on outcomes and costs of interest to the decision-maker;22
- is internally consistent – that is, the timeframe and costs are appropriate to the outcomes described;
- allocates responsibility for expenditure and delivery of outcomes;23 and
- is at a level of accuracy that is appropriate to allow a prudent investment decision to be made.
Providing a description of outcomes appropriate to justifying an investment implies having measureable, or assessable, indicators for the outcomes. In cases where outcomes are difficult to measure accurately, it is a reasonable expectation of decision-makers that suitable proxy measures of success be identified, particularly for more costly projects.
To help justify the expenditure, and to evaluate success later, it is good practice to indicate the extent of improvement in the outcomes, or associated performance indicators, expected to be due to the project, and to arrange appropriate measurement before and after implementation.
The outcomes and cost of a project are directly related to each other. A particular set of outcomes will involve a particular set of costs. This interrelationship means the outcomes and costs will be developed together, based on a detailed study of the associated project requirements, risks and other relevant factors.
Where a progressive planning approach has been adopted, as suggested in the preceding section 3.1 of this Guide, developing the business case will involve building on the work already done in preparing, and gaining approval of, a project concept plan. This additional work may result in a greater understanding of the work involved, and provide fresh perspective on the project.
Project sponsors can assist the development of a statement of outcomes in the business case by:
- Identifying the business outcomes of most relevance to decision-makers (see earlier discussion at page 47). For many projects, a relatively small number of outcomes are of central interest to decision-makers.
- Reviewing the proposed scope of the project – in particular using their broader perspective and experience to identify outcomes that may be too ambitious, or which may be missing;
- Identifying related outcomes which are of interest to decision-makers which will not be delivered by the project, and arranging that their exclusion is mentioned in the business case summary, to help reduce the risk of incorrect expectations.
To support accurate and informative costing of project proposals for decision-makers, the project sponsor should give particular attention to:
- The use of appropriately skilled staff to undertake the costing. Reliably estimating the cost of projects – particularly those with ICT elements – can be complex.
- The parameters used as the basis of financial assessments. For example, the net present value of a project depends strongly on the timing of the benefits and costs, and the expected life of assets. It is prudent for the project sponsor to have such parameters identified and to make a judgement on their appropriateness. Some parameters which affect financial assessments may also be included in other sections of a business case, such as the assumptions section – for example, unit costs or client numbers, and the requirements section – for example, the expected life of a system.
- The cost estimates being sufficient to achieve the proposed outcomes. As discussed in the following section, this is generally achieved by developing a complete set of the requirements, and costing those requirements to estimate the cost of developing the project products. The full cost will also need to include the rollout and handover stages, and any operational costs needed to achieve the proposed outcomes. A useful crosscheck is to have an independent review of the costing.
- The cost estimates including a contingency allowance, and that the amount is appropriate to the risks identified.
- Financial management arrangements – such as to whom project funds need to be allocated and how resultant savings or income will be managed.
- Identifying non-financial resources required and making relevant information visible to decision-makers as issues needing to be taken into account. For example, some projects may require the allocation of scarce internal facilities or specialist staff.
- The correct accounting treatment of expenditure, in particular the distinction between capital and operational expenditure.
22: Decision-makers will also be interested in any relevant non-financial requirements for the project.
23: By default, the project sponsor is responsible for delivering the project products. Given the possible involvement of different parties in a project, it is useful to clarify responsibility for the project outcomes and all the elements of expenditure needed to achieve those outcomes.
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