The Business Case is one of the most important project management documents that exists in a PRINCE2 project, containing the relevant and optimum mix of information to judge whether the project is, and remains, viable and achievable and is therefore worth investing in.
The Project Board and Stakeholders must have confidence at all times that the project remains viable and since its viability is ongoing the Business Case is not static and must therefore be actively updated with current information on costs, risks and benefits throughout the project's lifecycle.
- Provides Business Justification
- Developed at the start
- Maintained throughout
- Reviewed at End Stage Assessments
- Reason for the Project
- Expected Benefits
- Estimated Costs
- R.O.I Calculations
- Drives Decision Making
- Answers the questions:
- Is the continued investment in this project still worthwhile?
- If so, the Project Manager will inform the Project Board on how to continue
- If not, (e.g. the R.O.I is no longer probable) the Project Manager will recommend to the Project Board that the project should be stopped
Outputs, Outcomes and Benefits in PRINCE2:
- A project's Output is any of the project's specialist products (whether tangible or intangible)
- An Outcome is the result of the change derived from using the project's outputs
- A Benefit is the measurable improvement resulting from an outcome that is perceived as an advantage by one or more stakeholders
Example of Outputs, Outcomes and Benefits
|Output:||New Sales System|
|Outcome:||Sales orders are processed more quickly and accurately|
|Benefit:||Costs are reduced by 10%, volume of sales orders increased by 15% and revenue increased by 10% annually|
Development of the Business Case
In PRINCE2, the Business Case is developed at the beginning of the project and maintained throughout the life of the project, being formally verified by the Project Board at each key decision point, such as end stage assessments, and confirmed throughout the period that the benefits accrue.
In this context:
- Develop means getting the right information upon which decisions can be made
- Verify means assessing whether the project is (still) worthwhile
- Maintain means to update the Business Case with actual costs and benefits and current forecasts for costs and benefits
- Confirm means assessing whether the intended benefits have been (or will be) realized. Confirming benefits will mostly take place postproject.
Developing the Business Case
The Project Executive is responsible for creating the Business Case and ensuring that the benefits defined by the Senior User represent value for money, are aligned to corporate objectives and are capable of being realised.
Although development of the Business Case can be delegated it is essential that whoever is writing it has the appropriate business skills and acumen (e.g. understanding of profit and loss, balance sheets, cashflow forecast).
The outline Business Case is derived from the Project Mandate (the trigger for the project) which should also contain information on the Business Case in terms of why the project is needed. In the Starting-Up process, the Business Case information is taken from the Project Mandate and copied to the outline Business Case in the Project Brief where it is elaborated on. The Project Brief is then presented to the project board for authorization.
During the Initiation Stage, the outline Business Case is extended into the full Business Case document where it becomes part of the PID (Project Initiation Documentation).
Verifying and Maintaining the Business Case
The Business Case drives all decision making by ensuring that the project remains justified and that the business objectives and benefits being sought can be realized, and should therefore be reviewed:
- At the end of the Starting up a Project process by the Project Board in order to authorize project initiation based on a reasonable justification
- At the end of the Initiating a Project process by the Project Board in order to authorize the project
- As part of any impact assessment by the Project Manager of any new or revised issues or risks
- In tandem with an Exception Plan by the Project Board, in order to authorize the revised stage and the continuation of the project
- At the end of each stage by the Project Manager to determine whether any of the costs, timescales, risks or benefits need to be updated
- At the end of each stage by the Project Board, to authorize the next stage and the continuation of the project
- During the final stage by the Project Manager, to assess the project’s performance against its requirements and the likelihood that the outcomes will provide the expected benefits
- As part of the benefits review (possibly by corporate or programme management), to determine the success of the project outcomes in realizing their benefits
Confirming the Benefits
- Identify the benefits
- Select objective measures that reliably prove the benefits
- Collect baseline measures (from which the improvements will be quantified)
- Decide how, when and by whom the benefit measures will be collected
The Senior User(s) specifies the benefits and is held to account by demonstrating to corporate or programme management that the forecast benefits that formed the basis of project approval are in fact realized. This may involve a commitment beyond the life of the project as it is likely that many benefits will not be realized until after it has closed.
By default, the Executive is responsible for ensuring that benefits reviews are planned and executed, but there are circumstances where this may not always be the case:
- For projects in a programme environment, the project's Benefits Review Plan may be produced and executed by the programme, as one of the roles of the programme is to coordinate the realization of the benefits of its projects
- If the corporate organization has a centre of excellence or some form of performance monitoring unit, it may undertake the responsibility for measuring benefits of all projects within the organization
- For post-project measurement activities, the responsibility for benefits reviews will transfer from the Executive to corporate or programme management as the project closes (as the reviews will need to be funded and resourced)
The Benefits Review Plan is first created by the Project Manager in the initiation stage and is submitted to the Project Board for approval when seeking project authorization. It is then updated towards the end of each stage with actual benefits achieved, and a revised plan is created for any remaining reviews whether within or beyond the life of the project.
Contents of a Business Case
The Business Case should describe the reasons for the project based on estimated costs, risks and expected benefits. It typically contains:
- Executive Summary
- Explains why the project is required
- Business options
- Do nothing (should always be considered)
- Do the minimum
- Do something
- Expected Benefits
- List each benefit expected to be achieved
- Defining the current status of each benefit in quantifiable terms (so they can be measured, and tolerances set)
- Define how and when each benefit can be measured
- Expected Dis-benefits (really! who thought up that word - gah!! -> Drawback, Disadvantage)
- An outcome perceived as negative by one or more stakeholders
- Consequences of actual activity (A.K.A Issues) as opposed to Risks (that are uncertain whether they will arise)
- Period over which project costs will be incurred
- Period over which Costs/Benefits analysis will be based
- When Benefits are expected
- Earliest / Latest feasible Start date
- Earliest / Latest feasible Completion date
- Helps identify tolerances and timings for benefits review
- Derived from the Project Plan (including assumptions upon which they are based)
- Should include ongoing Operations and Maintenance costs (and their funding arrangements)
- Investment Appraisal
- Comparison of the development, operations and maintenance costs with the value of the benefits over a period of time (A.K.A Investment Appraisal)
- Should cover the cost of doing the project along with the ongoing Operations and Maintenance costs
- Major Risks
- A summarised Risk Profile highlighting the major risks that will have an effect on the business objectives and benefits
- Should cover the project delivery along with the ongoing Operations and Maintenance aspects
Responsibilities relevant to the Business Case
(business assurance responsibilities)