26 Jun The Project Business Case
Project Business Case
The business case is a document that helps decide if the project is desirable, achievable and viable. It is a key document that the decision makers use to decide whether the given project should be taken up. It helps them clarify, if possible quantify estimated costs, risks and the planned benefits
The business case is a documented economic feasibility study used to establish the validity of the benefits. A project manager is appointed formally when the business case is ready and a decision to undertake the project is already made.
The business case lists the objectives and reasons for project initiation. It helps measure the
project success at the end of the project against the project objectives. The business case is a project business document that is used throughout the project life cycle. The business case may be used before the project initiation and may result in a go/no-go decision for the project.
The business case considers all the aspects that will impact the project and the organization if the project is taken up. Before the business case, a needs assessment is performed. The needs assessment documents. Business goals and objectives, issues, and opportunities and recommending proposals to address them. The results of the needs assessment may be summarized in the business case document.
The project sponsor is generally accountable for the development and maintenance of the project business case document. The project manager is responsible for providing recommendations and oversight to keep the project business case, project management plan, project charter, and project benefits management plan success measures in alignment with one another and with the goals and objectives of the organization. Usually, the project manager is not officially appointed when the business case is being developed, but preferably, he should be involved in developing the business case . The process of development will enable him to grasp the background, the expectations of the customer, expectations of senior management and all the other key stakeholders. Involving an experienced project manager in developing the project business case, helps him manage the project in a better way. It increases chances of project success
Project managers should appropriately tailor the noted project management documents for their projects. In some organizations, the business case and benefits management plan are maintained at the program level. Project managers should work with the appropriate program managers to ensure the project management documents are aligned with the program documents
The business case is usually divided into different sections
Executive Summary: This section highlights the salient features and key points of the document. Expected ROI is also documented in this document.
Reasons:This section describes why the project is being undertaken. It elaborates the thought process for the project detailing why the project should be taken up . the section is elaborated on business needs. The business needs analyze the situation, make recommendations, define evaluation criteria among many important things. The reasons can include:
- Business Needs like:
- Need for action to be taken
- Documentation of what problem or opportunity is being addressed
- What is the scope
- Impacted stakeholders
- Analysis of the situation:
- Identifying
- Organizational goals and strategies
- Root causes of the problem
- Opportunity contributors
- Capability gap analysis (Required capabilities vs. available capabilities)
- Known risks
- Critical Success factors
- Decision criteria for various assessments
- Categories of criteria like Must/ Desired/ Not necessary
- Identifying
Business Options: The three basic options when considering a potential project are:
- Do nothing: The do nothing option is the one option which, if preferable to all other options, means that the project is not viable. In this case, there isn’t a project to invest in, and the organization can continue with the existing business as usual activities.
- Do the minimum
- Do something.
The ‘do the minimum’/’do something’ options represent potential projects each with their own costs, times, benefits and risks.
The Business Case should analyze each option, so that the project stakeholders can determine which presents the best investment for the organization.
The business case should very clearly state why one decision is better over the other from the above 3 options (e.g. it will deliver the best return on investment).
The board or the program manager will take a decision to go ahead based on this information. Rest of the information in the business case is based on the assumption that the best option is approved
Expected Benefits: The project may bring in many different kinds of benefits resulting from it. For example, investing in new machinery might bring benefits in terms of greater productivity and lower maintenance costs. Investment in training may realize benefits in the form of greater staff productivity. Sometimes, the benefits may not be easy to quantify. For example, if a hospital invests in new equipment may bring improvements in patient care, which would be an obvious benefit to the patient, but the financial benefits may be harder to quantify.
Where possible, benefits should be made measurable (e.g. the percentage increase in sales), to enable an informed judgment about the value of a project.
Expected dis-benefits: – A dis-benefit from a project is an actual consequence of a project which is perceived to be negative by one or more stakeholders (e.g. a drop in productivity whilst the project is ongoing). Dis-benefits are not equivalent with project risks. Risks are uncertain events that may or may not occur whereas dis-benefits actual negative consequences of the project that will occur. Dis-benefits should be analyzed as part of the investment appraisal (see a later section), to ensure that they do not outweigh the expected benefits of the project.
Timeline: Two toes if timelines are documented in this section. The first one discusses project duration. How much time a project should take to deliver the project. The second timeline talks about ho much time will be needed for the benefits to be handed over or transitioned to its rightful owners
Cost: The business case documents two types of costs. First one is the running costs of the project..The second is operations and maintenance cost of the project deliverables. This section also documents possible funding arrangements for these costs
Investment appraisal – the business case is basically a feasibility study for the project. This section of the business case contains a comparison of the aggregated benefits and dis-benefits against the risks and costs of the project along with any ongoing operational or maintenance costs. The objective of the investment appraisal is to assess the value of the project as an investment
Major risks – this section contains a summary of any major risks associated with the project, including an evaluation of their likely impact, and plans for dealing with their occurrence. These risks are taken into consideration by the Project Board when deciding whether to proceed with the project both when the project is starting up and also at the end of each management stage. If the project is deemed as too risky, then the Project Board may of course decide that it isn’t sensible to proceed.
Project End Review: Once the project completes all the deliverables, the benefits are compared with the business case to validate if the business case was realized. The Benefits Measurement Plan specifies how to measure the deliverables against the business case.
The business case is a guiding document for the project and the project has to perform within the directions set by the business case. The project manager will use this document extensively to keep the project aligned with it. As a PMP examination aspirant, you need to realize the importance of business case for keeping your project on the right track
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