South West Employers
Business Case & Specification Writing
Trainer: Date:
Activity 1 - Icebreaker
Is a middle child
(1 point)
Likes to eat Japanese food
(1 point)
Is wearing pink
(1 point)
Plays a team sport
(1 point)
Speaks another language
(1 point)
Wears glasses
(1 point)
Is over 6’ tall
(1 point)
Has less than four letters in his/her
first name
(1 point)
Has a last name that starts with a W
(1 point)
Has green eyes
(1 point)
Owns a Vauxhall car
(2 points)
Likes classical music
(2 points)
Preferred Maths to English in school
(2 points)
Knows someone famous
(2 points)
Has red hair
(2 points)
Has more than 2 children
(3 points)
Has made a parachute jump
(3 points)
Has visited more than 10 countries
(3 points)
Has more than 7 letters in his/her
first name.
(3 points)
Has a birthday in the same month as me
(3 points)
One unusual fact I have found out about someone here is? ____________________________ (5 points)
How many points do you have? _______
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
1. Introduction to Business Cases
2. Business Case Content
3. What is a Specification?
4. Writing a Specification
What is a Business Case and when is one needed?
Some functions 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
Innovation Savings - Think and Do Different
Su
pp
lier
Pri
ces
Profit
Risk Premium
Overheads
Direct Costs
10%
5%
45 – 50%
40 – 50%
Traditional Procurement
Squeeze the profit marginmay yield 3 – 5%
Target the 90%Might achieve 40%
Soft market testing
Demand Challenge
Innovate
Benchmark
Change of Use
Why have a Business Case?
ComplianceRisk
ManagementSecure
ResourcesSecureBudget
StakeholderBuy-In
EvaluateBenefits
InvestmentAppraisal
ProvideBaseline
MobiliseSupport
ProjectStructure
Approval
Requirements
Assess the situation, what (if anything) is needed?
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
Sections
1. Introduction to Business Cases
2. Business Case Content
3. What is a Specification?
4. Writing a Specification
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
Keep Satisfied Key Players
Minimal Effort Keep Informed
Internal
High
High
Low
Sta
keh
old
er P
ow
er
Stakeholder Interest
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 should
add 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
TIME(or production)
£
Total costs
Accumulation ofBenefits
Break even point
Benefits management & realisation Hard benefits
Soft benefits
Measurement
Manage and trackAnd 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
Strengths Weaknesses
Opportunities Threats
Internal
External
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
LogicalThis 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
Summary of typical content
1. Title page
2. Executive summary
3. Table of contents
4. Definitions/glossary of terms
5. Introduction
6. Project management
7. Definitions, scope and implications
8. Technical considerations
9. Commercial considerations
10. Risk analysis
11. Finance and resource considerations
12. Benefits management and realisation
13. Options appraisal
14. Recommendation
15. Appendices
16. Bibliography
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?
Sections
1. Introduction to Business Cases
2. Business Case Content
3. What is a Specification?
4. Writing a Specification
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!
Why is a specification needed?
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
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?
Supplier involvement
Advantages:
Access their expertise
Objective check & balance
Opportunity for refinement
Early notice of requirements
Considerations:
Conflict of interest?
Unfair advantages?
Reduces competition?
Encourages dependency?
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
The procurement cycle
Planning
Enquiry
Implement
Define & review need
Define & review need
Develop business case and write specification
Develop business case and write specification
Determine procurement strategy
Determine procurement strategy
InviteInvite
Pre-qualify suppliers
Pre-qualify suppliers
Issue RFQ or ITTIssue RFQ or ITTEvaluate tendersEvaluate tenders
Negotiate?Negotiate?
Contract awardContract award
Manage implementation and transition
Manage implementation and transition
Manage contract performance
Manage contract performance
Exit & terminationExit & termination
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
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
Technical / Input: Defines the technical and physical characteristics of a requirement eg
physical dimension, power input
Balance of risk
Execution risk iswith the purchaser
(You tell the supplierhow to do it)
Execution risk iswith supplier
(The supplier proposeswhat will do the job)
Output v Input specifications
Functional/Output:
Focuses on outputs
Details ‘delivery’
Reliant on supplier
Emphasises performance
Assigns risk
Delegates control
Technical/Input:
Focuses on inputs
Details ‘method’
Prescriptive
Emphasises compliance
Retains risk
Keeps control
Outcome specifications
Some golden rules
Do not get carried away with technical content. Always keep focused on the requirements (the must haves not the would be nice to haves)
Keep specifications as simple as possible
Ensure technical drawings etc are correct and up to date
Clarify the meaning of acronyms and ‘jargon’
When in doubt – explain
Avoid specifying brands (unless required)
Prepare, prepare, prepare
When to develop a specification
Is there an existing specification which meets your requirements exactly? Writing new specifications which are not needed can lead to duplication and lack of standardisation, adding unnecessary costs. Consider re-using or adapting a previous specification
However, writing a new specification may help you to improve on previous practice and to encourage innovation. There may also be cost savings to be made if you appraise options rather than simply run with what has been done before
Re-use of existing specifications
Exercise caution – changes may have occurred which could impact on the specification
Internal
Macro
Micro
Activity 9 – PQQ Selection
In three groups, prepare your response to the PQQ evaluation activity
First, decide on your evaluation criteria
Secondly, decide on your assessment method (scoring, pass/fail or traffic lights, or some other method)
Thirdly, use the matrix provided to evaluate
Sections
1. Introduction to Business Cases
2. Business Case Content
3. What is a Specification?
4. Writing a Specification
Writing a specification
Preparation and planning are key
Arrange the content into a logical form
Consider the likely main headings and then add in sub-headings
Consider ‘need to have’ versus ‘nice to have’ requirements
Everything included in the specification will become part of your legally binding contract with the supplier
Does the specification make it absolutely clearwhat is required? – test it out with colleagues
Structure and layout
There are no fixed rules
Put yourself in the position of the supplier
Is it logical?
Does it make sense?
Is it unambiguous?
Level of detail
Will vary with:
The value of the contract
The complexity of the requirement
The potential risks involved
Contents – summary
Structure:
Identification
Table of contents
Introduction
Background/history
Glossary
Other documents
Bibliography
Considerations:
Standards
Legislation
Regulations
Requirements:
Scope
Detailed requirements
On completion
Meet internal sign-off authorisation limits
Where appropriate, obtain sign-off before proceeding
Keep key stakeholders informed
Retain the specification in the contract file post-award
Use as a reference document for ongoing supplier performance management
Activity 10 – Specification Development
Prepare a specification for an item that adequately details your requirements. This should have sufficient information to allow another group to propose a price to deliver this to you
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 tomanage them