The Outline Business Case (OBC) aims to evaluate and identify the preferred option for delivery of the project, considering affordability and public value. Using the 5 case model, the OBC revisits the strategic, economic, commercial, financial and management aspects of the shortlisted options. After the OBC, the project moves to the procurement phase.

The purpose of the OBC is to revisit the options identified in the Strategic Outline Case (SOC) to identify the option which optimises public value (‘the preferred option’) following more detailed appraisal, and to set out the possible deal while confirming affordability and putting in place the management arrangements for the successful delivery of the project.

At conclusion of the OBC, senior management should be in a position to consent to the procurement phase of the project.

Five Cases in the Outline Business Case

The Strategic Case

• Confirm the case for change and record any material changes in the opening section to the strategic case in the OBC.

The Economic Case

The next step in the development of the economic case appraises the social, environmental and economic costs, benefits and risks for the shortlisted options and identifies the preferred option: the option most likely to offer the best social value for delivery of the project. While bringing together a variety of information on costs, benefits and risks to aid decision making, option appraisal should not be seen as unequivocally providing the ‘right’ answer.

The goal is ‘optimal’: we are seeking to identify the option which best balances the expected costs in relation to the benefits and risks.

• Revisit and refine the efficacy of the preferred way forward and other options in the shortlist, because more detailed information of the associated inputs, outputs and activities will be required for preparing the economic appraisals.
• Calculate the discounted costs and benefits for the shortlisted options and record the discounted values and benefit/cost ratios (BCRs) for each option.
• Undertake an appraisal of the quantifiable and qualitative benefits and explain why these are important enough to affect the decision for the ranking of the options. The main aim is to identify benefits that are quantifiable and can be expressed in monetary equivalent terms and to avoid defining benefits that cannot be measured, assessed or evaluated in any realistic way because there is no established evidence base.
• Identify and quantify the risks associated with the options contained in the economic appraisals for the project’s shortlisted options.
• Selecting the preferred option should be reasonably straightforward in the decision-making process if the required analysis has been rigorously undertaken.

The Commercial Case

The purpose of the commercial case is to set out the procurement arrangements for the project’s key outputs and activities. These arrangements need to be considered from the outset in order to secure long-term public value during the operational phase of the project.

Completing the commercial case requires undertaking the following actions for the preferred option identified in the economic case.

• Determine the procurement strategy and possible procurement routes for the project’s key outputs and activities.
• Identify the project’s service streams and required outputs and the scope and content of the potential deal to be made with public and private sector service providers.
• Identify how the service risks in the design, build, funding and operational (DBFO) phases of the project may be apportioned between the public and private sectors.
• Identify how the project intends to pay for its key services and outputs over the expected lifespan of the contract(s).
• Outline the contractual arrangements for the project, including the use of a particular contract, the key contractual issues and its accountancy treatment and personnel implications.

The Financial Case

The purpose of the financial case is to ascertain the affordability and funding requirements of the preferred option and to demonstrate that the recommended project is affordable. This involves determining the funding and affordability of the proposed project on the organisation’s income and expenditure account, balance sheet and prices for its services.

The focuses of the financial and economic appraisals are different. The economic appraisal focuses on the value for money of the overall project. The financial appraisal focuses on the affordability and fundability of the project. The costs and benefits appraised in the financial case reflect an accountancy-based perspective. Consequently, both resource and non-resource costs and benefits are factored into the analysis; so, for example, whereas VAT and depreciation are excluded from the economic appraisal, these costs are included in the financial appraisal because they have a direct bearing on the affordability of the project.

• Prepare financial model and the financial appraisal.

The Management Case

The purpose of the management case is to put in place the arrangements for the successful delivery of the project.

• Put in place the strategy, framework and plans for successful project delivery using a proven methodology for guiding investments through a controlled, well-managed and visible set of activities to achieve the desired results and benefits.
• Put in place the strategy, framework and plans required for managing change.
• Put in place the management arrangements required to ensure that the project delivers its anticipated benefits.
• Put in place arrangements for managing and mitigating risks during the key phases of the project.
• Put in place the necessary arrangements for project assurance, monitoring and evaluation.