The Transport Business Case provides evidence to support transport and transport-related investment decisions. The Business Case should demonstrate the need for change, how the proposed investment meets those needs and aligns with broader policy objectives. It should also provide evidence that the investment provides value for money, is commercially viable, financially affordable and deliverable.
The overall Business Case includes five sub-cases as follows:
(a) Strategic Case. The Strategic Case determines whether or not an investment is needed. It demonstrates the case for change by providing a clear rationale for making the investment and showing how the investment will further stakeholder objectives.
(b) Economic Case. The Economic Case assesses whether or not the investment is likely to provide value for money. In line with the Treasury’s appraisal requirements, the impacts considered in the Economic Case are not limited to those directly impacting on the measured economy, nor to those which can be monetised. They can include all economic, social and environmental impacts that are additional and can be attributed to the investment; that is, they would not have occurred without the investment.
The initial Value for Money category is identified based upon the Benefit Cost Ratio (BCR) of the scheme, using monetised impacts in line with DfT guidance. These categories are:
- Poor VfM if the BCR is less than 1.0
- Low VfM if the BCR is between 1.0 and 1.5
- Medium VfM if the BCR is between 1.5 and 2.0
- High VfM if the BCR is between 2.0 and 4.0
- Very high VfM if the BCR is greater than 4.0
The initial BCR typically includes direct user benefits, environmental impacts on noise, air quality or emissions as well as budget and tax implications. Additional benefits may be included in an ‘adjusted BCR’, for example wider economic impacts or reliability benefits. Qualitative and non-monetary factors are captured through the use of an appraisal summary table which requires an assessment of the impact of the scheme across several criteria from severe negative to severe positive.
The value for money assessment should identify impact of the investment on value and risk under different economic and investment scenarios. It also needs to show where the costs and benefits accrue, helping with cost allocation and benefits realisation.
(c) Commercial Case. The Commercial Case provides evidence on the procurement strategy that will be used to engage the market. It should present evidence on risk allocation and transfer, contract timescales and implementation timescale as well as details of the capability and skills of the team delivering the project and any personnel implications arising from the proposal.
(d) Financial Case. The Financial Case concentrates on the affordability of the proposal, its funding arrangements and technical accounting issues. It presents the financial profile of the different options and the impact of the proposed deal on the DfT’s accounts.
(e) Management Case. The Management Case considers whether the investment is deliverable. It reviews procedures for programme and project governance, risk management, stakeholder management and assurance. There should be a clear and agreed understanding of what needs to be done, by who and by when, with measures in place to identify and manage risks. The Management Case sets out a plan to ensure that the benefits that are set out in the Economic Case can be realised. All programmes and projects are expected to have a risk management plan that is proportionate to their scale.
The overall Business Case is developed across three key phases. In each phase, each of the Five Cases listed above is developed further.
- The process starts with a Strategic Outline Business Case (SOBC) that sets out the need for intervention and how it aligns with policy aims and objectives.
- An Outline Business Case (OBC) is then set out, providing a more detailed assessment of the options and selecting a preferred solution.
- The Full Business Case (FBC) is used to decide whether the proposal should move to the implementation phase, it includes detail on the proposed contractual management and processes.
Current DfT guidance recommends that each of the Five Cases is developed to a different extent depending on the phase. In the first phase the strategic and economic case for the project are key to securing the support for the Business Case. Once these aspects are in place, greater detail on the Commercial, Financial and Management cases are required.
Table 3.1 Importance of each of the Five Cases during each phase of the Business Case