The Five Case Model - A Template for Local Authorities' Project Business Cases? Phiroza Katrak

Public sector decision makers who approve major spending proposals need relevant and comprehensive information about proposed schemes, so that they understand the key issues and supporting narrative and evaluate them objectively before deciding whether or not to commit time and resource to major schemes.  

A coherent, well-prepared business case supports evidence-based decision making. It also prepares the groundwork for an efficient planning and approval process and the basis for managing and monitoring the scheme during and after implementation.

In 2018 the G20 group of nations adopted the Five Case Model as an international standard for infrastructure projects nationally and regionally. It is a structured approach for putting together a project proposal that outlines and demonstrates its economic and commercial viability and whether it can be delivered. The model, recommended by HM Treasury and Welsh Government, is best practice methodology for use by those responsible for using public resources for a project’s delivery.   

This business case development framework need not stop at infrastructure projects.  Local authorities consider capital expenditure schemes in which commerciality is a central or supportive objective.  The broader principles, systematic approach and methodology which are intrinsic to the Five Case Model provide a valuable template for non-infrastructure projects involving public resources or assets.

What does the Five Case Model encompass?

  • Strategic Case: Does the proposed scheme provide a strategic fit and is it supported by a compelling case for change?

This is the rationale whether the project is actually required. What are the existing arrangements (‘business as usual’)? Is there a need for change and why? What are the additional objectives and outcomes/benefits of the project? What are the risks, constraints and dependencies? Does it align with other projects and programmes in the organisation’s strategic portfolio? The business needs should be well-researched and supported by service demand and capacity planning. This ensures that schemes are planned and delivered as part of an approved strategy and which link with other related programmes and projects.

  • Economic case: Which option optimises public value?

This part of the business case requires a range of realistic options to be appraised and also compared with ‘business as usual’. The critical success factors on which the scheme(s) will be measured and identification of the preferred option delivering best public value, including wider social and environmental benefits are included here.

  • Commercial case: Is it commercially viable and attractive to the supply side?

The commercial dimension should demonstrate that the preferred option will result in a viable procurement and well-structured deal between the public sector and its providers. The focus here is on identifying which public- and private-sector partners’ and suppliers’ goods/services will be called upon, the procurement routes, the likely contractual arrangements and charging mechanisms and personnel implications.  Outputs and milestones are also addressed in this section as are business challenges and an outline of potential risks.

  • Financial case: Is the scheme both fundable and affordable?

Ascertaining the affordability and funding requirement of the preferred option is critical. It requires a thorough understanding of the capital, revenue and whole life costs of the scheme and how it will impact upon the balance sheet, income and expenditure and pricing arrangements (if any) of the organisation. Are the revenue and cost assumptions realistic?  Have they been rigorously tested with scenario analyses and their net effect on I&E and the balance sheet? The challenge here is also to identity potential funding gaps and take a view on how these would be resolved.  

  • Management Case: The organisation’s and its partners’ plans and capacity to deliver the scheme successfully.

This section sets out the arrangements for implementation and to determines the arrangements which will be in place for the delivery of the scheme from start to finish.  Programme management, contingency arrangements, governance and risk management arrangements are set out here.  This section also establishes the feedback, monitoring and evaluation arrangements for evidence-based reporting to demonstrate the scheme is being managed in accordance with best practice, objectives are being met and anticipated outcomes delivered.

Projects are more likely to deliver their intended output and benefit if they are properly scoped, planned and their cost and revenue impacts substantiated and understood from the outset.  

The latest version of the best practice guidance issued by HM Treasury and Welsh Government aligns with the refreshed Green Book 2018 and provides a practical “step by step” guide for building better business cases for better outcomes.