5 Case Business Model Single Stage Case
………………………………..
Primary Care Resource Centre
Version No:1 DRAFT
Issue Date: ………… 2013
5 Case Business Model Single Stage Case …………….. Primary Care Resource Centre Version 1.2 Date:
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Version History
Version Date Issued Brief Summary of Change Owner’s Name
Version 1
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Key Acronyms
Term / Acronym Definition
AEC Annual Equivalent Costs
AOF Annual Operating Framework
BCUHB Betsi Cadwaladr University Health Board
BJC Business Justification Case
BRP Benefits Realisation Plan
CDM-C Construction (Design & Management) Co-ordinator
CHC Community Health Council
CIM Capital Investment Manual
CPG Clinical Programme Group
CRB Cash Releasing Benefit
CSF Critical Success Factor
DCF Discounted Cash Flow
DV District Valuer
EqIA Equality Impact Assessment
GEM Generic Economic Model
GMP Guaranteed Maximum Price
GP General Practitioner
NHS National Health Service
Non CRB Non Cash Releasing Benefit
Non QB Non Quantifiable Benefit
NPV Net Present Value
PER Project Evaluation Review
PID Project Initiation Document
PIR Project Implementation Review
PPE Post Project Evaluation
QB Quantifiable Benefit
SCP Supply Chain Partner
SOBC Strategic Outline Business Case
SRO Senior Responsible Officer
TOR Terms of Reference
TUPE Transfer of Undertakings (Protection of Employment)
VAT Value Added Tax
VFM Value for Money
WAG Welsh Assembly Government
WG Welsh Government
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Contents Page
Version History 2 Acronyms 3 1. Executive Summary 1.1 Introduction 1.2 Strategic Case 1.3 Economic Case 1.4 Commercial Case 1.5 Financial Case 1.6 Management Case 1.7 Recommendation 2. Strategic Case 2.1 Introduction Part A: The Strategic Context 2.2 Organisational Overview 2.3 Business Strategies 2.4 Other Organisational Strategies Part B: The Case for Change 2.5 Investment Objectives 2.6 Existing Arrangements 2.7 Business Needs 2.8 Potential Business Scope & Key Service Requirements 2.9 Main Benefits Criteria 2.10 Main Risks 2.11 Constraints 2.12 Dependencies 3. Economic Case 3.1 Introduction 3.2 Critical Success Factors 3.3 Long Listed Options 3.4 Scoping Options 3.5 Service Solution Options 3.6 Service Delivery Options 3.7 Implementation Options 3.8 Funding Options 3.9 The Long List: Inclusions & Exclusions 3.10 Short Listed Options 3.11 Economical Appraisal 3.12 Qualitative Benefits Appraisal 3.13 Risk Appraisal 3.14 Preferred Option 3.15 Sensitivity Analysis 3.16 Confirmation of the Preferred Option 4. Commercial Case
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4.1 Introduction 4.2 Required Services 4.3 Potential for Risk Transfer 4.4 Proposed Charging Mechanism 4.5 Proposed Contract Length 4.6 Proposed Key Contractual Clauses 4.7 Personnel Implications (including TUPE) 4.8 Procurement Strategy & Implementation Timescales 4.9 FRS5 Accountancy Treatment 5. Financial Case 5.1 Introduction 5.2 Impact on the Organisations Income & Expenditure Account 5.3 Impact on the Balance Sheet 5.4 Overall affordability 6. Project Management Case 6.1 Introduction 6.2 Project Management Arrangements 6.3 Outline Project Reporting Structure 6.4 Outline Project Roles & Responsibilities 6.5 Outline Project Plan 6.6 Use of Special Advisors 6.7 Arrangements for Change & Contract Management 6.8 Arrangements for Benefits Realisation 6.9 Outline Arrangements for Risk Management 6.10 Outline Arrangements for Post Project Evaluation 6.11 Framework for Post Project Evaluation 6.12 Management of the Evaluation Process 6.13 Gateway Review Arrangements 6.14 Conclusion 6.15 Recommendation
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Appendices
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OBC Estates Component Annex
1. Executive Summary of the Estate implications of the Business Case 2. Estates Investment Objectives 3. Summary of Trust Estates Strategy
▪ The Existing Estate
- Existing Estate Site Plans
▪ Current Estate Performance (identifying data collection date) ▪ Estate Performance Improvement Targets ▪ Proposes Changes to the Estate ▪ Capital Investment Programme ▪ Land and Property Disposal and Acquisition Programme
4. Proposed Project Estate Options (minimum 1:500 scale) 5. Preferred Option Development Control Plan (minimum 1:200 scale) 6. Project Design Principles 7. Project Details 8. Site ownership status 9. Planning Permission Status 10. Quality Assurance and Standards Compliance
▪ AEDET ▪ BREEAM
11. Statement of Sustainable Development Commitment 12. Capital Costs and Projected Cash-flows (See OBC1- 8 forms) 13. Inflation calculations 14. Whole Life Cycle Cost Assessments 15. VAT Recovery Strategy 16. Assessments of Estate and Facilities Revenue Implications compared with
the base option
▪ Capital Charges ▪ Energy ▪ Rates ▪ Rent ▪ Water and sewage
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▪ Maintenance ▪ Security ▪ Cleaning ▪ Linen and laundry ▪ Car Parking ▪ Waste disposal ▪ Photocopying ▪ Telecommunications ▪ Portering ▪ Postal Services ▪ Commissioning ▪ De-commissioning
17. Comparison and reconciliation of functional content and capital costs with
SOBC
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1. Executive Summary
1.1 Introduction
The purpose of this Strategic Outline Business Case (SOBC) will determine the
development of the model of services to be provided in …………………….
The capital cost of the preferred option is estimated at £………… (at BIS PUBSEC
Firm Price Index 173 inclusive of VAT at 20%).
1.2 Strategic Case
1.2.1 The Strategic Context
The strategic drivers supporting this business case / investment for the
…………. are detailed below:
▪
In addition, the business case fits well within the local organisational
strategies outlined below.
▪
1.2.2 The Case for Change
1.2.3 Investment Objectives
Based on the information detailed in the Case for Change the following
Investment Objectives for this project are as follows:
▪ Investment Object 1
▪ Investment Objective 2
▪ Investment Objective 3
▪ Investment Objective 4
▪ Investment Objective 5
1.2.4 Potential Business Scope and Key Service Requirements
The options within these ranges are considered within the economic case.
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Minimum Intermediate Maximum
Potential
Business
Scope
Key Service
Requirements
1.3 Economic Case
1.3.1 The Long List: Inclusion and Exclusion
The long list of options was developed and categorised under the headings of
Scope, Technical Solutions, Service Delivery, Implementation and Funding.
A summary of inclusions, exclusions and possible options are detailed in the
table below:
Options Finding
1 Scoping
1.1 Do Nothing
1.2 Minimum Scope
1.3 Intermediate Scope
1.4 Maximum Scope
2 Service Solution
2.1 Do Nothing:
2.2
2.3
2.4
2.5
3 Service Delivery
3.1 In House
3.2 Outsource
3.3 Strategic Partnership
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4 Implementation
4.1 Big Bang
4.2 Phased
5 Funding
5.1 Public Funding (Single
Scheme / Separate
Funding)
5.2 Public Funding (Single
Funding / Phased Scheme)
5.3 Private Funding
1.3.2 Short Listed Options
Option 1 Option 2 Option 3 Option 4
Scope
Solution
Service Delivery
Implementation
Funding
1.3.3 Indicative Economic Costs
Undiscounted
(£ms)
Net Present Cost
(Value) (£ms)
Option 1: Do Minimum, No Change
Property & Opportunity Costs
Capital Costs (per OB forms)
Less: VAT (net)
Capital Costs (net VAT)
Lifecycle Costs
Optimism Bias & Risk Register
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Capital Sub-total
Revenue Costs
Total Costs
Less: Cash Releasing Benefits
Costs Net Cash Savings
Non Cash Releasing Benefits
Total
Undiscounted
(£ms)
Net Present Cost
(Value) (£ms)
Option 2:
Property & Opportunity Costs
Capital Costs (per OB forms)
Less: VAT (net)
Capital Costs (net VAT)
Lifecycle Costs
Optimism Bias & Risk Register
Capital Sub-total
Revenue Costs
Total Costs
Less: Cash Releasing Benefits
Costs Net Cash Savings
Non Cash Releasing Benefits
Total
Undiscounted
(£ms)
Net Present Cost
(Value) (£ms)
Option 3:
Property & Opportunity Costs
Capital Costs (per OB forms)
Less: VAT (net)
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Capital Costs (net VAT)
Lifecycle Costs
Optimism Bias & Risk Register
Capital Sub-total
Revenue Costs
Total Costs
Less: Cash Releasing Benefits
Costs Net Cash Savings
Non Cash Releasing Benefits
Total
Undiscounted
(£ms)
Net Present Cost
(Value) (£ms)
Option 4:
Property & Opportunity Costs
Capital Costs (per OB forms)
Less: VAT (net)
Capital Costs (net VAT)
Lifecycle Costs
Optimism Bias & Risk Register
Capital Sub-total
Revenue Costs
Total Costs
Less: Cash Releasing Benefits
Costs Net Cash Savings
Non Cash Releasing Benefits
Total
Option appraisal conclusions: ▪ Option 1 – this option ranks …… ▪ Option 2 – this option ranks …...
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▪ Option 3 – this option ranks ……
▪ Option 4 – this option ranks ……
1.3.4 Overall Findings: The Preferred Option
Summary of overall results
Evaluation Results Option 1 Option 2 Option 3 Option 4
Economic Appraisals
Benefits Appraisal
Risk Appraisal
Overall Ranking
Overall conclusions ……
1.4 Commercial Case
1.4.1 Procurement Strategy
1.4.2 Required Services
1.4.3 Potential for Risk Transfer
Potential Allocation Risk Category
Public Private Shared
Design Risk
Construction Risk
Transition & Implementation
Risk
Availability & Performance Risk
Operating Risk
Revenue Risks
Termination Risks
Technological Risks
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Control Risks
Residual Value Risks
Financial Risks
Legislative Risks
Other Project Risks
1.4.4 Proposed Charging Mechanisms
1.4.5 Proposed Contract Lengths
1.4.6 Proposed Key Contractual Clauses
1.4.7 Personnel Implications (including TUPE)
1.4.8 Implementation Timescales
Milestones Target Date
1.5 Financial Case
1.5.1 Summary of Financial Appraisal
The indicative financial implications of the proposed investment are as
follows:
Year … Year …. Year …. Year … Year … Year ….
£ £ £ £ £ £
Capital
Revenue
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Total
Funded by:
Existing
Additional
Total
1.5.2 Overall Affordability and Balance Sheet Treatment
1.6 Management Case
1.6.1 Project Management Arrangements
1.6.1 Programme Management Arrangements
Name Title
1.6.2 Outline Project Reporting Structure
Betsi Cadwaladr University Health Board
Investment Decision Maker
Project Owner / Senior Responsible Officer / Chair Programme Board
……………..
Project Director
Project Board
Reference
Group
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Project Manager
BCUHB User Groups
� Clinical
� Stakeholder
� Estates
Supply Chain Partner
TBC
Project Manager
(BCUHB Advisor)
TBC
Costs Advisor
(BCUHB Advisor)
TBC
� Architects TBC
� M&E Design TBC
� Structural Engineer TBC
� CDMC TBC
1.6.3 Outline Project Plan
The key dates and milestones associated with the project are detailed in the
table below:
Milestones Target Date
1.6.4 Benefits Realisation and Risk Management
Main Risk Counter Measure
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Strategic
�
�
�
Model of Care
�
�
Economic
�
Design
�
�
Equipment
�
�
Project Specific
�
�
�
1.6.5 Gateway Reviews Arrangements / Post Project Evaluation
Arrangements
1.6.6 Conclusions
1.7 Recommendation
It is recommended that the Welsh Government give approval to the Strategic Outline
Business Case for £…………….
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2. The Strategic Case
2.1 Introduction
The purpose of this Strategic Outline Business Case (SOBC) will determine the
development of the model of services to be provided in the …………………..
The capital cost of the preferred option is estimated at £…………… (at BIS PUBSEC
Firm Price Index 173 inclusive of VAT at 20%).
The annual revenue …………….
2.1.1 Structure and Content of the Document
The Strategic Outline Business Case has been prepared using the agreed
standards and format for business cases, as set out in the NHS Executive
Capital Investment Manual and other current guidance. This approved format
is the Five Case Model, and comprises the following key components:
▪ The Strategic Case section - this sets out the strategic context and
the case for change, together with the supporting investment
objectives for the scheme
▪ The Economic Case section - this demonstrates that the organisation
has selected a preferred way forward, which best meets the existing
and future needs of the service and is likely to optimise value for
money (VFM)
▪ The Commercial Case section - this outlines what any potential deal
might look like
▪ The Financial Case section - this highlights likely funding and
affordability issues and the potential balance sheet treatment of the
scheme
▪ The Management Case section - this demonstrates that the scheme
is achievable and can be delivered successfully in accordance with
accepted best practice
The purpose of this section is to explain and revisit how the scope of the
proposed project or scheme fits within the existing business strategies of the
BCUHB and to provide a clear and compelling case for change, in terms of
the existing and future operational needs of the organisation.
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Part A: The Strategic Context
2.2 Organisational Overview
2.2.1 Local Geography and Demography
2.2.2 Population Profile of ……………
2.2.3 Social Deprivation
2.3 Business Strategies
2.4 Other Organisational Strategies
Part B: The Case for Change
2.5 Investment Objectives
The provision of SMART criteria has been considered as part of the SOBC process
in the development of the investment objectives. The investment objectives for this
project are as follows:
Investment Objective 1 �
Investment Objective 2 �
Investment Objective 3 �
Investment Objective 4 �
Investment Objective 5 �
2.6 Existing Arrangements
This section describes the existing situation with regard to the investment – the
status quo. The existing arrangements are as follows:
Existing Cost (£) Total (m)
Current (Revenue)
Capital (Book Value)
2.7 Business Needs
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This section provides a detailed account of the problems, difficulties and service gaps
associated with the existing arrangements in relation to future needs.
2.7.1 The Local Case for Change
2.7.2 The Risks of Doing Nothing
2.7.3 Involvement of Stakeholders
2.7.4 Public Consultation
2.7.5 Proposed Service Model
2.8 Potential Business Scope and Key Service Requirements
The options within these ranges are considered within the economic case.
Minimum Intermediate Maximum
Potential
Business
Scope
Key Service
Requirements
2.9 Main Benefits Criteria
This section describes the main outcomes and benefits associated with the
implementation of the potential scope in relation to business needs. :
▪ CRB: Cash Releasing Benefits (e.g.: avoided costs)
▪ Non-CRB: Non-Cash Releasing Benefits (e.g.: staff time saved; economic
benefits)
▪ QB: Quantifiable Benefits (e.g.: achievement of targets)
▪ Non-QB: Non-Quantifiable or Qualitative Benefits (e.g.: improvement in staff
morale)
Investment Objectives Stakeholder
Group
Benefit Summary
Benefit Criteria
Investment Objective 1:
Patients
QB:
Non QB:
CRB:
Non CRB:
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Health Board
Staff: clinical /
administration
QB:
Non QB:
CRB:
Non CRB:
Health
Community /
Others
QB:
Non QB:
CRB:
Non CRB:
Investment Objectives Stakeholder
Group
Benefit Summary
Benefit Criteria
Patients
QB:
Non QB:
CRB:
Non CRB:
Health Board
Staff: clinical /
administration
QB:
Non QB:
CRB:
Non CRB:
Investment Objective 2:
Health
Community /
Others
QB:
Non QB:
CRB:
Non CRB:
Investment Objectives Stakeholder
Group
Benefit Summary
Benefit Criteria
Patients
QB:
Non QB:
CRB:
Non CRB:
Investment Objective 3:
Health Board
Staff: clinical /
administration
QB:
Non QB:
CRB:
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Non CRB:
Health
Community /
Others
QB:
Non QB:
CRB:
Non CRB:
Investment Objectives Stakeholder
Group
Benefit Summary
Benefit Criteria
Patients
QB:
Non QB:
CRB:
Non CRB:
Health Board
Staff: clinical /
administration
QB:
Non QB:
CRB:
Non CRB:
Investment Objective 4:
Health
Community /
Others
QB:
Non QB:
CRB:
Non CRB:
Investment Objectives Stakeholder
Group
Benefit Summary
Benefit Criteria
Patients
QB:
Non QB:
CRB:
Non CRB:
Health Board
Staff: clinical /
administration
QB:
Non QB:
CRB:
Non CRB:
Investment Objective 5:
Health QB:
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Community /
Others
Non QB:
CRB:
Non CRB:
2.10 Main risks
The main business and service risks associated with the potential scope for this
project are shown below, together with their counter measures.
Main Risk Counter Measure
Design
Development
� Supplier
� Specification
� Timescale
� Change management and project
management
Implementation Risks
� Supplier
� Timescale
� Specification and data transfer
� Cost risks
� Change management and project
management
� Training and user
Operational Risks
� Supplier
� Availability
� Performance
� Operating cost
� Project management
Termination Risks
2.11 Constraints
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The project is subject to the following constraints:
2.12 Dependencies
The project is subject to the following dependencies:
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3. The Economic Case
3.1 Introduction
In accordance with the Capital Investment Manual and requirements of HM
Treasury’s Green Book (A Guide to Investment Appraisal in the Public Sector), this
section of the SOBC documents the wide range of options that have been considered
in response to the potential scope identified within the strategic case.
3.2 Critical Success Factors
The Critical Success Factors (CSF’s) shown within the SOBC were as follows:
Critical Success Factors Description
1. Strategic case and business
needs and requirements
(Strategic Case)
� How the option meets and supports
the over-arching aims of local and
national strategy / legislation
2. Value for money (Economic
Case)
� Maximise the return on the required
investment in terms of the economy
� Minimise associated risks
3. Capacity and capability
(Commercial Case)
� How the option delivers the required
level of service and functionality
4. Affordability (Financial Case) � The delivery of the project within the
ascribed capital and revenue envelope
5. Potential achievability (Project
Management Case)
� Will be delivered within agreed
timescale
� Will deliver an operational, fit for
purpose facility
� Satisfies the level of skills required to
deliver the project successfully
3.3 The Long-Listed Options
The long list of options was generated by the workshop in accordance with best
practice contained in the Capital Investment Manual. The Workshop was held on
…………………. 2013 and members of the workshop are detailed below:
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Name Title
The long list of options was developed and categorised under the headings of Scope,
Technical Solution, Service Delivery, Implementation and Funding as follows:
3.4 Scoping Options
In accordance with the Treasury Green Book and Capital Investment Manual, the do
nothing / status quo / do minimum has been considered as a benchmark for potential
Value for Money (VfM). An infinite number of options and permutations are possible;
however, within the broad scope outlined in the strategic case, the following main
options have been considered:
▪ Option 1.1: Do Nothing
▪ Option 1.2: the Minimum Scope
▪ Option 1.3: the Intermediate Scope
▪ Option 1.4: the Maximum Scope
3.4.1 Option 1.1: Do Nothing
There will not be a ………………….
Advantages Disadvantages
Nil capital funding required
There will not be a ………….
3.4.2 Option 1.2: Do Minimum
Advantages Disadvantages
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The Do Minimum Option offers minimal change to service delivery / provision
- unable to fulfil recommendations of …………
3.4.3 Option 1.3: Intermediate Scope
This intermediate option allows for changes to current services provided in
line with the …………….
Advantages Disadvantages
This option would provide a ……………….
3.4.4 Option 1.4: Maximum Scope
The Maximum Option allows for ………………..
Advantages Disadvantages
This option would provide a whole system approach to the delivery of primary
/ community based services within the locality – thus enable multi-agency /
cross partnership working (health, Social care and third sector) in line with the
recommendations of the ………………
3.4.5 Overall Conclusion: Scoping Options
The table below summarises the assessment of each option against the
investment objectives and CSFs.
Reference to: Option 1.1 Option 1.2 Option 1.3 Option 1.4
Description of Option: Do Nothing Minimum Intermediate Maximum
Investment Objectives
1
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2
3
4
5
Critical Success Factors
1 Strategic case / business
needs and requirements
(Strategic Case)
2 Value for Money
(Economic Case)
3 Capacity and Capability
(Commercial Case)
4 Affordability (Financial
Case)
5 Potential Achievability
(Project Management
Case)
Summary
Options Finding
Scope
1.1 Do Nothing
1.2 Minimum Scope
1.3 Intermediate Scope
1.4 Maximum Scope
3.5 Service Solution Options
3.5.1 Introduction
This range of options considers the technical solutions in relation to the
preferred scope. The range of technical solution options are detailed below:
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▪ Option 2.1: Do Nothing: There will not be a ………..
▪ Option 2.2:
▪ Option 2.3:
▪ Option 2.4:
▪ Option 2.5:
▪ Option 2.6:
3.5.2 Option 2.1: Do Nothing:
Advantages Disadvantages
Implementation of this option
3.5.3 Option 2.2:.
Advantages Disadvantages
Implementation of this option
3.5.4 Option 2.3: Under this option
Advantages Disadvantages
Implementation of this option
3.5.5 Option 2.4: Under this option: .
Advantages Disadvantages
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Implementation of this option
3.5.6 Option 2.5: Under this option:..
Advantages Disadvantages
Implementation of this option will
3.5.7 Overall Conclusion: Service Solutions Options
The table and narrative below summarises the assessment of each option
against the investment objectives and critical success factors.
Reference to: Option
2.1
Option
2.2
Option
2.3
Option
2.4
Option
2.5
Option
2.6
Investment Objectives
1
2
3
4
5
Critical Success Factors
1 Strategic case /
business needs and
requirements
(Strategic Case)
2 Value for Money
(Economic Case)
3 Capacity and
Capability
(Commercial Case)
4 Affordability (Financial
Case)
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5 Potential Achievability
(Project Management
Case)
Summary
Options Finding
Scope
2.1
2.2 �
2.3 �
2.4 �
2.5
2.6
3.6 Service Delivery Options
3.6.1 Introduction
The following range of options considers the technical options for service
delivery in relation to the preferred scope and solution. The range of service
delivery options are detailed below:
3.6.2 Option 3.1: In House
This option describes the services delivered by the BCUHB, and managed by
the BCUHB.
Advantages Disadvantages
3.6.3 Option 3.2: Outsource
This option describes the service being delivered by an organisation outside
the BCUHB.
Advantages Disadvantages
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3.6.4 Option 3.3: Strategic Partnership
This option describes a strategic partnership arrangement for the provision of
services between the BCUHB and other organisations (e.g.: consideration of
a strategic partnership agreement with an outside organisation to help in the
provision of services)
Advantages Disadvantages
3.6.5 Overall Conclusion: Scoping Options
The table below summarises the assessment of each option against the
investment objectives and critical success factors
Reference to: Option 3.1 Option 3.2 Option 3.3
Description of Option: In House Outsource Strategic
Partnership
Investment Objectives
1
2
3
4
5
Critical Success Factors
Strategic case / business
needs and requirements
(Strategic Case)
Value for Money
(Economic Case)
Capacity and Capability
(Commercial Case)
Affordability (Financial
Case)
Potential Achievability
(Project Management
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Case)
Summary Preferred Discounted Discounted
Options Finding
Service Delivery
3.1 In House
3.2 Outsource
3.3 Strategic Partnership
3.7 Implementation Options
3.7.1 Introduction
The range of options gives consideration for implementation in relation to the
preferred scope, technical solution and method of service delivery. The range
of implementation options are detailed below:
3.7.2 Option 4.1: Big Bang
This option assumes that all the required services could be delivered within
the initial phase(s) of the project
Advantages Disadvantages
3.7.3 Option 4.2: Phased
This option assumes that the implementation of the required services would
be phased
Advantages Disadvantages
3.7.4 Overall Conclusion: Scoping Options
The table below summarises the assessment of each option against the
investment objectives and critical success factors
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Reference to: Option 4.1 Option 4.2
Description of Option: Big Bang Phased
Investment Objectives
1
2
3
4
5
Critical Success Factors
Strategic case / business
needs and requirements
(Strategic Case)
Value for Money
(Economic Case)
Capacity and Capability
(Commercial Case)
Affordability (Financial
Case)
Potential Achievability
(Project Management
Case)
Summary
Options Finding
Implementation
4.1 Big Bang
4.2 Phased
3.8 Funding
The range of options considers the choices available for funding and financing the
scheme in relation to the preferred scope, technical solution, method of service
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delivery and implementation. The ranges of funding options available are detailed
below:
3.8.1 Option 5.1: Public Funding (Single Scheme / Separate Funding)
This option describes the funding arrangements as separate and procured
and managed as a single project.
Advantages Disadvantages
3.8.2 Option 5.2: Public Funding (Single Funding / Phased Scheme)
This option describes a single funding arrangement and procured and
managed as a single project with a phased programme for delivery.
Advantages Disadvantages
3.8.3 Option 5.3: Private Funding
Advantages Disadvantages
3.8.4 Overall Conclusion: Scoping Options
The table below summarises the assessment of each option against the
investment objectives and critical success factors
Reference to: Option 5.1 Option 5.2 Option 5.3
Description of Option:
Investment Objectives
1
2
3
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4
5
Critical Success Factors
Strategic case / business
needs and requirements
(Strategic Case)
Value for Money
(Economic Case)
Capacity and Capability
(Commercial Case)
Affordability (Financial
Case)
Potential Achievability
(Project Management
Case)
Summary Preferred Discounted Discounted
Options Finding
Funding
5.1 Public Funding (Single
Scheme / Separate
Funding)
5.1 Public Funding (Single
Funding / Phased
Scheme)
5.2 Private Funding
3.9 The Long List: Inclusions and Exclusions
The long list has appraised a wide range of possible options.
Options Finding
1 Scoping
1.1 Do Nothing
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1.2 Minimum Scope
1.3 Intermediate Scope
1.4 Maximum Scope
2 Service Solution
2.1
2.2 �
2.3 �
2.4 �
2.5
3 Service Delivery
3.1 In House
3.2 Outsource
3.3 Strategic Partnership
4 Implementation
4.1 Big Bang
4.2 Phased
5 Funding
5.1 Public Funding (Single Scheme /
Separate Funding)
5.2 Public Funding (Single Funding /
Phased Scheme)
5.3 Private Funding
3.10 Short Listed Options
The preferred and possible options identified above have been carried forward into
the short list for further appraisal and evaluation. All the options that were discounted
as impracticable have been excluded at this stage. On the basis of this analysis, the
recommended short-list for further appraisal within this BJC is as follows:
Option 1 Option 2 Option 3 Option 4
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Scope
Solution
Service Delivery
Implementation
Funding
3.11 Economic Appraisal
3.11.1 Introduction
This section provides a detailed overview of the main costs and benefits
associated with each of the selected options. Importantly, it indicates how
they were identified and the main sources and assumptions. Each of the
short listed options have been reconciled in a cost benefit analysis to identify
which of the options provides the greater benefits for the least cost.
Methodology The benefits associated with each option were identified during a workshop held on …… with the stakeholders and customers for the scheme. A list of participants is attached at Appendix….
Description, sources and assumptions The benefits identified fell into the following main categories. In each case, the sources and assumptions underlying their use are explained. A more detailed explanation for each benefit line is attached to the economic appraisals in Appendix ……
Note: benefits fall into different categories which require different treatment within the OBC appraisals supporting the economic and financial cases – the distinctions are shown in the table below.
Table…..: Main Benefits
Type Direct to Organisation(s) Indirect to Organisation(s)
Quantitative (or quantifiable)
Measurable- for example, £s or numbers of transactions
As shown
Cash releasing These are financial benefits – for example, avoided spend, reduced cost etc
As shown
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The above are accounted for in the financial case appraisals
The above are NOT accounted for in the financial case appraisals
Non cash releasing These are economic benefits – for example, opportunity cost of staff time etc
As shown
All of the above are accounted for in the economic appraisals
All of the above are accounted for in the economic appraisals
Qualitative (or non quantifiable)
Non measurable –for example, quality improvements such as patient well being, improved morale etc
As shown
Subject to weighting and scoring – see below
Subject to weighting and scoring – see below
3.11.2 Estimating Benefits
The following table outlines the benefits where a monetary value has been
identified to date and included within the economic appraisal at SOBC / OBC
stage.
Estimated Benefits (pa) £ms Benefit Type Description
Option 1 Option 2 Option 3 Option 4
Quantitative Assumed falls within cash
releasing or non-cash
releasing categories
Reduction in indirect costs by
reducing number of sites e.g.:
estates and facilities costs
Cash
Releasing
Benefits
Sub-total
The above analysis is included within the financial case appraisal
Benefits in general overheads
where there by reducing
number of sites
Non-cash
Releasing
Benefits
Sub-total
All of the above are accounted for in the economic case appraisal
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3.11.3 Estimating Costs
Methodology Costs were estimated by ……in accordance with ……
Description, sources and assumptions The costs identified fell into the following main categories. In each case, the sources and assumptions underlying their use are explained. A more detailed explanation for each cost line is attached to the economic appraisals in Appendix ... Note: special consideration should be given to the use of ‘optimism bias’ at OBC stage. Transfer payments (VAT and capital charges etc) should not be included.
Costs falling to other public sector organisations should be included.
3.11.5 Net Present Cost Findings
The detailed economic appraisals for each option are attached at Appendix …... together with detailed descriptions for costs and benefits, and their sources and assumptions. (If applicable) The short-listed options have been risk-adjusted to account for the ‘risk retained’ (in £s) by the organisation under each option.
The following table summarises the key results of the economic appraisals for each option:
Table …: key results of economic appraisals
Undiscounted (£)
Net Present Cost (Value) (£)
Option 1 : Do Nothing / Do Minimum / Status Quo
Capital
Revenue / Current
Risk retained
Optimism Bias
Total Costs
Less Cash Releasing Benefits
Costs Net Cash Savings
Non-Cash Releasing Benefits
Total
Undiscounted Net Present Cost
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(£) (Value) (£)
Option 2 : Reference Project / Outline Public Sector Comparator
Capital
Revenue / Current
Risk retained
Optimism Bias
Total Costs
Less Cash Releasing Benefits
Costs Net Cash Savings
Non-Cash Releasing Benefits
Total
Undiscounted (£)
Net Present Cost (Value) (£)
Option 3 : Reference Project / Outline Public Sector Comparator (more
ambitious)
Capital
Revenue / Current
Risk retained
Optimism Bias
Total Costs
Less Cash Releasing Benefits
Costs Net Cash Savings
Non-Cash Releasing Benefits
Total
Undiscounted (£)
Net Present Cost (Value) (£)
Option 2 : Reference Project / Outline Public Sector Comparator (less ambitious)
Capital
Revenue / Current
Risk retained
Optimism Bias
Total Costs
Less Cash Releasing Benefits
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Costs Net Cash Savings
Non-Cash Releasing Benefits
Total
3.11.6 Option Ranking
The results are summarised and shown in the following Table:
Table ….: summary of results
Option Description Ranking
NPC (£s) Cash Benefit
Non Cash Benefit
Cost Net Cash Savings
Cost Net All Savings
1
2
3
4
5
3.11.7 Option Appraisal Conclusions
The key findings are as follows:
Option 1 – do nothing/do minimum/status quo
This option ranks…..
It provides ……
Option 2 – reference project/ outline PSC
This option ranks…..
It provides ……
Option 3 – reference project/ outline PSC (more ambitious)
This option ranks…..
It provides ……
Option 4 – reference project/ outline PSC (less ambitious)
This option ranks….. It provides ……
The results are summarised and shown in the following table:
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Option NPC (£ms) Ranking
Option 1: Do Minimum, No Change
Option 2:
Option 3:
Option 4:
3.11.8 Option Ranking
Therefore Option ……………. is ranked the preferred Option.
3.12 Qualitative Benefits Appraisal
A workshop was held on …………………….. to evaluate the qualitative benefits
associated with each option. Workshop attendees included:
Name Title
3.12.1 Methodology
The appraisal of the qualitative benefits associated with each option was
undertaken by:
▪ identifying the benefits criteria relating to each of the investment
objectives
• weighting the relative importance (in %s) of each benefit criterion in
relation to each investment objective
• scoring each of the short-listed options against the benefit criteria on a
scale of 0 to 10
• deriving a weighted benefits score for each option
3.12.2 Qualitative Benefits Criteria
The benefits criteria were weighted as follows for each investment objective:
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Criteria Sub Criteria
�
�
�
�
�
3.12.3 Weighting of Criteria
The workshop weighted the above criteria using the weighted pair’s method
(Appendix ………). The weightings given to each of the criteria are shown
below:
Criteria Weighting
Quality of Care (including Clinical Safety)
Deliverability
Accessibility
Sustainability
Interdependencies
Total 100.00
3.12.4 Qualitative Benefits Scoring
Benefits scores were allocated on a range of 0 - 10 for each option and
agreed by discussion by the workshop participants to confirm that the scores
were fair and reasonable. The scoring exercise was held, without knowledge
of the weightings, in order to prevent any bias in the scores allocated.
A score of zero indicated that the option failed to satisfy the criteria in any
respect. A score of ten indicated that the option satisfied the criteria perfectly.
Results of the benefits scoring against each option are attached at Appendix
…
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Score Evaluation
10 Could Hardly Be Better
9 Excellently
8 Very Well
7 Well
6 Quite Well
5 Adequately
4 Somewhat Inadequately
3 Badly
2 Very Badly
1 Extremely Badly
0 Could Hardly Be Worse
The scores assigned to each option are shown below and further detail of the
scoring are included within Appendix …..
Criteria Option 1 Option 2 Option 3 Option 4 Option 5
Total
Rank
3.12.5 Analysis of Key Results
The results of the benefits appraisal are shown in the following table:
Benefit Criteria &
Weight
Weight Option 1 Option 2 Option 3 Option 4 Option 5
Raw ® & Weighted R W R W R W R W R W
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(W) Scores
Investment
Objective 1
30
Investment
Objective 2
25
Investment
Objective 3
20
Investment
Objective 4
15
Investment
Objective 5
10
Total 100
Rank
3.12.6 Sensitivity Analysis
The methods used were:
a. Equal weighting
b. Exclusion top ranked criteria
c. Switching values
Results of Switching Values – Benefits Appraisal
3.13 Risk Appraisal
The risks associated with the project have been quantified.
Name Title
3.13.1 Methodology
Risk appraisal has been undertaken and involved the following distinct
elements:
▪ identifying all the possible business and service risks
• assessing the impact and probability
• calculating a risk score
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3.13.2 Risk Scores
The workshop assigned the risk scores shown in the following table on the
basis of participants’ judgment and assessment of previous procurements. A
more detailed assessment of the individual risks is shown in the risk register.
The range of scales used to quantify risk was as follows:
• low equals 2
• medium equals 3
• high equals 5
The risks and implementation issues of a capital project of this nature have
been identified, weighted, and action plans developed in a risk register in
Appendix ……..
Risks have been reviewed during the term of the SOBC development by the
Project Team to confirm:
▪ the likelihood of the risk occurring
▪ the potential impact
▪ the risk implications, including potential costs
The probability multiplied by the impact score gave the risk ratings low,
medium or high as shown in diagram below.
Likelihood
Consequence /
Impact
Almost
certain (5)
Likely (4) Possible
(3)
Unlikely
(2)
Rare (1)
Catastrophic (5) H H H M H
Major (4) H H M M H
Moderate (3) H M M L L
Minor (2) M M L L L
Insignificant (1) L L L L L
Score
Low Risk 1-5
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Medium Risk 6-14
High Risk 15-25
3.13.3 Optimism Bias
…………
3.14 The Preferred Option
The results of investment appraisal are as follows:
Evaluation Results Option 1 Option 2 Option 3 Option 4
Economic Appraisal
Rank
Benefits Appraisal
Rank
Overall Ranking
Option ………… emerges clearly as the preferred option in terms of the economic
and benefits appraisals.
3.15 Sensitivity Analysis
The methodology used was based upon the analysis supported via the Generic
Economic Model. Analysis has been considered where there could be a potential
impact on the ranking of the preferred option and the NPC calculation.
The methods used were:
a. scenario planning
b. ‘switching values’
3.15.1 Results of Scenario Planning
Appendix …(SENISITIVITY) provides a summary of the outputs of the
Generic Economic Model.
3.15.2 Results of Switching Values
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The impact of switching values has been completed using the GEM against
Option ……….. as the preferred option.
The assessment has been considered and is summarised in the following
table:
For Option 2 to Change
Ranking:
Option 3 Option 4
Initial Capital Outlay
Ongoing Revenue
3.16 Confirmation of Preferred Option
The preferred option remains Option ………..
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4. The Commercial Case
4.1 Introduction
The commercial case outlines the negotiated arrangements in respect of the
preferred option outlined in the Section 3: Economic Case. The preferred option
being Option …………………
4.2 Required Services
4.3 Potential for Risk Transfer
Potential Allocation Risk Category
Public Private Shared
Design Risk
Construction Risk
Transition & Implementation
Risk
Availability & Performance Risk
Operating Risk
Revenue Risks
Termination Risks
Technological Risks
Control Risks
Residual Value Risks
Financial Risks
Legislative Risks
Other Project Risks
4.4 Proposed Charging Mechanisms
4.5 Proposed Contract Lengths
4.6 Proposed Key Contractual Clauses
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4.6.1 Contractual Arrangements
4.6.2 Contract Type
4.7 Personnel Implications (including TUPE)
4.8 Procurement Strategy & Implementation Strategy
4.8.1 Procurement Strategy
4.8.2 Implementation Timescales
It is anticipated that the implementation milestones will be as follows:
Milestones Target Date
4.9 FRS5 Accountancy Treatment
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5. The Financial Case
5.1 Introduction
The purpose of this section is to set out the indicative financial implications of the
preferred option (as set out in the economic case section) and the proposed deal (as
described in the commercial case section). Strategic Outline Business Case Cost
Forms are enclosed at Appendix …
5.2 Impact on the Organisation’s Income and Expenditure Account
The anticipated payment stream for the project over its intended life span is detailed
below.
Year
2012 /
2013
Year
2013 /
2014
Year
2014 /
2015
Year
2015 /
2016
Year
2016 /
2017
Year
2017 /
2018
Year
2018 /
2019
Total
£000s £000s £000s £000s £000s £000s £000s £000s
Preferred Way Forward: Option ……..
Capital
Revenue
Total
Funded By:
Existing
Additional
Total
5.3 Impact on the Balance Sheet
5.3.1 Capital Charges and Impairment Calculation
Current
Cost
Cost of
Preferred
Option
Variance
£000s £000s £000s
Capital Costs
Build
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Equipment
Total
Capital Charges Assessment (using Capital Cost)
New Build (60 years)
Equipment (10 years)
Total
Capital Charges Assessment (with impairment factored)
Build (45 years)
Equipment (10 years)
Total
Impairment Calculation Cost of Preferred
Option
£000s
Capital Sum (build)
Floor area
Value per m2 (£s) (build)
Using Holywell Value per m2 (build)
Potential Impairment (v/m2)
As a %
Potential Impairment £000s
Potential Value after Impairment £000s
5.4 Overall Affordability
5.4.1 Summary Revenue Costs
Option 1 Option 2 Option 3 Option 4
Total Total Total Total
£000s £000s £000s £000s
Direct Costs
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Indirect Costs
Overheads
Total (before Capital Charges
Capital Charges
Total (with Capital Charges)
Variance to Do Nothing Option 1
The following table provides an indication of the level of savings required to
provide sustainability in the future and this is equated against the level of
return in percentage terms against the capital outlay. It should be noted that
this sustainable saving would also be required for existing service costs.
Year 1 Year 2 Year 3
Proposal at SOBC stage for Preferred Option:
Capital Outlay
Projected surplus/(deficit) against existing costs
Return on Investment (as %)
Required return on investment for sustainability:
Surplus required to cover 4 to 5% per annum
Require return on investment for sustainability
(as %)
5.4.2 Review of Current Costs
5.4.3 Review of Preferred Option Costs
Cost of Preferred Option
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6. The Management Case
6.1 Introduction
This section of the SOBC addresses the achievability of the scheme. Its purpose is to
set out the actions that will be required to ensure the successful delivery of the
scheme in accordance with best practice.
6.2 Programme Management Arrangements
6.2.1
6.2.2
6.2.3 A Project Board has been established to ensure the successful
delivery of the project and will be chaired by the SRO. The Project Board
membership includes:
Name Title
6.3 Project Management Arrangements
The project will be managed in accordance with PRINCE 2 methodology.
6.3.1 Project Reporting Structure
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Betsi Cadwaladr University Health Board
Investment Decision Maker
Project Owner / Senior Responsible Officer / Chair Programme Board
Project Director
Project Board
Reference
Group
Project Manager
BCUHB User Groups
� Clinical
� Stakeholder
� Estates
Supply Chain Partner
TBC
Project Manager
(BCUHB Advisor)
TBC
Costs Advisor
(BCUHB Advisor)
TBC
� Architects TBC
� M&E Design TBC
� Structural Engineer TBC
� CDMC TBC
6.3.2 Project Roles and Responsibilities
6.4.3 Project Director
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6.4.4 Project Manager
6.5 Project Plan
The key dates and milestones associated with the project are detailed in the table
below:
Milestones Target Date
6.6 Use of Special Advisors
Specialist Area Adviser
6.7 Arrangements for Change and Contract Management
6.7.1
6.8 Arrangements for Benefits Realisation
6.9 Arrangements for Risk Management
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6.10 Arrangements for Post Project Evaluation
6.10.1 Introduction
6.11 Framework for Post-Project Evaluation
6.12 Management of the Evaluation Process
6.13 Gateway Review Arrangements
6.14 Conclusions
6.15 Recommendations
References
▪
IDENTIFICATION OF KEY RISK AREA
Operating Costs
Capital
Availability
Design
Construction
Option Evaluation and
Risk Assessment
Option Evaluation and
Risk Assessment