September 2020 | Version: 1.3

Transport for NSW Business Case Guide This guide applies to all agencies within the NSW Transport cluster

Economics and Assurance Group Finance and Investment Corporate Services

TfNSW Business Case Guide – 2020 2

Foreword

The NSW Transport Cluster plans and delivers infrastructure and services across all modes of transport, including road, rail, bus, ferry, light rail and active transport (cycling and walking). The Cluster contributes to economic growth in NSW by delivering services, managing assets, and improving the transport system to enable the community to live, work and play.

Transport projects are helping to shape our cities, centres and communities for generations to come by delivering some of the largest transport infrastructure programs Australia has seen.

Strong evidence-based decision-making is a key contributor to the successful delivery of transport investments. A business case is a key management tool that provides insight into the justification of potential investments.

The Transport Business Case Policy (the Policy) requires business cases that inform evidence-based and outcomes-focused whole of life expenditure decisions that are in the public interest and demonstrate value for money. The Policy applies to all programs and projects (capital and recurrent, including Information and Communications Technology) across the NSW Transport cluster.

Successful implementation of the Policy requires a clear and consistent approach, and guidance, for business case developers, reviewers and approvers. While the NSW Government Business Case Guidelines assist agencies and government entities with the preparation of business cases in line with best practice across various sectors, further Transport sector specific guidance is necessary.

The Transport for NSW (TfNSW) Business Case Guide (the Guide) provides Transport specific guidance to assist divisions and agencies prepare effective, consistent and comparable business cases for a range of potential Transport projects and initiatives.

The Guide assists projects to align to the strategies and priorities of TfNSW. They supplement the general principles of existing NSW Government business case guidance and align with:

TPP17-01 NSW Gateway Policy

TPP18-06 NSW Government Business Case Guidelines

TPP18-09 NSW Government Outcome Budgeting Guidelines

Treasury Circular 12/19

Infrastructure NSW’s Infrastructure Investor Assurance Framework (IIAF)

ICT Assurance Framework

Recurrent Expenditure Assurance Framework

Transport Asset Management Framework

NSW Public Sector Asset Management Policy

The Guide supports the TfNSW Business Case Template. Additionally, there are a suite of tools available for further assistance.

Feedback or questions regarding the Guide should be directed to the TfNSW Evaluation and Economic Advisory team at: EconomicAdvisory@transport.nsw.gov.au

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Contents

Foreword ............................................................................................................... 2

Overview ............................................................................................................... 5

Business case development process .................................................................... 9

Writing a business case ...................................................................................... 12 1. Executive summary ................................................................................ 12 2. Case for change ..................................................................................... 13

2.1 Business need/opportunity ........................................................ 13 2.2 Objectives of this intervention ................................................... 15 2.3 Strategic alignment with government priorities and outcomes ... 15 2.4 Link benefits and risks to programs and program KPIs ............. 19 2.5 Stakeholders ............................................................................. 20 2.6 Potential options ....................................................................... 22 2.7 Cost estimates .......................................................................... 23

3. Value for money analysis ........................................................................ 25 3.1 Economic analysis .................................................................... 26 3.2 Financial analysis...................................................................... 28

4. Preferred option ...................................................................................... 30 4.1 Proposed funding ...................................................................... 30 4.2 Financial impact statement ....................................................... 32 4.3 Financial sustainability .............................................................. 32

5. Commercial analysis .............................................................................. 33 5.1 Procurement strategy ................................................................ 33

6. Management analysis ............................................................................. 34 6.1 Governance framework ............................................................. 34 6.2 Project management strategy, framework and plan .................. 35 6.3 Change management strategy and plan ................................... 35 6.4 Benefits realisation management .............................................. 36 6.5 Risk management, strategy, framework and plan...................... 37 6.6 Asset ownership and management plan ................................... 38 6.7 Stakeholder management plan ................................................. 38 6.8 Compliance requirements ......................................................... 39 6.9 Sustainability and planning pathway ......................................... 40 6.10 Safety and safety management ................................................. 40

Appendices ......................................................................................................... 42 Appendix 1: Overview of business case process for SBC, FBC and Light FBC 43 Appendix 2: Documents to be included in a business case submission ........... 44 Appendix 3: Key governance groups & responsibilities .................................... 45 Appendix 4: Agile business cases.................................................................... 46 Appendix 5: Place-making in business cases .................................................. 47 Appendix 6: Federal funding requirements ...................................................... 49 Appendix 7: TfNSW business case development contact points ...................... 52

Key reference documents and links .................................................................... 54

List of acronyms .................................................................................................. 56

Terms and definitions ...................................................................................... 57

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Note: Throughout this document there may be references and links to internal TfNSW documents and teams. These details are for TfNSW internal use only.

As Evolving Transport, an internal restructuring, is in progress throughout 2020, this Guide and the accompanying template may not fully reflect all proposed changes. The relevant sections of this document will be updated as new structures, functions and related processes emerge.

Document Summary Information

Objective Ref:

Author: Economics and Assurance

Division: Corporate Services

Version: 1.3

Document history

Version Amendment Amendment Date Approved by

1.0 Draft document released for internal Subject Matter Expert consultation. This document replaces the previous full, light and small business case guidelines and templates.

18 Nov 2019 Robert Smith

1.1 Draft document released for internal use and external Subject Matter Expert consultation

12 Feb 2020 Robert Smith

1.2 Final document release 18 June 2020 Martin Oaten

1.3 Revised Transport Outcome Driver Framework content

21 Sept 2020 Nicole White

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Overview

This document explains the steps and content required to complete a business case for any type of investment, with a focus on major transport initiatives. Project teams are encouraged to refer to the NSW Government business case guidelines (TPP18-06) for further guidance. It is to be used in conjunction with the TfNSW Business Case Template (the Template) in preparing all business cases within the NSW Transport cluster.

What is a business case?

A business case is a documented proposal that is used to inform an expenditure or policy decision. Therefore, a business case requires evidence assembled in a logical and coherent way which demonstrates:

the need for an investment and how it aligns with government priorities

potential solutions which maximise social welfare

solutions which are financially viable

value for money

the capacity and capability to procure, implement and realise benefits within a defined timeline

the required governance and systems to support delivery

an assessment of associated risks, interdependencies and the roles of stakeholders

the entity(ies) that will ultimately own, operate and maintain the asset

how expenditure and benefit estimates can be developed, applied, measured and verified through reporting of actual performance.

Developing a business case is a key part of any planning and investment decision. It puts outcomes and benefits for the customer at the centre of investment decision-making.

What is the purpose of a business case? How is it used?

A business case provides confidence to decision makers that the risks of achieving intended outcomes have been identified, managed, mitigated or understood and accepted. It should support an informed decision across the asset life cycle or investment cycle, from problem identification, funding decision, delivery and benefit realisation during operation to disposal. An effective business case will anticipate the questions a reader may have. It responds to, shapes and satisfies the reader’s need for evidence.

The business case will be used as the evidence base for a decision and the basis for tracking and evaluating a project.

Business cases may be subject to external review under NSW Gateway Assurance processes, State and federal funding bodies, public disclosure requirements, auditors, Parliamentary enquiries and as the basis for ex-post evaluation. A business case is an important tool that, as well as securing funding for delivering the project, supports a project as it is being managed and ensures knowledge is captured and documented for future reference.

When is a business case required?

In the Transport Business Case Policy, the case for change is always needed when expenditure is being planned. This should describe why funding is needed and what will be delivered for the money. Depending on the scale of the planned expenditure, the case for change needs to include certain requirements. A formal business case is required for new NSW Transport cluster expenditure (capital, recurrent, ICT or a combination of these) costing $1 million and over to support approval of funding.

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A business case should be as compact as possible while covering key issues. The size of a business case should reflect the degree of risk involved in the funding decision. NSW Gateway investment assurance requirements have risk tiered thresholds for external review of business cases.

The business case should also articulate in sufficient detail both the initial capital outlay and periodic asset and technology renewals, as well as incremental recurrent costs or savings in operating and maintenance costs.

Light, Strategic and Final business cases

Business cases are required to be submitted to NSW Treasury as part of the annual outcome-based budget process to inform consideration of major proposals and expenditure decisions made by the Cabinet Standing Committee on Expenditure Review (ERC). The threshold for the preparation and submission of business cases for external review varies but capital projects over $10m are required for Infrastructure New South Wales (INSW) assurance and budget processes.

Table 1 Threshold for business cases

Total Expenditure Business case preparation

< $1m Good business practice. A briefing note outlining the need for investment, analysis of the proposal and recommended option being proposed should support procurement.

$1m - $10m Light Final Business Case. Projects under $10 million do not require an SBC unless specifically requested, for example by NSW Treasury.

$10m and over

Gate 1: Strategic Business Case Gate 2: Final Business Case

There are three broad types of business case: light (Light FBC), strategic (SBC) and final (FBC) – an FBC is referred to as a Detailed Business Case in NSW Treasury references. The key difference between the three is the expected level of detail required. The level of detail in each business case will depend on many specific details such as the stage, type, value and risk of the investment. Typically, more rigorous analysis, in depth investigation and more detail is expected in an FBC, compared to a Light FBC. While the focus of an SBC is on analysis of a long list of options, the focus of an FBC is on detailed analysis of the short listed options and preferred option.

Strategic Business Case: An SBC confirms the need for an investment outlined in the Investment Brief and makes a value for money assessment. In particular, it assesses the feasibility of a long list of options reducing them to a shortlist of options. An SBC needs to demonstrate that there is at least one viable option worth pursuing. It may also seek approval to proceed with the development of an FBC. The evidence expected at this stage is preliminary in nature. The level of detail and accuracy will increase over time as the proposal develops. SBCs for Tier 1 High Profile / High Risk projects require approval by DaPCo (and ERC, where the project is estimated as over a value of $300 million). The need for DaPCo approval of SBCs for Tier 2 projects is at the discretion of the Minister or Cabinet committee.

Final Business Case: An FBC builds on the analysis of options undertaken as part of the SBC, and provides more comprehensive evidence to support a preferred option. An FBC is used for funding approval as part of the Budget Process. Where the FBC is for a Tier 1 project, a stand-alone submission to ERC to seek approval and investment decision is required.

Light Final Business Case: A Light FBC requires less detail. However, all business cases must address the nine investment assurance review criteria areas: business need and benefits, funding and value for money, sustainability, governance, risk management, project delivery, stakeholder management, change management and cost management.

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This document aims to provide a standard approach broadly applicable to the three types of business cases depending on the investment value and stage. The Template is to be used for all business cases. However, considering the uniqueness of each investment, the project team will need to exercise discretion and professional judgment while completing each business case. For ICT, you may seek assistance from your Portfolio PMO and/or ICT EPMO (Enterprise Portfolio Management Office).

For a rolling program1 additional details may be required to support a program plan, particularly regarding the prioritisation, governance arrangements and funding model. These are indicated in the relevant sections of this document.

Additional details may be required if Australian Government funding is sought. The cover-page should clearly identify the project phase, i.e. “Scoping”, “Development” or “Delivery”. Additional requirements are indicated in the relevant sections of this document and in Appendix 6. Refer to Notes on Administration for Land Transport Infrastructure Projects – 2019-2024 Appendix C1-Project Proposal Report Template for more detailed guidance.

Where a business case may not be required

Current practice is that a business case is not considered essential for certain “business as usual” maintenance and operational expenditure. This includes instances where expenditure has been included in a previous business case decision (e.g. the operating expenditure to support a capital project). However, if the revised recurrent expenditure is materially different from the original business case, it should still be subject to review.

A business case may not be required in the following instances:

Maintenance (capital or operational): work performed on physical assets which are captured in an approved Asset Management Plan. For example, work performed to address defects and deterioration of physical assets, replacement during or at the end of an asset’s useful life to ensure operational capacity. For new or changed scope, and major contract resets, development of a business case is good practice.

Operational expenditure: certain operational expenditure, for example, a service contract renewal might be supported with a program evaluation. In general, new operating expenses require a business case.

Certain high value operation and maintenance expenditure projects above $10 million may require a business case. Business case requirements for a project which falls under a broader program business case may be reduced or amended to reflect any evidence and approvals at the higher program level. Please contact Economics and Assurance, Corporate Services Division for more details.

What are the types of funding?

Capital Funds: Where expenditure requiring agency capital funds is involved, CEOs and TfNSW division heads are expected to have planned for these as part of the capital budget allocation process, and have included this in the NSW Transport cluster’s Transport Investment Plan (TIP).

Recurrent Funds: Recurrent expenditure (or Opex) is expected to be identified as part of agency or divisional business planning processes. This is expected to be funded from within existing agency or divisional budget allocations. New recurrent proposals need to be submitted to NSW Treasury through the budget process.

1 Normally a project or program where the requirements and/or scope are not defined or cannot be defined requires “rolling wave” planning where the plan is progressively elaborated.

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Any incremental recurrent expenditure that is expected to result from capital investments must be clearly articulated in the business case, planned for and included in any funding requirement submission from the Transport Investment Plan (TIP) and the Recurrent Budget.

As part of changes to Treasury’s Asset Management Policy, there will be significant changes to TfNSW’s asset management reporting and investment decision making. Part of these changes will be viewing all expenditure in its totality (Totex), and ensuring that both capital and recurrent funding requirements for new projects are articulated and secured before they can be approved for investment.

New accounting standards can impact the treatment of funding and so seek advice on areas in a business case which relate to finance leases, grants and revenue.

In considering funding for business cases, both capital and recurrent, expenditure will need to be aligned to the Transport Outcome Driver Framework, the tool Transport will use to drive, ensure and demonstrate value for the people of NSW.

What are the key components of a NSW Transport cluster business case?

A standard business case must broadly contain all the sections outlined below:

Chapter 1: Executive Summary - Summary of the business case

Chapter 2: Case for change - What is the business need and how does it fit strategically? What are the potential options to address the business need and the cost of the option(s)?

Chapter 3: Value for money analysis - Do the options maximise social welfare and deliver value for money? Is the intervention financially feasible?

Chapter 4: Preferred option - Which is the preferred option? What is the cost of the option? How much funding is being requested?

Chapter 5: Commercial analysis - Is there capacity and capability to procure, supply and maintain the service level proposed?

Chapter 6: Management analysis - Can the intervention be delivered? Are the appropriate governance frameworks, change management, risk management and project management strategies in place?

TfNSW Business Case Template:

The Template lays out the structure and content required for a business case. The Template can be used for the preparation of business cases for:

infrastructure, recurrent and ICT projects

all modes – roads, buses, rail, ferry, active transport

various funding types – capital, operating, state and federal

all sizes and phases – Light FBC, SBC and FBC

all federal phases – Scoping, Development and Delivery PPRs.

Who do I contact for further guidance and support?

Contact Economics and Assurance, Corporate Services Division for details about the business case policy, guidance, assistance and for other contacts within the Transport cluster or external stakeholders.

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Business case development process

A business case is a living document. It should be continuously revised and updated over time based on material changes to the availability and accuracy of information. Typically, there are three main stages in the development of business cases. At the end of each stage, a decision point is reached and not all business cases are funded to proceed.

Figure 1 Business case development staged process

This staged approach allows scaling of the investment proposal depending on its size, risk and overall complexity. Staged prioritisation also helps manage risks by considering whether the project will proceed at the end of each stage. This saves the cost of preparing a Gate 1 or Gate 2 business case if it is decided that the project should not proceed. However, where time and other constraints do not allow for a staged approach, the required content of the analyses should still be provided to support decisions.

For a Transport business case to have the best chance of funding approval, it needs to go through logical stages of development, a number of reviews and decision making points supported by relevant artefacts/documents. A broad summary of these three gates are presented below. For more details, visit the Group Finance and Investment confluence page.

Gate 0 – Needs Confirmation

Purpose: Identify the problem or service need and the priority of the investment.

Key deliverables: During this stage a Transport Cluster Investment Brief2 is prepared to get a project prioritised in the overall investment portfolio and seek funding to progress to Gate 1. Refer to the Investment Brief Guideline for assistance in developing an Investment Brief.

Key reviews: The Gate 0 review aims at providing confidence that the proposal aligns with the Government’s and Transport’s strategic plans, and the service need identified warrants further consideration.

Note: The Enterprise Governance Framework and Executive Committee Structure are being redesigned for the Evolving Transport Operating Model. It is anticipated that there will be amendments to the current committee functions, which may result in changes to committee names. Refer to TfNSW Corporate Governance intranet page to ensure approval/endorsement has been obtained from the relevant executive committee: http://intranet.transport.nsw.gov.au/governance.

Key contacts:

The Strategic Investments team for Investment Briefs

The Economics and Assurance team - For early guidance on the preparation of business cases email EconomicAdvisory@transport.nsw.gov.au, and for guidance on assurance email Assurance@transport.nsw.gov.au.

2 An Investment Brief captures the most important information to support an informed decision at this stage and is aligned to five key criteria used to support investment prioritisation. These include: (i) problem definition and supporting evidence (ii) strategic alignment (iii) government commitment (iv) operational risk mitigation (v) future operational cost impact. If the proposed investment is already supported by an existing program business case, Asset Management Plan or Services and Operations Plan, a new Investment Brief is not required.

Gate 0 Needs Confirmation Gate 1 Needs Analysis Gate 2 Investment Decision

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Gate 1 – Needs Analysis

Purpose: Identify the problem, desired outcomes and the concept designs for a broad range of options, evaluate and narrow options.

Key deliverables: Strategic business case

Key reviews:

Gateway Coordination Agencies (GCA) review: The following types of projects might require independent assurance review from GCAs (NSW Treasury, 2017):

(i) Capital projects costing $10m and over

(ii) Major recurrent projects greater than $100m over 4 years or $50m in any one year

(iii) ICT projects costing $5m and over.

For more information on Assurance process visit https://confluence.transport.nsw.gov.au/display/FID/Assurance

Table 2 presents the project types and relevant GCAs.

Internal Transport Investment Assurance review

Transport Network Assurance Committee (TNAC) Review: The project sponsor should obtain documented evidence of proposed configuration changes accepted by TNAC. Refer to Assurance and Governance Plan Requirements for more details. The TfNSW Configuration Management Plan describes requirements for obtaining this acceptance. Acceptance by TNAC includes acceptance of safety arrangements. The project sponsor should obtain this through the Asset Standards Authority (ASA) prior to or in parallel with Investment Assurance Reviews.

For ICT projects, ICT EPMO (Enterprise Portfolio Management Office) Review: ICT investments must submit business cases to Portfolio PMO/ICT EPMO prior to submission to the Investment Assurance process for review by the EPMO and relevant Transport cluster Governance forums. ICT Portfolio PMO/EPMO and the relevant Governance forums should be informed at the beginning when this business case is drafted. The business case must specify the alignment to the Transport cluster IT Strategy and be endorsed by the relevant Agency CIO. The PEFm (Project Execution Framework methodology) should be used for all IT investments. Please contact ICT EPMO for further guidance.

Key contacts:

Strategic Investments team

Economics and Assurance team - For guidance on preparation of business cases email EconomicAdvisory@transport.nsw.gov.au. For guidance on assurance email Assurance@transport.nsw.gov.au.

ICT EPMO Governance and Assurance team for ICT projects.

Gate 2 – Investment Decision

Purpose: Develop preferred option and a rigorous business justification

Key deliverables: Final business case

Key reviews: ICT EPMO Review, TNAC Review, internal investment assurance, GCA review

Key contacts: See Gate 1 key contacts (above)

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Table 2 Gateway Coordination Agencies (GCAs)

Tiers Infrastructure Projects ICT Projects Recurrent Projects

Tier 1 Infrastructure NSW (INSW) Department of Customer Services (DCS)

NSW Treasury

Tier 2 INSW DCS NSW Treasury

Tiers 3 & 4

External gateway review not required. Assurance requirements to meet internal governance arrangement. Investment>$10M - TfNSW Assurance team to arrange independent review Investment<$10M (Light FBC) – customer divisions to review

DCS External gateway review not required. Assurance requirements to meet internal governance arrangement

For more information on assurance process visit the TfNSW Assurance Confluence page

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Writing a business case

This section provides guidance on how to prepare Strategic and Final Business Cases (for investment value greater than $10 million) and Light Final Business Cases (for investment value less than $10 million). The level of detail expected in each business case will depend on the stage, type, value and risk of the investment and other specific details. Typically, more rigorous analysis, in depth investigation and detail is expected in a final business case than in a light and strategic business cases. Refer to Appendix 6 for federal government funded projects. Additional notes for rolling programs are provided in the relevant sections.

The relevant chapters and recommended content to be covered in a business case, which correspond to sections in the TfNSW Business Case Template, are outlined below.

1. Executive summary

This chapter must provide the following details:

Statement of purpose: Set out the purpose of the business case and state if it is being prepared for Cabinet approval in 1 to 2 sentences (always required for Tier 1 projects, required at the discretion of Minister or Cabinet committee for Tier 2 projects).

Need for the investment: Briefly describe the problem or business need or opportunity that is causing us to consider a new investment. Briefly describe the consequences of deferral and business as usual (‘do nothing different’/ ‘do minimum’) scenario

Objectives: List the objectives of the project focusing on the final outcomes you want to achieve rather than the process or system that will achieve them

Strategic alignment: Set out how objectives align with government priorities and outcomes

Project cost: Present the total cost across the life of the project, and the cost in its entirety, capital and recurrent

Key benefits: Briefly describe the key benefits of this project. Identify key assumptions and dependencies

Summary of cost-benefit analysis and financial appraisals of shortlisted options

Proposed strategy/recommended option

Key assumptions: Include any significant assumptions used in options analysis.

Major changes from SBC to FBC: Include any changes in scope, whole of life capital and recurrent costs, BCR and assumptions including the drivers of change (this section is for FBC only)

Financial impacts: Provide details of the impact of the options on key financial measures, such as Transport budgets

Risks and mitigation: Briefly describe the risks that may impact the delivery of the identified benefits and how these may be mitigated

Assurance pathway and gateway review status (if applicable): Status on closeout recommendations from previous gateway review

Program/project management (including governance arrangements)

Next steps: Describe the steps that will be undertaken during the next phase.

Fit-for-purpose content: An executive summary is mandatory for an SBC and an FBC. The FBC should revisit and update the details entered in the SBC. It should highlight, where possible, any major variation in project scope, whole of life capital and recurrent

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costs and benefits since the SBC. For a Light FBC, a detailed executive summary is not mandatory. As a minimum, a well written business case precis is recommended. For example, “We chose to <meet the strategic and specific need > by <preferred option> as this has <net cost and benefits including unquantified impacts> that are better than <other reasonable alternative options> given <an understanding of risks and uncertainties>”.

For projects seeking federal funding, refer to Appendix 6 for additional federal requirements.

Useful tips

Be concise and clear. A business case should be easy to read and written in plain English. It should be understandable to a reader who has no prior knowledge of the proposal.

Ideally, this section should be able to provide the executive with sufficient confidence to make a decision on whether to fund the project without going through the whole business case.

Align with content required for Delivery and Performance Committee (DaPCo)/ERC cabinet submission.

At every stage of the business case, the Estimated Total Cost (ETC) should refer to the whole of life cost also known as Totex (total expenditure) which is Opex plus Capex. That is, the total cost across the life of the project and the cost in its entirety: capital and recurrent.

2. Case for change

The business case must demonstrate that there is a clear need for the proposal and that the proposal delivers on the Government’s priorities and TfNSW strategic objectives including Future Transport Strategy 2056 and 10 Year Blueprint.

2.1 Business need/opportunity

This section must describe the problem, business need or opportunity that is causing Transport to consider a new investment. Describe who is affected, how they are affected and the impact on communities. Consider the customer problem that is being solved, including evidence and data to demonstrate the scale of the problem/opportunity. For transport projects this could cover the physical setting of the project, the age and function of existing assets, congestion, road safety, provision of a transport corridor for a new land-use development, network performance, constructability issue, environment and land use issues, demand of an asset or a current business process.

Describe existing issues and problems including results of previous investigations. Summarise the findings of technical studies that have been undertaken to support the business case analysis. This could be through: a movement and place analysis, demand analysis, crashes and safety issues, aging asset, customer needs analysis or proposed developments requiring transport needs. For road specific projects, assessment of road safety must be conducted to support FT2056 outcomes for fatalities and serious injuries. Draw upon evidence or data obtained through strategic planning, such as movement and place analysis, place plans or other studies. Provide spatial evidence where possible.

Describe the consequences of deferral and business as usual (‘do nothing different’/‘do minimum’) scenario. The consequences may include: increased levels of traffic congestion, lack of transport options for high growth areas, growth in crashes, negative customer outcomes, public transport operating at or above full capacity, customer dissatisfaction, asset failure or non-compliance with regulatory requirements or any known government commitment. The analysis should be based on information from the strategy and planning

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stages. For example, movement and place analysis, traffic or usage modelling, crash history, congestion, complaints or any commitment to the timing of when the problem needs to be addressed.

Fit-for-purpose content: Addressing the above content is mandatory for an SBC and Light FBC. An SBC will build on the information presented in the Investment Brief and update if there is any significant changes in the political, social, economic and organisational environment that might have an impact on problem definition, desired objectives, government priorities and stakeholders’ landscape. Supporting evidence should be provided. At the FBC stage, revisit and update the details entered in the SBC. In addition, address the questions below.

For an FBC, describe how the detailed level business requirements have been refined, documented and approved. Discuss issues and problems in detail, elaborating on the results of the analysis to describe how the proposed solution (preferred option) would produce the best outcomes and satisfy the customer’s short and long term needs. The rationale for any significant changes or revisions should be clearly documented, including the reasons why the conclusions of previous stages remain valid.

Describe the detailed risk assessment and quantify likelihood and consequences. Describe the timing within which the problem needs to be addressed. Provide likely implications of delaying a response to the problem and when these would be felt, such as reduction in the level of service (quality/quantity), failure to meet specific government commitments or legislative requirements or urgent action at additional cost due to asset failure or overload.

For projects greater than $100 million in value, quantify the “problem cost”.

Useful tips

Be concise and specific. For example, if risk is a compliance risk then note the regulation, if asset related then note the asset or type. If geographic then note the area.

Avoid subjective words such as improve, significant, degrade, reduce. Instead, substantiate these with facts, evidence and metrics.

Risk consequences or implications must be quantified (preferred), or qualified (if quantification is not possible)

Consider whether similar needs exist either inside or outside TfNSW that might be addressed together with this investment and therefore requires collaboration between departments on a common need

Engage relevant stakeholders from the outset of the business case and involve them in defining the business need/opportunity

Reference previous experiences and outcomes in implementing similar initiatives including previous endorsements of the business case or any costs expended.

Required attachments

Detailed business requirement specification

Other relevant documents to support the case for change such as demand modelling report, crash investigations and other technical studies.

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2.2 Objectives of this intervention

The business case objectives should be evidence based and outcomes focused. It should be a measurable way to determine the success of a project, based on evidence and customer focused outcomes rather than referring to the inputs, process or system that will achieve them. Examples of outcome objectives include:

a reduction in the travel time required to reach the Sydney CBD by x mins

a reduction in customer complaints from x to y by date z

a x% reduction in maintenance call-outs by date z

an increase in use of public transport from x to y by date z

a reduction in operating costs from $x to $y per year by date z.

The business case objectives should clearly reflect the case for change, be well defined to ensure the identification of relevant options, and consider the risks arising from intervention.

Fit-for-purpose content: Addressing the above content is mandatory for an SBC and a Light FBC. At the FBC stage, objectives must be revisited, refined and reconfirmed to ensure that they remain relevant and appropriate.

Useful tips

You cannot justify and support a project without clear objectives. These need to be agreed at the early point of the project. Any subsequent material change or re-interpretation should be made via appropriate change control. Where a proposed investment has multiple objectives, these need to be appropriately documented. Differentiation between primary and secondary objectives may be useful in prioritising objectives

The development of the objectives should be an iterative process which involves appropriate stakeholder engagement and evidence screening

Check if the project objectives are SMART: specific, measurable, achievable, realistic, and time-bound. However, do not make them so specific that they would rule out potentially viable options. Rather, they should be outcomes focused, aligned to higher level strategies and strengthen the screening process by helping you choose between alternative options

Refer to NSW Government Business Case Guidelines for further detailed guidance on setting objectives.

2.3 Strategic alignment with government priorities and outcomes

This section should demonstrate the strategic alignment of the proposal and business case objectives with Government’s priorities and overarching strategies. Strategic alignment refers to Government and Cabinet endorsed documents. Other internal planning documents such as Agency/Portfolio Plans, corporate plans and business plans should be referred to in the business need/opportunity section to support the evidence base. The key policies to check for strategic alignment are listed below.

State-wide policies

NSW Premiers Priorities and State Priorities - State Outcomes / Outcomes budgeting

Future Transport Strategy 2056 and associated Services and Infrastructure Plans (Greater Sydney Plan and Regional NSW Plan)

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10 Year Blueprint

State Infrastructure Strategy (SIS) 2018-2038

NSW Freight and Ports Plan 2018-2023

Road Safety Plan 2021

Transport Asset Management Framework

NSW Public Sector Asset Management Policy

Sydney-wide policies

Greater Sydney Regional Plan: A Metropolis of Three Cities (GSC)

Greater Sydney Public Transport Plan (TfNSW).

Sydney district level policies

District Plans (Eastern City, Central City, Western City, North District, South District) (GSC)

Sub District Transport Strategies (e.g. South East Sydney Transport Strategy, Western Sydney Aerotropolis, GPOP).

Transport’s Outcomes Framework

Transport’s 10-year Strategic Blueprint set out 3 State Outcomes to be delivered by the NSW Transport Cluster:

Connecting our customers’ whole lives

Successful places

Sustainable transport systems and solutions supporting economic activity

The fourth Outcome is an internal facing outcome designed to demonstrate the effectiveness of our people and culture:

Thriving people doing meaningful work

Note: The State Outcomes, their KPIs, their program mapping and the program measures are subject to revision and the Transport Outcome Driver Framework is in draft and being developed in line with NSW Outcomes Budgeting requirement.

Describe how the proposed change supports outcomes. Articulate the extent to which an investment aligns to strategies. For example, is it directly aligned such as an explicit action, or is it indirectly aligned therefore contributing to a broader objective? Include any specified timeframes for implementation (e.g. short-term 0-5 years, medium-term 6-10 years, long-term 10+ years).

Future Transport Strategy

The Future Transport Strategy sets the 40 year vision, directions and outcomes framework for customer mobility in NSW, which will guide transport investment over the longer term. Future Transport 2056 outlines six state-wide principles to guide investment, policy and reform and service provision. Table 4 below presents these Future Transport principles.

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Table 4 Future Transport outcomes for Greater Sydney and Regional Transport customers

Future Transport principles

Greater Sydney customer outcomes Regional NSW transport customer outcomes

1. Customer focused: Convenient and responsive to customer needs

New technology is harnessed to provide an integrated, end-to-end journey experience for customers

Future forms of mobility are made available to customers and integrated with other modes of transport

Flexible services are an integral part of the transport system helping to deliver reliability

A transport system that adapts to and embraces new technology

2. Successful places: Sustaining and enhancing the liveability of our places

Walking or cycling is the most convenient option for short trips around centres and local areas, supported by a safe road environment and suitable pathways

Vibrant centres supported by streets that balance the need for convenient access while enhancing the attractiveness of our places

The appropriate movement and place balance is established enabling people and goods to move efficiently through the network whilst ensuring local access and vibrant places

Supporting centres with appropriate transport services and infrastructure

3. A strong economy: Connecting people and places in the growing city

30 minute access for customers to their nearest metropolitan centre and strategic centre by public transport seven days a week

Fast and convenient interchanging, with walking times of no longer than five minutes between services

Changes in land use, population and demand, including seasonal changes, are served by the transport system

Economic development is enabled by regional transport services and infrastructure

4. Safety and performance: Safely, efficiently and reliably moving people and goods

Efficient, reliable and easy-to-understand journeys for customers, enabled by a simple hierarchy of services

Efficient and reliable freight journeys supported by 24/7 rail access between key freight precincts with convenient access to centres

A safe transport system for every customer with the aim for zero deaths or serious injuries on the network by 2056

A safe transport system for every customer with zero deaths or serious injuries on the network by 2056

A transport system that is resilient to significant weather events including floods, fog and bush fires

5. Accessible services: Accessible for all customers

Fully accessible transport for all customers

Accessibility to employment and services such as health, education, retail and cultural activities within Regional Cities and Centres

6. Sustainable: Makes the best use of available resources and assets

Transport services and infrastructure are delivered, operated and maintained in a way that is affordable for customers and the community

A resilient transport system that contributes to the NSW Government’s objective of net-zero emissions by 2050

Customers enjoy improved connectivity, integrated services and better use of capacity

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10 Year Blueprint

While the Future Transport 2056 sets the 40 year vision, the 10 Year Blueprint lays out where we need to focus in order to best respond to the challenges and opportunities we are seeing and lays out our desired outcomes, ambitions and strategic priorities for the next 10 years. The Future Transport principles map to one internal and three externally oriented outcomes.

Table 5 10 Year Blueprint outcomes

Future Transport principles 10 Year Blueprint/Transport Outcome Driver Framework primary outcomes

1. Customer focused Connecting our customer’ whole lives

Customers are safe

Comfortable journeys with great service

Convenient connectivity

The right prices

Timely journey options

2. Safety and performance

3. Successful places Successful places

Enable mobility for all

Essential service resilience

Healthy, active lives

Environmental sustainability

Enhancing communities

4. Accessible services

5. A strong economy Sustainable transport systems and solutions supporting economic activity

Quality assets

Smarter financial investments

Enable economic growth

6. Sustainable

Thriving people doing meaningful work

Working together for the greater good

Evolution of work

Great place to work

Growing meaningful careers

Safe and well at work

The 10 year Blueprint outcomes have been enhanced to demonstrate what the most significant drivers are for each primary outcome. The Transport Outcome Driver Framework captures this additional level of information. Refer to the 10 Year Blueprint and the Transport Outcome Driver Framework for more details.

In line with NSW Treasury Guidelines, Transport’s Outcome Driver Framework has a defined a set of indicators and program measures for each key intermediate outcome driver and lower level drivers. The approved set of Transport Outcome Driver Framework’ programs and measures is currently under review and will be included in this guide at a later date.

It is acknowledged that some investments may align more specifically with certain strategy documents. Include a narrative that covers how the investment supports the outcome and how it improves performance of the respective outcome(s) over time.

For roads transport projects, a movement and place analysis should be undertaken to demonstrate the strategic alignment of the project. Movement and place can be used to ensure strategic alignment of the project (as the objectives will be linked back to the various

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place vision/s) and ensure that place has been considered in its appropriate context for all (road) movement projects and with the relevant stakeholders.

For IT projects, describe how the project objectives align with the Cluster IT Strategy.

Fit-for-purpose content: Addressing the above content is mandatory for an SBC and Light FBC. At the FBC stage, provide additional commentary to demonstrate alignment with other strategies and plans such as federal plans and strategies, election campaigns, regulatory and legislative requirements. Provide references to explicit initiatives in the supporting State Infrastructure Plans (SIPs), hub and spoke model, movement and place, and articulate alignment to relevant customer outcomes. Such commentary may also be valuable at the SBC and Light FBC stage. Smaller projects may be aligned to strategies, program or project business cases that link to higher level objective. For projects greater than $100 million in value, quantify the problem cost.

2.4 Link benefits and risks to programs and program KPIs

The purpose of this section is to measure whether the business case objectives defined earlier have been achieved. This section must:

identify the key benefits of business case objectives defined in the earlier section. Examples of benefits include increasing efficiency, safety, liveability, effectiveness, quality, sustainability and/or equity. Benefits must be real in nature, attainable, consider sustainability, derive directly through the proposed intervention and be supported by evidence. Road projects must complete an assessment to demonstrate how the project improves the road safety or does not introduce undue additional risk

describe how the benefits link to Programs and Program KPIs

identify the risks that can impact the delivery of the identified benefits

identify how these risks may be mitigated

align the identified benefits and risks, where possible, with the measures of success in the 10 Year Blueprint for Transport (Page 24).

Fit-for-purpose content: Addressing the above content is mandatory for an SBC and a Light FBC. At the FBC stage, revisit and update the details entered in the SBC and also address the questions below:

why are these benefits important to government and to other stakeholders?

are the benefits supported by existing evidence obtained from post evaluation of similar interventions and/or existing literature?

what types of project KPIs are appropriate to measure the impact of interventions on these benefits?

what are the key interdependencies that might influence benefit delivery through the interventions proposed?

For guidance on Benefit Realisation Management refer to Transport BRM Guidelines. For projects seeking federal funding refer to Appendix 6 for additional federal requirements

Useful tips

Successful places (place-making): Transport assets can contribute to successful places at all scales. They contribute to successful places at the individual site and building scale through the place-making opportunities that can be realised through quality architecture

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and urban design of stations and other buildings. Transport assets contribute to successful places at the macro-scale of cities and regions through well-designed new and or change to existing precincts, districts or corridors delivered as part of the transport asset. The key to achieving successful places, no matter the scale, is to take a place-based approach to the design of the transport asset. This involves developing a detailed understanding of the place through comprehensive analysis of the physical, social, economic and cultural context. For more information on assessing potential place-making opportunities and guidance on benefits and risks, contact Precincts and Urban Design at CustomerServicesGroup_Precincts&UrbanDesign@transport.nsw.gov.au.

Movement and Place: All roads and streets have place qualities, and these need to be understood to ensure transport projects enhance communities and do not negatively impact the liveability of places. Movement and Place is a key process for understanding places and transports contribution to their success. All road transport projects and projects that use and/or interface with roads should adopt a Movement and Place approach to set place-based objectives, identify issues and opportunities that arise from transport networks’ interface with place and identify options to be validated against the place-based objectives. Places should be understood conceptually at needs assessment, and in detail through the Movement and Place process in the SBC, FBC and Light FBC stages of a project life cycle. For further movement and place guidance, contact Transport Planning at movementandplace@transport.nsw.gov.au. The project teams may also seek direction from the Movement and Place Implementation Board – a cross agency executive Board.

Financial sustainability: Proposals for investment should have a view about the longer term impact of the project on the clusters cost and revenue base and ideally contribute to an improved cost recovery level within the cluster in addition to delivering customer outcomes. Investments should seek to strike the right balance between customer outcomes and impact on taxpayers through the cost of the project. Opportunities for value enhancement/value sharing/value capture should be considered as well as opportunities to drive increased revenue to support payment of ongoing operational costs.

Travel Demand Management (TDM): Projects create opportunities to shape desirable transport behaviours and to redistribute journeys to more efficient and sustainable modes, times and routes. Consider opportunities of how the project can influence travel demand and whether the benefits of the project can be amplified or leveraged to achieve desired TDM outcomes. For further TDM guidance contact the TDM Implementation team at tdm@tranport.nsw.gov.au.

Risk: Enterprise risk management specialist should be engaged, on risk related activities and their impact on elements of the business case. Contact Audit and Risk team within Office of the Secretary for further guidance.

ICT Projects: Refer to Program and Portfolio Strategic Plan that lay out the benefits, alignment to Cluster IT Strategy/Future Transport 2056.

For road projects, apply the Safe Systems approach to improving road safety.

2.5 Stakeholders

Key stakeholders can contribute actively to the development of the proposal by providing their expert opinions, research and evidence. Stakeholders should include appropriate representatives from the agency developing the proposal, other agencies impacted by the proposal, users, recipients, owners or customers of the proposed service and central agencies, such as Treasury. In this section:

identify and engage all potential stakeholders at the start of the proposal planning process

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describe the likely impact of the change on each stakeholder group. A stakeholder map is recommended to present the likely impact felt by stakeholder and likely influence of stakeholders. Refer to NSW Government Business Case Guidelines for more details

describe the communities impacted by the proposal including during development and delivery

incorporate initial evidence of key stakeholder support for the proposal

identify potential risks including risks associated with involving (or not involving) certain stakeholders in the development of the proposal (i.e. considering if it is appropriate to contact external stakeholders). Identify risks to stakeholders deriving from the implementation of the proposal. Describe how it may impact the project delivery in terms of schedule and costs

describe how governance of the investment will enable stakeholder engagement, support and approval

consult with all relevant parts of Transport that can impact the outcome of the project, or will be impacted by it. Investigate whether the objectives of the business case can be better achieved through partnering with other areas in Transport. If the business case is for a capital asset that will then be handed over to another part of Transport for operation, ensure both parties have collaborated to agree responsibilities and that all costs involved have been identified.

Fit-for-purpose content: Addressing the above content is mandatory for an SBC and Light FBC. At FBC stage, revisit and update the details entered in the SBC.

Useful tips

Future Transport 2056 outlines a new approach to planning where we closely engage with our customers, industry and communities through ‘co-operative design’, or simply – ‘co-design’. Co-design means early involvement in the design process and ongoing collaboration with all of our stakeholders – customers, transport staff, the transport supply chain, industry, other government agencies and the wider community. This approach is designed to deliver an end result that meets stakeholders’ needs and ensures that the people who use or are affected by the transport network have a place at the table in making planning decisions

Early engagement with key stakeholders can provide valuable inputs in developing the business case. Engagement should be carefully planned to manage community expectations and maintain confidentiality, where appropriate.

Engage with Place SME’s with knowledge of your project/study area to understand and document how your project impacts the place qualities of the area around it (either positively or negatively)

Engage with Travel Demand Management SMEs with knowledge of your project/study area to understand how your project impacts the capacity and travel behaviour of the transport network around it (either positively or negatively)

Consider the impact of the project on local communities, particularly during construction, and what costs or approaches are required to minimise impacts, such as noise and environmental incidents.

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2.6 Potential options

The potential strategic response is a long list of high-level approaches to address the business need/opportunity. In this section:

Focus on the needs of the customers

Consider a diverse range of options such as alternative modes, build or non-build solutions, modification or addition to the existing transport system with new infrastructure, modified service or regulations, technological solutions, organisational or process change, education or information campaigns, any alternative approaches to major infrastructure such as non-infrastructure solutions or any other policy changes.

The range of options may vary with the type and level of the objectives. Options should also consider how the issue would be managed if no funds were available. What can the business do to target the objective or minimise the risk within its existing means? The business needs to provide evidence that all solutions have been explored and exhausted before seeking further funding.

Fit-for-purpose content: Addressing the above content is mandatory for SBC. At SBC stage, outline a long list of approaches. At FBC stage, revisit and update the details of the shortlisted options. For a Light FBC, developing a long list of options is not mandatory. Develop a short list of viable options.

Useful tips

Place-making opportunities - Engage with Place SME’s (e.g. Customer Experience, Design & Delivery) during options development and analysis for specific guidance on opportunities, costs, benefits and risks. Early engagement with Place SMEs, before investment decisions have been made, is essential to ensure that options consider the implications on the place being created or impacted. Without a comprehensive understanding of the place at micro and macro scale, there is the potential that the transport asset could overlook an opportunity to enhance place success or seriously impact on its ability to succeed. For more information on assessing potential place-making opportunities and guidance on benefits and risks, contact Precincts and Urban Design at CustomerServicesGroup_Precincts&UrbanDesign@transport.nsw.gov.au

Design quality – To ensure the options are proposing the best quality outcome, a joined up approach to identify potential opportunities is important. Urban design review of options should be undertaken by recognised independent experts such as the TfNSW Design Review Panel which is convened by the Precincts and Urban Design team or alternatively, a project specific Design Review Panel can be set up. Design review should be conducted periodically throughout the development of the long and short list options. The endorsement of recognised independent experts on the TfNSW Design Review Panel will give decision makers confidence in the potential quality of the outcome and its ability to contribute to Successful Places

Innovation opportunities - To be a leader in transport we need continuous innovation, new ways to solve problems and deliver value, and a culture that applies learnings from other industries. Consider opportunities for innovation in developing the long list of options

Co-design and collaborative problem solving - To deliver future transport outcomes and adapt to changing needs, we need to find new ways of working, continuously innovate, and involve everyone that benefits from, or is impacted by, transport and land use planning decisions

Travel Demand Management – Consider whether there are opportunities for projects to influence desired travel behaviours and network outcomes and if appropriate, include targeted strategies that encourage customers to redistribute journeys to more efficient and

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sustainable modes, times and routes, or to reducing the need to make a journey. For further guidance contact the TDM Implementation team at tdm@tranport.nsw.gov.au.

Required attachments

Details of feasibility studies undertaken on options.

2.7 Cost estimates

Outline the estimated cost, basis of the estimate, its accuracy and any key cost assumptions for each strategic response. At every stage of the business case, the Estimated Total Cost (ETC) should refer to the whole of life cost. This means the total cost across the life of the project from development through construction, to operation and finally disposal. This section should provide the following details where they are applicable:

Capital Expenditure (Capex)

The Capex estimate should clearly show the following in this order:

construction costs: Costs required to complete the activities associated with the construction elements of a project. These include:

o direct costs – labour, plant or material costs that can be directly associated to individual construction/operating works. Include high level description of material and labour that would be used

o indirect costs – costs incurred by the contractor/operator which cannot be directly associated to individual works, e.g. Contractor Project Management, Contractor Design

o overhead and margin – any contractor/operator overhead costs and profit margin to be applied.

Any land acquisition costs including the acquisition costs of residual land are to be included in the capital costs in the year they are expected to be incurred.

Land acquisition cost should include the gross value of the land acquired for the project. The gross value is the cost of all land required to complete the project including land subsequently classified as residual upon determination of the final project boundary. Thus, the project acquisition cost would include acquisition of land parcels within the project boundary and acquisition of land parcels outside the project boundary.

The acquisition value of any saleable land residual land transferred to Land Sale Bank is to be entered in the project costs cashflow as a negative cost (credit) in the year the transfer is expected. The project cost must include the cost of maintenance and remediation of residual land until it is transferred to Land Sale Bank at project finalisation.

Provide details of:

client or owner costs: these include any internal client project management, client design, insurances and property acquisition to deliver the project.

base estimate: sum of construction and client costs with no contingency or escalation applied to provide an expected cost of the asset at today’s dollar.

contingency allowance: this is applied only to the base estimate to reflect the required levels of confidence with the estimate to cover additional costs for inherent risk and contingent risk. Inherent risk can be thought of as the possible variability in the estimate for direct and indirect cost items based on confidence of information supplied, e.g. geo-tech surveys, drawings. Contingent risk is for possible items that are not listed in direct

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and indirect cost items to cover events such as abnormal weather or contaminated ground.

escalation: cashflow expenditure with an appropriate escalation rate.

Ongoing maintenance, operating and service costs

Provide details of:

the ongoing maintenance, service and operating costs

who will bear these costs, what component of their budget (whether operating or capital), how they have been estimated and an indication of their acceptance

assets that need no longer be maintained, are being replaced or may be disposed of upon completion of this investment

assets that no longer be required after project completion and whether any effort / costs associated with this is being undertaken within the project or, if considered outside the scope of the project, what agency has agreed to undertake this

how the asset would be maintained, cost of maintenance, who would be the maintenance authority. Identify the savings in maintenance costs.

Basis of Estimate Report

For every estimate provided there should be an accompanying Basis of Estimate Report to provide confidence that the estimate has the following:

sources of cost information

estimate and contingency methodology

assumptions

exclusions - describe any work that will deliberately be excluded and the reasons for it

benchmark to similar relevant projects.

For guidance please refer to TfNSW Basis of Estimate Report template.

Contingency Management Strategy

Provide details of the amount of contingency, the basis for the amount of contingency allowed, lessons learned from similar projects, how contingency is linked to the Risk Plan and who “owns” the contingency. Any contingency built in the forecasts must be isolated and quarantined in the last period of the forecast, with any forecast release of this contingency during the forecast period clearly justified and described.

Governance

Explain governance of contingency and how any cost over-run will be managed.

For more guidance on cost estimation refer to the following documents:

for road projects refer to Project estimates technical procedure document.

for all infrastructure construction projects developed and delivered by Infrastructure and Place (IP) that seeks Australian Government funding for road and rail infrastructure projects refer to Cost Estimating for Infrastructure and Place Projects - DMS-ST-173 .pdf. This document describes the requirements to be applied when developing cost estimates and is based on the Cost Estimation Guidance Note 2 Mar 2017 issued by the Australian Government Department of Infrastructure, Transport, Regional Development and Communications (DITRDC). Refer to Guidance Note 3A – Probabilistic Contingency Estimation and Guidance Note 3A – Supplementary Guidance, for guidance on application of risk methodologies.

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TfNSW Life Cycle Costing Standard is applicable during the business case development stage that is while choosing between options for individual sub-components or design alternatives that require additional cost analysis, including changes to assets or provision of new assets by Authorised Engineering Organisations (AEO).

Cost planning management

Describe how costs will be identified, analysed, planned and managed throughout the investment lifecycle.

Fit-for-purpose content: Addressing the above content is mandatory for SBC and Light FBC. At SBC stage, preliminary maintenance, operating and service costs would be investigated and presented at a level of detail that clearly shows the line items comprising the cost summary. At this stage project costs are usually P50 which represents project cost with sufficient risk provisions to provide a 50 per cent level of confidence, that is, that there is a 50 per cent likelihood that the project cost will not be exceeded.

At FBC stage, revisit and update the details entered in SBC. A P50 and also a P90 cost estimate is usually required which represents the project cost with sufficient risk provisions to provide a 90 per cent level of confidence in the outcome, that is, that there is a 90 per cent likelihood that the project cost will not be exceeded.

For projects seeking federal funding refer to Appendix 6 for additional federal requirements.

Useful tips

Generate S curve analysis chart for cost estimation to visualise the progress of a project over time.

Required attachments

Basis of Estimate Report

Cost Management Plan.

3. Value for money analysis

A cost-benefit analysis (CBA) is a critical component of an assured business case required for Cabinet funding approval. A CBA is an appraisal and evaluation technique that estimates the economic, social and environmental costs and benefits of a project or program in monetary terms. Refer to the TfNSW Cost-benefit analysis guide for more information.

A CBA needs to be submitted to NSW Treasury for initiatives with: capital expenditure ≥$10M, recurrent expenditure on a case-by-case basis in consultation with Treasury and high risk projects. Even for smaller projects when a CBA is not a compliance requirement, providing evidence of thinking about value for money for the customer, monetising costs and benefits and evaluating a wide range of options is good practice. It helps ensure an initiative delivers value for money for the community of NSW.

Reaching an informed decision requires establishing the base case, developing and refining a long list of options and narrowing it down to a short list of options. These short listed options will then be assessed in more detail at the FBC stage to identify a preferred option.

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3.1 Economic analysis

In this section in the Business Case Template, summarise the Base Case and all the options considered, including the benefits, dis-benefits, risks and costs associated with each option.

3.1.1 Base case

The base case is the projected costs and benefits without the proposed initiative. It is the baseline that the options are compared to. The base case is usually defined as “business as usual” or “do minimum” (i.e. the current policy environment including the continuation of current quality and quantity of service such as planned maintenance and usage). When establishing and defining the base case, it is important to:

be realistic and quantified

avoid using an unrealistic “worst case” or “do nothing” scenario as the point of comparison

consider the future impact of any committed projects or any projects that could have a material impact on the viability of the options, e.g. transportation system innovations already in the pipeline or projects already under development, small scale spot infrastructure capacity improvements or an expanded bus service

include any significant assumptions, expected changes caused by population growth and changes to technology and expected future events.

3.1.2 Long list of options

Once the base case has been defined, a long list of options should be developed which are a range of feasible solutions (strategic options) with the potential to meet the investment objectives.

For each feasible solution provide a clear and concise summary of the following:

project boundaries including what is “in scope” and “out of scope”, what is to be delivered by the project, how it will meet the project objectives, what the Government will get for its money and why each significant component is needed

inter-related government decisions and projects that are proposed and/or being progressed that would have a material impact on the operation and benefits associated with this project

impacts of the new assets on all existing government assets and services

other works or projects in proximity or otherwise related to the proposed project which do not constitute part of the proposed scope of works

works that will be required to support the integration and ongoing operation of the new asset into the existing environment

all feasible impacts to current government assets, services and the wider community as a result of the construction of the proposed project

demand analysis undertaken including underlying assumptions and sources. Where relevant the impact on transport capacity and travel behaviours should be demonstrated during construction and operation of the project

any value management analysis undertaken to determine the economic and wider social, environmental and community benefits. Include non-quantitative forms of economic analysis such as multi criteria analysis and cost comparison analysis.

Also consider the potential for public private partnerships, value sharing and innovation, integrated land use planning, and integrated network transport options. A Movement and Place approach should be taken in all phases of Transport work – from planning through to

TfNSW Business Case Guide – 2020 27

final business case and beyond, in order to ensure that place considerations are made and the right balance is struck between movement and place.

The following measures should be calculated for each option in the CBA:

Net Present Value (NPV) – The difference between the present value of benefits and the present value of costs

Benefit Cost Ratio (BCR) – The ratio of the present value of benefits to the present value of costs.

The Estimated Total Cost (ETC) must refer to the whole of life cost. This means the total cost across the life of the project, and the cost in its entirety, capital and recurrent (this can also be referred to as TOTEX). Further guidance on options in CBA can be found in the Transport for NSW Cost-Benefit Analysis Guide and the NSW Government Guide to Cost–Benefit Analysis (TPP17-03).

At the SBC stage, the CBA on the long list of options is likely to be based on preliminary information on costs, benefits and risk generally available at this stage. For example, standard parameters for estimating benefits and costs could be used instead of project specific parameters. However, associated risks must be stated and tested.

The main purpose of a CBA at the SBC stage is to support a systematic options analysis to generate the short list of options, at least one of which has sufficient merit to warrant further development in an FBC. While CBA for all the long list of options is good practice, it may be challenging for certain projects to undertake CBA on all options. In such cases, project managers may use judgement on how practical and beneficial CBA can be for the business case. Where it is decided that CBA will not to be undertaken for certain options, provide clear reasons for not undertaking CBA.

Useful tips

If the project is a pilot and, if successful, will be rolled out in the future on a larger scale, the business case should still show consideration of future costs and benefits, and the associated impact on the BCR

Road safety - The preferred option must not result in a higher level of road safety risk for the network. This could be determined via the Safe System Assessment Process. For further guidance on road safety infrastructure issues contact Senior Manager Safer Roads at NSW Centre for Road Safety

In tables showing BCR and NPV, a layered presentation of totals may be useful, such as with and without WEBs

For projects not seeking federal funding, where possible TfNSW recommends that expected value should be used for the CBA as a preference over the P50 value but estimates at P50 value can be used in the CBA.

Potentially significant dis-benefits must be identified, costed and included in the CBA.

Required attachments

CBA report that complies with TfNSW Cost-benefit analysis guide

Traffic and all transport modelling, demand modelling, crash analysis, geotechnical, flooding and drainage, heritage and other specialist reports, road safety analysis template.

CBA calculation model (unlocked and showing calculation formulae)

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3.1.3 Short list of options

A long list of options requires further assessment to determine how well the options meet the investment objectives and provide value for money. An NPV greater than 0 and a BCR more than 1 implies that a proposal could be viable. The options with higher BCRs and NPVs are generally shortlisted for further analysis in the FBC (short list of options). This section should provide a clear and concise summary of:

the NPV and BCR of the base case and options assessed, including results from sensitivity analysis altering critical assumptions

major differences between the options

all critical assumptions supported by evidence

justification for the option/s selected (also justify why specific options have been excluded)

benchmarking of results against other similar projects in the past.

Fit-for-purpose content: Addressing the above content is mandatory for SBC. At FBC stage, revisit and update the details entered in the SBC. Assess in detail the economic, social and environmental costs and benefits of the short list of options identified in the SBC. Since the SBC Stage, additional information may have become available that may affect the option appraisal. This includes:

more accurate cost estimates, including more definitive project specifications, more detailed project scoping and current market costs

more accurate benefit estimates based on market or service demand studies, valuation studies, stakeholder consultation plans and more detailed design specifications.

The rationale for any significant changes or revisions should be clearly documented. This should include why the conclusions of the previous stages remain valid and consider whether any options previously eliminated from the long list should be revisited based on the new, more accurate information.

For a Light FBC, developing a long list of options is not mandatory. Develop a short list of viable options. Include stated objectives, base case and assumptions.

Useful tips

Engage with Place SME’s (e.g. Urban Design team, Transport Planning team) during options development and analysis for specific guidance on opportunities, benefits and risks.

3.2 Financial analysis

Financial appraisal (FAP) is a method of assessing the extent to which the project will generate revenues to meet its financial obligations. While some projects may not generate significant revenue streams, it is a useful analysis to understand the direct financial impacts on the entity due to cash outflows from the costs of a project. Quantifying the scale of cash outflows for each option shows which options have a higher cost impact on the agency. The level of detail and accuracy required in an appraisal depends on the scale and risk of the project and the stage of development. The key steps in financial appraisal are described below.

Identify cash flows

forecast the incremental costs and revenues of the shortlisted options

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estimate nominal cash flows (before /after tax)

use an appropriate rate by which the cash flows should escalate

outline the reasons for the basis chosen and the rates assumed in the appraisal

estimate residual asset values

detail approaches, assumptions and sources of data.

Calculate net present value

calculate net cash flows – project cash outflows less project cash inflows

discount net cash flows for each period using weighted average cost of capital (WACC)/Risk Free Rate (RFR)

calculate overall NPV to generate a preferred option, a project is potentially viable if the NPV is greater than zero.

Sensitivity analysis

specify best and worst case scenarios

alter critical assumptions subject to uncertainty one at a time to test sensitivity to financial projections

risk categories to consider include: market risk, completion risk (on time, on budget), operating risk, financial risk, environmental risk, private sector partner risk (contractual obligations), and political risks

test a wide range of scenarios.

Useful tips

The discount rate should reflect the inherent risk in a project. For projects that involve cash flows subject to market risks (e.g. user charges, commodity prices, demand risks and changes in technology), these cash flows should be discounted at a rate reflective of the risks inherent in the project (e.g. WACC). For projects which do not involve cash flows exposed to economic or market risks, this will generally be at or close to the RFR.

Post-tax WACC vs Pre-tax WACC - Cash flows and the discount rate should be expressed on a consistent basis. That is, post-tax cash flows must be discounted at post-tax WACC rates and pre-tax cash flows must be discounted with a pre-tax WACC. Generally, cash flows are specified on a nominal post-tax basis in which case a post-tax WACC rate is applicable. Contact Economics & Assurance, Corporate Services for WACC rates for use in Transport cluster projects.

A negative NPV does not necessarily mean a project should not progress. For example, it might be appropriate for NSW government to invest in overcoming market failure, provide a social good or commission services without a revenue source being produced. In this situation, it is possible for a FAP to produce a negative NPV, while the CBA results show an economic benefit outweighing the cost.

Consult with the Pricing and Revenue team for guidance on identifying and developing revenue opportunities (financial sustainability includes minimising revenue at risk). Developing revenue forecasts for all projects and programs across all of transport is one of the key functions of the Pricing and Revenue team.

At SBC stage project costs are usually P50 which represents project cost with sufficient risk provisions to provide a 50 per cent level of confidence. That is, that there is a 50 per cent likelihood that the project cost will not be exceeded.

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At FBC stage, revisit and update the details entered in SBC. A P90 cost estimate is usually required which represents the project cost with sufficient risk provisions to provide a 90 per cent level of confidence in the outcome, that is, that there is a 90 per cent likelihood that the project cost will not be exceeded.

Required attachments

Financial analysis calculation model

Fit-for-purpose content: Addressing the above content is mandatory for an SBC and Light FBC for short list of options. At the FBC stage, revisit the FAP and update the details entered in the SBC. More detailed analysis of the short list of options, using updated and more detailed and accurate evidence and assumptions on financial costs and benefits, is required. The option with the highest NPV will be the option that is preferred in a FAP (reflecting the net cost to the budget). The rationale for any significant changes or revisions should be clearly documented. This should include why the conclusions of the previous stages remain valid, and consider whether any options previously eliminated should be revisited based on the new, more accurate information.

4. Preferred option

Following the CBA and FAP, a preferred option should be selected from the shortlist of options based on indicators such as BCR and NPV from the CBA, and NPV from the FAP. Other factors which deserve consideration when selecting the preferred option might include: early considerations on achievability, supplier capacity and capability, reputational and environmental risks and impacts, how much of the problem will be solved, expected impact on state outcomes and level of community impact. In addition, careful consideration need to be given in the CBA to all significant qualitative aspects identified.

Summary of the BCR: Provide details of the BCR using a discount rate of 7 per cent, 3 per cent and 10 per cent. For projects seeking federal funding replace the lower discount rate of 3% with 4%. Where applicable also calculate IRR (Internal rate of return) for each option.

Benefit indicators: Provide a benefit indicator table that lists all the benefits used to calculate the BCR. Include benefit area, benefit indicator, benefit units, present value of each benefit and value of benefit as a percentage of total benefits.

Traffic and use assumptions: List out all key assumptions pertaining to the CBA. For instance, projected traffic could be split out by mode and induced traffic.

Fit-for-purpose content: Addressing the above content is mandatory for an SBC and Light FBC. At the FBC stage, revisit and update the details entered in the SBC. Updates since the SBC could include changes in scope, whole of life capital and recurrent costs, the BCR and assumptions from the SBC to FBC, including the drivers of change.

4.1 Proposed funding

While remaining compact and strategic, the business case must clearly articulate and separate the following:

the amount and timing of capital or recurrent funding required

the amount and timing of any additional recurrent funding required (for capital projects)

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the amount and timing of any anticipated recurrent savings (for capital projects).

This section must summarise the capital and recurrent expenditure funding required for the program / project. This captures funding required for the whole of the project and also a subsection that separately specifies the funds requested to cover the next investment phase. Key considerations include:

total project costs including construction, client or owner cost and contingencies: Indicate funding source and provide a separate line for each funding source. Indicate how and why the costs differ from previous/existing provisions. Provide a breakdown by year. For annualised contingency provide any assumptions used in estimating

maintenance costs: Maintenance costs include routine maintenance and major periodical maintenance (MPM) costs including component renewals that may occur at shorter intervals than others. Provide details of the existing Transport Investment Plan (TIP) provisions for maintenance, proposed provisions for maintenance and the difference

ongoing operating cost: Indicate funding source and provide a separate line by each funding source. Indicate how and why costs differ from previous / existing provisions. At a minimum, provide summary of estimated operating and service costs on a line by line basis. The impacts should be discussed and agreed with the appropriate budget manager. Also, for pilots and trials, consider ongoing costs beyond the trial and the funding solution for that

revenue and financial savings: Present revenues expected from the project and any financial savings that can be used to offset project cost. Revenues could include fare-box revenues, property sales and commercial asset earnings. Financial savings could include expected reduction in operating cost such as labour and utility costs, lower maintenance costs and commercial re-structuring savings

commercial offset: Indicate any potential opportunities to offset the cost of the project with returns from any other activity

budget request: Summarise the funds required to complete the next phase of investment (e.g. in an SBC this could be the funds required to complete the FBC). Provide a breakdown by financial year if these costs will span multiple years and indicate if they are Opex or Capex. Also provide breakdown of what it is to be used for in line with Finance and Investment Assurance Committee (FIAC)/AMC requests. The split between Capex and Opex is particularly relevant where projects involve complex procurement models, such as Public-Private Partnerships (PPPs) or grants to Third Parties. Project teams are encouraged to seek advice from Group Finance to ensure project budget are appropriately categorised in any funding requests.

private sector participation: Indicate if private funding or financing is being or has been investigated for the proposed project. Provide details of how the assessment was carried out and whether there is scope for private sector participation. If private funding or financing is not considered, outline the reasons behind this decision. Infrastructure projects with a total estimated capital value exceeding $100 million, must be assessed for possible PPP procurement to ensure value for money (see NSW Public Private Partnerships Guidelines).

Fit-for-purpose content: Addressing this content is mandatory for SBC and Light FBC. At SBC stage funding would be sought for project development and to undertake the necessary studies to investigate the options, strategic estimate and BCR and identify the funding required for the total project at a high level. The preliminary funding to deliver the project should be estimated that includes completion of concept design, environmental assessment (EA), various studies to complete EA, economic appraisal, risk assessment and

TfNSW Business Case Guide – 2020 32

program cost to complete the delivery. At FBC stage, provide detailed funding estimates split by funding source to deliver the project.

For projects seeking federal funding refer to Appendix 6 for additional federal requirements.

Useful tips

The program / project scope must be set and agreed at inception between relevant parties. Any change or reinterpretation should be made via appropriate change control

Even if the project or next phase is proposed to be entirely Opex funded (i.e. no capital funds are yet being requested), Corporate Services requires visibility of all business cases that will lead to a capital investment

Consult with the Pricing and Revenue team for guidance on identifying and developing revenue opportunities (financial sustainability includes minimising revenue at risk). Developing revenue forecasts for all projects and programs across all of transport is one of the key functions of the Pricing and Revenue team.

4.2 Financial impact statement

A Financial impact statement (FIS) projects the impact of the selected option on key financial measures including Transport budgets. The FIS should include estimates of operating expenses, revenue, net cost of services, capital expenditure (net of offset savings), available funding, net funding impact and total funding sought. The Transport Business Case Template provide useful tables to present the results in a structured manner.

Fit-for-purpose content: Addressing the above content is mandatory for SBC and Light FBC. FIS should be prepared and submitted for the preferred option if requiring budget funding. At FBC stage, revisit the FIS and update the details entered in the SBC. More detailed analysis of the preferred option, using updated and more accurate information is required.

Useful tips

Ensure expenses are truly incremental to the “business as usual” or “do minimum” scenario to avoid any double counting of cost

Ensure any mid-life or through-life asset renewals and major maintenance requirements are considered

Contacts Economics and Assurance for further guidance.

4.3 Financial sustainability

The Transport cluster has set a vision within Future Transport 2056 which aims to improve customer mobility and responds to the broader environmental impact on the cluster, particularly technology. To deliver on this vision it is critical that the Transport cluster ensures the right investments are made that support improved customer outcomes and longer term financial sustainability of the network, driving an increased cost recovery level against our network to reduce the subsidy required from taxpayers.

Describe how this project will be financially sustainable

A project can achieve financial sustainability by:

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driving a lower operational cost than current infrastructure or operations that are currently in place

generating an opportunity to create new or increased revenue, whether core revenue or ancillary revenue

considering the phasing and timing of projects to take into account the capacity for industry to support the proposed program

establishing a financing strategy including setting up key financial targets and policies for income generation, building reserves and covering core costs

being aware of internal or external risks that could threaten our valuable resources.

How to calculate financial sustainability?

The headline measure for financial sustainability is cost recovery, looking at the ratio of cluster generated revenue over the operating costs of the cluster. Cluster generated revenue refers to farebox revenue, advertising and other ancillary revenue. The figures provided within the FIS will support this analysis.

Consult with the Pricing and Revenue team for guidance on identifying and developing revenue opportunities (financial sustainability, includes minimising revenue at risk). Developing revenue forecasts for all projects and programs across all of transport is one of the key functions of the Pricing and Revenue team.

Fit-for-purpose content: Addressing the above content is mandatory for FBC and Light FBC.

5. Commercial analysis

The purpose of the Commercial Analysis is to develop a procurement approach that meets governance standards and maximises project benefits.

5.1 Procurement strategy

The Procurement Strategy should describe the following:

approved contract budget and/or pre-tender estimate

procurement program/s

high level scope of the sourcing requirements

preliminary commercial risk profile

internal and external analysis conducted for the goods, works or services to be procured

implications of environmental, safety, communications and other influencing factors

procurement Cross-Functional Team identified to conduct the procurement

approved project delivery strategy where relevant, developed in accordance with the TfNSW Procurement Strategy.

For more guidance on procurement under the Public Private Partnership (PPP), refer to National PPP Policy and Guidelines and NSW PPP Guidelines, which provide details on preparation, procurement and contract management of PPP projects.

Other sections to be considered in this section are listed below.

Technical requirements: In this section, describe the expected quality and performance standards for the service or asset being procured. Technical requirements of the service/asset that is being procured are a key element in guiding procurement selection.

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Procurement options: Detail the procurement options considered, including the recommended option. Procurement options must reflect the scale, risk and complexity of the project or program, affordability of the options and also the capacity of the delivery agency.

Preferred Procurement Method: Detail the recommended procurement strategy, why it is preferred and the process used to determine this. Identify the advantages, disadvantages and risks of the proposed procurement method. Discuss an appropriate risk management strategy, including probity risks. Explain why the risk allocation between TfNSW and any external supplier is appropriate. Demonstrate at an early stage how the procurement strategy will contribute to value for money and how this will be managed as part of the governance arrangements.

Tender Process: Briefly explain the tender process envisaged for any procurement proposed. If a tender process is not being proposed, detail how the proposed procurement strategy will meet the value for money requirement.

Potential contractual issues: Provide details of the form of contract between Transport and the prospective supplier which will ensure high quality and cost-effective methods to achieve the objectives.

Include a completed Implementation Statement (IS) as required by Infrastructure NSW as part of the Gateway process. Further advice in completing an IS can be obtained from Commercial Services Branch in the Infrastructure and Place division.

Fit-for-purpose content: Addressing the above content is not mandatory for SBC stage, but is mandatory for Light FBC and FBC.

Required attachments

Procurement plan.

6. Management analysis

The purpose of the management analysis is to provide the assessor of the business case with confidence that an economically and financially viable solution is also realistically implementable, its risks are manageable and its benefits can be tracked and realised. The management analysis includes a range of activities that are described in more detail below.

It should be noted that currently project management systems are being reviewed and consolidated across the Transport Cluster as part of the Evolving Transport reforms. The results of these changes will be included, once they are completed, in subsequent versions of the business case guide.

6.1 Governance framework

This section should demonstrate that a project team with appropriate skills and experience exists (or can be procured) to develop the next stage of the business case for the project in order to achieve the desired outcomes. To demonstrate effective project governance describe:

the purpose and scope of the governance framework

the governance structure, roles and responsibilities. Consider preparing accountability/task matrix, such as a RACI matrix, stating clearly who is responsible, who is accountable, who needs to be consulted, and who must be kept informed at every step.

the project management structure (use organogram) with clear roles and responsibilities

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project reporting, monitoring and evaluation arrangements

supporting assurance arrangements

terms of reference for governance bodies.

Fit-for-purpose content: Addressing the above content is mandatory for SBC and Light FBC. At FBC stage, revisit and update the details entered in SBC.

For Rolling programs, state the governance model that prioritises projects including:

assessment: define the scope, timeline, benefits baseline and forecast, and cost

prioritisation and approval: monitor alignment to TfNSW strategic outcomes and program objectives and benefits

Useful tips

Review governance arrangements on an ongoing basis and make appropriate adjustments to reflect the lifecycle stage or changed circumstances impacting the project.

Separate the approval, advisory or support roles clearly, as well as the input from other project stakeholders.

Refer to Appendix 3 for Key Governance groups and responsibilities.

Required attachments

Governance plan.

6.2 Project management strategy, framework and plan

The purpose of this activity is to ensure that strategies, frameworks and plans are in place to ensure the project is well managed and is achieving its targets. Project management is a structured framework for defining and implementing change within an organisation.

The project plan must describe methods, timeframes and responsibilities for a target or milestone to be achieved. At a minimum, a project plan should include:

key milestones and timeframes associated with each stage of implementation

project dependencies - deliverables from other related projects and dependency of other projects on the deliverables of this project

key decision points and identification of any independent assurance requirements

governance, resourcing arrangements and related costs.

Fit-for-purpose content: Addressing the above content is mandatory for SBC, FBC and Light FBC. However, a high level overview of project plan, milestones, timeframes and resourcing arrangements is sufficient at SBC stage.

6.3 Change management strategy and plan

The change management strategy and plan should be comprehensive, together with underlying communication and development strategies. This plan should be developed by a change

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manager in conjunction with the project manager and business and impacted stakeholder subject matter experts. In this section, summarise the following:

stakeholders who will be involved in the change management process

changes to be managed, including the benefits or objectives of the project or program at a strategic level and workflow analysis at an operational level

change management roles and responsibilities such as a change sponsor, change agents and the stakeholders that will have to make changes to their work practises

stakeholders to be impacted by the change to be delivered and who is responsible for delivering change management activities to support those stakeholders

communication strategies and plans needed to deliver the change required

training, tools, processes or work methods needed to deliver the change required

change control process and the mechanism to monitor and measure the effectiveness of the change management process

description of how the project/initiative will manage inflight changes and innovation

describe the handover arrangements and management of transfer of assets.

Fit-for-purpose content: Provide high level details of how change will be managed and tracked in the SBC and Light FBC covering the items listed above. At the FBC stage, provide a comprehensive change management strategy and plan.

6.4 Benefits realisation management

Benefits Realisation Management (BRM) is the process of identification, quantification, documentation and tracking of benefits and outcomes throughout the lifecycle to support realisation. A comprehensive BRM plan, register and investment logic map (ILM) (also known as a benefits map) should be prepared by the project manager in conjunction with the business and any external contractors to ensure that the proposed project will deliver the forecasted benefits identified in the business case. For further guidance refer to Transport Benefit Realisation Management Guidelines.

In this section, a high level summary of these three documents must be provided, with the full documents submitted as appendices. A comprehensive BRM plan must include:

key project information such as problem identification, scope and interdependent projects

identification of quantitative and qualitative benefits and any dis-benefits

pathways and monitoring processes for performance measurement, tracking and reporting, resourcing, budget and timeframes

governance, including identification of key benefit roles

identification of benefit realisation risks

change management and handover processes.

A benefit register must include identified performance measures, baselines and identification of owners/sponsors.

An ILM must include project information such as problem/opportunities, initiatives and/or scope, likely benefits, alignment to Transport Outcome Drivers and interdependencies.

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Fit-for-purpose content: Addressing the above content is mandatory for an SBC, Light FBC and FBC. At the SBC stage a high level draft BRM plan, register and ILM is sufficient. At the FBC stage, a comprehensive final plan, register and ILM are required. For further guidance on requirements refer to Transport Benefit Realisation Management Guidelines.

Useful tips

Note that the ILM is often embedded in the BRM Plan and can replace sections such as project information and benefits lists. For further guidance on how to scale the application of BRM to your project please refer to the Transport Benefit Realisation Management Guidelines.

Note that the BRM Plan also covers the content required for an evaluation plan under NSW Treasury’s Program Evaluation Guidelines.

Planning for benefits realisation should start when the project or program is being designed, with much of the planning completed before the project or program has commenced operations. This maximises opportunities for collecting and/or utilising relevant data. The benefits realisation plan will also help understand the resources that will be needed for conducting benefits realisation.

Required attachments

Benefits Realisation Plan

Benefit Register

Investment Logic Map

For distributable guidance, please contact the benefits realisation management team.

6.5 Risk management, strategy, framework and plan

This section must address how risks will be identified, analysed and managed throughout the investment lifecycle. Key steps include:

describe how risks have been and continue to be identified (e.g. through workshops, frequency and timing)

identification of risks must be done in consultation with stakeholders

describe how risks have been and continue to be assessed, monitored, managed, and treated (e.g. avoid, transfer, mitigate or accept)

describe also how risks are to be reported on

summarise the risks categorised in the risk register.

These must be addressed in accordance with TfNSW Enterprise Risk Management (TERM) Standard or equivalent. For ICT projects, this section must be addressed in accordance with the TfNSW ICT Projects Risks & Issues Operating Procedure.

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Required attachments

Risk Register - Refer to TfNSW Enterprise Risk Management (TERM) Toolkit # 3 – Risk Registers for more information on risk registers.

6.6 Asset ownership and management plan

In this section, provide an asset register of the project/program detailing asset owner, operator and maintainer of all assets delivered through the project/program. Identify assets that will be retired because of the project. Present accurate operating and maintenance costs for the life of the asset. Include an asset management strategy that indicates how assets will be managed through the asset lifecycle. Include mandatory and projected costing. Include any impacts on asset maintenance access. Project team must confirm inclusion of the project in the TfNSW Asset and Services Plan (ASP)3.

Fit-for-purpose content: Addressing the above content is mandatory for SBC if preferred or short list of options are infrastructure related. At FBC stage, refine and update the details in the SBC. This section is may not be necessary for a Light FBC.

6.7 Stakeholder management plan

Provide a stakeholder management plan covering the contents below.

Engagement plan: Describe how the stakeholders have been and continue to be involved in developing the proposal.

Consultation plan: Summarise a high-level stakeholder consultation plan which covers:

o consultation undertaken and the role that stakeholders played in determining and endorsing the preferred option

o how stakeholder issues have been integrated into the service scope or why they have not been included

o overview of the likely impact of the preferred option on key stakeholders, and outline their position in relation to the project

o how the relevant issues will be managed

3 The Treasury Asset Management Policy requires TfNSW to submit an Asset Management Plan (or Asset and Services Plan (ASP)). Asset Management Plans are a central part of ‘lifecycle planning and operation’ which outlines an agency’s ownership of real property, utilisation metrics and property disposal plans.

Fit-for-purpose content: Addressing the above content is mandatory for SBC and Light FBC. Risks should be regularly monitored from the early stages of the business case and as part of options generation and assessment. At FBC stage, refine and update the details in the SBC. Focus on risks in delivering and operating the preferred option. Include a detailed risk management plan and risk register in an appendix. Include relevant lessons learnt from post implementation reviews as risk controls. Summarise any significant risks that may emerge during project delivery or in the future after the project is completed. Describe how each of these risks has been assessed and propose relevant control methods.

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o endorsements from relevant General Managers, where there are major impacts (e.g. Operations and Maintenance areas)

o endorsement from Director Community Engagement or representative.

Fit-for-purpose content: Addressing the above content is mandatory for SBC and Light FBC.

At FBC stage, refine and update the details in the SBC. Additionally, when completing the stakeholder management analysis and planning consider the following:

what is the stakeholder management and engagement strategy for the procurement stage of the project and is it comprehensive?

how has intra- and inter-agency consultation resulted in the identification of opportunities to enhance the outcomes of the preferred option?

how have the views and concerns of stakeholders been incorporated into the development of the procurement strategy?

how has the project benefited from early market engagement in the development of the preferred option or procurement strategy?

what is the market engagement and tenderer engagement approach for the procurement stage, is it robust and how will it enhance benefits and deliver innovation?

how has the market engagement and community stakeholder activity been coordinated with other relevant projects to mitigate communications/stakeholder fatigue as the project progresses?

how is the stakeholder engagement plan for the procurement and delivery resourced, coordinated and reflected in the project’s current or future governance structure?

Useful tips

While determining the appropriate level of public and stakeholder participation consider potential for conflict over the project, potential for major social, environmental or economic impacts and any relevant legislative requirements.

Start off with a stakeholder map.

Required attachments

Stakeholder management plan / communication strategy.

6.8 Compliance requirements

The purpose of this section is to assure that the project team understands their responsibilities with regard to both State and Commonwealth legislation and regulation and has taken steps to actively comply. A good practice business case should:

identify any key statutory obligations, policies and standards to which the project must comply

identify any key policies and standards that have been adopted

describe any particular benefits or costs that may apply as a result

demonstrate how compliance will be achieved and validated.

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Fit-for-purpose content: Addressing the above content is not mandatory for SBC. This section is mandatory for Light FBC and FBC.

6.9 Sustainability and planning pathway

TfNSW is committed to delivering transport services, projects, operations and programs in a manner that balances economic, environmental and social issues to ensure a sustainable transport system in NSW. These commitments are set forth within the Environment and Sustainability Policy more broadly. The Transport environment and sustainability policy framework and TfNSW environmental sustainability plan provide further guidance.

In this section, describe how these environment and sustainability themes have been addressed and identify targets/initiatives to be pursued for each option. Detail any project specific sustainability strategies that will be adopted. The themes include: energy management, pollution control, climate resilience, resource management, biodiversity, heritage, liveable communities, corporate sustainability and sustainable procurement.

Additionally:

detail the key environmental risks that have been identified.

list activities/investigations that should be undertaken at the FBC stage to inform and refine a preferred option. This would help to avoid risks (where feasible) and mitigate/manage residual impacts. It is important that adequate funding and resources are provided for the next stage to allow for planning activities and technical studies.

complete and attach a Planning Pathway and Environmental Risk Assessment (PPERA) and Sustainability Strategic Management Plan (SSMP) to the SBC.

Fit-for-purpose content: Addressing the above content is mandatory for SBC and Light FBC.

At FBC stage, refine the details entered in the SBC. A Preliminary Environmental Assessment (PEA) or equivalent would need to be prepared to re-assess the key environmental risks of the project, whether any recommended measures within the PPERA had reduced or altered these risks, and the need for further assessment and mitigation. For Light FBC, this content is mandatory. However, SSMP and PPERA, ‘short’ form templates can be used.

6.10 Safety and safety management

Safety assurance processes extend before and beyond the project delivery phase and thus it is critical that safety is considered at all stages of the proposed change. Where the business case relates to a new or altered asset, the requirements of the Asset Standards Authority (ASA) must be addressed through the business case. To determine the potential safety impact of the change, the Initial Safety Change Assessment – 20-FT-388 must be completed for these projects. If it is determined that the proposed change does not impact on safety only the first page of this assessment must be completed.

The Guidance on Engaging Independent Safety Assessor could be referred to in this section. For additional information on the safety change process refer to the Safety Change Management Standard 20-ST-006. The Assurance and Governance Plan Requirments - T MU AM 00003 ST set the minimum requirements for the information to be included in an assurance and governance plan.

This section must describe how the proposed project contributes to improved safety of roads, rail corridors, public transport infrastructures, transit facilities, passenger safety and the

TfNSW Business Case Guide – 2020 41

security of transport assets. Public transport interchanges are identified as one of the highest pedestrian safety risk locations on the NSW road network. Therefore, the safety of people must be considered as users transfer from one mode of transport to another.

Describe the safety considerations that have been built into the overall project activity along with any safety or engineering assurance requirements. Additional information can be sourced from the TfNSW Safety Management System. For road projects, refer to the Austroads Guide to Road Safety Part 6: Road Safety Audit for more guidance on the Safety Management Cycle of a road network.

Fit-for-purpose content: Addressing the above content is mandatory for SBC & Light FBC. At FBC stage, refine and update the details in the SBC. Additionally, provide an outline of a safety plan which includes strategy for the safe operation of the project, system and procedures including an emergency plan in FBC and Light FBC.

Required attachments

Safety plan and management

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Appendices

i. Appendix 1: Overview of business case process for SBC, FBC and Light FBC

ii. Appendix 2: Documents to be included in a business case submission

iii. Appendix 3: Key governance groups & responsibilities

iv. Appendix 4: Agile business cases

v. Appendix 5: Place-making in business cases

vi. Appendix 6: Federal funding requirements

vii. Appendix 7: TfNSW business case development contact points

TfNSW Business Case Guide – 2020 43

Appendix 1: Overview of business case process for SBC, FBC and Light FBC

Gate 1: Strategic Business Case Gate 2: Final Business Case Light Final Business Case

I. Case for Change I. Case for Change I. Case for Change

Step 1: Business need/opportunity Step 21: Revisit steps 1 to 7

Step 1: Business need/opportunity

Step 2: Objectives of intervention Step 2: Objectives of intervention

Step 3: Strategic context Step 3: Strategic context

Step 4: Benefits and risks Step 4: Benefits and risks

Step 5: Stakeholders Step 5: Stakeholders

Step 6: Potential options Step 6: Potential options

Step 7: Cost estimates Step 7: Cost estimates

II. Value for Money Analysis II. Value for Money Analysis II. Value for Money Analysis

Step 8: Economic analysis - Base case and long list of options

Step 22: Revisit steps 8 and 9 to confirm economic and financial analysis

Step 8: Economic analysis - Base case and shortlisted options

Step 9: Financial analysis Step 9: Financial analysis

III. Preferred Option (Indicative) III. Preferred Option III. Preferred Option

Step 10: Preferred option (indicative) - scope, cost, proposed funding Step 23: Revisit to confirm the preferred option Step 10: Select a preferred option

Step 11: Financial impact statement and financial sustainability

IV. Commercial Analysis V. Commercial Analysis

Step 24: Develop a procurement strategy Step 11: Develop a procurement strategy

IV. Management Analysis (Preliminary) V. Management Analysis VI. Management Analysis

Step 12: Governance framework Step 25: Revisit steps 12 to 20 Incorporate SBC steps 12 to 16, 18 to 20 and FBC step 26 as appropriate. Step 13: Project management strategy, framework and plan

Step 14: Change management strategy and plan

Step 15: Benefit realisation management

Step 16: Risk management, strategy, framework and plan

Step 17: Asset ownership and management plan

Step 18: Stakeholder management plan

Step 19: Sustainability and planning pathway

Step 20: Safety and safety management

Step 26: Compliance requirement

Gate 1: Strategic Business Case Gate 2: Final Business Case Light Final Business Case

TfNSW Business Case Guide – 2020 44

Appendix 2: Documents to be included in a business case submission

The following are the usual attachments to the business case submission

SBC FBC Light FBC

Business Requirements Specification and other studies to support case for change such as demand modelling report, crash investigations and other technical studies.

Yes Yes No

Feasibility Studies. Yes Yes No

Economic Cost-benefit analysis (CBA) report Yes Yes No

Economic CBA calculation model Yes Yes Yes

Financial Appraisal Yes Yes Yes

Basis of Cost Estimate Yes Yes No

Cost Management Plan Yes Yes No

Procurement Plan No Yes Yes

Assurance and Governance Plan No Yes No

Benefits Realisation Plan Yes Yes No

Benefit Register Yes Yes Yes

Investment Logic Map Yes Yes Yes

Risk Management Plan / Risk Register No Yes No

Stakeholder Management Plan / Communications Strategy Yes Yes No

Planning pathway and environmental risk assessment, and the sustainability and strategic management plan

Yes Yes No

Information Security Plan (ICT Projects) Yes Yes Yes

Safety Plan and Management No Yes Yes

Other background documents:

Strategic / concept / detailed design and detailed estimates.

Options and preferred option report.

Preliminary environmental investigations / environmental assessment.

Traffic and all transport modelling, crash analysis, geotechnical, flooding and drainage, heritage and other specialist reports.

Delivery program.

Operations Concept Definition.

Maintenance Concept Definition.

Yes Yes No

For details on attachments for federal business cases: Refer to Section J of the Federal Project proposal report template.

For more details on attachments for ICT business cases: Refer to TfNSW PEFm.

TfNSW Business Case Guide – 2020 45

Appendix 3: Key governance groups & responsibilities

Key governance roles and responsibilities are outlined below. Please note, the key roles and responsibilities relating to business case development and approval are being reviewed as part of Evolving Transport (an internal organisational change program). This section will be updated as new structure, functions and related processes emerge.

The project manager / director develops the business case and liaises with relevant entities to undertake required assessments (e.g. CBA and financial appraisal, value enhancement assessments). Will liaise with Economics and Assurance to confirm assurance requirements, arrange Gateway reviews and address issues arising from these reviews and appraisals. As an expenditure may have more than one project manager throughout its lifecycle, project managers are also responsible for ensuring appropriate handover processes are followed between each lifecycle stage.

The senior responsible officer is the visible owner of the project who drives the change process. The role is accountable for successful delivery (program meets its objectives and delivers the projected benefits) and is recognised throughout the organisation and beyond as the key leadership figure in driving the change forward.

The project sponsor, usually a senior executive, is ultimately accountable for the success or failure of the expenditure and ensuring that it is focused on achieving its business objectives and delivering the forecast benefits. The project sponsor is usually responsible for securing the financing and budget approval. An expenditure may have more than one project sponsor throughout its lifecycle.

The Division Deputy Secretary oversees and approves a Division’s projects, reviews and approves project proposals / business cases and considers if expenditure can be funded from existing budgets. The Division Deputy Secretary is also responsible for the approval of operating expenses to develop strategic and final business cases.

The Group CFO, Group Finance and Investment, Corporate Services oversees investment assurance assessments, Gateway Reviews and submission of business cases to FIAC. The role is also responsible for the assessment of budget impacts and financial implications of proposed projects.

The IT Subcommittee / Portfolio Board is responsible for the review, approval and prioritisation of ICT projects.

The Chief Information Officer is responsible for reviewing any business cases with information technology impacts and the delivery of the technology solution.

The CFO of Operating Agencies is responsible for ensuring that (i) appropriate local procedures are in place for approval and review processes of approved projects (ii) the Business Case Policy and Guide are effectively implemented and adhered to within the Agency.

The Operating Agency Chief Executive is responsible for the approval of business cases prepared by operating agencies.

The Finance and Investment Assurance Committee (FIAC) makes recommendations to the Secretary to support decision making on proposals, funding allocations and the financial management of capital and operational budgets across the Transport cluster.

The Secretary prioritises expenditure within the transport portfolio, endorses business cases to NSW Treasury, other central agencies, Minister and Cabinet.

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Appendix 4: Agile business cases

What is an agile delivery approach?

A traditional capital investment model involves the entire program to be scoped in advance, the funding to be allocated up front and the delivery method to be clearly defined. However, this approach does not align with how development occurs in a rapidly changing sectors such as ICT.

Any change in the plan during the execution phase may lead to reduction of quality, cost overruns, long delays, or not delivering the committed requirements.

An agile delivery involves continuously refining and re-prioritising initiatives such that only those initiatives which are most crucial at that point-in-time, are scoped, funded and delivered. This approach helps ensure that the project delivers what is needed and relevant.

The key enablers for this agile approach are funding and governance models that can support the agile delivery approach and respond to a high level of uncertainty and rapidly evolving shifts in ICT and customer expectations.

Agile Approach and Enablers

How to present an agile delivery approach in business cases?

To apply an agile delivery approach, a rolling program business case is required which clearly presents a mechanism for managing the funding and governance model that prioritises projects in line with customer needs.

The Governance section of the business case must clearly state:

assessment section: define the scope, timeline, benefits baseline and forecast, and cost

prioritisation and approval section: monitor alignment to TfNSW strategic outcomes and ICT/relevant program objectives and benefits. Ongoing tracking and reporting will ensure benefits delivery and address risks promptly.

At the end of each financial year, a FIAC business paper and assurance report must document the changes from proposed to actual scope, benefits delivered, proposed initiatives and funding request for the upcoming year.

An incremental rolling program funding model provides opportunities to formally report benefits within each financial year and to outline any new risks to the program based on new learnings, new technology advancement or other cluster-wide programs for the following year.

Useful Tip

It is important to determine whether the Agile approach is suitable for a project or a program. There are certain project/program attributes that should be tested to determine whether the project is suitable for “Agile delivery approach” such as Scrum. In ICT Agile PEFm (Project Execution Framework) - agile projects are developed which consists of the governance and delivery aspects.

For more guidance on agile approach for ICT projects refer to Department of Customer Service website.

Agile ApproachDefine the high level outcome (not the output)

Decide a timetable when this need to be achieved

Decide what is the best output to achieve the desired outcome

Design and build solution

EnablersFunding the outcome

Governance model that will respond to the frequent changes by applying a

prioritsation process that ascertains the most crucial scope to be delivered

TfNSW Business Case Guide – 2020 47

Appendix 5: Place-making in business cases

What is Place-making?

Place-making refers to the development and management of the built environment to influence the character or experience of places. Successful place-making either preserves or enhances the character of our public spaces, making them more accessible, attractive, comfortable and safe.

All roads transport projects and projects that use and/or interface with roads need an understanding of the places that those projects interface with, in order to improve on the characteristics of a well-designed built environment (place qualities) – good access and connection, safety and comfort, a network of green infrastructure, provision of amenity and uses, and character. Transport’s main contributions are in facilitating walking, making space for uses - both public space and land use interface, travel options, climate adaptation and meeting community expectations for that place. A Movement and Place approach should be taken in all phases of Transport roads-related work – from planning through to final business case and beyond, in order to ensure that place considerations are made and the right balance is struck between movement and place.

What is the role of Transport Business Cases in place-making space?

Implementing new transport projects has the potential to transform the structure of urban places by changing liveability, accessibility, amenity and economic success of communities. Transport links are an essential adjunct to successful place-making.

Project teams at relevant Business Case stages should:

consider place-making elements in each project for the successful implementation of Future Transport Strategy 2056 and the 10 Year Blue Print

apply a Movement and Place approach to roads-based transport projects to identify and deliver place-based outcomes

identify and measure benefits

contact relevant SMEs contacts for further assistance.

How to identify and measure the place-making benefits?

The benefits of place-making need to be identified in business cases and in cost-benefit analysis (CBAs) for new infrastructure projects. The benefits of successful place-making are well known and accepted in a qualitative sense and include aesthetic, social, cultural, environment and heritage impacts. These need to be included in cost benefit analyses however a range of benefits are also quantifiable. Work from Applied Economics commissioned by Infrastructure Australia lists a detailed set of potential place-making benefits, including:

uplifts in land value

infrastructure and service delivery savings

urban amenity

heritage benefits

environmental benefits (e.g. lower greenhouse gas emissions from high density housing)

health benefits from increased active transport and associated health benefits

project specific producer surplus

Wider economic benefits are also an indirect effect of place-making. TfNSW is currently researching the emerging best-practice approach and methodologies in this area, and how

TfNSW Business Case Guide – 2020 48

they could be applied by TfNSW. There may be other related considerations that place-based business cases will need to consider, such as whether the time horizon for costs and benefits needs modification – particularly where transport is unlocking long term and multi-stage outcomes such as urban redevelopment around new stations. Care should also be taken to characterise benefits to align with strategic policy – for example whether or not pedestrian or cycle priority is counted as a traffic benefit (decongestion, through mode shift) or disbenefit (delay, along relevant routes).

What are my next steps?

Early engagement: Contact Place SMEs to identify opportunities to apply the principles of urban design and design excellence to create a successful place.

Identifying options: Consider options with Place opportunities while developing a long list on options during the CBA phase. Engage with Place SMEs during options development and analysis phase. For more information on assessing potential place-making opportunities and guidance on benefits and risks, contact Precincts and Urban Design at CustomerServicesGroup_Precincts&UrbanDesign@transport.nsw.gov.au

The NSW Government Architect has also released a short reference document titled ‘Aligning Movement and Place’ which can be used to understand the movement and place considerations, until a full Practitioner’s Guide is published. When applying a Movement and Place approach to roads projects, further guidance can be sought from Transport Planning at movementandplace@transport.nsw.gov.au.

Who are the Place SMEs?

Transport Planning: This team collaborates with customers, councils and other government agencies, to integrate transport and land use planning and achieve multi-modal place-based outcomes as identified in Future Transport 2056.

Customer Experience, Design & Delivery: This team provides urban design expertise and advice to teams.

Outside of Transport project managers may consult with Councils, Department of Planning, Industry and Environment (DPIE), Greater Sydney Commission (GSC) and other place SMEs where needed.

TfNSW Business Case Guide – 2020 49

Appendix 6: Federal funding requirements

Checklist for federal government funded projects: This checklist maps the requirements of federal government funded projects, as detailed in the Federal Project proposal report template and the related section of the TfNSW business case template. Check the Federal templates to make sure all the requirements are sufficiently captured in the TfNSW Business case. This can be attached to the business case template.

Federal requirements as PPR Mapped in TfNSW BC

A. PROJECT OVERVIEW

Proponent Details

A1 Entity Name

A2 Primary Project Contact

Proponent and Project Information

Proponent and Project Information

A3 Project Partners Project partners: Identify Federal, State or Local Government and/or private organisations making a financial or in-kind contribution to the project.

Project Details

A4 Project Name:

A5 Project Identification (ID):

A6 Project Summary (Max 500 words): Include Rationale/ objectives, Location, Key benefits, Progress to date

A7 Geographical Coordinates in Shapefile format if available

A8 Corridor and section of the National Land Transport Network (if appl.)

Note: A8 is not required for Projects with a total Federal contribution of $7.5 million (with total estimated cost of $25 million).

Executive Summary

Proponent and Project Information

Proponent and Project Information

Executive Summary

Proponent and Project Information

Proponent and Project Information

A9 Related Projects: Provide details of other works, projects or studies related and/or interdependent to the proposed Project (please provide web links to studies where applicable). This may include works related to the Project that are not considered ‘Approved Purposes’ under Section 2.1.3.2 of the NLT Act.

Executive summary

Section 2.4 Benefits and risks

Section 6.2 Project management strategy, framework and plan

B. PROJECT SCOPE

B1 Problem/ Opportunity Statement: Include evidence and data to demonstrate the need for Australian Government funding to address the problem and/or make the most of the opportunity.

Note: B1 is not required for Projects with a total Federal contribution of $7.5 million (with total estimated cost of $25 million).

Section 2.1 Business need/opportunity

B2 Options Evaluation: Describe what options are being considered/ were

considered? Explain the process for evaluating the options and determining the preferred option. How public participation helped inform the preferred option? Include assumptions made in comparing options; and if the project with the highest Net Present Value was not selected, explain why.

Note: If the Project is in Scoping Phase and seeking funding for studies such as Options Analysis and/or Business Case development that will include an investigation of the options this should be noted here with further detail provided in B3.

Note: B2 is not required for Projects with a total Federal contribution of $7.5 million (with total estimated cost of $25 million).

B3 Scope of Project Phase: Outline the Scope of the project depending on specific phase: Scoping Phase, Development Phase, Delivery Phase:

B4 Eligibility under the National Land Transport Act 2014

Section 2.6 Potential options

Section 3.0 Value for money analysis

Section 4.0 Preferred Option

TfNSW Business Case Guide – 2020 50

Federal requirements as PPR Mapped in TfNSW BC

B4 Eligibility under the National Land Transport Act 2014: Please indicate which part(s) of the Act are relevant to Project approval.

B5 Supply chain analysis (freight rail only)

C. PROJECT COSTS

C1: Complete the jurisdiction-specific Project Cost Breakdown Template provided by the Department. A probabilistic Cost Estimation process must be used for Projects with a total anticipated Outturn cost (including contingency) exceeding $25 million unless otherwise approved by the Commonwealth. Projects with a total anticipated Outturn cost (including contingency) under $25 million may use a deterministic methodology, however the Department recommends using a probabilistic cost estimation method where possible. Refer to Australian Government Cost Estimation Guidance.

Note: C1 is not required for Projects with a total Federal contribution of $7.5 million (with total estimated cost of $25 million).

C2: Provide details of the Total Outturn Cost breakdown summary including Base cost estimate, contingency, total project cost estimate, escalation and total outturn cost estimate.

C3: Provide a budget profile for the Project. The budget profile should outline the Australian Government and State Government funding contributions for the overall Project per financial year at P50 Outturn Costs for projects that have an Australian Government contribution of $25 million or more. For projects that have an Australian Government contribution of under $25 million, P90 Outturn Costs should be used.

C4: What is the status of the State Government funding outlined above? State if the funding is committed in budget forward estimates, announced but not yet committed in the budget or yet to be confirmed.

C5 Details of the escalation rates used

Include in Executive summary - request for approval and funding to develop and implement: Overall project cost, funding request, Ongoing operating and maintenance costs (whole of life, Investigation of Private Funding.

Section 4.0 Preferred Option

Section 2.7 Cost estimates

D. BENEFITS

D1 Provide a summary of the expected positive outcomes and benefits to be delivered by the Project. This is addressed above.

D2 Provide summary of BCR using a discount rate of 4 per cent and 7 per cent for both the P90 and P50 cost of the Project. If not practicable to do so, please outline reasons why.

Note: D3 to D5 are not required for Projects with a total Federal contribution of $7.5 million (with total estimated cost of $25 million).

D3 Complete a Benefit Indicators table.

D4 Complete the Benefit Net Present Value (NPV) table.

D5 Complete the traffic and use assumptions table.

Section 4.0 Preferred Option

E. FINANCING AND PROCUREMENT

E1 If the total estimated project cost greater than $50 million, outline the process for considering alternative funding and/or financing opportunities and the outcome of the considerations. Provide details of how this exploration was carried out and whether there is scope for private sector financing or alternative funding. Consideration should be given to the following: What will be covered? Core versus non-core services; The capacity and appetite of the market to be able to deliver this kind of Project; Public interest; Long term sustainability; Value for money; Value capture opportunities; and Opportunities for private sector contributions. Attach a copy of the formal assessment.

E2 If the estimated Project cost is less than $50 million was private funding or financing investigated proportional to the size of the project. If so, provide a summary of how it has been considered and the outcome of the considerations?

Note: E1 and E2 are not required for Projects with a total Federal contribution of $7.5 million (with total estimated cost of $25 million).

E1 and E2 to be covered in section 4.0 Preferred Option – 4.1 Proposed funding

TfNSW Business Case Guide – 2020 51

Federal requirements as PPR Mapped in TfNSW BC

E3 What is the preferred procurement method for the Project? Outline the specific details of the contracting method (design and construct for example) and why it was chosen. If over $50 million, how was a PPP considered in line with the National Public Private Partnership Guidelines? Refer to the Notes on

Administration for Land Transport Infrastructure Projects – 2019-2024 for more details

E4: Is a tender exemption being sought?

E3 and E4 to be covered in section 5.1 Procurement Strategy

E5 Project Timeline E5 to be covered in section 6.2 Project management strategy, framework and plan

F. RISK AND SUSTAINABILITY

F1 Identify the major risks, and proposed mitigation strategies to successfully deliver this Project.

Note: F1 and F2 are not required for Projects with a total Federal contribution of $7.5 million (with total estimated cost of $25 million).

F2 Identify the major dis-benefits of the projects and how the Project may impact the community and environment.

F3 Detail any sustainability strategies that will be adopted

F1 to be covered in section 6.5 Risk management, strategy, framework and plan

F2 and F3 to be covered in section 6.9 Sustainability and Planning Pathway

G. STAKEHOLDER ENGAGEMENT

G1 Provide details on how public and stakeholder participation will be facilitated during this phase, and the project overall.

G2 Complete a stakeholder consultation table covering information on completed or planned consultations, the type of consultation the relevant stakeholders involved as well as a brief description of the issues raised and a plan to manage those issues.

G3 Provide a comprehensive public recognition signage plan. The plan should set out the proposed signage for the Project in line with the Signage Guidelines available from the Department’s website at https://investment.infrastructure.gov.au/about/resources/signage_guidelines.aspx.

Section 2.5 Stakeholders

G2 and G3 to be covered in section 6.7 Stakeholder management plan

H. COMPLIANCE

H1 List Commonwealth or State legislation triggered by the Project.

H2 Does the Building Code 2016 apply to this Project? If so, please confirm compliance.

H3 Does the Australian Government Building and Construction WHS Accreditation Scheme apply to this Project? If so, please confirm compliance.

Note: H4 and H6 are not required for Projects with a total Federal contribution of $7.5 million (with total estimated cost of $25 million).

H4 If the Project has an Australian Government funding contribution of equal to or greater than $7.5 million, has an Indigenous Participation Plan been attached?

H5 If the Project is more than $20 million, a Local Industry Participation Plan must be provided to the Department.

H6 Is the proposed Australian Government contribution $100 million or greater. If yes, has the Business Case been submitted to IA for review?

Section 6.8 Compliance requirements

Projects are subject to funding conditions set out in the NPA and from these sources:

A1: The NLT Act (see https://www.legislation.gov.au/Details/C2018C00226)

A2: Compliance with other laws; and

A3: Indigenous Employment and Supplier- Use Infrastructure Framework.

For information on Federal funding conditions, refer to Appendix A (Funding conditions) of Notes on Administration for Land Transport Infrastructure Projects – 2019-2024.

TfNSW Business Case Guide – 2020 52

Appendix 7: TfNSW business case development contact points

(As at March 2020 – Subject to change)

Steps in Gate 0 - Needs confirmation

Step 1: Need identification

Project need is identified by the project initiator

Step 2: Early engagement

Project Team contacts Strategic Investments through the relevant DMO/PMO on alignment, planning, costing and scope of a project/program to provide clarity on requirements and strategic priority.

Project Team contacts Economics and Assurance to:

Receive advice from the Assurance team on: (i) High level risk determination (ii) Relevant GCA requirements and future timings

Receive advice from the Economic Advisory team on: (i) How to prepare Business Case (ii) Economic evaluation methodology

Receive advice from the Benefits Realisation Management team on: (i) Project benefits realisation requirements

Engage with Place SMEs to identify opportunities to apply the principles of urban design and design excellence to create a successful place within the project boundaries. For more information on assessing potential place-making opportunities and guidance on benefits and risks, contact Precincts and Urban Design at CustomerServicesGroup_Precincts&UrbanDesign@transport.nsw.gov.au.

For roads-related projects, a Movement and Place analysis should be included to demonstrate consideration of both place and movement objectives, options and outcomes. Contact movementandplace@transport.nsw.gov.au for guidance.

Step 3: Develop an Investment brief

Project team to complete a Transport Cluster Investment Brief. Refer to the Investment Brief guideline for recommended steps and useful tips while preparing the Investment Brief. Note: If the proposed investment is already supported by an existing program business case, Asset Management Plan or Services and Operations Plan, a new Investment Brief is not required.

Step 4: Submit Investment brief

Project Team submits Investment Brief to Strategic Investments by the two key cut-off points each financial year. For proposals that require planning funds for the current financial year, this must be submitted by the end of September for consideration and approval as part of

the Proposed TIP and mid-year review process. Alternatively, proposals seeking planning funds for the following financial year must be submitted by the end of February for

consideration and approval as part of the Budget.

Investment Briefs may need to be submitted to Infrastructure NSW, the Department of Customer Service as required under the relevant assurance framework dictated by the risk tier and nature of the proposal

Step 5: Evaluation and Prioritisation

Strategic Investment to: (i) Develop Funding Strategy (in consultation with the project team) (ii) Evaluate project based on prioritisation criteria.

Step 6: Consult Economics & Assurance

Project Team to consult Economics and Assurance for: (i) Inputs required for the business case (ii) Applicability of economic evaluation parameters (iii) Advice on risk tiering and assurance (iv) Advise on benefit realisation requirements

Step 7: Submission for approval

Strategic Investment submits the results and recommendations from the assessment to TfNSW executives to inform the Executive Quarterly Off-site (EQO) Finance and Investment Committee (FIAC) for prioritisation, endorsement and approval.

Step 8: Undertake risk self-assessment

Project Team to undertake a risk self-assessment to determine the preliminary Project Tier using GCA Risk Profile Tool (RPT)

(i) IIAF Risk Profile Tool for capital infrastructure and operational technology projects (ii) Risk Profile Tool for capital and recurrent ICT projects (iii) REAF Risk Profile Tool for major recurrent Expenditure projects

Step 9: Develop PAP Project Team to develop preliminary Project Assurance Plan (PAP), in consultation with the Assurance team

Step 10: Approval Project Team to obtain Agency and Sponsor approval on RPT and PAP

Step 11: Submit PAP & RPT

Project Team to submit PAP and RPT to Economics & Assurance

Step 12: Assessment & Submission

Economics and Assurance assesses the project Investment Brief and submits to FIAC for prioritisation and approval

TfNSW Business Case Guide – 2020 53

Step 13: Approval FIAC approves Investment Brief: (i) Approval to register with GCA (ii) Preliminary risk rating (Project Tier) (iii) Project Assurance Plan (PAP) (iv) Seed Funding (v) Proceed to Gate 1

Step 14: Register Economics and Assurance completes the project registration with GCA under the appropriate framework

Step 15: GCA review & Advice

GCA: i. Reviews the preliminary Project Tier and Project Assurance Plan and confirms if they

are appropriate for the project

ii. Advises the delivery agency of the interim approval of the Project Tier and Project Assurance Plan, for the purposes of progressing

iii. Refers the preliminary Project Tier and Project Assurance Plan to the GCA's Advisory Group (E.g. Risk Review Advisory Group (RRAG) for INSW/IIAF)

iv. Makes a recommendation to the Infrastructure Investor Assurance Committee (IIAC) / Government Chief Information & Digital Officer (GCIDO) / Major Recurrent Advisory Group (MRAG) on the final Project Tier and Project Assurance Plan for endorsement

v. Advise DaPCo of IIAC/GCIDO/MRAG endorsed Project and Project Tier

vi. Advise delivery agency of IIAC/GCIDO endorsed Project Tier and Project Assurance Plan

Step 16: Project team advised

Economics and Assurance advises project team on confirmation of Project Tier and Assurance Pathway

Steps in Gate 1 – Needs analysis

Step 1: SBC Project Team prepares draft Strategic Business Case

Step 2: Submit to E&A Economics and Assurance completes a Pre-gate Review or projects progressing to Gateway Review or a review under the TfNSW Assurance Framework for projects not undertaking GCA gateway reviews

Step 3: Update SBC Project team updates the Strategic Business Case and prepares responses to recommendations (if any)

Step 4: FIAC Approval Project Team submits to FIAC for approval to release to Gateway Coordination Agency (GCA) for Gateway Review

Step 5: GCA Review GCA conducts review:

Tiers Infrastructure Projects ICT Projects Recurrent Projects

Tier 1 INSW DCS Treasury

Tier 2 INSW DCS Treasury

Tier 3 &

4

External gateway review not

required. Assurance

requirements to meet

internal governance

arrangements

DCS External gateway review

not required. Assurance

requirements to meet

internal governance

arrangements

Step 6: E&A Review Economics and Assurance completes assurance reviews under the TfNSW Assurance Framework for projects

Step 7: Update SBC Project team updates the Strategic Business Case and prepares responses to recommendations (if any)

Step 8: Funding required?

If funding is required, Business case Prioritisation followed by approval of funds

Step 9: FIAC process FIAC approves SBC; Approval to proceed to Gate 2/Final Business Case

Steps in Gate 2 – Investment decision

Step 1: FBC Project Team prepares draft Final Business Case and submit to Economics and Assurance

Step 2: E&A review Assurance process depending on risk tier; review and assess robustness of business case and economic parameters; benefit realisation plan and register

Step 3: Prioritisation Review priorities and funding strategies

Step 4: FIAC Process Project team sends responses to FIAC

Step 5: Approval FIAC approves Final Business Case. Approval to proceed to Gate 3

Step 6: Update TIP Project is added to Transport Investment Plan (TIP) as emerging investments

TfNSW Business Case Guide – 2020 54

Key reference documents and links

Documents Description File Location Document Type

Transport Business Case Policy

Directs preparing business cases for Transport investments

Transport for NSW website

Policy

Transport business case template

Provides structure and content required for business cases for all NSW Transport cluster projects

Transport for NSW website

Template

Transport CBA Guide Provides transport specific guidance on conducting CBA

Transport for NSW website

Guidelines

NSW Government Guide to Cost-Benefit Analysis (TPP17-03)

Provides general guidance on conducting CBA NSW Treasury website

Guidelines

NSW Government Business Case Guidelines (TPP18-06)

Provides general guidance on preparing business cases

NSW Treasury website

Guidelines

NSW Government Outcome Budgeting (TPP 18-09)

Provides guidance on developing and maintaining the framework that underpins each State Outcome and also provides details on financial and non-financial requirements for performance reporting purposes

NSW Treasury website

Guidelines

Infrastructure NSW’s Business Case Toolkit

Provides templates and supporting materials to develop NSW Government Business Cases.

INSW website Guidelines and Toolkit

Notes on Administration for Land Transport Infrastructure Projects – 2019-2024

Provide administrative detail to support the National Partnership Agreement on Land Transport Infrastructure Projects (NPA) and support the Australian Government’s investment in infrastructure projects (Projects).

DITRDC Website

Guidelines and Templates

IA Assessment Framework

Sets out the assessment framework that Infrastructure Australia uses to consider initiatives and projects for inclusion on the Infrastructure Priority List (IPL).

Infrastructure Australia website

Framework

TPP 17-01 NSW Gateway Policy

Sets out guidance and minimum requirements for the delivery and monitoring of Gateway reviews in NSW

NSW Treasury website

Policy

NSW Treasury Recurrent Expenditure Assurance Framework

Provides assurance for both the investor and delivery agency for major recurrent projects.

NSW Treasury website

Framework

INSW Infrastructure Investor Assurance Framework

Provides independent risk-based assurance process for the State’s capital projects

INSW website Guidelines

ICT Assurance Framework

Provides independent risk-based assurance process for the State’s capital and recurrent funded ICT projects

Department of Customer Service website

Framework

Treasury Circular 12/19

Directs submission of business cases to Treasury based on the size and risk profile of the project or program.

NSW Treasury website

Circular

TfNSW Business Case Guide – 2020 55

Budget Estimates 2019-20, Budget Paper No 3

Outlines the financial and service delivery functions of government sector agencies.

NSW Treasury website

Budget paper

Future Transport Strategy 2056

Sets the 40 year vision, directions and outcomes framework for customer mobility in NSW, which will guide transport investment.

Transport for NSW website

Framework

10 Year Blueprint Lays out Transport’s desired outcomes, ambitions and strategic priorities for the next 10 years.

Transport for NSW website

Framework

State Infrastructure Strategy (SIS) 2018-2038

Sets out the NSW Government’s infrastructure vision for the state over the next 20 years, across all sectors

NSW Government Website

Strategy

State Outcomes State Outcomes are clear statements of what the Government is seeking to achieve for the people of New South Wales. An outcome focus will drive a broader conversation on different options, new partnerships and alternative ways of delivering services to achieve results

NSW Treasury website

Budget paper

NSW Freight and Ports Plan 2018-2023

The NSW Freight and Ports Plan 2018-2023 is a call to action for government and industry to work together to make our freight system more efficient, more accessible, safer and more sustainable for the benefit of producers, operators, customers and communities across NSW.

Transport for NSW website

Strategy

Road Safety Plan 2021 Sets out priority areas to address recent increases in the road toll and to move us towards achieving the NSW Government’s State Priority Target to reduce fatalities by 30 per cent by 2021.

Transport for NSW website

Strategy

Transport Asset Management Framework

Asset management, is a series of co-ordinated activities that balance the cost, risk and performance of assets. TfNSW asset management enables whole of lifecycle decisions to be made about our assets.

Transport for NSW Intranet

Framework

NSW Public Sector Asset Management Policy

The new asset management policy which aims to drive better asset management through strengthening accountability, performance and capability across the public sector.

NSW Treasury website

Framework

Greater Sydney Regional Plan

A Metropolis of Three Cities – the Greater Sydney Region Plan is prepared concurrently with Future Transport 2056 and the State Infrastructure Strategy, aligning land use, transport and infrastructure planning to reshape Greater Sydney as three unique but connected cities.

NSW Government Website

Strategy

Australian Transport Assessment and Planning (ATAP) Guidelines

The guidelines provide a comprehensive framework for planning, assessing and developing transport systems and related initiatives.

Australian Government

Guidelines

Transport Outcomes Driver Framework

Transports Outcomes Driver Framework in line with NSW Treasury Outcome Budgeting Policy

Transport for NSW SharePoint

Framework

TfNSW Business Case Guide – 2020 56

List of acronyms

AEO – Authorised Engineering Organisations

BCR – Benefit cost ratio

Capex – Capital expenditure

DaPCo - Delivery and Performance Committee

DITRDC – Department of Infrastructure, Transport, Regional Development and Communications

DPIE – Department of Planning, Industry and Environment

ERC – Expenditure Review Committee

FAP – Financial appraisal

FBC – Final business case

FIAC – Finance and Investment Assurance Committee

FIS – Financial impact statement

GCA – Gateway coordination agency

GPOP – Greater Parramatta to the Olympic Peninsula

GSC – Greater Sydney Commission

ICT – Information communication technology

IIAF – Infrastructure investor assurance framework

INSW – Infrastructure NSW

IP – Infrastructure and Place

IT EPMO – Information technology enterprise portfolio management office

LFBC – Light final business case

MPM - Major periodical maintenance

NoA – Notes on administration

NPV – Net present value

Opex – Operating expenditure

PEFm - Project execution framework methodology

PMO – Program management office

SBC – Strategic business case

SME – Subject matter expert

SRO – Senior responsible officer

TIP – Transport investment plan

TNAC – Transport Network Assurance Committee

Totex – Total expenditure

TPP – Treasury policy paper

WACC – Weighted average cost of capital

TfNSW Business Case Guide – 2020 57

Terms and definitions

Contingency Cost

An amount added to an estimate to allow for items, conditions, or events for which the state, occurrence, or effect is uncertain and that experience shows will likely result, in aggregate, in additional costs. Typically estimated using statistical analysis or judgment based on past asset or project experience.

Contingent risk

This type of risk is one that is incidental or dependent on something else. Unforeseen circumstances such as weather impacts, industrial issues, safety, planning approval conditions, design development, owner requirements, geotechnical investigations and potential claims from contractors are some examples. The likelihood of occurrence of contingent risks is usually less than 100%.

Escalation Changes in the cost or price of specific goods or services in a given economy over a period of time. This is similar to the concepts of inflation and deflation except that escalation is specific to an item or class of items (not as general in nature).

Financial Impact Statement

Presentation of the financial implications of the proposed project indicating all variations in expenditure and receipts affected by the proposal, even if the net effect of the proposal is nil. It should reflect the expected effects on the consolidated fund and statutory funds and the effects on the resource allocations/receipts of any other agency during the current year and the three succeeding financial years.

P50 and P90 Estimate

P50 cost estimate means there is a 50% probability that the cost will not be exceeded. A P90 cost estimate means that the contingency allowance on top of the Base Estimate is sufficient to ensure that there is a 90% chance that the amount will not be exceeded. In adopting a P90 approach the costs (inclusive of risk) will be higher (90% probability that the project estimate will be attained).

Weighted Average Cost of Capital (WACC)

WACC is an estimate of the expected return on total agency assets. It can reflect the minimum return sought by investors / shareholders. The WACC method estimates the cost of capital by combining the return on debt and equity of the agency, weighing these returns by the total value of debt and equity held.

Whole of life cost

Total cost across the life of the project including capital and recurrent. Refers to the total cost of ownership over the life of an asset, also known as Totex (total expenditure) and commonly referred to as "cradle to grave" or "womb to tomb" costs. Costs considered are financial cost. Typical areas of expenditure which are included in calculating the whole-life cost include, planning, design, construction and acquisition, operations, maintenance, renewal and rehabilitation, depreciation and cost of finance and replacement or disposal. By using whole-life costs, this avoids issues with decisions being made based on the short-term costs of design and construction. Often the longer-term maintenance and operation costs can be a significant proportion of the whole-life cost.

Work Breakdown Structure (WBS)

WBS is a deliverable oriented decomposition of a project into smaller components. It defines and groups a project's discrete work elements in a way that helps organise and define the total work scope of the projects. A work breakdown structure element may be a product, data, service, or any combination. A WBS also provides the necessary framework for detailed cost.