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BBCF_Terminology_2

Section 2: Five Case Model

TermDefinition
Benefit–cost ratio (BCR) BCR is a measure of economic efficiency. The ratio compares the monetised benefits from implementing a project or providing a service with the whole-of-life costs of that project or service. For example, a project which has the total benefits of GBP100 million, with a total cost of GBP50 million (both in present value), has a BCR of 2. BCR is used to assess improvement activities in the cost–benefit appraisal portion of the Investment Assessment Framework.
Capital expenditure Expenditure on durable assets such as land, buildings and equipment. Also known as CapEx.
Commercial case This examines the commercial viability of a preferred option and the consenting and procurement strategy that will be used to engage the market. It presents evidence on risk allocation and transfer as well as details of responsibilities for delivering different aspects of the programme. The commercial case is usually part of the single-stage  business case or detailed business case.
Constraint An externally imposed boundary within which work must take place or outputs must perform
Critical Success Factors Attributes essential for successful delivery of the project or programme, against which the initial assessment of the options for the delivery of the proposal will be appraised.
Dependency A relationship indicating that one outcome or activity has a requirement of another outcome or activity (e.g. the other activity must have been completed).
Dis-benefit A dis-benefit is the measurable deterioration that results from an outcome. It answers the question: ‘what value is lost as a consequence this outcome?’ Dis-benefits are generally less well identified and investigated in business case documentation, and are regarded as 'unwanted side effects'. They can, of course, be extremely damaging to business cases.
Economic case The economic case demonstrates that the proposal optimises VFM. It identifies and evaluates a wide range of options against the investment objectives. Development of the economic case takes place during the programme business case, focusing on consideration of alternative responses and identification of a preferred programme. The case is further developed as part of the indicative business case, identifying a long list of options which is reduced to a shorter list, and finally a preferred option.
CapEx Capital Expenditure. Expenditure on durable assets such as land, buildings and equipment.
Cost benefit ratio Alternate term for Benefit-cost Ratio (BCR). BCR is a measure of economic efficiency. The ratio compares the monetised benefits from implementing a project or providing a service with the whole-of-life costs of that project or service. For example, a project which has the total benefits of GBP100 million, with a total cost of GBP50 million (both in present value), has a BCR of 2. BCR is used to assess improvement activities in the cost–benefit appraisal portion of the Investment Assessment Framework.
Financial case Outlines the financial viability of the programme and possible funding sources by demonstrating that the preferred option will result in an affordable and fundable investment. The financial case is usually developed within the detailed business case.
Five Case Model A systematic framework for the development and the presentation of the business case over time (SOC, OBC and FBC). The five cases to be made are: Strategic, Economic, Commercial, Financial and Management.
Long list A list of alternative responses that are consistent with the objectives, constraints and depenencies of a proposal. Their detail must be sufficiently understood to be able to discard the less attractive options to arrive at the short list
Management case Assesses whether a proposal is achievable and deliverable. It tests project planning, governance structure, risk management, communications and stakeholder management, benefits realisation and assurance. The management case is usually a key part of the single-stage business case or detailed business case.
Operating expenditure The costs for running business operations on a daily basis. Also known as OpEx.
OpEx Operating expenditure. The costs for running business operations on a daily basis.
Preferred way forward The most attractive option in the long list. Often becomes the preferred option in the short list.
Revenue expenditure Outgoings matched to revenue for the current accounting period (e.g. repairs and maintenance costs)
Risk A risk is a potential variance (either positive or negative) from an expected outcome. Risks usually apply to the delivery of a project. They are within the project team’s control to manage (avoid, minimise or mitigate) to achieve the defined scope and expected benefits. Risks differ from uncertainties.
Short list A list of alternative responses that are consistent with the objectives, constraints and depenencies of a proposal and are sufficiently attractive to warrant a detailed investigation. Derived from a 'long list', the short list will include the 'do nothing' and 'do minimum' options. The preferred option is selected from the short list.
Strategic case This is the Business Case Approach phase where the problem owner, together with other stakeholders, develops their understanding of the problem and whether the benefits of investing in addressing it are justified. The strategic case is made up of a strategic assessment (problem and consequence) and strategic context (assumptions, environment and interdependencies). Workshops, such as investment logic mapping, or other consultation may need to be undertaken in order to ensure agreement between stakeholders.
Value for money Value for money requires the delivery of desired outcomes where the net present value of benefits exceeds the net present value of costs. The benefits and costs should take into account intangible factors where possible.
VFM Value for money. Requires the delivery of desired outcomes where the net present value of benefits exceeds the net present value of costs. The benefits and costs should take into account intangible factors where possible.
Do minimum option In business cases, the do-minimum option represents the minimum level of expenditure required to maintain a minimum level of service. The do-minimum option is used as a baseline for comparing marginal costs and benefits of alternative activities. It provides the benchmark for determining the relative marginal value for money added by the other options under consideration.
Do nothing option The cost of the status quo, often used as a benchmark for VFM.
Lever A management mechanism or device used to bring about change in a system or organisation. The term lever is used as it refers to the use of a small force to bring about a significant alteration in performance, behaviour, attitude, etc.
Loose lever A management mechanism or device used to bring about change in a system or organisation, but for which the outcome of the use of the lever is somewhat uncertain - the lever may have the intended effect, or have little or no effect, or may even have the opposite effect to that expected.
Clear lever A clear lever is a management mechanism or device used to bring about change in a system or organisation where there is relative certainty that the intended result will happen.
Created by: Hilary Small
 

 



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