This guidance describes the steps needed to begin development of a business case at an activity level, either as the first part of a single-stage business case (SSBC) or as a separate indicative business case (IBC) phase.
Please note that core elements of this guidance are likely to be needed regardless of whether the business case is developed in a single stage or as a separate IBC and detailed business case (DBC).
Remember also that the level of effort should be fit for purpose, for example, the effort required to progress an SSBC is likely to be less than for a separate IBC or DBC, since lower levels of risk and complexity are involved in an SSBC. However, some steps, specifically those involving the submission of a separate National Land Transport Programme (NLTP) funding application at the end of the IBC, will not be needed if the activity is being addressed as an SSBC.
The indicative business case (IBC) involves revisiting and confirming (and modifying as appropriate) the strategic context and strategic assessment, and evaluating options to deliver the activity. If the decision is to proceed with the activity, a funding application to proceed to the detailed business case (DBC) is submitted.
The IBC needs to follow the key Business Case Approach (BCA) principles of investing for benefits, fit-for-purpose effort and clarity of intent, and the key behaviours of progressive development and informed discussion.
The main purpose of the IBC is to continue the progressive case for investment and include a clear line of sight to all supporting evidence collected up to this point. The IBC must:
If it is carried out as a separate phase, that is, not part of an SSBC, the IBC must also include a funding request to proceed to a DBC.
If the IBC is for an activity that is part of a programme that was identified in a PBC, you must:
Consider a ‘funnelling’ exercise to review the problem statement(s). The activity may now have a different strategic context, so be prepared to refine the problem statement(s) to something more specific as your focus narrows. You may need to hold another problem definition workshop, but keep in mind the BCA principle of fit-for-purpose effort and judge whether the complexity, risk and likely cost of the activity warrants a full workshop.
This ‘revisit’ of the strategic case at an activity level is necessary because programmes typically include multiple activities that may be brought forward for development over a significant period of time. Each IBC may only address a subset of the investment objectives for the overall programme, so this requires a level of detail about the activity that is unlikely to be included in the strategic case for the entire programme.
At the activity level, you need to:
Depending on the complexity and risk, you could also consider a workshop to discuss what is known and what has been found out to date as a way of bringing stakeholders up to speed ahead of developing a longlist of options to implement the activity.
Ideally, the need for different people to be involved as the business case develops will have been identified early in the process in an engagement plan.
Once the strategic assessment and context has been confirmed, a longlist of options for the activity is developed. For example, if the activity is an intersection upgrade, some options may be to build a roundabout, make it a grade-separated intersection, or add traffic signals.
These options are then evaluated to identify a shortlist – this process is sometimes called ‘optioneering’. As always, apply the principle of fit-for-purpose effort. If the investment proposal is low risk and low complexity, it may be that a frontrunner option is obvious.
However, you may consider holding a workshop to develop options; ideally, that would involve key stakeholders, who then get an opportunity to review and contribute to the draft longlist. Having discussions documented clearly and transparently ensures the assessment and development of options is well understood by all.
As options are developed and considered, apply some ‘filtering’ so that options where a fatal flaw is identified are not developed further. It is important to document when, and why, this is done.
The evaluation of these considerations must include discussions about trade-offs. For example, an option that isn’t lowest cost, or doesn’t deliver against all objectives, may be chosen because it has a more acceptable risk level than a lower-cost option that meets objectives.
Create a shortlist from the longlist assessment. Ideally, this would be just two or three options, including a ‘do–minimum’ option that you will compare the other options against. It is good practice to aim for a single, clear preferred option at the end of the shortlisting exercise – then you only need to do detailed analysis of one option, and the investor(s) can be clear about what type of solution is proposed. However, because the BCA is principles–based, there will always be exceptions.
There may sometimes be investments where the advantages/disadvantages, risks and accurate cost estimates for two or three options are hard to distinguish, meaning more work is required to identify the best solution. Doing more work to understand the risks and identify a preferred solution will help to make an informed decision and tell a clear story to the investor(s) as to why you are recommending a particular way forward.
Also think about whether further information is required to develop the shortlisted option(s) during the assessment stage. For example, if options will be circulated for public consultation, is more design work necessary?
Once you have confirmed your preferred option, put a ‘hold’ on the business case development and check the preferred option with the investor(s) to avoid heading down a wrong and/or expensive track. It is also an opportunity to get buy-in from investors and decision makers. Depending on complexity, risk and relationships, this check can be as simple as an informal phone call.
It is important to give decision makers the opportunity to engage with the thinking behind the investment as it develops, not just at the end. This means thinking about decision makers (or groups, committees, etc) within your own organisation as well as within the Transport Agency. The more costly and risky the proposed investment is, the more formal this check should be. It is also recommended that the preferred option is considered by any specific governance groups that may have been set up to oversee development of the business case. For example, you may need to take the proposal to a project advisory group, programme control board, or other relevant governance group.
Add to and refine the IBC document as your knowledge grows. This includes continually applying the business case assessment questions to ensure you have covered the key issues that will form the Transport Agency’s assessment of the business case. In addition, regular discussions with a Transport Agency investment advisor helps to ensure that the business case is robust, and there are ‘no surprises’ when it is assessed.
The IBC should confirm the case for change (the strategic case) and demonstrate that it optimises value for money (including the economic case). It should also include an outline of the:
The detailed analysis of these cases will be done and reported in the DBC phase.
A document information guide is available as an option for you to use and adapt when writing your IBC document to help tell your investment story.
The following is a summary of the elements that should be covered in an IBC:
The business case developer and the problem owner make an initial assessment of the strength of the business case, guided by the 16 business case assessment questions, and evaluate the investment proposal against the Investment Assessment Framework (IAF). The results of this ‘self-assessment’ should be recorded in the IBC document.
Send the IBC document to all participant stakeholders for comment before submitting it to the Transport Agency for assessment of the business case. If there are co-investors, you will need to seek their support, which will likely involve going through their internal approval processes. The decision-making needs of each co-investor must be clear in the project plan and governance section of the IBC document.
When you decide that the IBC is ready for assessment by the Transport Agency, request support via the Transport Investment Online (TIO) system.
If you are seeking NLTP funding for the next phase, usually a DBC, you must submit a robust funding application for implementation in TIO, with the IBC uploaded as the supporting document.
The following steps are only required if the IBC and DBC are being developed separately, with a formal NLTP funding application prior to starting the DBC. If the business case is being developed in a single stage, development will be put on hold at this point until the approval of the Transport Agency has been obtained.
The nature of the hold point and level of approval required will depend on the cost, risk and complexity of the activity.
When the request for IBC support and DBC approval is received in TIO, the Transport Agency assesses the business case against the business case assessment questions and the criteria set out in the IAF to determine whether:
A recommendation is then made to the delegated decision maker to support the IBC or otherwise. If the Transport Agency investment advisor has been involved throughout development of the business case, there shouldn’t be any surprises that result from the decision.
Note that this is for guidance only, and should be adapted as necessary.
Online learning modules have been developed by the Transport Agency, and are available to our partner organisations. To request access to the modules, email firstname.lastname@example.org with your name, title, organisation and manager’s name.
The ‘Activity-level business cases’ course covers single-stage, indicative and detailed business cases.
To open the course, click the link above and then click ‘enrol’. You will be prompted to enter your log in. Once you have logged in, you should be taken directly to the course. You can also find it by going to the catalogue and searching for ‘activity-level business cases’.
This information sheet is designed to accompany the learning module.
Other relevant information sheets: