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BUSINESS CASE GUIDELINES
Overview
This documents provides guidelines to completing and submitting
a business case for authorisation, key responsibilities of those
involved in the process, and key contacts should further
information be required.
The high level process for authorisation of a business case is as
follows:
Submit proposal to High Level Blueprint Forum
Develop a business case
Collect preliminary concurrences
Submit business case to the POLIC (or appropriate)
Budget & Benefits Tracking/PIR
OARPOND
1. High Level Blueprint Forum
Proposers (Project Lead) should initially complete a High Level
Blue Print. [Contact Steve Redgers for further information and
proformas] Prior to submission to the HLBP Forum, the
appropriate Finance Partner and Business Solutions Manager
should be engaged. The Finance Partner will provide high level
financial analysis and a recommendation as to whether to pursue
the proposal from a financial perspective.
The Finance Partner/HLBP Forum will advise whether a business
case is required and should also highlight areas which may be
significantly impacted and therefore where additional preliminary
concurrences may need to be obtained (see section on
Concurrences).
The Terms of Reference for the POLIC (Appendix A) detail when a
business case requires POLIC authorisation. Where a proposal
falls outside this criteria (e.g. budgeted spend <£250k), the HLBP
forum has the authority to authorise delivery, provided that the
Finance Partner and Sponsor have provided a recommendation to
authorise expenditure.
2. Business Cases — Formats
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For cases > £1m, the Group Investment Committee format should
be used:
pal
“Standard Business
Case Format 0708.dc
A Group Investment Appraisal Model must be completed for all
cases over >£1m. The model will determine the key financials of
the case and need to be assessed against the appropriate hurdle
rates (see Appendix B).
This model is available from the Group Investment Lotus Notes
database or by contacting the Finance Partner or POLIC
Secretary.
For cases < £1m, the following summary format and a simplified
model to determine key financials can be used (currently being
developed), though the hurdle rates still apply.
al
“Summary Business
Case Format 0708.d¢ reed to add simplified model currently with Group
Investment]
The formats are a guide and can be adapted to a certain extent,
however the key points to note are:
- Keep it simple
- Provide a clear and coherent request a the beginning of
the case
- Articulate the problem and solution and any associated
key issues.
- Complete the key metrics (or include non financial
measures if financial measures are not relevant)
- Be-concise (generally cases should be no more than 2
sides of A4) but include information relevant to the
decision being made
- For consistency, do not change the font or general format
of the case (e.g. metrics/request at the top).
3. Concurrences
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For business cases requiring POLIC authorisation, the following
concurrences should be obtained prior to submission of the case
to the POLIC.
Operations - Andy Jones
Sponsor - the relevant ET member
Finance - the relevant Finance Partner
[Note: Operations concurrence should be requested at least 1
week prior to the POLIC meeting]
For certain cases, further preliminary concurrences may be
appropriate and the Finance Partner will advise when these are
required.
For example,
Agents Pay - Kevin Gilliland
P&BA - Rod Ismay
Group Property - via Sharon Bull
Procurement - Tam Curran
[For cases involving Legal costs, the Finance Partner should
contact Deborah Holmes/Martin Elmslie regarding budget
availability]
Other concurrences required are to be obtained through
submission to the POLIC.
These are:
Marketing - Gary Hockey-Morley
Finance - Peter Corbett
Strategy - Sue Whalley
Sales - David Glynn
P&OD - Debbie Moore
Operations - Ric Francis
Network - Paula Vennells
Legal - Clare Wardle
3.1 Role of Signatory
The person authorising the concurrence is providing assurance
that they have reviewed and understood the impact of the initiative.
In particular, they are agreeing to:
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- Expenditure (the initiative can be delivered within the
levels quoted)
- Benefits (quoted benefits can be realised and budget
adjustments will be made where appropriate)
- Operational Capability (the appropriate resources are
available to deliver the initiative)
3.2 Format of Concurrence
There is no defined format for a concurrence (an email is
sufficient), however, the following should be adhered to:
- The concurrence should include reference to agreed
expenditure/benefits
- Any conditions of concurrence should be clearly stated
- Acopy of the concurrence should be held locally by the
relevant finance analyst with a copy of the case
- Dates and signatories obtained should be included in the
relevant section of the business case.
4. Submit Business Case
The POLIC Terms of Reference indicate when a business case is
required to be submitted (Appendix A). Business cases should be
submitted to the POLIC Secretary via the relevant Finance
Business Partner.
In certain cases further authorisation from Group Investment may
be required, however cases should always be reviewed by the
POLIC prior to submission to Group Investment. Further details
regarding authority levels, (particularly for Pay Awards, pricing,
new products etc) are available in the Group ‘Delegated
Authorities’ paper and should be referred to by the Finance Partner
as appropriate.
4.1 Dates
For business cases to be reviewed by either the POLIC or Group
Investment, papers must be submitted in accordance with the
deadlines below.
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Committee Dates v5.Committee Dates.doc
[Note: Group Investment require at least 2 weeks notice of cases]
5. Budget & Benefits Tracking/PIR
For all cases, it is important that any spend is monitored and
remains within budget and benefits are tracked and realised.
Relevant budget adjustments should be made within year, or in the
planning round for future years.
For cases over >£1m a PIR will be required to be completed and is
generally commenced towards the end of the project, whilst the
project staff are still in post. A further PIR may be required within
6/12 months to review recurring benefits. Formats can be
obtained from POLIC Secretary.
For smaller cases, expenditure and benefits should be tracked by
the Finance Partner.
Expenditure only cases should be tracked through the usual
performance/cost management process by the Finance Partner.
At the time of submission of the case, key benefit measures should
be detailed and held centrally by the POLIC Secretary in the
following file:
Z:\Finanical Analysis\Investment Appraisal\2007-08\PIRS\Benefits
Tracking.xls
This should be updated regularly by the Finance Partner and a
summary will be provided to the POLIC.
6. Responsibilities
The following outlines the key responsibilities of the stakeholders
6.1. Proposer (Project Lead):
- To write the business case using the correct format
- To obtain the relevant (pre-POLIC) concurrences
- To submit the case to the relevant Finance Partner
- To write the PIR
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6.2 Finance Partner:
- To review (sense check) the case and provide relevant
sensitivity analysis
- Tocomplete the financials
- To inform Deborah Holmes/Martin Elmslie if any Legal costs
involved
- To provide a recommendation (to approve or reject the
scheme) and state whether funds are
budgeted/unbudgeted/centrally held etc.
- To check the correct format has been used
- To check relevant concurrences have been obtained
- To submit to POLIC
- To track expenditure and benefits and update Benefits
Tracking file
7. Key Contacts
Finance Partners:
Sharon Bull - Operations, P&OD, Finance, Strategy
Laura Croft - Marketing
Damion Taylor - Sales & Network
Michelle Andelin - POLIC Secretary
Adrian Terry - Group Investment Appraisal
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APPENDIX A
POST OFFICE LTD INVESTMENT COMMITTEE (POLIC)
1. Members
The Investment Committee members will be the members of the
POL ET plus representatives from Group Investment Appraisal
and Legal Services. The Committee will be chaired by Alan Cook.
Attendance is expected by ET members who are sponsoring a
business case, otherwise ET members are expected to use their
discretion based on the items on the agenda and other priorities -
substitutes are not required other than in the unavoidable absence
of an ET sponsor for a case being reviewed..
2. Terms of Reference
POL Investment Committee is required to approve:
= Budgeted investments (or one-off spends) over £250k
= All unbudgeted spend (substituted spend can be deemed to
be budgeted provided there is reasonable line of sight)
= Requests for centrally held (including POOC) activity
budgets
Commercial contracts and pay awards
Price changes
New products
Significant changes to products
Post Implementation Reviews
Quarterly Review of Crown Office Programme and Agency
Network Change (first one in July)
= All requests (inc <£250k)for Consultancy Spend (Terms of
Reference & Deliverables to be included)
= Any increases in Headcount
[Note: Requests to spend funds of previously authorised cases
(e.g. Crown Office Programme and Agency Network Change) can
be authorised by the Finance Director and sponsoring Director].
3. Authority Levels
All cases >£250k are required to go to POLIC, however further
authority is required for larger cases.
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I Authority Required [Investment
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Royal Mail Holdings Board >£20m
Group Investment Committee £10m - £20m
Group Finance Director £5m - £10m
POLIC (Investment Model to Group £1m -£5m
Investment)
POLIC £250k - £1m
POLIC <£250k unbudgeted
Sponsoring Director & Finance Partner < £250k budgeted
APPENDIX B
HURDLE RATES
IRR will be the primary success measure for investments with NPV
and Payback being used as supporting measures. The following
IRR hurdles apply:
IRR% NPV Pay Back
(1) Compliance N/A N/A N/A
(2) Replacement 10.5% ie} 5S yrs
(3) (a) New Money — Capex & Opex 30% Positive 4 yrs
(b) New Money — Peoplex 30% Positive 3 yrs
(c) Acquisitions 20% Positive 7 yrs
When the IRR of a case is over 12% but under the required hurdle
rates (or below 10.5% for replacement investments) the Group
CEO and Group FD shall be entitled to authorise cases up toa
value of £20m. All such approved cases will be reported to the
Holdings Board.
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