01 Feb 2010
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All project management methods mandate the use of a Business Case for all projects. Vicky Billingham, Training Director at Projectivity Ltd explains the purpose and importance of a Business Case in a project and looks at the contents of a Business Case and how it is used throughout the project lifecycle.
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Introduction
Have you ever:
- Worked on a project and wondered why the project was being undertaken?
- Been part way through a project and believed that the project was not worth continuing any more?
- Felt that the reasons for carrying out the project were not based on a sound foundation
If you have answered ‘yes’ to any of these questions, then this article will help to clarify your causes for concern and how you might use a Business Case to resolve them.
You may have heard of the highly successful project to build the Millau Viaduct, which was delivered to specification within time and cost constraints. The original A75 motorway, which linked Clermont Ferrand and Beziers, passed through the town of Millau in the middle of the Tarn Valley. Motorists had to descend into the valley through a steep road and cross the town of Millau, to reach the other end of the valley. The roads were generally crowded and the situation worsened in the summer months when motorists took close to three hours to cross the valley. After an initial period of increased traffic congestion caused by sightseers, the viaduct has delivered its predicted benefits by providing a route across the Tarn Valley and reducing congestion in the area. The 24 km (15 mile) journey up and down the Tarn Valley, which had earlier taken three hours, has been reduced to less than 20 minutes.
Consider the project to build the Channel Tunnel, which was completed in 1994. It is the second-longest rail tunnel in the world, and the longest undersea tunnel in the world. At completion, the whole project had cost around £10 billion, which was an overspend of about 80%. Since the project completion, the tunnel has been operating at a large loss; £1.33 billion in 2003 and £570 million in 2004. Shares of the stock that funded the project dropped to 90% of their value between 1989 and 1998. The reasons for this have been given as high interest payments because of the debt and the volume of passenger and freight traffic being much less than the forecasts - only 38% and 24%, respectively.
Surely some serious questions about the Business Case for the Channel Tunnel have to be asked. As Eurotunnel is a privately-owned company the justification for the project was to make a profit. Was the project researched properly? 38% or 24% of forecast usage is extremely low. Was the Business Case used correctly during the Channel Tunnel project?
Purpose of a Business Case
The Business Case has a number of objectives:
- Project validation; to carry out an internal check to ensure that the project is worth doing, ie the benefits outweigh the costs
- Responding to events; if something changes during the project, the Business Case enables repetition of the internal check
- Internal communications; to ensure that all of the stakeholders are aware of the benefits.
The Business Case is the key document within the Project Management Plan or Project Initiation Documentation. At any time during the project we can refer to the Business Case to see whether the project is still justified, and to check that the relevant elements of the business environment have not changed significantly.
The ultimate success of a project is measured by the realisation of the benefits, so the benefits as described in the Business Case drive the project. All decisions about the project should be made by considering the expected benefits.
It is important to note that a Business Case is written to justify the amount to be invested in the project, so it is written from the perspective of the customer (who is funding the project), rather than the supplier (who is supplying work to the project). In other words, the Business Case says, “What return can we expect on our investment?” or “How much is it going to cost us to achieve these benefits for our business?”
The Project Sponsor owns the Business Case and therefore will usually produce it. But it is possible that the Project Sponsor will oversee the development of the Business Case by the Project Manager. In many environments, the Project Manager does all of the ‘leg work’ and the Project Sponsor directs and approves the Project Manager’s work. But even if the Project Sponsor delegates this work to the Project Manager, the Project Sponsor still owns the project and therefore owns the Business Case as well.