Indicative business case phase

What is the purpose of the indicative business case phase?

The indicative business case (IBC) identifies a recommended option to address the case for change for an individual activity. The IBC provides assurance that the recommended option is the best approach to deliver the desired outcomes and is an effective solution to the problems identified in the strategic case.

The recommended option will then be taken forward for full analysis against a do-minimum option in the detailed business case (DBC) phase. In some instances, more than one preferred option may be taken forward for analysis in the DBC. For example, this can be useful where it is difficult to choose between two options without detailed analysis or a better understanding of specific risk.

The IBC phase can be used to:

further develop the business case for an activity that is part of a programme developed within a programme business case (PBC), or
it can be used as a business case development phase for a standalone activity.

The diagram below shows where the IBC phase fits within the framework of business case development pathways.

View larger image [JPG, 218 KB]

The five-case model and the indicative business case phase

The NZ Transport Agency Waka Kotahi (NZTA) BCA is based on New Zealand Treasury’s Better Business Cases (BBC) methodology, which is a five-case model.

The table below shows the focus of the five cases in an IBC phase

Strategic case What is the compelling case for change?	Economic case Does the preferred option optimise value for money?	Commercial case Is the proposed deal commercially viable?	Financial case Is the investment proposal affordable?	Management case How can the proposal be delivered successfully?

Develop or refine	Develop or refine	High-level only – completed in DBC	High-level only – completed in DBC	High-level only DBC

Within the five-cases, the IBC emphasis is placed on the strategic case (the case for change) and the economic case (optioneering), with the aim of indicating a recommended option. The IBC allows decision makers to decide whether to formally support the preferred option before significant effort and expenditure is undertaken to complete the remaining cases in a DBC. Initial work is likely to be needed on the commercial, financial and management cases in the IBC phase, to inform choices between options and build an understanding of risks and uncertainties.

For more information about each case in the five-case model, see our detailed guidance.

Five-case model

When to use an indicative business case

When preparing to undertake an activity-level business case, you need to think through the levels of cost risk, and complexity to determine whether:

you develop the business case in a single stage via a single-stage business case (SSBC) or SSBC-lite, or

you develop the business case in stages via an IBC, followed by a DBC or implementation business case.

Your NZTA investment advisor will be able to provide advice around which pathway is most appropriate for your investment. Pathway discussions usually form a key part of point of entry (PoE) discussions, or discussions about the scope of the next phase of business case development.

For more information about choosing your business case pathway, see our detailed guidance.

Determining your pathway through the business case phases

An IBC + DBC pathway should be used when high levels of risk or complexity are associated with the activity, or when the range of potential options is broad.

In such cases, the decision to subsequently complete the DBC phase will be subject to the problem owner demonstrating that:

an appropriate range of options has been considered
there is at least one recommended option that represents value for money, has good strategic alignment, and has the potential to meet investment objectives as assessed through the Investment Prioritisation Method (IPM)
Investment Prioritisation Method
the indicative risks and uncertainties associated with the recommended option are acceptable (to the extent they are defined at this stage) and can be managed effectively
implementation is required within a five-year period.

This pathway would usually be recommended if the investment:

involves high risk and/or complexity, for example because of uncertainty, political, stakeholder and/or public interest or technical issues
it involves high cost, or a likelihood of options that include high cost
the breadth of possible options makes scoping and procuring an SSBC unattractive to decision makers, or the professional services market
triggers your organisation’s significance policy

involves other circumstances where seeking a formal decision from NZTA at the end of option selection will help to manage investment risk.

In some instances, particularly where background information is easily accessible and plentiful, it is possible for informed professionals to undertake a quick desktop IBC, where emphasis is placed on scoping the next DBC phase of work to confirm assumptions, address gaps and risks. Assumptions must be transparent and replicable to ensure any subsequent questions or scrutiny can be provided confidence. Before deciding to do a desktop IBC you should be satisfied that you can complete the key action expected in an IBC phase and apply the principles of the BCA to the extent appropriate. IBCs developed through a desktop exercise will receive the same level of scrutiny when it comes to assessment. Talk to your investment advisor to check if this is an appropriate approach for the business case you’re working on.

For investments that are less complex or with lower risk or uncertainty, an SSBC or SSBC-lite can be considered.

Single-stage business case phase

Keep talking to your NZTA investment advisor, who should be engaged throughout the development of the business case. Your investment advisor can provide guidance to ensure that a fit-for- purpose level of effort is undertaken in the development of the IBC – so that time and effort isn’t wasted, and rework is avoided.

Business Case Approach principles

The IBC needs to follow the key BCA principles of investing for benefits, fit-for-purpose effort, clarity of intent, progressive development and informed discussion.

Business Case Approach principles

What is expected of an indicative business case?

The steps you will need to follow to develop your IBC will depend on the specific needs of your investment. However, as a broad outline the IBC is expected to:

understand (confirm) the strategic context of the activity
understand (confirm) the problems and benefits targeted by intervention
identify a longlist of options to solve the cause or obtain the benefits
robustly screen the longlist and determine the potential benefits, costs, risks and dis-benefits of options
identify a shortlist, then identify a recommended option to progress to detailed analysis (consider multi-criteria analysis (MCA), costs and indicative economics)
where relevant, demonstrate the integration and effectiveness of the recommended option in achieving overarching programme objectives
identify requirements for further development of the business case, and scope the work needed to risk mitigate outcome, cost and scope.

Stakeholder engagement

The IBC should demonstrate that stakeholders have been engaged at an appropriate level to understand and agree the recommended pathway.

To do this successfully It’s important to define stakeholders early and have a clear plan for differentiated stakeholder engagement.

While the exact scope of engagement will depend on the needs of your business case, the focus for engagement in the IBC phase is mainly on:

understanding stakeholders’ views, community aspirations and local context
setting direction and developing investment objectives with partners and stakeholders

identifying and exploring options, and seeking stakeholders’ insights into the preferred option and outcomes.

Find out more about engagement in the BCA on our webpage.

Engagement and the Business Case Approach

Facilitated workshops are extremely useful, but a less formal or structured approach may work just as well for less complex activities.

Getting the right workshop facilitator is important – they need to manage the process, not the outcome. We recommend using external, independent facilitators, who have no stake in the outcome. Facilitators need to be able to lead informed discussions to express the workshop objectives and outcomes in plain language and concepts, and obtain agreement of all participants to the outcome of the workshops.

Putting your indicative business case together

1. Develop the strategic case

The strategic case is the foundation of the business case and establishes whether there is a valid case for change. Depending on your business case pathway, you may have already developed a strategic case as part of a PBC, or as a standalone strategic case phase. You will continue revisiting your strategic case throughout business case development. For more about the strategic case as part of the five-case model, read our detailed guidance.

Strategic case

If the activity is part of a programme identified in a PBC, then your IBC must:

Show how this activity fits within the wider programme.
Demonstrate how this activity will contribute to the problem statements, benefits and investment objectives from the PBC. The strategic context may have changed from the PBC, depending on how much time has passed, the scope of the individual activity and as investment priorities change, so be prepared to refine the problem statement(s). Explain any changes from the PBC to retain line of sight.
Test whether the investment is still needed – if other activities in the programme have already been implemented, have they had the desired effect?

For all strategic cases:

Establish the strategic context, including any previous work on the specific activity as well as relevant activity management plans (AMPs), PBCs, policies, strategies and alignment to other programmes and projects.
Undertake an environmental scan to consider other issues relevant to the location that could be addressed at the same time. Establish the environmental context, opportunities and constraints including current system operating environment (for example renewals programmes).
Identify the stakeholders the activity affects and who should be involved in the development of the business case, and how. This should be set out in your engagement plan.
Engagement and the Business Case Approach
Undertake problem and benefit definition, through a facilitated investment logic mapping (ILM) workshop or equivalent. The business case should outline the methodology used and the stakeholders involved.
Defining problems and benefits
Collect evidence to prove or disprove the problems and opportunities, and establish baselines for the set of measures being used
Develop investment objectives, to support optioneering.
Developing investment objectives
Discuss whether investment is needed at this time, or if it could be delayed.

Apply the principle of fit-for-purpose effort. If the investment proposal has low complexity, low risk and low uncertainty, it may be that some of the workshops and tools suggested above are not required.

However, it is important to ensure that a wide range of viewpoints and options are considered.

2. Develop the economic case

The purpose of the economic case in an IBC is to confirm your answer to the questions: What are the options? and What is the best option to achieve the sought benefits?

If this activity has emerged from a PBC, you will progress from the parameters agreed in the programme. It is important to not relitigate the PBC, or broaden into other alternatives without revisiting the PBC. For more about the economic case as part of the five-case model, read our detailed guidance.

Economic case

In the IBC phase, a good economic case will:

Identify a longlist of options, detailing the methods used and the wide range of stakeholders who were involved in longlisting. The longlist should be included as in the appendices. Longlist options should include concise descriptions or feasibility type drawings to aid collective understanding and basis for assessment.
Evaluate the longlist to identify a shortlist. All decisions to progress or dismiss options should be robust (using first sieve MCA or equivalent), documented and included in the appendices. Consider whether public consultation is required to inform further evaluation.
The early assessment sifting tool (EAST) may help with this exercise.
Early assessment sifting tool
Develop and discuss a do-minimum option to compare to the shortlisted options.
Do-minimum option
Further develop the shortlisted options, including concept designs or concept specifications. Evaluate each of the shortlisted options against the do-minimum, and identify the recommended option.
- Evaluations would usually be completed using MCA or an equivalent. Key stakeholders should be kept involved throughout this process and are often included using workshops.
  Multi-criteria analysis
- Options should be assessed for their ability to deliver against investment objectives while considering risks, timeframes, interdependencies, and the intervention hierarchy.
  Intervention hierarchy
- Options should consider trade-offs and not be only incremental of each other – for example, balancing achievement against different objectives, or having different risk profiles
- Options should consider cost estimates, cost ranges (risk), economics and incremental economics where relevant
Prepare an appraisal summary table (AST), including an indicative benefit–cost ratio (BCR) for each shortlisted option.
Appraisal summary table
You will need to demonstrate how the preferred option addresses the problem(s), will deliver the expected benefits, and provides value for money. If a part of a wider programme, show how the preferred option aligns with other elements of the programme. The preferred option must be supported by robust analysis and be articulated in a clear, compelling way to explain why this is the right option.

Some key considerations:

It is useful for workshop participants to understand the strategic case to focus their thinking.
Think about whether further information is required to develop the shortlisted option(s) during the evaluation stage, and what work is required to understand the risks and trade-offs required to select the preferred. This may accelerate or defer tasks from the DBC.
Think about how best to meaningfully present the information for different audiences – for example decision makers, or the public during consultation.
MCA is a commonly used tool for comparing options and support trade-off conversations, but a less formal or structured approach may work just as well for less complex activities. At a minimum options must be evaluated against the investment objectives, but may also include more detailed criteria that are relevant to differentiate between options.
All decisions should be documented and included in the appendices.

3. Establish the commercial, financial and management cases

While the detailed analysis of these cases will be completed in the DBC phase, any known information, risks, assumptions, or an outline of work to be completed for each of these cases should be outlined in the IBC. This is essential for correctly right sizing your detailed business case going forward. The key considerations for each of the cases are outlined below.

Commercial case: How should the next phase (and implementation, if appropriate) be procured? Is it attractive to the market?
Financial case: What are the potential funding sources for this project? Have whole-of-life costs (including revocation and property requirements) and fundability been considered?
Management case: Is the scope for the next phase clear? Have risks, uncertainties and assumptions been well documented including how they need to be addressed in the DBC? Has consideration been given to staging and timing for next phase (and implementation if appropriate)? Does the recommended option require implementation in the five-year time frame?

Further guidance on the commercial, financial and management cases can be found in our five-case model guidance.

Commercial case
Financial case
Management case

Completing the indicative business case document

An information guide is available as an option for you to use and adapt when writing your IBC document, to help you tell your investment story. Right-sizing and critical thinking must be applied when using the information guide to suit your particular circumstances.

Indicative business case document information guide [DOCX, 1.2 MB]

However, it is important to ensure that a wide range of viewpoints and options are considered.

You should be working on the IBC document throughout the process, adding to it and refining it 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 NZTA assessment of the business case. In addition, regular discussions with your NZTA investment advisor helps to ensure that the business case is robust, and there are ‘no surprises’ when it is assessed.

The IBC document should:

tell your investment story clearly, in a way that can be understood by others
use graphics, maps and diagrams as an effective way of communicating what the data shows
describe all supporting evidence collected up to this point – include the complete data and technical information as appendices, or provide references showing where this information can be accessed
include supporting analysis and other work commissioned to provide evidence
include documentation developed during workshops, for example an investment logic map.

Consider creating an A3 summary page that tells your investment story graphically and succinctly.

Send the IBC document to all participant stakeholders for comment before submitting it to NZTA for assessment. 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 management case of the IBC document.

If a DBC is expected as the next step, a clear understanding of the scope and funding requirements for that phase is needed.

How do I know if my indicative business case phase is complete?

Before approaching NZTA for a formal assessment of your business case, you should make a self-assessment to check the document is ready.

How you answer this will depend on how complex the investment is, and how much risk or uncertainty is involved.

A key question to ask is: Is the preferred solution clearly defined, and positioned within the local context?

There are a few things that can help you answer this question, including:

Talk to your NZTA investment advisor. It’s important to work with your investment advisor throughout the IBC phase. They will be able to help you get the level of detail right and avoid missing any important steps.
Check against the 16 questions, which have been developed to help business case practitioners understand when they have done enough. All 16 questions relate to the IBC although questions 14–16 will be confirmed during the DBC. At IBC they are designed to test confidence in:
- whether the preferred solution is clearly defined (with a clear rationale for its selection)
- whether the preferred solution can really be delivered
- whether the preferred solution represents the best value for money approach.

How to self-assess your business case

What does NZTA look for in an indicative business case?

When assessing applications to fund business case phases from the National Land Transport Fund (NLTF), NZTA will seek assurance that the IBC has been adequately developed.

As a principles-based approach, there is no checklist of specific actions to follow to ensure that NZTA’s expectations regarding the IBC phase are being met. However, when assessing funding applications for subsequent business case phases, there are some general questions that assessors will consider, to ensure the principles relating to the strategic case are being followed, including:

Are there clear descriptions of the problem(s) that are driving the need for investment?
Are there clear descriptions of one or more benefits that can be expected, if the problems are successfully addressed, and can they be tracked?
Is the strategic context, within which the investment will be made, clearly described?
Are there clear investment objectives, that logically derive from the problem(s) and benefit(s)?
Has a range of options been considered, appropriate to the phase of development?
Does the range of options include low-cost options or alternatives alongside higher-cost ones?
Are the options essentially multiple versions of the same solution, or is there a range of genuinely different approaches? NZTA expects that reasonable effort will be made to find and consider innovative responses alongside tried-and-tested ones. This is particularly important when developing the longlist of options.
Do the options flow logically from the problems and benefits? Have low-cost options been discounted too early?
Has the assessment of options followed MCA guidelines, or equivalent robust process?
Are the MCA criteria clear and appropriate? Do they:
- allow a meaningful comparison of options, and
- include criteria to allow risks and uncertainties to be compared for each option?
Is there a clear recommended option, with a clear narrative for its selection?
Are the commercial, financial and management cases developed enough to gain a sense of whether the recommended solution can actually be delivered? Note that some uncertainty around this is usually acceptable in the IBC; it is expected further work will be done to complete these cases through a DBC phase.
Is the scope of work needed to develop the investment through to implementation clear? Are the estimated costs consistent with that scope?

What happens next?

When you decide that the IBC is ready for assessment by NZTA, request support via Transport Investment Online (TIO), or your investment advisor for NZTA projects. If you are seeking NLTF funding for the next phase, usually a DBC, you must submit a robust funding application in TIO, with the IBC uploaded as the supporting document.

Transport Investment Online(external link)

When the request for IBC support and DBC approval is received in TIO, NZTA assesses the business case against the criteria set out in the IPM to determine whether:

the business case is valid, and
the preferred option is aligned with the Investment Prioritisation Method
Investment Prioritisation Method(external link)

A recommendation is then made to the delegated decision maker to support the IBC or not. If your NZTA investment advisor has been involved throughout development of the business case, there shouldn’t be any surprises that result from the decision.

Make sure you communicate with key stakeholders about the reason for the decision. Consider holding a report-back session for all stakeholders, especially if you planned for one in your engagement plan.