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As part of our Business Case Refresh, we're in the process of updating this Business Case Approach (BCA) page to make sure it reflects the most up-to-date guidance.
An individual land transport intervention to address a problem or opportunity, which will have a defined start, end and scope, for example a bridge replacement. Activities are usually part of a programme.
A grouping of similar activities for National Land Transport Programme (NLTP) funding. The purpose of the classification of activities is to:
2021-24 NLTP activity classes and work categories
The single-stage business case (SSBC), SSBC-lite, indicative business case (IBC) and detailed business case (DBC), are sometimes called activity-level businesses cases because they focus on the details of an activity (as opposed to a programme of activities). They are funded from the relevant activity class.
Plans prepared by the owners of infrastructure assets that detail how they manage these assets in the context of the services they are supporting and explain the purpose of holding the asset. The goal of good asset management is to support the delivery of a level of service (whatever the service may be) in the most cost-effective manner, taking long-term sustainability into account. Local authority AMPs are prepared in accordance with clause 2 of schedule 10 of the Local Government Act 2002. AMPs should be based on the New Zealand Asset Management Support(external link) (NAMS) Group’s International infrastructure management manual.
A strategic way of responding to the problems and delivering the benefits identified in the strategic assessment of a business case. Alternatives and options are sometimes referred to interchangeably, however, in this context they have different definitions. An alternative is a higher-level response, such as exploring potential for different land use arrangements, or encouraging greater use of other modes to address projected growth in network demand, alongside more conventional supply focused approaches involving new infrastructure.
Alternatives and options are usually considered and assessed during the programme business case phase and developed during the detailed business case phase. In developing alternatives, it is important to consider ones that address:
See also Options
A regional council, territorial authority, or public organisation that has been approved to apply to for funding from the National Land Transport Fund.
Benchmarking is where an investment proposal is compared against a normalised group of other proposals within a pre-determined peer group with a similar network levels of service to ensure value for money. NZ Transport Agency Waka Kotahi will use peer groups for cost–benefit appraisal benchmarking and act as the basis for cost comparison discussions.
A benefit is the measurable improvement that results from an outcome. It answers the question: ‘what value is derived from this outcome?’ In the context of a business case, a benefit is normally a positive consequence of responding to an identified problem or opportunity. Examples include:
Note that a specific use of the term benefit arises when monetised benefits are used to determine a benefit–cost ratio (BCR). Not all benefits can be monetised.
See also Benefits map
The impact of an investment is described using one or more benefit measures. Measures can be quantitative or qualitative, and are used for both monetised and non-monetised benefits.
Quantitative measures are used to describe impacts based on a quantity and are usually expressed as a number or percentage. Qualitative measures are more descriptive and are designed for use with benefits that cannot easily be monetised - although they can be used for monetised benefits as well, if appropriate.
For further information on monetisation and measurement of benefits, refer to the principles for selecting benefits and measures
NZ Transport Agency Waka Kotahi (NZTA) uses BCR as a measure of economic efficiency from a national perspective as defined in the Monetised benefits and costs manual. The ratio compares the monetised benefits to land transport users and the wider community 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 $100 million, with a total cost of $50 million (both in present value), has a BCR of 2. It enables different projects to be compared with each other. BCR is used to assess improvement activities for the efficiency factor of the Investment Prioritisation Method, which NZTA uses to assess proposed investments.
A one-page flowchart that shows the benefits of a potential investment to an organisation or its customers in a form that can quickly be understood by decision makers. It should also include:
Benefits maps are typically created as an output of a benefits workshop and usually continue to be developed as the business case progresses.
See also investment logic mapping.
A document that expresses the reasoning and justification for investing in a change, project or programme. It:
The Business Case Approach provides a robust and flexible way of developing business cases for transport investment.
The NZ Transport Agency Waka Kotahi principles-based framework for developing a business case for investment, which must be followed by organisations seeking funding from the National Land Transport Programme.
These underpin the Business Case Approach:
This looks at 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.
This is the identification of constraints to a proposed investment, such as no-go areas or where there would be additional cost for a preferred solution. For example, what is the environment (physical, social)? How do locals use this environment? What is the context? What are the constraints? Constraint mapping sets the scene for how problems impact on people and places in the area.
A continuous programme is a group of activities, relating to existing assets and services, delivered on an on-going basis from one National Land Transport Programme (NLTP) to the next to maintain an adequate customer level of service (CLoS)
That includes:
Cost effectiveness analysis is used instead of a full cost–benefit appraisal where the objective is to compare the cost of different ways of achieving a given effect (such as a customer level of service), or comparing the relative cost of different strategies with different effects.NZ Transport Agency Waka Kotahi uses this approach to evaluate the economic efficiency of components of a public transport programme and operations, maintenance and renewals programmes, by comparing a programme with other similar programmes.
NZ Transport Agency Waka Kotahi (NZTA) uses CBA as a way of quantifying the monetary value of the national benefit that results from government investment in transport. Assessment tools vary according to the context. For example:
CBA is part of the Investment Prioritisation Method, which NZTA uses to assess proposed investments.
See also Benefit–cost ratios.
CLoS are agreements between the transport user and the system provider that defines expectations, in measurable terms, for what the customer will experience when using the transport system for their journey.
NZ Transport Agency Waka Kotahi (NZTA) uses the following CLoS:
Where there is a gap between the expected service level and the current service level, it helps define the efficient level of investment needed.
This phase develops a proposed activity, providing more detail about the economic, financial and commercial cases, and how it would be implemented. Because they are developed for each activity, one programme may have multiple DBCs.
DBCs usually only involve detailed analysis of the preferred option and the do-minimum option identified in the indicative business case (IBC).
Elements of the DBC phase, and the IBC phase, may be developed in a single-stage business case.
Find out more about the detailed business case
In developing business cases, the do-minimum option should represent the minimum level of expenditure required to maintain a minimum level of service, not the minimum level of investment required to achieve the investment objectives. For example, the most likely transport situation over the course of the appraisal period if no further intervention were to occur.
In theory, every option should be compared with the option of doing nothing at all, that is, the do-nothing option; however, for many transport activities it is not practical to do nothing at all.
It is important not to overstate the scope of the do-minimum option, that is, it should only include activities that are absolutely essential to preserve a minimum level of service. Where network interdependencies exist, the do-minimum option should take into account other activities elsewhere on the network where these other activities have a commitment to funding, and where they affect the demands and level of service at the location of interest.
The minimum level of investment to achieve the investment objectives is explored through the use of further options, in addition to the do-minimum. 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.
The main purpose of the economic case is to demonstrate that the investment proposal optimises value for money. This is achieved by identifying and evaluating a wide range of options in terms of how well they will meet the investment objectives. Initial development of the economic case takes place during the programme business case, where the emphasis is on consideration of alternative responses and identification of a preferred programme. The economic case is further developed as part of the indicative business case, by the identification of a long list of options which are then evaluated to a short list, and ultimately a preferred option.
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.
The usual contribution, in percentage terms, that NZ Transport Agency Waka Kotahi makes to an approved organisation, for the delivery of an activity or combination of activities. The FAR system identifies how the costs of delivering transport activities are shared between central government through the National Land Transport Fund and local government (primarily through local body rates). Funding assistance rates are not subsidies, but part of a co-investment system which recognises that there are both national and local benefits from investing in the land transport network.
The GPS sets out the government’s priorities for expenditure from the National Land Transport Fund (NLTF) over the next 10 years.NZ Transport Agency Waka Kotahi uses the results alignment portion of the Investment Prioritisation Method to ensure that NLTF investments are aligned to the GPS.
Government Policy Statement on land transport (GPS)(external link)
Improvements are activities that increase levels of service to address an identified or significant gap in customer levels of service (CLoS), or improve the efficiency of the land transport system in delivering existing CLoS.
These activities include but are not limited to state highway improvements, local road improvements, regional improvements, resilience improvements, walking and cycling improvements and public transport improvements.
A phase of business case development where individual activities or combinations of activities within the preferred programme are developed further. The purpose of an IBC is to provide decision makers with an early indication of the preferred option for an investment at an activity level.
The IBC will typically include:
An IBC will typically form the first part of a single-stage business case, although for high risk/high complexity activities it may be carried out as a separate phase, followed by a decision by investors whether to continue to detailed business case.
Find out more about the indicative business case
For NZ Transport Agency Waka Kotahi, integrated planning means leading and working with central, regional and local government, private developers and other partners such as Kiwi Rail and port companies, to bring land use planning, and transport planning and investment together to deliver an affordable transport system that supports a growing economy, safe and vibrant communities and a healthy environment, now and in the future.
A system describes interdependent relationships. Economic or social activity generally leads to increased transport and land use demands. Facilitating those demands may reinforce increased economic or social demands. Different parts of the transport network may also be interdependent. A highway capacity improvement in one location may lead to increased demand upstream or downstream, or demands on other parts of the road network. Similarly, a public transport improvement may lead to less highway travel. These system interdependencies must be understood if the full implications of an intervention are to be identified.
Any action or change that is designed to impact positively on the transport system. This is used to refer collectively to a broad range of actions or changes, including but not limited to policy and regulation, infrastructure, services, land use, demand management or other system optimisations.
Related to the value scale that has to be given to each type of intervention. For National Land Transport Fund investments, that means alternative and option selection should start with lowest cost alternatives and options before considering higher cost alternatives and options. The hierarchy considers integrated planning first, followed by demand management, then best use of existing network, and lastly, new infrastructure.
We use the IPM to prioritise investments proposed for the National Land Transport Programme (NLTP), giving effect to government priorities and direction as outlined in the Government Policy Statement on land transport (GPS).
Investment Prioritisation Method
The point at which an organisation makes a formal decision whether to continue to develop an investment proposal to the next stage.
Investment gates are normally required after each phase of business case development before progressing to the next appropriate phase, and prior to implementation.
It follows that the number of gates will vary depending on the exact business case development path followed by each investment; low complexity/risk investments may only require investment decision gates following the strategic case and prior to implementation. More complex investments, and particularly large and complex programmes of investments, will require more decisions and hence need more investment decision gates.
Before deciding whether to continue to support an investment proposal from the National Land Transport Programme (NLTP), NZ Transport Agency Waka Kotahi (NZTA) will make an assessment, which includes determining:
whether the business case supporting the investment proposal is fit for purpose, guided by the relevant questions from the 16 business case assessment questions
the degree of alignment of the investment proposal with strategic priorities and objectives in the Government Policy Statement on land transport (GPS), using the criteria set out in the NZTA Investment Prioritisation Method
whether the investment proposal is consistent with the purpose of the Land Transport Management Act (2003)
whether the scope of the next phase is consistent with the complexity and risk of the investment proposal.
An investment logic map, often called an ILM, is a single page depiction of an investment story. It sets out the problem statements, benefits, strategic responses and changes necessary to deliver a particular business outcome.
Investment Logic Mapping is used to develop investment logic maps, and is a structured way of reaching agreement on problems and the benefits of addressing them, and testing the rationale for potential investment with key stakeholders. Investment logic mapping involves a series of workshops, led by a facilitator (who may or may not be an accredited ILM facilitator), and involving key stakeholders. Usually, it comprises two workshops:
The outputs of the workshops are an investment logic map and a benefits map, both of which are flowcharts that show the underpinning logic of investing to solve a problem. Using ILM, even the most complex investments can be communicated clearly on a single page.
Find out more about investment logic mapping
The intended outcomes or goals of an investment – what the investment is aiming to achieve. Investment objectives are stated so as to make them SMART, that is: specific, measureable, achievable, realistic and time-bound. Setting good investment objectives is a critical part of a business case and informs the later assessment of potential options.
See also Objective
The organisations that are investing or co-investing in a project. In the Business Case Approach (BCA), investment partners may include approved organisations,NZ Transport Agency Waka Kotahi and any other co-investors. In early stages of the BCA, these organisations are potential investors, as there is no guarantee they will invest funds in a project.
The investment story is a narrative about why it is worth investing in something – in the context of the National Land Transport Programme, it is about solving a transport-related problem. It should be compelling, in plain-language and able to be understood by laypeople, not just transport experts.
Transport of people and freight on land by any means, and the infrastructure, goods and services facilitating that transport. Includes coastal shipping and associated infrastructure.
The LTMA provides the legal framework for managing and funding land transport activities. The purpose of the LTMA is to contribute to the aim of achieving an affordable, integrated, safe, responsive and sustainable land transport system.
Read the Land Transport Management Act 2003(external link)
The legislation that provides the framework and powers under which New Zealand’s local authorities operate.
Read the Local Government Act 2002(external link)
An organisation’s approved maintenance, operations and renewal activities, which continue to meet the agreed customer levels of service (CLoS). Maintenance programmes can be core or enhanced. Core maintenance programmes refer to work required to continue pre-determined and appropriate CLoS. Enhanced maintenance programmes refer to continuing existing appropriate CLoS at a higher cost due to an external factor (generally for a short, defined period).
See also Continuous programme
Assesses whether a proposal is achievable and able to be delivered. 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.
See Benefit measures
The NZ Transport Agency Waka Kotahi (NZTA) Monetised benefits and costs manual (MBCM) is the industry's standard for the economic evaluation of land transport activities in New Zealand. The MBCM sets out economic evaluation procedures and values used in calculating benefit–cost ratios, necessary for applications seeking investment where a cost–benefit appraisal is a mandatory NZTA requirement.
See also Benefit
Monetised benefits and costs manual
A tool that can be used to compare and evaluate alternatives and options in a longlist to produce a shortlist, from which a recommended programme or preferred option is identified. It is generally used during the programme business case and single-stage business case (or indicative business case) phases of the Business Case Approach. A less formal or structured approach may work just as well for less complex programmes.
A dedicated fund for maintaining and developing local and national transport services, administered by NZ Transport Agency Waka Kotahi and distributed through the National Land Transport Programme. The fund was established under section 10 of the Land Transport Management Act 2003.
The NLTP is issued every three years and contains all the land transport activities, including public transport, road maintenance and improvement, and walking and cycling activities, that NZ Transport Agency Waka Kotahi anticipates funding over the next three years. It reflects the priorities of the government, as outlined in the Government Policy Statement on land transport (GPS). It includes investment in projects and programmes with local authorities and other investment partners, state highways, road policing, road safety, research and emergency works.
An objective is a statement of a result that is to be achieved, usually within a specific timeframe and with available resources. Objectives are used in a number of ways for business case development. Investment objectives are the specific results that are sought from a particular business case, either at a programme level or an intervention level. Other objectives are likely to be external to a business case, and may relate to the overarching goals or aims of the organisation, government or both. They are stated as outcomes, not as specific activities or interventions.
Examples of relevant objectives could include:
See also Investment objectives
A road network classification for commuting, freight and tourist journeys. It also provides customer levels of service attributes for resilience, travel-time reliability and roughness. ONRC divides New Zealand’s roads into six categories based on how busy they are, whether they connect to important destinations, or are the only route available:
In the context of a business case, an opportunity typically refers to a set of circumstances which make it possible to further the goals and objectives of an organisation.
Opportunities are closely related to problems. The term ‘opportunity’ is often used together with ‘problem’ to refer to a ‘problem or opportunity’ as the situation, issue or driver that has given rise to a perceived need for change. It is important that the problem elements of cause and consequence are still fully explored when identifying an opportunity, as these are essential areas of understanding to develop a robust business case.
Typically, the problem statements and benefits need to be considered together to fully understand the ‘problem or opportunity’.
To ‘engineer’ an option, that is, to consider various options in depth and compare, contrast and score them to find the best option.
Options represent different ways to achieve an outcome or objective. They are often confused with alternatives but, in this context, they have different definitions. Alternatives are the broader level of an intervention, whereas options are more detailed. For example, if it had been decided that the best way (the favoured alternative) to address a particular problem was to improve an intersection for safety or efficiency reasons, options could include simple rearrangement of geometry or sight lines, building a roundabout, installing traffic signals, or grade separation.
Options considered and shortlisted should include a do-nothing option and/or a do-minimum option (where only already planned work such as maintenance is carried out).
See also Alternatives, Preferred option
The result of a change (action or intervention). Examples include:
The product, change or solution that is implemented to achieve an objective. Examples of outputs include:
The first step in the Business Case Approach (BCA), where the problem owner develops an initial view of the potential problem or opportunity, and reviews existing information so an informed decision can be made about what phase the business case should start at and how it should progress through the BCA.
Find out more about the point of entry
The preferred option is typically the one with the highest, risk adjusted net present value (NPV: the present value of an investment’s expected benefits minus the costs of acquiring the investment), based on all costs, benefits and risks having been quantified and valued robustly.
Where an option has significant intangible benefits, these can out-weigh the difference in NPV between this and alternative options. These considerations should be evaluated at the same time as trade-off discussions. For example, an option that isn’t lowest cost, or doesn’t deliver against all objectives, may be chosen as the preferred option because it has a more acceptable risk level than a lower-cost option that meets objectives.
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.
In the context of the Business Case Approach it is the issue that has been identified that may lead to a business case for investment to address the problem. There are various ways the problem could come to light, for example:
See also Problem statement , Opportunity
The person (or organisation) who has identified the business problem or opportunity, and who initiates the Business Case Approach (BCA).
A problem is the reason action needs to be considered. Problems are usually stated in negative terms and are made up of two parts – cause and consequence (or effect). The problem statement or statements are critical to understanding the need for an investment and need to be stated at a level that enables the reader to get a sense of the significance of the investment.
A problem statement is a brief statement (usually a single sentence) that summarises the cause and consequence of a problem. It is typically supported by a brief explanation that provides further detail of the causes and consequences. In identifying problems, it is important to get to the root cause so that it can be addressed effectively, otherwise the problem is likely to continue occurring.
Problem statements are developed during the strategic case phase of the Business Case Approach (BCA), but are reviewed and refined throughout the development of the business case as the causes and consequences of the problem are better understood.
See also Investment logic mapping and investment logic map
The problem trajectory helps ‘unpack’ a problem by analysing and considering the component parts in detail. It is useful in problem definition sessions for testing initial views of a problem and determining consequences and underlying causes.
Interrelated and complementary combination of activities that address a problem. A programme can span more than one work category and more than one activity class, for example a programme could include a road improvement activity and public transport improvement activities.
The Business Case Approach phase in which options and alternatives to address the underlying or root causes of the problem are identified, and a recommended solution is proposed, which could include a broad mix of activities that might be delivered by multiple parties over a period of time. PBCs are generally developed only for investments that have a higher complexity or risk and could involve more than one transport mode or other interventions. It reduces risk and ensures all appropriate options are considered.
Find out more about the programme business case
An activity that has a defined start, end and scope.
Regional transport committees prepare RLTPs every six years to set out all the transport activities the region intends to progress over the next six years. They feed into the National Land Transport Programme (NLTP), but also include aspects outside of the NLTP.
These committees prepare regional land transport strategies and regional land transport plans, and provide advice as requested by the regional council. Membership is specified by section 105(2) of the Land Transport Management Act 2003, and must include representatives from the regional council, local councils in the region, NZ Transport Agency Waka Kotahi and other stakeholders.
A risk is a 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.
A root cause is a fundamental reason for the occurrence of a problem – either now, or in the future. Essentially, a root cause represents a fundamental process or system that is failing or that doesn’t exist, which needs to be addressed if the problem is to be avoided or prevented from recurring.
A phase of business case development where individual activities or combinations of activities within the preferred programme are developed further. A SSBC combines the steps that are typically carried out in separate indicative business case and detailed business case phases for high-risk or high-complexity investments.
The SSBC confirms the strategic and economic cases, and develops the financial, commercial and management cases prior to implementation.
A SSBC does not require a formal decision for the release of funds at the end of shortlisting options, however the problem owner may still elect to seek an investment signal from NZ Transport Agency Waka Kotahi at this point, to assist in managing investment risk.
Find out more about the single-stage business case
A solution describes the changes that must be made by the organisation to deliver benefits, including details of how the strategic intervention will actually happen. Unlike a strategic intervention, it is able to be specified in terms of time and cost. Solutions may include any physical assets that are required to allow the changes to occur.
Investment partners, people who have the most knowledge of a subject and/or represent an interested or affected party, for example a local authority, community group or iwi. They will be consulted at various stages of business case development.
The strategic assessment uses robust tools and methodology to determine quickly and at low cost:
The strategic assessment is initially developed as part of the strategic case, but is reviewed to ensure it is still fit for purpose at every stage in the development of the business 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 to ensure agreement between stakeholders.
Find out more about the strategic case
The strategic context is the alignment of the potential benefits from a proposed investment with the business problem owner’s priorities, regional and national priorities, other programmes and strategies, and other organisations’ priorities (if relevant).
It includes:
The strategic context is part of the strategic case, but is reviewed to ensure it is still fit for purpose at every stage in the development of the business case.
Transport activities are derived demands, which means they do not happen for their own sake but form part of a wider system that includes land use, economic and social activity, technology and other system pressures. To understand a problem or opportunity it is important to understand the dynamics of this system, which may include positive and negative feedback.
The NZ Transport Agency Waka Kotahi web-based funding allocation system. It is the key source of project information and a record of investment decisions made in the National Land Transport Programme (NLTP). All activities funded through the NLTP are recorded in TIO, including the expected benefits and long-term outcomes from each decision.
An uncertainty is an event or change in conditions. Uncertainties usually relate to the problem or investment need, and are usually external factors that lie outside the project team’s control. Uncertainties can result in a different future state from that anticipated or assumed in the business, and can impact the need for an investment and/or require a change in the response to a problem.
Examples of uncertainties include technological developments, major shifts in markets and economic conditions, the behaviour of other organisations, changes in demographics including variance from growth forecasts, or events related to the natural environment. If such events occur they can have both positive and negative impacts on benefit delivery. Uncertainties are distinct from risks.
See also Uncertainty log
Records assumptions and uncertainties that may have an impact on the investment proposal. For example, a major housing development in the locality may be on the books but it’s not clear when it will happen. Make assumptions about what some of the effects may be if a proposal goes ahead, such as changes to road, rail, or ports.
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. An intervention is ‘value for money’ if the national welfare after an intervention is greater than before the intervention. Delivering value for money is a statutory requirement.
The individual elements that make up an activity.
