When preparing a Business Case, the preferred option should not be determined solely by cost considerations. Instead, it should be the option that offers the optimal balance of costs, risks, and benefits.
For public sector Business Cases, this determination often hinges on assessing the Benefit-Cost Ratio (BCR), a crucial metric that compares the anticipated benefits against the projected costs. In order to calculate this, you need to monetise the benefits – with some being more easily valued than others.
So, have you set out:
What benefits you expect to be delivered by the project?
What sort of benefits are you expecting?
How are you going to quantify them?
Where possible, how will you assess the monetary value of them?
Clearly identifying the benefits to be derived from any project is critical, and monetising these helps make the Value for Money argument and the case for change. Understanding and applying these principles ensures that the preferred option for your Business Case is not just the cheapest, but the one that delivers the greatest overall value, aligning with both fiscal responsibility and project objectives.
The various types of benefit classifications for a Business Case are set out below:
1. Cash Releasing Benefits (CRBs)
These are quantified in financial terms, where budgets would be reduced by the value of the benefit and/or reduce the costs for an organisation in such a way that the resources can be re-allocated elsewhere. For example, through providing a combined reception team across multiple service providers could reduce the overall number of admin team members, thereby creating a staff related cash saving.
2. Non-Cash Releasing Benefits (NCRBs)
3. Societal Benefits (SBs)
4. Unmonetisable Benefits (UBs)
✏️ Top Tip: Focus on cash releasing and non cash releasing benefits and the 80:20 rule in terms of calculations: focus the most effort on quantifying and monetising the biggest benefits.
The level of detail you need to assess the project’s benefits can be dependent on the reporting requirements and stage of development of your project. The table viewable here sets out the various stages which need benefits to be included, and the level of detail and calculation required.
⭐Success Story: A new Healthy Living Centre for Kent & Medway ICB
In our work on the Healthy Living Centre project for NHS Kent and Medway Integrated Care Board, we conducted extensive analysis to identify, quantify, and monetise the benefits associated with the shortlist of options.
This effort led to a significant Benefit to Cost Ratio for the Preferred Option at the Outline Business Case stage, achieving a ratio of 9:1 compared to 6.6:1 for the next best option. As a result, a critical hurdle for approval by NHS England was successfully met.
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Project Benefits and Business Case Stages
The level of detail you need to assess the project’s benefits can be dependent on the reporting requirements and stage of development of your project. The table below sets out the various stages which need benefits to be included, and the level of detail and calculation required.
Business Case Stage | Strategic Outline Case (SOC) | Outline Business Case (OBC) | Final Business Case (FBC) Short Form Business Case (SFBC) |
Benefits impact – Better Business Cases | Preliminary assessment of benefits in the case for change. Critical Success Factors for long listing and SWOT analysis at Short Listing via the Option Framework. | Cost benefit analysis (CBA) of shortlisted options - measure and monetise benefits. Plan for successful delivery. | Update Cost Benefit Analysis of short listed options. Ensure successful delivery by finalising arrangements. |
Strategic Case | Preliminary analysis as part of the case for change within the Strategic context. | Review and confirm SOC. | Review and confirm SOC. |
Economic Case | Determine Critical Success Factors. Long List review to include provisional value for monetary assessment(cost/benefit/ risks). Short list considers main benefits of each option to determine the Preferred Way Forward. | Economic appraisal of Short Listed Options to include cost benefit analysis. Calculation of the Net Present Social Value (NPSV) includes the measurement and monetisation of benefits. | Economic Appraisal and NPSV reviewed and updated. |
Management Case | Limited or none. | Benefits realisation arrangements should be set out at OBC, with plans for successful delivery, including: (1)Benefits Realisation Strategy. (2) Benefits Realisation Plan. (3) Benefits Register. (4) Evaluation of benefits realised. | Finalise Benefits realisation arrangements including Benefits realisation strategy, plan, register and evaluation of benefits realised. |
Below is an illustrative table of monetised benefits (discounted over the life of the project, i.e. 60 years) for inclusion in a business case.
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