Our audit focused on government systems
Our audit objective was to determine whether the government has systems to ensure that comprehensive business cases are prepared for significant initiatives to support decisions regarding those initiatives.
We examined business cases for several recent significant initiatives
We examined business cases for several recent significant initiatives considered by the government, including the cases supporting One Window Access to Services, Alberta SuperNet, various capital initiatives of the Ministry of Infrastructure (see page 152 of this report), and the Alberta Corporate Service Centre.
The estimated costs for these initiatives range from $20 million to almost $200 million.
We did not assess whether the initiatives were appropriate
We did not assess whether the initiatives are appropriate. We evaluated whether the business cases comply with good practices and include all relevant costs and benefits for making rational decisions.
Standards
Recommendation No. 1 Standards for business cases
We recommend that the Ministry of Executive Council work with other ministries to develop standards for business cases.
No standards exist Currently, there are no government-wide standards to guide
ministries in the development of business cases. The business cases we reviewed include some components of an effective business case, but are missing other important components.
An introduction should present the history, the decision required and the scope of the case
In general, a business case begins with a discussion of the history behind the initiative and the need for a decision. All of the business cases we reviewed provide this information. The scope of the business case should also be clearly described, however, this was not done in most of the cases we reviewed.
The case should outline the project’s governance structure
Particularly where multiple ministries are involved, the governance structure and accountability framework of the initiative should be included in the business case. The importance of developing such frameworks is discussed within several of the cases we examined, however the cases do not directly address who is responsible for the project and who controls it.
A description of how the initiative supports
government goals should be in the case
A description of how the initiative will support the goals and objectives of the organization should be included in the business case. All of the business cases we reviewed provide a thorough discussion of how the initiatives support the government’s goals and objectives.
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Impact and risk assessments should be part of the decision-making process
Impact and risk assessments should be done early on and presented in the business case to ensure impacts and risks are considered in the decision-making process. Furthermore, any legal, financial or social constraints should be identified. Otherwise, the alternative selected may not be feasible once the impacts, constraints or risks are later identified and are determined to be unmanageable or unacceptable. Impact and risk assessments were not consistently incorporated in the business cases we reviewed. Some of the business cases include risk assessments, complete with mitigating factors. Other cases only mention the importance of preparing these assessments in the future.
Any assumptions should be clearly stated
Any assumptions should be clearly stated within the business case, tested, and challenged by senior decision-makers. The majority of cases we reviewed describe effectively the assumptions made to conduct the cost-benefit analysis so that the reader has a sense of the limitations of the analysis.
All feasible alternatives should be identified
The next step is to identify all feasible alternatives in an open-minded way such that the status quo is not unreasonably defended or attacked. The status quo should, in fact, be one of the alternatives considered in the case. Current resources or facilities should not rigidly constrain the alternatives. Without in-depth knowledge of the projects, it is difficult for us to assess whether all reasonable alternatives were identified in the business cases we reviewed. Only one of the cases we reviewed included the status quo as an
alternative.
A comprehensive cost-benefit analysis should be prepared for each
reasonable alternative
Most notably, a comprehensive business case should also include a cost-benefit analysis (CBA). The CBA essentially quantifies,
wherever possible, the advantages and disadvantages of each reasonable alternative, enabling the decision-maker to identify the optimal alternative. Where outcomes are not quantifiable, they should be assessed qualitatively. The CBAs we reviewed were not comprehensive. In most cases, qualitative costs and benefits were acknowledged in the text but not included for consideration in the
CBA. Moreover, in the majority of the cases, the CBA was presented for only the recommended alternative, thus precluding a cost-benefit comparison of all reasonable alternatives explored within the business case.
The recommendation should be clearly stated and supported
Finally, the business case should conclude with a clearly stated recommendation, supported with evidence from the business case.
The rationale for recommending one alternative, and its advantages over other alternatives, should be clearly presented.
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Final decisions should be documented
The business case is provided as information to the decision-maker.
The final decision requires judgment and consideration of issues perhaps not contemplated in the business case. As a result, there will be times when the decision-maker does not follow the recommendation made in a business case. In these situations, the reasons for the departure should be documented. The explanation is necessary to ensure that the basis for the deviation can be
understood, and that any deficiencies in the business case are recognized. For several of the initiatives we examined, the alternative being pursued does not link directly to the
recommendation made in the case yet the reason is not clearly documented.
A post-implementation review should be completed
Once the initiative is underway, a post-implementation review should be conducted using the business case to confirm that
program objectives are being met. This review can also be of value in identifying strengths and weaknesses in the business case for future reference. As most of the initiatives we reviewed have not been implemented, we could not check whether a
post-implementation review was conducted.
Standards will ensure that the best information is available for decision-making
It is important that standards for business cases exist to ensure the best information is available for decision-making. Incomplete or inadequate business cases may result in resources being
inappropriately allocated, or incorrect decisions being made. The projects may also be structured inefficiently because insufficient consideration is given to alternatives.
Standards should outline the key components of a
comprehensive business case
Standards should outline the key components of a comprehensive business case and include guidance on the development of the case.
The standards should recognize that while there are common components to all business cases, the level of detail in a business case depends on the stage of assessment of the initiative. For example, if a strategic decision were required on the initiative, the business case would be at a higher level than for an initiative for which a decision regarding the method of implementation is required. Further, the standards should also acknowledge that business cases for significant initiatives could be developed in several stages.
The standards should also indicate the types of initiatives that require business cases
The standards should also indicate what types of initiatives require comprehensive business cases. Consideration should be given to the significance of the investment required and the risks and impacts of the initiative to both government and the public.
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Formal review and approval should also be required
In addition, the need for a formal review and approval process to be established early in the development of the business case should be highlighted in the standards. This may include specifying the level and type of information that will be required in the business case at each stage. For most of the cases we reviewed, the review and approval processes were unclear. In some instances, this resulted in inefficiencies as approvals were delayed until the necessary
information was presented.
Setting standards will ensure decision-makers have the information required to compare alternatives
Setting standards for business cases will provide assurance that decision-makers have the information required to determine the most appropriate alternative for significant initiatives. The government has already developed a framework for information technology initiatives entitled “A Cost Benefit Assessment Framework for Information Technology Projects”. Although focused on technology initiatives, this document could provide the basis for more general standards and guidance for business cases for other types of initiatives.