Today and more than ever, organizations require the submission and approval for a business case before a project can be approved for execution. A proper business case should ensure that the project aligns with the organization’s strategic objectives, ensures financial viability in terms of benefits and costs, tangible and intangible, and provides an acceptable level of cost and schedule risk exposure. For projects’ intensive organizations having a standard process for creating a business, cases is a must and not a choice.
Project Management Information Systems (PMIS) like PMWeb should be used to create all proposed project-related business cases, whether selected or not, by the organization. Of course, should the project be determined by the organization, the approved business case should become part of the project management plan.
One of the advantages of having a PMIS solution like PMWeb is that there is no limit to the number of projects that can be added. For every considered project investment, the project team needs to provide the available details on the opportunity and how the project aligns with the organization’s strategic objectives. Using PMWeb specification, all strategic objectives will be predefined to enable the project manager to identify the degree of alignment. The project manager will have the options of “1” for partially aligned, “2” for moderately aligned, and “3” for fully aligned. For strategic objectives that the project has no contribution, the value will remain blank.
The next step is to create the project’s cost-benefit analysis. PMWeb budget module will capture all tangible project’s costs and benefits against the predefined cost breakdown structure. The tangible benefits could be summarizing the anticipated increased revenue and decreased expenses that the project will bring when completed. As for the project’s estimated costs, those should include all direct and indirect costs as well as allowed contingency.
For each budget line item, whether it was benefit or cost, the project team needs to determine how those expenses will be spent, or revenues will be earned during the project’s duration. To achieve this, the project team member can link each budget line item with the relevant project schedule activity to determine the start or finish dates for the line item or provide those dates based on his/her best guess. The project team can select how those funds will be spread over the duration, for example, bell-shaped, front or back-loaded, linear, or any other distribution.
In addition to the tangible benefits and costs captured by each budget line item, the budget module specifications can be used to capture the additional information that relates to intangible benefits and costs. There are different options for recording those benefits and costs. The first option is to let the project team member add all the project team’s intangible benefits and costs. The other option is to have an exhaustive list of all possible intangible benefits and costs predefined. The project team can select those applicable to the project’s business case. The second option is highly recommended as it helps in creating a comprehensive list of all possible benefits and costs to make it easier for the project team to select from as well as enable aggregating this valuable information across all projects.
Of course, and similar to all other PMWeb modules, supportive documents for the anticipated benefits and estimated costs, among others, can be uploaded and attached to the project budget. In addition, a workflow can be assigned to the project budget to ensure formal review and approval of the reported benefits and costs.
A project business case will never be considered to be complete without reporting on the project’s risk exposure from at least cost and schedule perspectives. PMWeb, a custom form builder, will capture the risks associated with the project delivery. For each identified risk, the project team needs to estimate the likelihood or probability of the risk to occur. A 5-point scale will be used to assess the possibility where “1” for a remote chance while “5” for almost sure to happen. Also, for each risk, the project team needs to identify the impact that this risk will have on the approved project budget and completion date should it occur. Again, a 5-point scale will be used to assess the impact, where “1” for minor impact while “5” for drastic impact. The likelihood and impact scores will be the basis for calculating each risk’s exposure, which could have a value that could vary from “1” to “25”. This enables calculating the project’s overall cost and schedule risk exposure. Should the risk exposure be less than “9,” it will be considered low “Green,” “9” to “14” moderate “Cyan” risk while a score of more than “14” will be high “Red” exposure.
The information captured in PMWeb will enable the project team to share the business case comprehensively yet easy to read and understand. The Business Case Financial Analysis and Summary Report use the information captured in PMWeb to calculate the Internal Rate of Return (IRR) and Net Present Value (NPV) measures. Both calculated estimates were based on the assumption that the organization has the requirement that all considered projects should have an IRR that exceeds 18%.
Another version of the report can be created to replace the detailed cashflow projection table with a graphical cash flow that shows the project’s aggregated benefits and costs by period and the cumulative project’s cash flow. This will enable the project team to visualize the project’s break-even period.
