Why does the budget not meet the expectation?

Transcription

1 or Why does the budget not meet the expectation?

2 Return On Investment Senior internal and external stakeholder management focusing on Project ROI and business cases. Is the Bid cost the same as the budget for the contract/programme/project Why does the ideal of under budget and over returns rarely happen More often over budget and under return. A Bid is a project

3 Business Case Budget Expectation

4 Example Software Business Case 1m in 10m IT spend on roll out 10% contingency included in pricing given to finance and company board Contract won fixed price in large outsourcing deal Supplier (Microsoft) software price increased between submission of pricing and contract signature PM no problem contingency fund Board what contingency we cut that to reduce overall price 1. Make sure the budget is what is required with contingency and not cut higher up the food chain 2. Understand finances including ROI calculations 3. Make sure that any pricing that is date impacted is clearly understood 4. You can t negotiate with Microsoft on global licensing costs

5 Business Case Initiating a Project or Programme? In reality it comes before a project or programme can start to be resourced Has to be checked and have proactive senior management support continuously The vision or mandate that leads to the programme or project may not have ROI in a hard business case - but Public Sector do things for other reasons

6 Example Senior Stakeholder Outcome (Programme) of double the sales revenue within 5 years Presentation to a company 7 person Executive Board of the business case HR Director not part of direct communications plan for stakeholders (programme SRO on the Board had promised to brief - but had not) HR had been given staff reduction target by CEO preventing recruitment and no contractors Finance Director disagreed with cost figures presented although obtained from his deputy Business case being presented by this contractor was dead within 5 minutes after waiting 2 months for opportunity to present 3 Companies were expecting contracts as a result of the approved business case did they understand and support the business case?

7 Lessons Learned 5. Make sure that all the decision makers are briefed before hand 6. Check the costs again make sure the FD agrees 7. One to one briefings of all senior stakeholders before a programme or project board 8. If the business case adds up (which this did) then even these problems can be overcome

8 Funding in Public Sector How Public Bodies get money is crucial to the programme or project does your client have the money? Spend to save is still possible if the Business Case adds up Difficult financial decisions for public sector e.g. child protection officer for 5 years or new data storage system? Complex stakeholders including the general public

9 Example Building Schools for the Future (BSF) BSF has 3 business cases Strategic Local Authority s intention Outline Options then to open market via the European Journal Full Preferred bidder prior to signature Capital funding from Central Government based on pupil numbers per new school Local Education Authority needs written agreement from each School Board of Governors to commit to long term funding and to cover cost gaps (if any) between grant and cost No money provided until after Full Business Case approved so inside the authority another business case and project needs to be funded to go through the process

10 Lessons Learned 9. Complex finances take more time than you think but as Bid Manager/PM you need to know where the money and resources come from 10.Access to senior stakeholders in Public Sector severely (sometimes legally) restricted 11. The ROI on these business cases is social change not financial hard sell to finance directors 12.Business cases submitted frequently missed key elements and undertakings

11 Lack of Skills in Risk Management Huge problem we may be litigious and risk adverse but lack skill to measure risks Some risks will always exist Who owns the risk not just registers them More stakeholder management How should risk be costed?

12 Example Olympics It must happen - very fixed timeline Stakeholders very complex Who owns the risk for example security for the main stadium completion? How do you cost the risks? 500k per hour per channel for HD satellite hire What is the ROI? Is it always just financial? How do you bid into such an environment 13. Risk needs to sit with the person best able to mange it 14.Have that long difficult meeting early in the process to capture and assign risks 15. Don t forget the opportunities 16.Don t over cost the risk - probability and impact 17. Bid must understand the risks

13 Non Financial ROI Adding value to the Business Case Service improvements Fewer problems fewer contact centre calls Lower costs Better Patient Outcomes Fewer deaths, less drugs, less treatment Lower costs Nicer building More efficient (cost) less employee dissatisfaction Less employee turnover reduced training requirement Lower costs

14 Budget Cost + Contingency (+ Risk Opportunity) + Profit = Price Budget = Price Profit For a given timescale, resources and budget the scope of the programme / project can be achieved Budget Time Scope Volume = scope If one parameter changes so must something else Resources

15 Summary Bid to Programme or Project requires budget and commitment The business case is the key to all If the ROI doesn t work nor will the programme / project and the bid will probably fail on all accounts A winning bid has to win for the client and the supplier A bid is a project so treat it as one

16 Thank You Phil Henley