21st Century Schools and Education Funding Programme business case guidance

Transcription

1 21st Century Schools and Education Funding Programme business case guidance Guidance Guidance document no: 161/2015 Date of issue: March 2015

2 21st Century Schools and Education Funding Programme business case guidance Audience The document is aimed at local authorities, diocesan authorities, further education institutions and higher education institutions. Overview The guidance and templates will assist those developing business cases for consideration by the Department for Education and Skills. Action required The guidance should be used when preparing business cases for funding from the 21st Century Schools and Education Funding Programme. Further information Enquiries about this document should be directed to: Christina Morgans Capital Funding Branch Department for Education and Skills Welsh Government Cathays Park Cardiff CF10 3NQ Tel: Fax: Additional copies This document can be accessed from the 21st Century Schools website at Related documents This guidance should be read in conjunction with The Green Book and Public sector business cases using the five case model: update guidance which can be found on the Treasury website at Digital ISBN Crown copyright 2015 WG24387

3 Contents 1. Introduction 2 2. Application process 5 3. Assessment process Project approval process Project monitoring and evaluation Band B 38 Annex 1: Strategic outline programme (SOP) template 39 Annex 2: Strategic outline case (SOC) template 41 Annex 3: Worked example options framework (SOC stage) 45 Annex 4: Outline business case (OBC) template 52 Annex 5: Full business case (FBC) template 55 Annex 6: Business justification case (BJC) template 58 Annexes 7 and 8: Options appraisal template (worked example) and options appraisal template (blank) 61

4 1. Introduction 1.1 Context The 21 st Century Schools and Education Programme is delivered by the Welsh Government in accordance with the Better Business Case Guidance. To be of assistance, the Welsh Government has provided this guidance note in support of this process to illustrate the specific information requirements of the Department for Education and Skills. This guidance should be read in conjunction with the Green Book and Public sector business cases using the five case model: update guidance which can be found on the Treasury website at: st Century Schools and Education Programme background Band A of the 21 st Century Schools and Education Programme represents a 1.4 billion investment over the five year period ending 2018/19. All 22 Local Authority areas will benefit from this major schools improvement programme, which will support the rebuild and refurbishment of over 150 schools and colleges. The programme is 50% funded by Welsh Government using a combination of capital and revenue funding, with the remaining 50% funding provided by local authorities and others. The primary aims of the programme are to: Reduce numbers of poor condition school buildings Reduce surplus capacity and Reduce running costs so as to maximise resources available to target improvements to learner outcomes. The programme is also able to include proposals that address specific demand for places in Welsh Medium and Faith Based provision. 1.3 Changes to process Following feedback from our partners in Local Authorities and the Further Education sectors, we want to reduce bureaucracy by streamlining the business case process. All of the Business Cases being submitted are underpinned by a Strategic Outline Programme (SOP), which provides an overarching view of individual Local Authority / Further Education Institution strategy. Individual projects can then be approved subject to receipt of a satisfactory Business Case. 2

5 For projects over 5 million, Business Cases are submitted in three stages: Strategic Outline Case (SOC) Outline Business Case (OBC) and Full Business Case (FBC). For smaller projects less than 5 million in value the SOC, OBC and FBC are replaced by a single document, the Business Justification Case (BJC). The purpose of this guidance document is to simplify the Business Case Process. To do this, we have created forms that include targeted questions and word counts that can act as a guide for completion of business cases. We operate on a principle of continuous improvement, and welcome your comments on this Guidance to improve the content. 1.4 Process overview All Business Cases will be based on the five key areas that underpin the Better Business Case Process (Five Case Business Model). Strategic Case How does the proposal fit strategically with government/local priorities? What is the case for change and clear SMART investment objectives? Economic Case What are the options for delivering the investment objectives and which one optimises value for money? Commercial Case How can a deal be done with delivery agents? What is the procurement strategy and the commercial arrangements for the proposed investment? Financial Case Is the proposal affordable? What are the sources of match funding and what is the accounting treatment of the investment? Management Case How can we manage the successful delivery of the scheme and whole life benefits? These five areas are examined at each stage of the Business Case process, with greater detail being available at each stage of development. The SOC will focus on the strategic justification (Strategic Case), investment objectives for the project (Strategic Case), the reasoning behind 3

6 reduction of the long list to a short list of options (Economic Case) and the proposed management structure (Management Case). The OBC will focus on the commercial strategy (Commercial Case), the detailed analysis of the shortlisted options (Economic Case), details of match funding and profile of spend (Financial Case). Any changes to the strategic justification or any additional options considered should also be included. The FBC will focus on, finalised management structure (Management Case), monitoring and evaluation of benefits (Management Case) and the agreed contract (Commercial Case). For smaller projects, the BJC covers all of these areas in a single iteration. In certain situations, it may be possible to combine business cases, and submit a joint SOC/OBC or a joint OBC/FBC. This is appropriate for Business Cases that are relatively straightforward (i.e. not contentious, like for like replacements etc.) or lower value investments (generally less than 10 million). If you wish to combine your Business Case submission, please speak to the appropriate contact (See 2.2), who will be able to advise you on whether a joint SOC/OBC or OBC/FBC is appropriate. 4

7 2. Application process 2.1 Background Business cases map to the stages of development of your project and provide break points that enable key decisions to be made. Because of the different decisions being made at each stage, different levels of information are required to support the case. To reflect the different information requirements, forms have been created that ask key questions that will allow us to gather the appropriate information for each stage of the process. All relevant information should be contained in the body of the document. With the exception of the Option Appraisal Template, which is to be attached as an appendix, any other annexes / appendices will be disregarded. 2.2 Strategic outline programme (SOP) Strategic Outline Programmes have been devised to assist the development and agreement of programmes in support of an agreed strategy/ strategies. This document captures the purpose of the investment at a strategic level. Although this Guidance predominantly deals with SOC, OBC and FBC, there may be occasions where it is necessary to amend your Strategic Outline Programme (SOP) to reflect a change in direction or an identified need for an increase or decrease in resources. The process for such a change is as follows: Raise the issue with the appropriate contact: o Programme Director o Head of Capital Funding o Schools Reorganisation Manager South o Schools Reorganisation Manager North Submit a form that explains the purpose for the change and the implication to objectives, options and funding. This will then be assessed by the Capital Panel and any recommendation for approval signed off by the Minister for Education and Skills. Please note that any requests for an increase to the Programme Envelope are subject to the following conditions: 5

8 Programme Envelope up to 25 million: Request for increase to have a maximum limit of 30%. Programme Envelope up to 50 million: Request for increase to have a maximum limit of 15% Programme Envelope over 75 million: Request to have a maximum limit of 10%. Any requests will only be considered if evidence can be provided that there is a genuine shortfall in funding and / or the LA / FE programme is at least 50% through delivery (this can be based on number of projects delivered and / or total value). Please refer to Annex 1: SOP Template. 2.3 Strategic outline case (SOC) At an early stage, the main purpose of the SOC is to establish the need for investment; to appraise the main options for service delivery; and to provide a recommended or preferred way forward for further analysis. In practice, this entails building on local and governmental strategy documents to make the case for change within the strategic case; preparing and appraising the long list of options within the economic case; and recommending a preferred way forward, together with indicative costs, for more detailed analysis within the Outline Business Case (OBC). Business planning is an iterative exercise, so bear in mind the need to revisit earlier assumptions. Also note that the SOC should be prepared in accordance with best practice guidance provided in HM Treasury s Green Book. The SOC requires particular emphasis on the following: Strategic justification for the project, including Welsh Government priorities Identification of project investment objectives (SMART) Moving from a long list to a short list of options Management structure SOC Supporting guidance Executive summary This should be a concise summary of your findings. It should cover the following: What do you want to do? 6

9 Why do you need to do it? What will it achieve in terms of benefits to condition, capacity and learners? What is the estimated cost? It should also contain a summary of the information contained within each of the five cases Strategic case This is one of the most important components of this document. In the first instance, it should clearly identify the following: Strategic Fit What are the strategic drivers for this investment and what are the associated strategies, programmes and plans at a national, regional and local level? Case for change: Identified investment objectives that are strategic; measureable; achievable; relevant and time-constrained (SMART) Summarise the existing arrangements Summarise the investment need Identify the potential solutions Identify the benefits and risks Identify any constraints and dependencies; It may be helpful to consider the case in terms of the following, which is expanded in the Economic Case o a minimum scope essential or core requirements/outcomes o an intermediate scope essential and desirable requirements/outcomes o a maximum scope essential, desirable and optional requirements/outcomes. There are a number of key questions that should be answered when the case for change is addressed. These include: What is the condition of the school or college that you wish to replace / refurbish / relocate or amend catchment? What is the current capacity of the school? What is the demand for places at the school / college? How will the proposed project reduce surplus capacity / how will the proposed project meet demand for school / college places? What will the impact of this project be on nearby schools and colleges will it increase surplus capacity elsewhere / will it address sufficiency of places in the area. How does the school/college work with other providers in the area? Will the project have any impact on nursery places/early years education? Welsh Medium Education? Play areas? After school care / wrap around childcare? Special Educational Needs Provision? Further Education Provision? 7

10 What are your transitional arrangements for learners how will learner outcomes be maintained during the period of the build? Please refer back to the Strategic Outline Programme (SOP) noting any key changes since the production and approval of these documents Economic case The purpose of the Economic Case at the SOC stage is to identify your long list of options and reduce it down to a short list. To do this, it is important that you identify your critical success factors. These might typically include: Does the option fit with local / national strategies? Does the option provide good value for money? Is the option deliverable? Is the achievable in the timeframe? Is the option affordable? Is the option socially/politically acceptable? Does it provide better outcomes for learners? Each option should be assessed against both the investment objectives and critical success factors and carried forward or discounted as appropriate. It is useful to address these questions in a workshop. Attendees should represent the groups affected by the project, as well as members of the project team. It is important that you note who attended the workshop held to generate the long list of options and record when the workshop was held. As a minimum, each option should include a brief description of the option; A recording of each option s advantages and disadvantages; A recording on the conclusion reached in respect of the option; The reasoning behind any decision made, particularly when an option is discounted. In terms of the generation and analysis of your long list of options, the options framework enables consideration of a wide range of options and provides a methodology to develop a short list of options for further analysis at OBC. The short list of options should always include a status quo /do minimum option. The options framework comprises: Scope (coverage: who, what, where etc.) Service Solution - (how: technical) Service Delivery - (who: provider) Implementation - (when: phasing & time) Funding (how: ) 8

11 Please see the worked example in Annex 3. At this point, a brief analysis should be undertaken around the indicative economic costs of the shortlisted options; remember to adopt a proportionate approach and make allowances for optimism bias. This work should enable identification of a preferred way forward at this time, subject to more detailed analysis in the OBC Commercial case At this stage, it is only necessary to identify your proposed procurement route, e.g. Use of a regional framework such as SEWSCAP or North Wales Contractors Framework / use OJEU Procurement route. Reference should be made to the inclusion of community benefits and, if known, whether they will be core and/or non core to the contract, what community benefits will be requested and capturing results via the measurement tool Financial case At this stage only limited information is needed. You should: identify the estimated cost of the preferred way forward broken down over financial years; and how this will be funded. For example: The preferred way forward will cost an estimated 10 million, which is 50% funded by the Welsh Government. The remaining 50% will be via 1 million Capital Receipts, which are already realised, 2.3 million local authority capital funding and 1.7 million borrowing. It is important that any match funding secured is identified, and that any uncertainty or assumptions around the remaining match funding is captured here Management case This should explain that the scheme is an integral part of the Local Authority / Further Education Institution 21 st Century Schools and Education programme, which comprises a portfolio of projects for the delivery of The following arrangements will be put in place to ensure the successful development of the scheme and production of the OBC The project will be managed in accordance with Prince2 methodology. 9

12 A Gateway Review has been undertaken on the programme, in conjunction with agreement to the SOP. The consequent actions are as follows The Milestone activities are as follows.. It would be useful to also include references to early plans/proposals for benefits realisation or evaluation. Please refer to Annex 2: SOC Template and Annex 3: Worked Example of an Options Framework. 2.4 Outline business case (OBC) The main purpose of the OBC is to: revisit the case for change and the preferred way forward identified in the SOC; establish the option which optimises value for money; outline the deal and assess affordability; and demonstrate that the proposed scheme is deliverable. In practice, this entails updating the strategic case if appropriate; undertaking investment appraisal within the economic case; and completing the commercial, financial and management cases, with supporting benefits and risk registers. Sign off of the OBC provides agreement that a tender process can now take place. By OBC stage, you will have already undertaken site investigation and design and management costs. At the point that your OBC is signed off, you will be entitled to claim for eligible costs incurred to date Executive summary This should summarise the following: Investment objectives Long list of options (summary) Short list of options (summary) Preferred option What investment is needed? What will this pay for? How will this address capacity surplus / deficit? How will this address building condition? How will this improve learner experience? What impact will the preferred solution have on other schools in the locality? What are the headline benefits? It should contain a summary of the information contained within each of the five cases. You should confirm that any issues raised by the Welsh Government at SOC stage have been addressed Strategic case 10

13 At OBC Stage, it may be necessary to update the Strategic Case as presented at SOC. This may be in relation to local changes in policy or in response to comments raised during the assessment process. It is important that the Strategic Case identifies whether any changes have been made and/or records responses to comments raised by Welsh Government assessors. If there are no changes to be made and/or no comments to be addressed, this should be stated Economic case At OBC stage it is vital that a convincing and comprehensive Economic Case is provided. This analysis should include confirmation that the Investment Objectives and Critical Success Factors identified in the SOC have been revisited and have not changed. It is also important that the long list of options is referred to and that it is confirmed that these have been revisited and no changes made. Short-listed options Restate the shortlisted options as identified in the SOC. Any changes should be highlighted. The economic appraisal should provide an overview of the main costs and benefits associated with the shortlisted options. This will be supported by the detailed financial analysis (please see Annex 7 for a worked example, and Annex 8 for a blank proforma) Information around costs and exclusions are included in the HM Treasury Green Book Guidance on Options Appraisals. The Economic analysis focusses on value for money and should: Use constant (base year) prices; Include opportunity costs; Include all quantifiable costs, benefits and risks to both organisation and wider society; Include environmental costs; make allowances for optimism bias; Exclude all Exchequer transfer payments for example, VAT; Exclude general inflation Exclude sunk costs; and Exclude depreciation and capital charges. A new build school or college should be assessed over a sixty year period. Refurbishment of a school or college should be assessed over a thirty year period. As well as the quantifiable costs and benefits, including an analysis of qualitative benefits should also be undertaken. 11

14 This should be undertaken by identifying the benefits criteria relating to each of the investment objectives. The method used is as follows: weight the relative importance (in %) of each benefit criterion in relation to each investment objective score each of the short-listed options against the benefit criteria on a scale of 0 to 9 derive a weighted benefits score for each option. The results of this analysis should also be summarised together with the reasoning behind the weighting and scoring of benefits. Aim to include independent participants in the analysis to ensure that decisions are as objective as possible and not biased by a preference for a particular solution. Benefit Criteria and Weight Raw (R) and weighted (W)scores Benefit Criteria 1 Benefit Criteria 2 Benefit Criteria 3 Benefit Criteria 4 Benefit Criteria 5 Total Rank Option 1 Option 2 Option 3 Option 4 R W R W R W R W Risk appraisal Qualitative (unquantifiable) The risks associated with the scheme must be identified, prioritised and appraised in all instances. In the case of significant, new and/or high value investments, the risks should be quantified in s and included in the economic appraisals ( cost of risk retained ). In the absence of risk measurement (in s), a sum should be included for optimism bias. All other risks; those that are unquantifiable in s, should be appraised as shown below. In the case of medium and small sized schemes, it may suffice at this stage to weight and score the risks for each option and to rank accordingly, see below. Whatever the approach, a sum must be included for optimism bias in the economic appraisals. Ideally, the risks should be quantified (in s) in all cases and the unquantifiable risks assessed as outlined below. In most instances, you will find the service risks 12

15 associated with the design, build and operation features of the scheme fall in the former category, while associated business risks fall into the latter. External environmental risks, for example, inflation, may be ignored for the purposes of this appraisal, given that they are common to all options. Risks in respect of each of the options should be recorded and scored. Following the three elements of analysis: Economic, Benefits and Risk, a summary table should be produced. Evaluation Results Economic appraisals Benefits appraisal Risk appraisal Overall Ranking Option 1 Option 2 Option 3 Option 4 The conclusion should then be reached that the preferred option is X because of the following reasons. Sensitivity analysis It is important that the sensitivity of the preferred option is tested through: switching values scenario planning / analysis ( what if ) by altering the values of the uncertain costs and benefits to observe the effect on the overall ranking of options. The results of this testing should be recorded in the OBC and whether this has changed the preferred option ranking Commercial Case This section of the OBC outlines the proposed deal in relation to the preferred option outlined in the economic case. This should confirm the method of procurement, the required services and the potential for risk transfer. Risk Category 13 Potential allocation Public Private Shared

16 1. Design risk 2. Construction and development risk 3. Transition and implementation risk 4. Availability and performance risk 5. Operating risk 6. Variability of revenue risks 7. Termination risks 8. Technology and obsolescence risks 9. Control risks 10. Residual value risks 11. Financing risks 12. Legislative risks 13. Other project risks At this stage details of the framework or procurement route should be set out and how they comply with WPPS, if a separate procurement process via OJEU is being undertaken confirmation that SQuID will be used as the pre qualification questionnaire and principles of WPPS are built into the procurement and advertised via sell2wales. Full details of the community benefits to be included in the tender process should be provided, including Core/ non core or both to the contract; included in contract notice/ Prior Information Notice or framework; Priorities that you are seeking to address; Potential targets; Process for managing the delivery of Community Benefits through the contract; Confirmation that contractors will be required to complete the community benefit measurement tool for the project. For further details guidance please follow this link: Financial case The purpose of this section is to set out the forecast financial implications of the preferred option by financial year (as set out in the economic case section) and the proposed deal (as described in the commercial case). As the Welsh Government is paying for 50% of the project, it is important that we are confident that the remaining 50% of the project is affordable. 14

17 At this point in the project development, it should be possible to identify the sources of match funding and confirm that these are signed up to by the relevant parties in the local authority / Further Education Institution. For example: Capital Receipts: Have these been received? Are they ring fenced for the project? If the asset is not yet sold, what is the basis of valuation? When will the money from the sale be received? Will the timing of any sale impact on the project cash flow? Capital Funding: Has this been signed up to by the Cabinet / Board? If so, when was this meeting? If not, when will this proposal go before the Cabinet / Board for sign up? Prudential / Other Borrowing: Has the borrowing been secured? Has a revenue stream been identified to fund the borrowing? Has a sensitivity analysis been carried out to ensure that the borrowing is affordable if any circumstances change? Savings achieved through school reorganisation: Have the relevant consultations been undertaken to achieve the proposed reorganisation? Has the Cabinet confirmed that they are happy to ring fence this released revenue for the purpose of funding the project? If so, on what date was this confirmed? Will the project generate revenue costs or savings? Project cost template Costs of the project should be broken down as follows using the information available at the time. Ground floor area (gfa) of project = Number of pupil places (including SEN) = Number of SEN places = Preliminary items Site Investigation Land Acquisition Elemental Construction Costs building only Substructures Superstructures Finishes Fittings and Furnishings 2014/ / / / /19 Total Cost per m2 Cost per pupil 15

18 Services External works including drainage Total Construction Costs Building Only External Works Abnormal items Total Construction Costs Fixtures and Fittings ICT equipment Professional Fees Design and Management external Design and Management internal Risk Contingencies Client Other Scheme Total All supplier overheads, profit and prelims should be included in the items above In all cases, capital charges, VAT, and the cost of risk (any contingency or allowance for risk adjustment and optimism bias) should be shown separately. For Voluntary Aided and Further Education Institutions, there are VAT implications for capital investment and HMRC guidance should be sought to ensure that the full cost of the project is reflected in the application. You will need to detail the cashflow showing the impact of the capital spend, and revenue savings and any interest repayments. It should also be made clear who the created asset belongs to. For example, will it sit on the Balance Sheet of the Local Authority or another party? Management case This section of the OBC addresses the achievability of the scheme. Its purpose, therefore, is to build on the SOC by setting out in more detail the actions that will be required to ensure the successful delivery of the scheme in accordance with best practice. This section should include confirmation that the project will be managed in accordance with PRINCE 2 methodology, details of the reporting organisation and structure for the project, details of project roles and responsibilities, and an overview of the project plan with milestones. 16

19 The description of the project structure should include a structure chart for assessors to better understand roles and reporting lines. It is also important that this case provides the outline arrangements for contract management; benefits realisation, risk management and monitoring and evaluation. The Gateway Review Process should also be referenced, along with confirmation that any recommendations are actioned. Please refer to Annex 4: OBC Template 2.5 Full business case (FBC) The Full Business Case is submitted following procurements, but prior to contract signature. The main purpose of the FBC is to evidence that the most economically advantageous offer is being procured and that it is affordable. In addition, the FBC explains the fundamentals of the negotiated deal and demonstrates that the required outputs can be successfully achieved. In practice, this entails updating the Economic Case to reflect the procurement phase; completing the commercial case to record the preferred service provider s offerings; updating any changes to the Financial Case and putting in place robust management arrangements for delivery of the required products and services Executive summary This should state that X million is being sought to deliver X over a period of X years. It should briefly cover the strategic reasoning behind the investment, the benefits, the decrease / increase in capacity, the improvement in building condition and impact on learners. It should include key facts such as cost per m 2, cost per pupil, capacity of the proposed school and any implications for other schools in the surrounding area. It should also contain a summary of the information contained within each of the five cases Strategic case Please refer back to the Strategic Outline Programme (SOP), Strategic Outline Case (SOC) and Outline Business Case (OBC), noting any key changes since the production and approval of these documents. 17

20 Any comments made as part of the assessment process should be reflected here and covered off. Any changes to national, regional or local strategies that have occurred since approval of the OBC should be noted here. The investment objectives of the project should be restated and any changes since OBC noted. Please reference the business strategy for the organisation(s), and any related national or regional strategies, noting any changes since agreement to the OBC for the scheme Economic case As this section has been covered in detail at OBC stage, there is no need to restate the case in detail, although highlight any important changes and consider whether or not the changes might materially impact upon the ranking of the options achieved at OBC. This section should restate the critical success factors, highlight any changes since OBC, and confirm that all economic appraisals have been carried out in accordance with HM Treasury s Green Book. For those submitting a joint OBC/FBC, please note that both sets of guidance must be used in conjunction and a full analysis provided Commercial case This section of the FBC sets out the negotiated arrangements and includes a description of the required services and risk transfer agreements. This should be a full analysis that: Outlines the method of procurement and how it complies with the EU Directives, Public Contract Regulations and Welsh procurement policy Sets out the negotiated deal and contractual arrangements Sets out financial implications of the deal Provides confirmation that both OJEU/framework and/or Standing Order Procedures have been adhered to Confirms the community benefits Programme/ Schedule you have set Confirms how targets are going to be met and how you will manage the delivery of Community Benefits in partnership with the contractor Financial case The purpose of this section is to set out firm financial implications of the contracted solution. This should contain finalised financial arrangements: 18

21 As the Welsh Government is paying for 50% of the project, it is important that we are confident that the remaining 50% of the project is affordable. This case should confirm the sources of match funding. For example: Capital Receipts: Confirmation that these have been received and ring fenced for the purpose of the project. For any receipts not realised, assurance should be made around the timing an amount of the receipt. Capital Funding: Evidence of commitment by the Cabinet / Board should be provided. Prudential / Other Borrowing: Evidence that borrowing is secured and a revenue stream identified to cover repayments should be provided. Savings achieved through school reorganisation: Evidence of commitment by the Cabinet / Board should be provided. Costs of the project should be broken down as per the OBC, but updated to show greater detail and finalised costs per financial year following negotiation of contract. Project cost template Details Project Title and location New Build % (Area) Refurbishment % (Area) Extension % (Area) Short description of work including any unusual constraints Number of pupil places Number of SEN places Total number of pupil places in school Number of storeys (including basement) Delivered though Regional Framework? Y/N (Please state name of framework) Contract period in weeks GFA (m2) 19

22 Anticipated Community Benefits Number of anticipated trainee and apprenticeship opportunities Anticipated use of local subcontractors on project as a % of construction cost. Preliminary Items Site Investigation / Feasibility Land Acquisition Sub Total Preliminary Items Element (BCIS Definition) Substructures Frame Upper Floors Roof Stairs External Walls External Windows and doors Internal walls and partitions Internal doors Superstructures Wall finishes Floor finishes Ceiling finishes Finishes Loose furniture and equipment Fixed furniture and equipment Fittings and Furnishings Sanitary appliances 2014/ / / / /19 Total Cost per m2 Cost per pupil 20

23 Services equipment Disposal installations Water installations Heat source Space heating and air conditioning Ventilating systems Electrical installations Fuel installations Life and conveyor installations Fire and lightning protection Communications and security installations Special installations ICT Infrastructure ICT Screens Builder s work in connection Management of the commissioning of services Services Services Sub Total Building Works External Works Site works Drainage External Services Minor Building Works Demolition and works outside the site Highway Costs (Eligible) Abnormal Items Sub Total External Works Total Construction 21

24 Costs Professional Fees Design and Management external Design and Management - internal Risk Contingencies Client Other Scheme Total All supplier overheads, profit and prelims should be included in the items above In all cases, capital charges, VAT, and the cost of risk (any contingency or allowance for risk adjustment and optimism bias) should be shown separately. It is important that you state clearly whether you can reclaim any VAT Management case This case should include confirmation that PRINCE 2 methodology will be used, plus finalised project reporting structures (including named individuals) and project management arrangements. A project plan should be included that identifies key milestone dates for the project. This case should include a detailed plan to demonstrate how benefits will be realised, which includes the responsible officer, monitoring arrangements, plans to evaluate and the anticipated completion date for evaluation work. A copy of the Risk Register should be included along with a plan for the management of risk, including risk owners. This case should also include arrangements for contract management, gateway reviews and contingency plans Please refer to Annex 5: Full Business Case Template. 2.6 Business justification case (BJC) The Business Justification Case is reserved for projects below 5 million in total Purpose State clearly what the business justification is in support of: typically this is to seek approval of... for on in support of 22

25 2.6.2 Strategic context Please provide an overview of the context within which the investment will be made. In other words, the strategy, work programme, service, project or operation, which the investment supports. What is the condition of the school or college that you wish to replace / refurbish / relocate / amend catchment? What is the current capacity of the school / college? What is the demand for places at the school /college? How will the proposed project reduce surplus capacity / how will the proposed project meet demand for school places? How does the school/college work with other providers in the area? Will the project have any impact on nursery places? Welsh Medium Education? Play areas? After school care? Special Educational Needs Provision? Further Education Provision? What are your transitional arrangements for learners how will learner outcomes be maintained during the period of the build? Case for change Business needs Please provide the compelling reasons for investment in the required services or assets, with reference to: the investment objectives for the procurement; the problems with the status quo. Benefits Please provide a summary of the main benefits associated with the investment, distinguishing between qualitative and quantitative; cash releasing and non-cash releasing; direct and indirect to the organisation, as appropriate. Also highlight how you would seek to maximise the Community Benefits policy, including priorities you wish to address such as Targeted Recruitment and Training. Please detail any targets set, the approach to be taken (core, non core or both), confirmation you will require the successful contractor to complete a Community Benefits Measurement tool and management and delivery of such outcomes. Risks Please provide a summary of the main risks associated with the investment, distinguishing between business and service risks during the design, build and operational phases of the project, as appropriate Available options Please provide a description of the main options (or choices) for investment, together with their relative advantages and disadvantages (a SWOT analysis). 23

26 Please bear in mind: That a minimum of four options should be considered, including the do minimum or status quo (unless there are compelling reasons to the contrary) That these options may differ in potential business scope, service solution, service delivery, implementation and funding, depending on the nature of the investment That the investment appraisal for each option should be contained as an appendix and prepared in accordance with the tools and techniques set out in the Capital Investment Manual and HM Treasury Green Book. Preferred option On the basis of the above, please: State why the recommended option optimises value for money (VFM) Describe the services and/or assets required Procurement route Please state how the asset or service will be procured in compliance with the EU directives, Public Contract Regulations 2006 (soon to be updated in 2015) and Welsh procurement policy and Wales Procurement Policy Statement. This may involve the use of an existing contract; a call-off contract or framework agreement; or the requirement for a new procurement under the above Funding and affordability Please indicate: The capital and revenue costs of the proposed investment How the investment will be funded Any affordability gap that Welsh Government funding is sought for. Please complete Project Cost Template as detailed in paragraph 2.5 Full Business Case (FBC) Management arrangements Please indicate how the investment will be delivered successfully with particular reference to: Project management arrangements Business assurance arrangements Benefits realisation monitoring 24

27 Risk management Post project evaluation Contingency plans Please refer to Annex 6: Business Justification Case Template 25

28 3. Assessment process The Business Case assessment process undergoes a three stage process. Business Case Scrutiny Group; Capital Panel, chaired by the Director General of Education and Skills and attended by Directors from the Department for Education and Skills; Ministerial sign-off. 3.1 Business case scrutiny group Meetings take place on a monthly basis, and are typically scheduled for the start of the month. Cases must be received two weeks before this date to ensure that adequate time is given for Group members to assess the cases. The group is attended by policy leads and technical experts from across the Welsh Government. In particular, the group looks at the cases and assesses for consistency with Welsh Government strategy, the ability to deliver, a robust economic case, commercial strategy and affordability. Where the group identifies a serious issue that is likely to impact on the ability of the Capital Panel to make a decision, the project lead will be identified and further information sought. 3.2 Capital panel This group also meets on a monthly basis, with meetings scheduled mid-month. This means that any issues identified through the Business Case Scrutiny Group must be addressed in the two weeks before the next meeting. The Capital Panel is chaired by the Director General for Education and Skills. The Panel is made up of Directors and Deputy Directors from the Department of Education and Skills, plus one independently appointed person representing the industry view. The Capital Panel review cases and take into account findings from the Business Case Scrutiny Group. Cases not approved by the Panel are referred back to applicants for more information. 3.3 Ministerial approval Those cases recommended for approval by Capital Panel are referred to the Minister for Education and Skills and a formal decision sought. 26

29 The aim of the department is to assess the Business Case within 6-8 weeks of submission. 27

30 4. Project approval process 4.1 Grant letter Following approval of your Outline Business Case, eligible costs incurred in relation to site investigation and design and management fees may be reclaimed. A grant letter will be issued that specifies the amount that can be claimed at this point. All grant issued during this point in the development of the project is subject to clawback should the project not be approved at Full Business Case. When the Full Business Case is approved, a proforma will be issued that captures details of the project including costs and benefits. This information will feed into the finalised grant letter issued for signature. 4.2 Conditions There are a number of specific grant conditions that local authorities need to be aware of when submitting business cases. These are summarised below. British Research Establishment Environmental Assessment Method (BREEAM). It is a requirement that where WG grant is used for new build schools or stand alone buildings, that BREEAM excellent rating is achieved, ( stand-alone construction means it does not encompass renovation to an existing building or an extension unless the extension is self-contained). For example, a two storey classroom extension would not require a BREEAM excellent rating but would require an EPC of A. However if the proposed structure is a stand alone building which is self-contained and has its own direct utility services then BREEAM would apply. If during the construction of a new school it is anticipated that BREEAM excellent will not be achievable then the local authority will need to advise Capital Funding Branch in the first instance, as it could potentially impact on availability of grant funding. A business case would be required to support any departure from achieving excellent rating. In all cases the Minister s approval will be required. BREEAM is a measurement of sustainability. If there is a specific issue that means that the excellent rating cannot be achieved, please contact officials to discuss. Energy Performance Certification (EPC) In the case of remodelling projects then an EPC rating of A is required (NB it is understood that difficulties in achieving A rating can be experienced and Local 28

31 Authorities / Further Education Institutions are asked to refer to Capital Funding Branch for further guidance). It is understood that in the case of projects where the new extension can meet EPC A, difficulties can arise in bringing up the remaining build up to a similar standard. If this happens, advice should be sought from Capital Funding Branch. Recycled content There is a minimum standard for recycled content requiring at least 15% of the total value of the materials used should derive from recycled and reused content in the materials selected. Fire sprinklers It is a requirement that fire sprinklers are incorporated into new build school and college projects and where significant remodelling is taking place. Part B of the Building regulations and Building Bulletin 100 refers to fire safety and applies to all new school buildings, major refurbishments and extensions. In all cases Local Authorities / Further Education Institutions are encouraged to discuss fire safety installations with their local fire safety officer. Where Local Authorities / Further Education Institutions are unsure of the requirement in respect of remodelling works, please contact the Capital Funding Team. For example, we would not expect sprinklers to be installed in a two classroom extension project; however, we would expect sprinklers to be considered for a four or eight classroom extension build. Where the remodelling of a school involves extensive upgrading of the existing school infrastructure, fire sprinklers should be installed. In the case of water mist suppression systems, these systems do not yet have British Standard approval and should you chose to install this type of systems then an appropriate business case needs to be submitted to the Capital Funding Team, in all cases advice should be sought from the local fire safety officer. Acoustics (BB93) Acoustic testing, to demonstrate compliance with Building Bulletin 93 (BB93), is a requirement of the 21 st Century Schools and Education Programme and all schools that receive Welsh Government capital grant must demonstrate compliance with the standards. This condition also includes the requirement for Local Authorities / Further Education Institutions to obtain a pre-completion test to ensure compliance with BB93. As it currently stands, acoustic testing is only a recommendation under the Building Regulations. Community benefits In line with the Welsh Government aim of developing a vibrant Welsh economy capable of delivering strong and sustainable economic growth and Tackling 29

32 Poverty, it is important that the significant infrastructure delivered through the 21st Century Schools and Education Programme maximises the opportunities available. The Community Benefits policy is a way to lever social, economic and environmental outcomes through public procurement. The policy, enables public bodies to use procurement to implement contract clauses and conditions that deliver sustainable outcomes, such as creating employment, training, opening up supply chain opportunities for local business, contributing to education, and offering opportunities for those furthest from the labour market. It is a strategic tool to help deliver the Welsh Government priorities such as the Lift Programme and offering training opportunities for people who are from workless households. Local Authorities are required to provide details of the approach they will be taking to maximise the community benefits to be achieved prior to submission of Full Business Case. This should include any other priorities to be addressed, targets, the schedule/ programme of Community Benefits, and how the delivery of Community Benefits will be managed (in both the SOC and OBC). These should be included along with wider benefits as identified in the Economic Case. There is also a requirement that a Community Benefits Measurement tool is completed every 12 months for the project and returned to Value Wales. For more information, please go to where you can find help with different approaches, policy priority areas, and Frequently Asked Questions to help shape your Community Benefits approach. If you require further assistance please [email protected]. 4.3 Eligible expenditure Capital expenditure is defined in statute through the Local Government Act We use the broad definitions provided by the Chartered Institute of Public Finance and Accountancy (CIPFA) on Local Authority Accounting in Great Britain. In general terms it represents expenditure in relation to: The acquisition or creation of a new asset The enhancement of existing assets Enhancement, in relation to any asset, means the carrying out of works which are intended: (a) (b) (c) to lengthen substantially the useful life of the asset; or to increase substantially the open market value of the asset; or to increase substantially the extent to which the asset can or will be used for the purposes of or in connection with the school concerned. 30

33 Essentially capital expenditure relates to the provision and improvement of significant fixed assets including land, buildings and equipment (such as schools, new houses and machinery) which will be of use or benefit in providing services for more than one financial year. Sometimes it can be difficult to determine whether capital expenditure either maintains or improves the life/value of an asset. The table below provides some key words that can indicate if expenditure is capital or revenue. Key words indicating Capital expenditure Enhance, Upgrade, Extend, Improve, Construct or Purchase Key words indicating Revenue expenditure Repair, Maintain, Replace Like-for-like, Remedial or Renew Capital expenditure for schools/educational purposes comprises of the following: The cost of acquiring land and buildings Cost of new construction Cost of extensions to existing buildings The enhancement* of land, road or buildings (within the school footprint) Purchase of computers/computer equipment if they form part of a large scale capital project can be capitalised, including associated cabling and hardware. Enhancement* is where money is spent on an existing asset which substantially increases its value or lengthens its useful life. It excludes routine repairs and maintenance. Funding for the 21 st Century Schools and Education Programme is targeted to support remodelling and reconstruction: Remodelling extensive upgrading of the existing building and redesign of the accommodation (e.g. curriculum-led upgrades, new facilities and full DDA compliance). Reconstruction e.g. partial/total demolition and rebuilding to modern standards (i.e. 21 st Century Schools standard). Professional fees We are often asked whether the Welsh Government will cover professional fees as part of 21 st Century Schools and Education Programme. Primarily only those costs that are directly attributable to bringing an asset into working condition can be classed as capital expenditure. Capital expenditure can include any architects and surveyors fees where they lead to the acquisition or the construction of a building. We will consider professional fees from RIBA Stage 2 onwards (architects design fees etc.) to be capital if the 31

34 appropriate business case is approved and the asset is created / built. However, where the fees are incurred in the very early stages of a capital programme, relating to the Inception and Strategic Briefing stages (RIBA Stages 0-1); they will be deemed revenue activities. Fees incurred in previous financial years that are deemed to be capital can be scored against a Local Authority / Further Education Institution s 50% contribution. This must be detailed in the Financial Case section of the business case submission so we understand what part of the project(s) we are funding. This is dependant upon approval of Full Business Case / Business Justification case submission. Where expense is incurred using internal design teams or consultancies affiliated with Local Authorities, the following rules apply in respect of eligibility of spend: Internal design teams with an allocated central budget from within the authority are not eligible for grant. Internal design teams that have no central budget set, but charge fees to other departments that use their services. In this case, the salary costs of the design team, pay, National Insurance and pension costs, can be reclaimed. The on-costs, which include accommodation costs, payroll and financial support etc. would not be eligible. Internal departments that are set up as a consultancy, e.g. a business separate to the Authority that operates as a commercial entity, the entire amount would be eligible. Where Local Authority costs are not eligible under the criteria above, these can be used as part of the Authority s 50% contribution to the cost of the project. ICT and furniture and fittings Equipment, furniture and furnishings should only be included in the total cost of a project where it can be clearly demonstrated that their inclusion is essential for the day to day operation of the asset. Loose furniture and fittings would be allowable in respect of a new school build but not as part of a refurbishment project. Purchase of new computer equipment, associated infrastructure and software may be treated as a capital cost, if they form part of a large capital project such as a new build school. Highways access Capital funding is provided for the reconstruction or remodelling of schools, therefore grant funding is attributable to the infrastructure contained within the school boundary. For example, where a capital project requires works to be done to improve highways access to the school this would not qualify for Welsh Government grant, and would fall to the Local Authority to fund. 32

35 Leisure and community facilities We encourage the construction of flexible assets, and would support projects that incorporate flexible spaces that can be used both by the school / college and community, for example, sports halls. Any areas constructed purely for commercial / community use will not be considered eligible. Voluntary aided schools Under paragraph 5 of Part 2 of Schedule 3 to the School Standards and Framework Act 1998, the Welsh Ministers (WM) have the power to grant aid up to 85% of qualifying expenditure, with the governors themselves required to meet the remaining 15%. Qualifying expenditure means expenditure in respect of the provision, alteration or repair of premises or equipment for the school. Currently governing bodies of Voluntary Aided schools and /or diocese are required to fund 15% of any capital project when seeking grant assistance from the Welsh Government. On the issue of the rate of capital grant support for projects within the 21 st Century Schools and Education Programme that involve Voluntary Aided schools, it should be noted that the funding envelopes for each of the Local Authorities Band A programmes have been approved. The expectation is that Local Authorities are now required to deliver their Band A projects within that estimated envelope cost and that the intervention rate of 50%, which is set at programme level, will remain. In the case of Voluntary Aided Schools, the Welsh Government 85% share is included within the 50% allocated. Maintaining affordability of this first wave is fundamental to the success of the overall programme and Welsh Government acknowledges the constraints of the capital budget alongside the scale and ambition of the Band A programme. It is, therefore, imperative that all appropriate funding sources are maximised; including appropriate contributions from all relevant stakeholders, including the Voluntary Aided sector. As part of the business case submission process, funding profiles for each of the projects within Local Authorities must be determined. This means that the intervention rate at project level does not necessarily have to be set at 50% (this was a planning assumption that we requested to inform the development of our funding model) and can be varied depending on the financial resources that are available, both to Welsh Government, the Local Authority and other stakeholders, at the time a Full Business Case submission is made. However, in determining the appropriate levels of support required from Welsh Government, at project level, Local Authorities will be advised that if a project is for a Voluntary Aided school Welsh Government s grant should be set at 85%. 33

36 For example: If a Local Authority has a 100 million Programme that includes a Faith School at a cost of 10 million. The Welsh Government share of funding to the overall Programme is 50 million. 8.5 million of this would be allocated to the Faith School. The Diocese would pay 1.5 million. The remaining match funding of 41.5 million is allocated against the 90 million of projects remaining. For specific information about Voluntary Aided Schools in respect of issues including VAT, capital maintenance grant (CRAMP) and 21 st Century Schools Grant, please contact the Capital Funding Branch. 34

37 5. Project monitoring and evaluation 5.1 Routine monitoring Payments are made on a quarterly basis and relate to spend incurred. Payment will not be released ahead of need. Monitoring is carried out on a quarterly basis. This will involve: Confirmation of spend incurred to date Updating the Business Case submission timetable Updating the Matrix (Cashflow) It is extremely important that these documents are not viewed in isolation. Business Case approval is needed before spend can be released, and this should be accounted for in the Matrix. It is also vital that the figures in the Matrix are accurate, that the Programme Envelope approved value is not exceeded and that all Business Case submissions are aligned to the information on the Matrix. It should be noted that, in view of the significant budgetary pressures on the Welsh Government, we would expect business case to be received on time and that project profiles are adhered to. The Welsh Government can consider front loading project profiles, (i.e. Welsh Government could provide grant support for the first year or so of the project etc.) but we would require supporting documentation from both the Section 151 Officer and the Chief Executive prior to approval that Local Authority funding is available to complete the project. The Department for Education and Skills (Infrastructure Unit) does not have the capacity within the WG financial arrangements to carry forward any unspent resources (slippage) from one year to the next. Any request to amend funding profiles will require a legal variation to the signed grant agreement letter to be undertaken. In all cases requests must be made via the Capital Funding Team within reasonable timescales. 5.2 Audits All projects in receipt of grant are subject to an annual audit by the Wales Audit Office. Please note that appropriate records must be kept in respect of spend, including invoices, timesheets and evidence of compliant procurement processes. 5.3 Benefits Achieving benefits are essential to the success of the Programme. Closing reports will need to cover the following benefits: Confirmation that an asset has been created in line with the approved Business Case; BREEAM Excellent has been achieved; 35

38 EPC Rating of A has been achieved; Sprinklers have been installed; Targets in respect of acoustics and recycling have been met. Community benefit measurement report to capture benefits achieved through the lifetime of the project (measurement tools can be completed annually with a final tool submitted on completion) Further assessments will also be made post completion to verify other benefits anticipated as a result of the project, including; Reduction in surplus capacity / sufficient capacity has been achieved Improvements to learner outcomes Any job creation / apprenticeships created Reduction to absence rates etc. 5.4 Retentions All projects will be subject to a 2.5% retention, which will be withheld until receipt of a satisfactory closing report and associated documentation. The closing report and documentation should be received within eighteen months of project completion. 5.5 Publicity It is important that the Welsh Government and project sponsors work together to maximise publicity for projects and highlight the contribution the 21 st Century Schools and Education Programme is making in Wales. Records should be kept of formal and informal announcements, press and journal articles and press releases, media interviews (television and radio) and official launches and openings to evidence the publicity measures being undertaken during your project s lifecycle. As a minimum: Site signage during construction should acknowledge the Welsh Government s 21 st Century Schools and Education Programme All press releases should include reference to the source of funding in the opening paragraphs Any project announcement should reference the Welsh Government s 21 st Century Schools and Education Programme; and Your website should clearly acknowledge the funding support from the 21 st Century Schools and Education Programme. For full publicity guidance please the mailbox: [email protected] 36

39 5.6 Procurement Procurement should be via an approved Welsh Government Framework or via full competition aligned with Welsh / European requirements. 37

40 6. Band B Now that Band A has commenced, plans are being made for the second wave of investment, Band B, which will be implemented in Wales from 2018/9 onwards. Educational transformation will remain a vital outcome of our investment in Band B of the Programme. However, we also recognise that that it is hugely important that we address the condition of our schools infrastructure. This means that investment will be prioritised for buildings in the poorest condition. The reasoning behind this is to ensure that our educational infrastructure is of an acceptable standard. Where there are identified educational needs (e.g. low school banding) this will be picked up as part of the investment and necessary improvements made as a condition of funding. Using building condition as the driving force of the investment, the high level objectives of the programme have been refined, and are listed below: To improve the financial viability and effectiveness of the education estate by To raise the standards of learning environments to support the achievement of learners and progression to post-16 education by Provide schools and colleges supporting the breadth and depth of the curriculum required for 21st century learning by In all cases, individual projects within the programme will be assessed on: Extent of the strategic fit with Welsh Government educational priorities Value for Money. Deliverability (affordable, achievable and timely) Socially and politically acceptable Given our challenging economic environment, it is important that funding from all sources is considered. We are in discussion with our colleagues in the Department for Finance and Corporate Services as to what this might look like. With limited capital funds, there are a number of options. However, it is likely that any funding package will comprise of the following elements: Funding will be achieved by a combination of capital and revenue funding. Other finance options, such as private finance initiatives will have to be considered 38

41 Annex 1: Strategic outline programme (SOP) template Request for change Key facts Local Authority. Requested amount of Increase / Decrease to Envelope.. Has this been signed off by the Cabinet / Board / Diocese Please provide a summary of the proposed change. Maximum 1000 Words (Any words above 1000 will be discounted) What is changing? Will there be more / fewer projects delivered as a result of this change? What are they? What is the reason for this change? Maximum 1000 Words (Any words above 1000 will be discounted) Why is this change necessary? What options have you explored? Maximum 1500 words (Any words above 1500 will be discounted) What was the date of your meeting to discuss options? Who was present? Describe each option What are the advantages and disadvantages each option? What was the conclusion reached in respect of the option? What was the reasoning behind this conclusion? How will this affect your ability to match fund? Maximum 1000 Words (Any words above 1000 will be discounted) Please state the total programme envelope, including the additional funding requested and how this is match funded. 39

42 Signed Printed Position in the organisation Date. 40

43 Annex 2: Strategic outline case (SOC) template Executive summary 1500 Words Maximum This should be a concise summary of the proposal. What do you want to do? (At this point, you will have moved from a long list, to a short list of options. However, it would be useful if you could state your preferred way forward at this point) Who are the beneficiaries? Why do you need to do it? What will it achieve in terms of benefits to condition, capacity and reduction of costs? What is the estimated cost? E.G. This is a proposal to build a new school on an existing site for 1,500 learners. This will address surplus capacity / poor building condition in the existing school. It will result in the replacement of a Category D school with one that is Category A. It will reduce surplus capacity by 200 places, bringing the current surplus down to below 10% and we anticipate a 20k per annum revenue saving in respect of energy costs. The cost of the preferred option is estimated to be 10 million. However, more detailed analysis will take place in the OBC stage. Summary of the findings within each of the five sections of the Business Case. Strategic case 2000 Words Maximum The purpose of this is to detail the strategic context of the case. Strategic Fit which should consider strategic drivers for the investment and the associated strategies, programmes and plans at a national, regional and local level. Case for change. What are your investment objectives? These should be strategic; measureable; achievable; relevant and timeconstrained (SMART). Summarise the existing arrangements; Summarise the investment need; Identify the potential solutions; 41

44 Identify the benefits and risks; Identify any constraints and dependencies. It may be helpful to consider the case in terms of the following, which is expanded in the Economic Case: a minimum scope essential or core requirements/outcomes an intermediate scope essential and desirable requirements/outcomes a maximum scope essential, desirable and optional requirements/outcomes. There are a number of key questions that should be answered when the case for change is addressed. These include: What are the names, location and types (e.g. community, voluntary aided) of schools affected by the proposal? What is the proposed age range and language medium of the provision? What is the location of the provision and the location of any provision which is to be replaced, if different? Why has this location been chosen? What is the condition of the school or college that you wish to replace / refurbish / relocate? What is the current capacity of the school? What is the demand for places at the school? If an increase in demand is forecast please provide evidence of the uptake in future years. What are the results of any catchment area review? (as an alternative to expanding provision at a location) How will the proposed project reduce surplus capacity / how will the proposed project meet demand for school places? What is the proposed size of provision, with details of any nursery, sixth form or additional learning needs provision? If additional needs provision is proposed, information on the needs of the pupils to be admitted; Proposed transitional arrangements and the impact on standards What impact will the project have on the community? Will there be any loss of or addition to community facilities e.g. leisure centres, meeting facilities? What will the impact of this project be on nearby schools and colleges? Will the project have any impact on nursery places/early years education? Welsh Medium Education? Play areas? After school care / wrap around childcare? Special Educational Needs Provision? Further Education Provision? If so, please give details. Please give details of current learner outcomes along with projections of measureable improvements to these figures for 42

45 each phase of learning. This will ensure that a comparison pre and post-investment can be made and will demonstrate that the impact on learner outcomes has been fully considered. Please refer back to the Strategic Outline Programme (SOP) noting any key changes since the production and approval of these documents Economic case 2000 Words Maximum The purpose of this section is to take your long list of options and bring it down to a short list. It is important that you identify your critical success factors at this stage. For example, does the option fit with local / national strategies? Does the option provide good value for money? Is the option deliverable? Is the achievable in the timeframe? Is the option affordable? Is the option socially/politically acceptable? Each option should be assessed against both the investment objectives and critical success factors and carried forward or discounted as appropriate. These options should be examined as a group exercise and that you record the time, date and attendees involved in this process. As a minimum, each option should include a brief description of the option; A recording of each option s advantages and disadvantages; A recording on the conclusion reached in respect of the option; The reasoning behind any decision made, particularly when an option is discounted. Use of the options framework is encouraged. Following this analysis, a short list of options is identified that will be taken forward for more detailed analysis in the OBC. The short list of options should always include a status quo/do minimum option. At this point, a brief analysis should be undertaken around the indicative economic costs for the shortlisted options (although keep the analysis proportionate). Remember to also make allowances for optimism bias, particularly in the absence of more detailed risk appraisal. Commercial case Maximum 250 words Please state your preferred procurement route. E.g. Use of a regional framework such as SEWSCAP or North Wales Contractors Framework / use OJEU Procurement route. Reference should be made to the inclusion of community benefits and, if known, whether they will be core and/or non core to the contract, what 43

46 community benefits will be requested and capturing results via the measurement tool. Financial case Maximum 250 words Please state the current estimated funding requirement and how this bid will be match funded. Management case Maximum 250 Words This should explain that the scheme is an integral part of the Local Authority / Further Education Institution 21 st Century Schools and Education Programme, which comprises a portfolio of projects for the delivery of The following arrangements will be put in place to ensure the successful development of the scheme and production of the OBC The project will be managed in accordance with Prince2 methodology. A Gateway Review has been undertaken on the programme, in conjunction with agreement to the SOP. The consequent actions are as follows The Milestone activities are as follows.. Signed Printed Position in the organisation Date. 44

47 Annex 3: Worked example of options framework (SOC stage) Please note that the issues covered are indicative only. Each project will have different options, different service delivery requirements etc. 1.1 The long list options The long list of options was generated by a Welsh-medium Review workshop in 2013, which included a range of external stakeholders. Each option was evaluated against the investment objectives and the extent to which it met the Critical Success Factors. This results in options either being discounted, carried forward for further consideration in the short list or identified as a preferred way forward. The options framework was used to identify the widest possible number of feasible options, focussing on the following key dimensions: scope, service solution, service delivery, implementation and funding. These are considered with Investment Objectives and Critical Success Factors: 1.2 Investment objectives 1. To ensure that there are sufficient places in Welsh-medium primary school education to meet the current projected increase in demand by To deliver Welsh-medium education in buildings that meet the aspirations of the Local Authority 21 st Century Schools Strategic Outline Programme and the Primary School Organisation Policy, by To ensure that the highest quality teaching and learning of Welsh-medium primary education to take place in the area, by To ensure that Welsh-medium primary education in the catchment is delivered in a way that is cost-effective and maximises resources, by To increase the number of pupils accessing primary Welsh-medium education provision in the area, by Critical success factors 1. Is the proposal strategically aligned? 2. Does the proposal represent value for money? 3. Is the proposal politically / socially acceptable? 4. Is the proposal deliverable? 5. Is the proposal affordable? 45

48 2.1 Scope This section examines the main options in relation to the service scope of the proposal which are as follows: Status Quo - maintain current provision of Welsh-medium education in the area to 190 places Do Minimum provide an increased capacity of Welsh-medium education in the area to 210 places Intermediate provide an increased capacity of Welsh-medium education in the area to 240 places plus pre school provision Do Maximum provide an increased capacity of Welsh-medium education in the area to 270 places and provide pre school provision / community facilities. 2.2 Advantages and disadvantages analysis Status Quo although this option keeps costs to a minimum, it does not meet the strategic objectives of the local authority or the Welsh Government and will not meet demand for Welsh medium places in the area. Do Minimum although this option does largely minimise costs, the increase in places is not sufficient to meet the short term demand for Welsh medium education in this area. Intermediate Will meet short term demand for Welsh places in the area, however, it will not meet the medium to long term demand. Maximum Will meet the demand in the medium-long term, however, is more expensive. 2.3 Conclusions The table below summarises how well the above options meet the investment objectives and the Critical Success Factors agreed for the scheme. Scope Investment objectives Critical Success Factors Status quo Do minimum Intermediate Maximum Maintain capacity Increased capacity Increased capacity Increased capacity to of 194 places to 210 places to 240 places 270 places On the basis of the above analysis, the preferred way forward is the maximum option, as this meets all the investment objectives and CSFs, strongly in most cases. The remaining options do not fully meet the spending objectives and are therefore discounted. 46

49 3.1 Service solution This section examines the main options in relation to the service solution of the proposal which are as follows: Status Quo leaving the existing school unchanged and handling demand for Welsh Medium primary education on an ad-hoc basis by providing transport to the nearest alternative Welsh Medium School. Do Minimum Maintain primary education on current site replacing mobile classrooms and refurbishing permanent buildings. Intermediate Use existing school buildings of acceptable condition and construct one new block that will increase capacity. Do maximum Entire school rebuilt. 3.2 Advantages and disadvantages analysis Status Quo although this option reduces capital requirements the school will be physically too small to meet requirements. Do Minimum this option also reduces capital requirements, however capacity of the school remains an issue. Intermediate Most cost effective option as some existing buildings are in acceptable condition. Do Maximum New build on site is more expensive than intermediate and will result in replacement of some existing good condition buildings. 3.3 Conclusions The table below summarises how well the above options meet the investment objectives and the Critical Success Factors agreed for the scheme. Status quo Do minimum Intermediate Maximum Service School unchanged Refurbishment Refurbishment plus New build one new building Investment objectives Investment Objectives On the basis of the above analysis the preferred way forward is the Intermediate option 47

50 As maintaining the status quo would not be acceptable, the do minimum option is carried forward as the benchmark for value for money. The do maximum option is discounted as it is not deliverable or affordable. 4.1 Service delivery This section examines the main options in relation to the service delivery of the pre school provision. Currently, pre-school is outsourced to a third sector provider, with the school services delivered by in-house staff. Status Quo see intermediate Do Minimum bring provision of pre-school services in house. Intermediate is in fact the current status quo and benchmark for change the existing arrangements are that a third sector Welsh-medium pre-school provider is used. Do Maximum outsource both pre-school and school service provision 4.2 Advantages and disadvantages analysis Do Minimum Provides the Local Authority with greater degree of control over the quality and resourcing of the pre-school service, but puts that Local Authority in charge of service delivery when it may not be the most appropriate party. Intermediate Decreases the control that the Local Authority has over preschool services, but offers a tried and tested solution which has yielded successful results to date. Do Maximum Simplifies the provision of school services for the Local Authority, however it relinquishes too much control over the services provided. 4.3 Conclusions The table below summarises how well the above options meet the investment objectives and the Critical Success Factors agreed for the scheme. Service delivery Spending objectives Status quo Do minimum Intermediate Maximum see intermediate bring provision of Mixed provision outsource both preschool pre-school in and school house service provision CSFs On the basis of the above analysis, the preferred way forward is the intermediate option. 5.1 Implementation This section examines the main options in relation to the implementation of the proposal which are as follows: 48

51 Do Minimum Deliver the scheme by September 2016 Intermediate to deliver the scheme by March 2016 this would take an additional 6 months minimum to deliver with additional expense and potential stakeholder problems Do maximum to deliver the scheme by September Advantages and disadvantages analysis Do Minimum - reduces the risk of the scheme by allowing time and space to reprocure the scheme, however, this option also delays the benefit of a much needed school, and does not address capacity issues quickly enough. Intermediate Allows proportionate amount of time to procure, but still potentially delays the much needed school and is not acceptable to stakeholders. Do Maximum the school is delivered sooner, however, there is no scope to re-design the school to deliver additional cost savings. 5.3 Conclusions The table below summarises how well the above options meet the investment objectives and the Critical Success Factors agreed for the scheme. Status quo Do minimum Intermediate Maximum to deliver the to deliver the scheme by March scheme by 2016 September Implement n/a to deliver the scheme by September 2016 Spending objectives CSFs Do Maximum is the preferred option. This is the option favoured by stakeholders and will deliver the provision the soonest. 6.1 Funding This section examines the main options in relation to the funding of the proposal which are as follows: Do Minimum use of entirely Local Authority funding Intermediate blended funding package (Local Authority and Welsh Government) Do Maximum use of entirely external funding sources (including Welsh Government) 6.2 Advantages and disadvantages analysis Do Minimum The main advantage of this approach is that it affords full control of the investment to the Local Authority, however, it is not affordable. 49

52 Intermediate This option is affordable, however, investment is potentially delayed as a result of the application process. Do Maximum The advantage is that it does not impact on the Local Authority budget, however, this is not aligned with policy and funders are not available to enable delivery. 6.3 Conclusions The table below summarises how well the above options meet the investment objectives and the Critical Success Factors agreed for the scheme. Funding option Spending objectives Status quo Do minimum Intermediate Maximum - use of entirely Local Authority Funding blended funding package (Local Authority and Welsh Government) use of entirely external funding sources (including Welsh Government) CSFs On the basis of the above analysis, the preferred way forward is intermediate, as this is achievable and meets all the requirements. As the other options do not meet critical success factors, they are discounted. 7.1 Summary of the short list Each of the above elements of choice (scope, service solution, delivery, implementation and funding) enables a rational short list to be compiled based on this preliminary analysis, to identify viable options for further detailed economic analysis, which enables the preferred option to be selected. This forms the basis for the rest of the business case the detail of the commercial, financial and management cases is entirely focused on delivery of the preferred option. Least Ambitious Intermediate More ambitious Scope 194 place 210 place 240 place 270 place Service Solution Transport Refurbishment Partial new build New build Delivery In house Mixed Outsource Implementation September 2016 March 2016 September 2015 Funding Local Authority Local Authority plus Welsh Government Welsh Government plus external funding The agreed short listed options have been re-named (options 1-4). These fully describe the scenarios which are subjected to economic analysis in the Economic section of the Outline Business Case. They are as follows: Option 1: Status quo/do minimum (benchmark for value for money) 50

53 continue to provide Welsh-medium education area at the current capacity level of 194 places on the existing site replace existing mobile classrooms and refurbish the permanent blocks offer places at the closest Welsh-medium schools/streams to those additional pupils who require Welsh-medium provision and fund/provide transport continue with mixed service provision, with a third sector Welsh-medium preschool provider providing pre-school services Paid for with existing Local Authority budgets Option 2: Less ambitious way forward To provide Welsh-medium education in the area to a capacity level of 270 places, with flexibility to expand to 300 Partial new build (without Early Years and Community provisions) Mixed service provision Facility to be delivered by March 2016 Local Authority and Welsh Government Funding. Option 3: Preferred way forward To provide Welsh-medium education in the area to a capacity level of 270 places, with flexibility to expand to 300 Partial new build with integrated Early Years Facility and Community/Multiagency provision Mixed service provision Facility to be delivered by September 2015 Local Authority and Welsh Government funding. Option 4: Alternative way forward (PWF but with re-procurement) To provide Welsh-medium education in the area to a capacity level of 270 places, with flexibility to expand to 300 Mixed service provision Facility to be delivered by September 2016 to enable re-procurement activity to explore opportunity to reduce build costs Local Authority and Welsh Government fundin 51

54 Annex 4: Outline business case (OBC) template Executive summary 1500 Words Maximum This should be a concise summary of the proposal. What do you want to do? (At this point, you will have analysed your short list of options and have a preferred option) Who are the beneficiaries? Why do you need to do it? What will it achieve in terms of benefits to condition, capacity and reduction of costs? What is the estimated cost? E.G. This is a proposal to build a new school on an existing site for 1,500 learners. This will address surplus capacity / poor building condition in the existing school. It will result in the replacement of a Category D school with one that is Category A. It will reduce surplus capacity by 200 places, bringing the current surplus down to below 10% and we anticipate a 20k per annum revenue saving in respect of energy costs. The cost of the preferred option is estimated to be 8.3 million. This figure will be confirmed in the Full Business Case. Include a summary of the conclusions reached in each of the five sections of the Business Case. Strategic case 1000 Words Maximum At OBC Stage, it may be necessary to update the Strategic Case as presented at SOC. This may be in relation to local changes in policy or in response to comments raised during the assessment process. It is important that the Strategic Case identifies whether any changes have been made and/or records responses to comments raised by Welsh Government assessors. If there are no changes to be made and/or no comments to be addressed, this should be stated. 52

55 Economic case 3000 Words Maximum This section should briefly restate the long list of options and then undertake a detailed analysis of the shortlist. This should include: Appraisal of costs and benefits; Appraisal of qualitative benefits; Assessment of risk (including optimism bias); and Sensitivity analysis. The preferred option should then be identified. Commercial case 1000 Words Maximum This section of the OBC outlines the proposed deal in relation to the preferred option outlined in the economic case. This should confirm the method of procurement, the required services and the potential for risk transfer with details of the procurement route and its compliance with EU Directives, Welsh Procurement policy, WPPS etc.full details of the community benefits to be included in the tender process should be provided, including Core/ non core or both to the contract; included in contract notice/ Prior Information Notice or framework priorities that you are seeking to address; potential targets Process for managing the delivery of Community Benefits through the contract confirmation contractors will be required to complete the community benefit measurement tool for the project. Financial case 1000 Words Maximum The purpose of this section is to set out the forecast financial implications of 53

56 the preferred option (as set out in the economic case section) and the proposed deal (as described in the commercial case). As the Welsh Government is paying for 50% of the project, it is important that we are confident that the remaining 50% of the project is affordable. At this point in the project development, it should be possible to identify the sources of match funding and confirm that these are signed up to by the relevant parties in the local authority / Further Education Institution. Management case 1000 Words Maximum This section of the OBC addresses the achievability of the scheme. Its purpose, therefore, is to build on the SOC by setting out in more detail the actions that will be required to ensure the successful delivery of the scheme in accordance with best practice. This section should include confirmation that the project will be managed in accordance with PRINCE 2 methodology, details of the reporting organisation and structure for the project, details of project roles and responsibilities, and an overview of the project plan with milestones. It is also important that this case provides the outline arrangements for contract management; benefits realisation, risk management and monitoring and evaluation. The Gateway Review Process should also be referenced, along with confirmation that any recommendations are actioned. Signed Printed Position in the organisation Date. 54

57 Annex 5: Full business case (FBC) template Executive summary 1500 Words Maximum This should be a concise summary of the proposal and be updated to include the finalised position. What do you want to do? (At this point, you will have analysed your short list of options and have a preferred option) Who are the beneficiaries? Why do you need to do it? What will it achieve in terms of benefits to condition, capacity and reduction of costs? What is the estimated cost? E.G. This is a proposal to build a new school on an existing site for 1,500 learners. This will address surplus capacity / poor building condition in the existing school. It will result in the replacement of a Category D school with one that is Category A. It will reduce surplus capacity by 200 places, bringing the current surplus down to below 10% and we anticipate a 20k per annum revenue saving in respect of energy costs. The cost of the preferred option is 8 million. Include a summary of the findings of each of the five areas of the Business Case. Strategic case 1000 Words Maximum Please refer back to the Strategic Outline Programme (SOP), Strategic Outline Case (SOC) and Outline Business Case (OBC), noting any key changes since the production and approval of these documents. Any comments made as part of the assessment process should be reflected here and covered off. Any changes to national, regional or local strategies that have occurred since approval of the OBC should be noted here. The investment objectives of the project should be restated and any changes since OBC noted. Please reference the business strategy for the organisation(s), and any related national or regional strategies, noting any changes since agreement to the OBC for the scheme 55

58 Economic case 1000 Words Maximum As this section has been covered in detail at OBC stage, there is no need to restate the case in detail, although where changes have occurred, consider whether or not these changes would materially impact upon the ranking of the options achieved at OBC, and record your conclusions This section should restate the critical success factors, highlight any changes since OBC, and confirm that all economic appraisals have been carried out in accordance with HM Treasury s Green Book. For those submitting a joint OBC/FBC, please note that both sets of guidance must be used in conjunction and a full analysis provided. Commercial case 1500 Words Maximum This section of the FBC sets out the negotiated arrangements and includes a description of the required services and risk transfer agreements. This should be a full analysis that: Outlines the method of procurement and how it complies with the EU Directives, Public Contract Regulations and Welsh procurement policy Sets out the negotiated deal and contractual arrangements Sets out financial implications of the deal Provides confirmation that both OJEU/framework and/or Standing Order Procedures have been adhered to Confirmation of the community benefits Programme/ Schedule you have set, how targets are going to be met and how you will manage the delivery of Community Benefits in partnership with the contractor, (if procurement has been completed any responses/submissions received from the successful contractor can be annexed to the FBC) Financial case 1000 Words Maximum The purpose of this section is to set out firm financial implications of the contracted solution. This should contain finalised financial arrangements: As the Welsh Government is paying for 50% of the project, it is important that we are confident that the remaining 50% of the project is affordable. 56

59 This case should confirm the sources of match funding. For example: Capital Receipts: Confirmation that these have been received and ring fenced for the purpose of the project. For any receipts not realised, assurance should be made around the timing an amount of the receipt. Capital Funding: Evidence of commitment by the Cabinet / Board should be provided. Prudential / Other Borrowing: Evidence that borrowing is secured and a revenue stream identified to cover repayments should be provided. Savings achieved through school reorganisation: Evidence of commitment by the Cabinet / Board should be provided. Costs of the project should be broken down as per the OBC, but updated to show finalised costs as following negotiation of contract. In all cases, capital charges, VAT, and the cost of risk (any contingency or allowance for risk adjustment and optimism bias) should be shown separately. Management case 1000 Words Maximum This case should include confirmation that PRINCE 2 methodology will be used, plus finalised project reporting structures (including named individuals) and project management arrangements. A project plan should be included that identifies key milestone dates for the project. This case should include a detailed plan to demonstrate how benefits will be realised, which includes monitoring arrangements and plans to evaluate (including identifying the lead for evaluation and date for submission to the Welsh Government?). A copy of the Risk Register should be included along with a plan for the management of risk, including risk owners. This case should also include arrangements for contract management, gateway reviews and contingency plans Signed Printed Position in the organisation Date. 57

60 Annex 6: Business justification case (BJC) template Executive summary 1000 Words Maximum This should be a concise summary of the proposal and be updated to include the finalised position. What do you want to do? (At this point, you will have analysed your short list of options and have a preferred option) Who are the beneficiaries? Why do you need to do it? What will it achieve in terms of benefits to condition, capacity and reduction of costs? What is the estimated cost? E.G. This is a proposal to build a primary school on an existing site for 320 learners. This will address surplus capacity / poor building condition in the existing school. It will result in the replacement of a Category D school with one that is Category A. It will reduce surplus capacity by 100 places, bringing the current surplus down to below 10% and we anticipate a 10k per annum revenue saving in respect of energy costs. The cost of the preferred option is 4 million. Strategic context 1500 Words Maximum Please provide an overview of the context within which the investment will be made. In other words, the strategy, work programme, service, project or operation, which the investment supports. What is the condition of the school or college that you wish to replace / refurbish / relocate / amend catchment? What is the current capacity of the school? What is the demand for places at the school? How will the proposed project reduce surplus capacity / how will the proposed project meet demand for school places? What will the impact of this project be on nearby schools and colleges? Will the project have any impact on nursery places? Welsh Medium Education? Play areas? After school care? Special Educational Needs Provision? Further Education Provision? 58

61 What are your transitional arrangements for learners how will learner outcomes be maintained during the period of the build? Please provide the compelling reasons for investment in the required services or assets, with reference to: the investment objectives for the procurement; the problems with the status quo. Please provide a summary of the main benefits associated with the investment, distinguishing between qualitative and quantitative; cash releasing and non-cash releasing; direct and indirect to the organisation, as appropriate. Please also highlight how you would seek to achieve added value and maximise Welsh Government s Community Benefits policy. Please provide a summary of the main risks associated with the investment, distinguishing between business and service risks during the design, build and operational phases of the project, as appropriate. Available options 2000 Words Maximum Please provide a description of the main options (or choices) for investment, together with their relative advantages and disadvantages (a SWOT analysis). Please bear in mind: that a minimum of four options should be considered, including the do minimum or status quo (unless there are compelling reasons to the contrary) that these options may differ in potential business scope, service solution, service delivery, implementation and funding, depending on the nature of the investment that the investment appraisal for each option should be contained as an appendix and prepared in accordance with the tools and techniques set out in the Capital Investment Manual and HM Treasury Green Book. Preferred Option On the basis of the above, please: state why the recommended option optimises value for money (VFM) describe the services and/or assets required. Procurement route 1000 Words Maximum Please state how the asset or service will be procured compliance with the EU 59

62 directives, Public Contract Regulations 2006 (soon to be updated in 2015) and Welsh procurement policy and Wales Procurement Policy Statement. This may involve the use of an existing contract; a call-off contract or framework agreement; or the requirement for a new procurement under the above. Funding and affordability 1000 Words Maximum Please indicate: the capital and revenue costs of the proposed investment how the investment will be funded any affordability gap Please complete the table in Section 2.5 Management arrangements 1000 Words Maximum Please indicate how the investment will be delivered successfully with particular reference to: project management arrangements business assurance arrangements benefits realisation monitoring risk management post project evaluation contingency plans Signed Printed Position in the organisation Date. 60

63 Annexes 7 and 8: Options appraisal template (worked example) and options appraisal template (blank) Annex 7: Options appraisal template (worked example) Annex 7 is a worked example of an options appraisal template and can be found at: Annex 8: Options appraisal template (blank) Annex 8 is a blank template for options appraisal and can be found at: