Writing a business case that compares alternative options

A business case justifies why a project should go ahead. According to the Association for Project Management's Body of Knowledge, it does this by evaluating the benefit, cost and risk of alternative options and providing the rationale for the preferred solution. In other words, comparing options is not an add on to a business case. It sits at the heart of it.

When the business case is written

A business case develops with the project. An outline business case is produced during the concept phase, when options are being identified and their viability tested. It gives decision makers enough information to decide whether to invest in developing the project further. A full business case follows once the preferred option has been developed in detail. The business case should then be reviewed at each decision point and whenever a significant change or risk arises.

Business case or sanction paper?

In many regulated businesses the document that goes to the executive or investment committee is called a sanction paper. You may also see investment paper, funding request or gate paper. It is not quite the same as the business case. The business case is the full justification. The sanction paper is the shorter decision document built from it, asking for authority to commit money at a particular stage.

Sanction is often staged. A development sanction releases funding to investigate and develop the options. A later full or delivery sanction commits to building the preferred option. A strong business case makes each sanction paper quicker to write and easier to approve, because the evidence and reasoning are already in place.

The five case model

Many organisations in the UK public sector and regulated industries use the HM Treasury five case model, set out in its guidance on developing business cases. It asks five questions:

The options appraisal lives mainly in the economic case. Even if your organisation uses a simpler format, the same five questions are worth answering.

A practical structure

1. Executive summary. The need, the options, the recommendation and the cost, on one page.
2. Needs case. The problem, its evidence and the consequence of doing nothing. See our guide on writing a clear needs case.
3. Options considered. The long list, the reasons options were discarded and the short list. See building a credible range of options.
4. Appraisal method. The criteria, weights and scoring approach, agreed before the options were scored.
5. Appraisal results. How each short listed option performed, with the evidence behind each score and a note on how sensitive the result is.
6. Preferred option and rationale. Why this option, including the trade offs accepted and why the alternatives were not chosen.
7. Costs and funding. The estimate, its level of accuracy, contingency and how the work will be funded.
8. Benefits. What the option will deliver and how it will be measured.
9. Risks and delivery. The key risks, how they will be managed and a realistic programme.
10. Recommendation and approval. What decision is being asked for and a record of who approved it and when.

Outputs, outcomes and benefits

It helps to be precise about what an option delivers. An output is what the project produces, for example new pump sets. An outcome is the changed situation that results, for example a site that no longer suffers unplanned outages. A benefit is the measurable improvement that stakeholders value, for example fewer service interruptions and lower maintenance cost. Business cases are most convincing when they connect all three.

Financial measures

Where options have different costs and benefits over time, a simple capital cost comparison can mislead. Whole life cost brings in operation, maintenance and replacement over a stated period. Net present value converts future costs and benefits into today's money so options can be compared fairly and payback period shows how quickly an investment returns its cost. Use the measures your organisation expects and show your assumptions.

Estimates and their accuracy

Early estimates are uncertain and a business case should say so. State the level of accuracy (for example plus or minus 30% at concept stage) and the method used. Common approaches include bottom up estimates built from individual items, comparisons with similar past projects, parametric estimates based on unit rates and three point estimates that consider optimistic, most likely and pessimistic outcomes. Re-estimate as the design develops.

Keep it live

A business case is not a document to approve and file. Review it at each decision point, keep changes under control and check that the preferred option still delivers the benefits it promised. If it no longer does, the right decision may be to change course, or even stop.

Common mistakes

• A single option presented as a foregone conclusion, with no genuine alternatives.
• Benefits described vaguely and never measured.
• Estimates presented as certain at an early stage.
• The rationale missing, so nobody can later explain why this option was chosen.
• A business case that is never revisited after approval.

How DevelopVault helps

DevelopVault keeps the site evidence, the options, how they were scored and the decision in one visual record. Decision packs export to PDF, PowerPoint and Excel. Your business case can then draw on a clear, traceable record of what was found, what was considered and why the preferred option was chosen. See DevelopVault Enterprise.

Frequently asked questions

Related guides

This guide is general information, not professional or regulatory advice.