STAGE 2

Option Analysis Guide

Business Case Development Framework
Release 3
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The Business Case Development Framework guides the development of business
cases for infrastructure proposals. This guide considers Stage 2: Options Analysis as
illustrated in Figure 1.
OVERVIEW

Business Case Development Framework Overview (document)

STAGE 1: STAGE 2: STAGE 3:

Strategic Assessment Options Analysis Detailed Business Case
PURPOSE

To identify potential ideas To narrow the breadth of options To evaluate the viability of the
that could resolve the issues by applying rigorous evaluation highest ranked option/s with
or develop the opportunity. criteria before assessing the surety of outcomes across all
Evaluate whether any of the viability of any remaining options. evaluation criteria and develop
ideas have the potential to investment implementation plans.
be viable options.

Building on the work of the Building on the work of the

previous stage. previous stage.
KEY ELEMENTS

The evaluation will help shape The evaluation will involve The evaluation will involve a
the service need and base case. developing stringent criteria comprehensive assessment across
and applying appropriate all criteria (socio-economic,
Hold workshop/s to generate (optimisation) techniques environmental, financial and
ideas followed by an evaluation to narrow the options. Any sustainability) using in-depth
of these ideas against a set of remaining options are then evaluation tools to develop
relevant criteria to determine subjected to a rigorous detailed conclusive evidence of investment
if any could potentially achieve evaluation of the potential viability (or otherwise) and
viable outcomes to either viability using socio-economic, certainty of expected outcomes.
resolve the issue or develop environmental, financial and
the opportunity. sustainability analysis and Development of detailed
then ranked accordingly. implementation documents
covering governance, risk,
procurement (where appropriate),
contractual terms and operations.
OUTCOMES

Identification of service need and Updated service need and A business case is produced
potential longlist of options. preferred option/s supported which provides clear,
by robust analysis. comprehensive evidence
for decision-makers.
FURTHER GUIDANCE

Investment Logic Mapping Guide

Benefits Management Guide

Stakeholder Engagement Guide

Cost Benefit Analysis Guide

Social Impact Evaluation Guide

Figure 1: Business Case Development Framework

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 1

 PRINCIPLES FOR BUSINESS
POLICY CONTEXT
CASE DEVELOPMENT

The Queensland Government is committed to delivering CONSIDERATIONS QUESTIONS

efficient and effective public services through strong
people-focused principles and strategic service drivers. Investment » Have non-built solutions
been considered?
This vision is supported by government’s commitment » What evidence will the analysis
to continuously improve public sector accountability and add to substantiate the case
advance Queensland through innovative service delivery. for investment?
This will ensure the right infrastructure is delivered in the right
place at the right time to meet current and emerging needs. Decision » Does the proposal include all
the necessary analysis to inform
WHAT IS A BUSINESS CASE? the decision-maker?

Credibility » Has the analysis been informed

A business case is a documented value proposal. It aligns by contemporary and reliable
with key government strategic objectives and is considered information?
the core management and assurance tool to inform investment » Are considerations and
decisions that maximise value for taxpayer dollars and benefits assumptions clearly articulated?
for Queenslanders.
The objective of developing a robust, service-need-centric Transparent » Has the information been
business case is to ensure resource allocation and decisions prepared without bias and has
are well timed, deliver value-for-money, and are fit for consideration been given to
purpose. Risks should be appropriately considered and managing risks and benefits?
managed to ensure investments are consistent with
Comparability » Does the assessment
government priorities and objectives.
support comparison to other
A well developed business case provides transparency infrastructure proposals?
of analysis to support investment decisions.
Accountability » Does the proposal clearly identify
WHAT IS THE BUSINESS CASE a single point of ownership for:
DEVELOPMENT FRAMEWORK? › sponsorship?
› planning and development?
The Business Case Development Framework provides › engagement of stakeholders?
fit-for-purpose guidance in recognition of the different › risk and benefits management?
needs, assumptions and considerations for analysis across
infrastructure investment proposals.

Figure 2: Business Case Development Framework principles

Page 2 | Business Case Development Framework – Stage 2: Options Analysis Guide

Contents

Introduction 4 Section D: Preferred option/s

Approach 7 implementation considerations 66

Executive summary 11 D1 Market considerations 68

D2 Delivery model analysis 70
Section A: Proposal context 12
D3 Next steps 75
A1 Proposal background 14
Conclusions 76
A2 Governance and assurance 16
Recommendations 77
A3 Service need 18
Health check D 78
A4 Base case 23
Health check A 27 Glossary 79

Section B: Options longlist to shortlist 28 Appendices 80

B1 Options longlist 30 Appendix 1: Benefits register 80

B2 Options longlist to shortlist 32 Appendix 2: Risk register 81

Health check B 37 Appendix 3: Initial stakeholder

engagement plan 82
Section C: Options analysis considerations 38 Appendix 4: Multi-criteria analysis 83
C1 Social impact evaluation 40
C2 Environmental assessment 43
C3 Sustainability assessment 45
C4 Economic analysis 50
C5 Financial analysis 53
C6 Affordability analysis 59
Health check C1 61
C7 Options analysis 62
Health check C2 65

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 3

 Introduction

How to use this guide

This guide can be used as both a source book and a road This guide outlines a minimum
map to consider the documentation and concept analysis standard only. It is not intended
needed for a robust and transparent Stage 2: Options to cover all policy obligations or
Analysis. The structure of the guide mirrors that of the agency requirements.
Stage 2: Options Analysis Template, with each section
referencing what you need to consider for options analysis The level of analysis required for a
documentation and reporting. robust and transparent Stage 2: Options
Analysis will vary, depending on the
This guide, its companion template and supporting complexity of the proposal.
supplementary guides include a range of tools to guide
your business case analysis and documentation. The
contents of these documents are important—they include
things to consider, assessment criteria and checklists—and
will help you develop a business case that supports a robust,
transparent and comparable evaluation. As each proposed
investment is unique, you should tailor your analysis to
fit the proposal. Support any changes with a rigorous and
transparent process.
The following key content indicators have been included
in call-out boxes to help you use this guide:

REFERENCE

TARGET/EXPECTATION

FLAG/IMPORTANT
TO NOTE

Page 4 | Business Case Development Framework – Stage 2: Options Analysis Guide

Purpose Structure of this guide
The purpose of the Stage 2: Options Analysis is to The guide is divided into five main sections:
assess the potential options developed at Stage 1:
Strategic Assessment. 1. Executive summary
2. Section A: Proposal context
The Stage 2: Options Analysis builds on the assessment
3. Section B: Options longlist to shortlist
of service need and benefits in the Stage 1: Strategic
Assessment. It uses a structured options assessment process 4. Section C: Options analysis considerations
where the longlist of options is reduced to a smaller number 5. Section D: Preferred option/s—
of robust and defensible shortlist options. The shortlisted implementation considerations.
options should be analysed to identify preferred option/s Figure 3 presents the options analysis guide structure.
for detailed analysis in Stage 3: Detailed Business Case.
Completing the activities outlined in Stage 1: Strategic This guide has been designed to work with the Stage 2:
Assessment will support the integrity and quality of your Options Analysis Template document.
Stage 2: Options Analysis.
This guide is supported by additional detailed material
in the Cost Benefit Analysis (CBA) Guide and Social
Impact Evaluation (SIE) Guide. The relationship between
this document and other Business Case Development
Framework (BCDF) documents is shown in Table 1.

Table 1: Business case development

STAGE 1: STAGE 2: STAGE 3:
STRATEGIC ASSESSMENT OPTIONS ANALYSIS DETAILED BUSINESS CASE
Purpose Conceptualisation: Options consideration: Preferred option/s analysis:
» articulates the service need » reconfirms service need » reconfirms Stage 2:
to be addressed » analyses and assesses options Option Analysis
» identifies intended benefits » identifies preferred option/s » confirms the economic, social,
» develops a longlist of options » confirms whether to invest environmental and financial
in a Stage 3: Detailed viability for investment
Business Case decision-making

PAF stage Strategic Assessment of Service Preliminary evaluation Business case

Requirement (SASR)

Supporting » Benefits Management Guide » Benefits Management Guide » Benefits Management Guide
documents » Investment Logic » Social Impact » Social Impact
Mapping Guide Evaluation Guide Evaluation Guide
» Stakeholder Engagement » Cost Benefit Analysis Guide » Cost Benefit Analysis Guide
Guide » Investment Logic Mapping » Investment Logic
Guide Mapping Guide
» Stakeholder Engagement » Stakeholder Engagement
Guide Guide

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 5

 SECTION A
Proposal context

SECTION B
Options filter—longlist to shortlist
EXECUTIVE SUMMARY
SECTION C
Options analysis considerations

SECTION D
Preferred option/s—implementation considerations

Figure 3: Options analysis guide structure

Page 6 | Business Case Development Framework – Stage 2: Options Analysis Guide

Approach

Business case development stages Note that some activities will inform or refine earlier
assessments (Stage 1: Strategic Assessment) and information
Business case development does not always follow a developed within sections of the Stage 2: Options Analysis
linear process. However, for efficiency, the Queensland will link to other sections, as illustrated in Table 2.
Government recommends that you prepare a business case
in several sequential development/analysis stages. Consider
and agree key content before you progress further.

Table 2: Key development stages and activities

STAGE ELEMENT KEY ACTIVITIES OUTPUTS COMMENTS

Stage 1: Service need » Document the » ILM » Assessment of

Strategic identification/ problem/opportunity » Proposal background service need should
Assessment clarification and justify why a section be undertaken
service need exists, » Service need section during the Stage 1:
(summary in including demand Strategic Assessment
Section A) » Strategic considerations
» Document the proposal section and updated and
background and documented in
» Initial risk register
strategic environment this stage
» Identify stakeholders
» Conduct investment
logic mapping (ILM)
workshop with key
stakeholders
» Identify high-level
initiatives that could
respond to the
service need
» Identify longlist options

Options analysis » recommend, where appropriate, option/s to be

considered for detailed assessment in the Stage 3:
The Stage 2: Options Analysis should: Detailed Business Case (where you will undertake further
analysis on the commercial, financial, economic and social
» reconfirm the service need and strategic context
viability of the proposal) to allow investment decision-
» document how the proposed response contributes to makers to decide whether to invest in the proposal
government policy
» consider whether the preferred option/s is suitable to be
» explain the proposal scope, providing sufficient detail to delivered as a Public Private Partnership (PPP) or should
allow decision-makers to understand how the service be progressed by a traditional delivery model.
need will be addressed
» filter the longlist of options to a shortlist The analysis within a proposal is not a linear process.
Some activities will inform or refine other assessments,
» confirm and assess potential options, giving decision- and information developed within sections of the Stage 2:
makers confidence that the most appropriate option/s Options Analysis will link to other sections, with all analysis
will progress to the Stage 3: Detailed Business Case for focused on risks and benefits, as illustrated in Figure 4:
more detailed analysis Development of the Stage 2: Options Analysis.
» document the economic, social, environmental and
financial viability of shortlisted options to support
selection of the preferred option/s

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 7

 EXECUTIVE SUMMARY

STAKEHOLDER ENGAGEMENT

SECTION A: Proposal context

Proposal background
Governance and assurance
Service need
Base case

SECTION B: Options longlist to shortlist

Options longlist
Shortlisting options from longlist
BENEFITS

SECTION C: Options analysis considerations

RISK
Social impact evaluation
Environmental assessment
Sustainability assessment
Economic analysis
Financial analysis
Affordability analysis
Options analysis

SECTION D: Preferred option/s implementation considerations

Market considerations
Delivery model analysis
Next steps

CONCLUSIONS

RECOMMENDATIONS

Figure 4: Development of the Stage 2: Options Analysis

Page 8 | Business Case Development Framework – Stage 2: Options Analysis Guide

Program versus individual project The Business Case Development Framework (BCDF) allows
fit-for-purpose flexibility for program-based business cases.
You should consider whether to prepare and present a If a potential program has several major, complex and
business case for a program, portfolio or for an individual interdependent projects, consider a business case for the
proposal. This should be an early consideration, ideally at program master plan and a separate business case for each
Stage 1: Strategic Assessment. For example, a strategic individual project. Identify and apportion the risks, costs,
program master plan or investment plan, continues into a benefits and outcomes to each project, as well as for the
Stage 2: Options Analysis program master plan, or portfolio combined program/portfolio. You can then develop the
investment plan considering priority options. As the proposal business case analysis at the detailed business case stage in
progresses, the need for additional actions or activities may the context of its broader program, system or portfolio.
arise at Stage 3: Detailed Business Case.
Using a whole-of-life, whole-of-system program approach
to business case analysis can improve infrastructure
outcomes. It allows clearer, more transparent decision-
making by creating end-to-end visibility of a long-term
portfolio investment.
Some considerations when choosing a program or portfolio
business case include:
» Are there many proposals/options (projects) under
a single coordinating structure or portfolio?
» Does each project contribute to the same or
similar outcomes?
» Are the projects part of a long-term plan that needs to
be executed and made a priority over an extended period
e.g. beyond the forward estimates?
» Are subsequent projects necessary to achieve full benefits
and improved outcomes?
» What is the value of the program and is approval needed?

Note on terms
For the Business Case Development Framework (BCDF), the use of the term ‘proposal’ refers
to the suite of options identified, and subsequently refined, to one or several options.
The ‘options analysis’ includes the full spectrum of approaches to address the service need
(problem/opportunity) e.g. reform, better use, improve existing and new build.
A ‘project’ is an activity to create a product or service, whereas a ‘proposal’ is a plan to be
considered for the creation of a product or service. Business cases are the development
of the plan (or proposal) for investment consideration.
All proposals should consider lifecycle costs (capital and operating), benefits and risks, business
and operational changes, regulatory and/or legislative changes as well as infrastructure
implementation and service delivery.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 9

 Stakeholder engagement
Stakeholder engagement during options analysis is critical Further information on effective
to the quality of the options analysis and outcomes. stakeholder engagement during
Stakeholder engagement activities in the Stage 2: proposal development is included in the
Options Analysis help support: BCDF Stakeholder Engagement Guide.
» greater understanding of different stakeholders’
perceptions of the service need, which can help identify
appropriate initiatives or options
» effective identification of stakeholders’ expectations
about potential options and the benefits, helping to
assess potential demand and commercial considerations
» better outcomes and greater accuracy in identifying public Where a proposal is considered to be
interest considerations of national significance, your proposal
» establishment of ‘social licence’ i.e. stakeholders’ team should engage with Infrastructure
ongoing approval and social acceptance of a proposal Australia. If Infrastructure Australia
» effective risk management (refer Stage 3: Detailed is likely to consider the proposal
Business Case Guide) further, make sure your Stage 2:
Options Analysis recommendations
» improved proposal outcomes when there are overlapping
include two proposal options for
jurisdictions or when approvals are required from multiple
departments or independent regulatory agencies. These further consideration in your Stage 3:
improved project outcomes may include time, cost and Detailed Business Case.
user satisfaction.

Overall considerations
The extent of your Stage 2: Options Analysis should be
informed by the size, scope, risk and complexity of the
proposal. This guide is designed to help you develop a
quality, robust and transparent options analysis with a
continual focus on effectively managing benefits, risks
and stakeholder engagement.

The analysis for a proposal must be supported by appropriate evidence.

Robust evidence:
» includes sound analysis, assumptions and inputs, and allows for uncertainty, which increases
with time
» uses well-developed quantitative or qualitative data collection techniques
» adopts defensible methodologies
» uses appropriate forecasting such as a spreadsheet or model that is purpose built and appropriate
» explains limitations e.g. small survey size and/or low survey response rate
» references, where applicable, data and inputs from major statistical and research agencies
such as the Australian Bureau of Statistics, the CSIRO or the Bureau of Meteorology.

Current evidence:
» uses the most contemporary information available.

Sources of evidence:
» use agency data collection, published performance indicators and statistical collections
» include relevant and contemporary population growth (or decline) and demographic change data.

Page 10 | Business Case Development Framework – Stage 2: Options Analysis Guide

Executive summary

Purpose Content to include

The executive summary gives the reader a clear and concise At a minimum, this section should provide a summary of
overview of all relevant aspects of the proposal and the all material aspects of the Stage 2: Options Analysis and
actions you would like from the investment decision-makers. the recommendations, as well as:
» the service need, problem and opportunity statements
Considerations » the targeted outcomes and benefits
Prepare the executive summary after the analyses are » the options identified (longlist) and your assessment that
complete and you have prepared the conclusions and establishes a shortlist of options
recommendations sections.
» all assessments and an analysis of the viability
The executive summary should: of shortlisted options (risk, cost, economic,
environmental, social, sustainability, funding, financial,
» tell the story and be easy to read commercial, delivery and affordability) to support your
» include all key aspects of the proposal recommendations
» clearly identify all decisions required and the » recommendations for decision-makers.
associated implications
To provide a concise overview for decision-makers, include
» be concise, self-contained and able to be read
an appraisal summary table to help consolidate the critical
independently of the full options analysis report.
information for each of the shortlisted options.

Outcomes
The reader will be able to understand the key aspects of the
proposal including outcomes from the analyses, conclusions
and recommendations.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 11

Section A:
Proposal context
Section A should give information on the strategic context for the proposal. This will form the foundation for the analysis
in sections B and C. It should also provide decision‑makers with a clear outline of:
» the proposal’s history and background
» governance and assurance
» the underlying service need
» benefits targeted
» base case.

SECTION A: PROPOSAL CONTEXT

A1
Proposal background

A2
Governance and assurance
BENEFITS

RISK
A3
Service need

A4
Base case

Figure 5: Overview of proposal context

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 13

 A1 Proposal background

Purpose
The background provides a concise history and context for Consider the potential for optimism/
the proposal. momentum bias and, if appropriate,
conduct an independent review of the
Considerations Stage 1: Strategic Assessment analysis,
outcomes and recommendations.
» Infrastructure proposals sometimes develop over several
years. If this is the case, your proposal background should
note any effect this time period has had on the underlying
assumptions and approaches to your proposal.
» Review the output and analysis from the Stage 1: Strategic
Assessment including identifying any material changes
since it was prepared. Note how you have considered the
previous stage in progressing the proposal through to
Stage 2: Options Analysis. This may include:
› planning and policy changes and impacts e.g. strategic
considerations, alignment and changes in government
objectives
› changes to proposal objectives, scope, needs, demand,
benefits and risks
› changes to the environment e.g. new initiatives
or options, emerging stakeholders, emerging
opportunities, economic changes, population
demographics, social and political changes
› any concerns about the timeliness and validity of data
used to justify the service need—and subsequent
adjustments needed
› review longlist options analysis to make sure your
analysis is still robust and/or test your options
against changes that have emerged since Stage 1:
Strategic Assessment.

Page 14 | Business Case Development Framework – Stage 2: Options Analysis Guide

Content to include
Table 3 lists the required content and considerations for this section.

Table 3: Proposal background content considerations

CONTENT CONSIDERATIONS

Proposal environment » Location (include a map)

» Investment context e.g. Proposal originated during a period of drought or higher
economic activity
» History of the proposal
» Scope and depth of all relevant investigations and studies

History of the proposal » Background to the proposal including:

› when a problem/opportunity was selected for consideration
› when the service need was first identified
› an outline of any relevant planning works
› any feasibility studies undertaken (previous and ongoing), noting their scope, depth
and results
» Summary of previous decisions
» Details of any assurance processes you completed to support the strategic analysis stage

Review of Stage 1: Strategic » Review the Stage 1: Strategic Assessment or output from a Strategic Assessment of Service
Assessment Requirement (SASR) or Strategic Business Case (SBC) to confirm the service need, benefits
targeted, initiatives and longlist options.
» Document any material changes since the Stage 1: Strategic Assessment was prepared,
noting how you considered changes as you progressed the proposal through the Stage 2:
Options Analysis. Material changes may include:
› planning and policy changes
› changes and impacts e.g. strategic considerations/alignment/changes in government
objectives
› changes to proposal objectives, scope, needs, benefits and risks
› changes to the environment e.g. new initiatives/options, emerging stakeholders,
emerging opportunities, economic changes, and social and political changes
› any concerns (and subsequent adjustments) regarding the age and validity of data used
to justify the service need.
» The longlist of options developed at Stage 1: Strategic Assessment form the basis for
Stage 2: Options Analysis.
» The longlist of options should be reconsidered here to ensure it remains current
and relevant.

Outcomes
The proposal background should clearly explain where the proposed initiative is located and why the proposal came about,
including reference to contemporary information and policy developments.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 15

 A2 Governance and assurance

Purpose
This section should consider the arrangements for developing, Documenting the governance and
approving and assuring the Stage 2: Options Analysis. assurance arrangements for the options
analysis assures the decision-makers that
Considerations the appropriate people, expertise and
agencies have participated and that you
GOVERNANCE have undertaken robust and evidence-
» Governance arrangements will vary depending on the based options analysis.
complexity of the proposed options and the number of
agencies with responsibilities in delivering the option/s.
» Review any governance arrangements established for the
previous stage to make sure they are still appropriate.

ASSURANCE
Assurance activities are designed
» Assurance gives grounds to assess whether the options to improve the efficiency and
analysis is robust and gives a sound basis for decision-
effectiveness of a proposal and
makers to consider the proposal.
the quality of its outputs.
» Assurance should be informed by the complexity and risk
of the proposal.
» The nature and extent of assurance activities should be
informed by:
› The experience and maturity of the agency or
› The nature and risk of the proposal options: Assess
department: The extent of assurance activities you
the overall risk and potential financial exposure
need will also depend on your agency’s experience and
associated with the options. Risks (including financial,
maturity in previous infrastructure assessments and/or
social and environmental) that are rated as high for
in developing business cases.
completing the options analysis should inform the
specific assurance activities. » Principles to underpin establishing assurance
activities include:
› Complete: documents contain all the information
necessary for an investment decision.
› Reliable and reasonable: the quality of the information
is appropriate to address specific requirements of
Before completing the Stage 2: Options the option and can be relied on because it has been
Analysis, you should undertake a Gate prepared with appropriate expertise and rigour.
1 Assurance Review (if considered › Comparable: the information is presented in a way
appropriate). The results of this review that allows ‘like-for-like’ comparison with other option
should be incorporated into the analysis analysis processes.
and should be documented and noted in › Transparent: the information has been prepared
this section. without bias and with all risks, implications and
Gateway reviews are mandatory for mitigations clearly documented.
ICT-related initiatives. The Queensland › Owner-engaged: throughout the development of the
Government Chief Information options analysis, the Senior Responsible Owner (SRO)
Office (QGCIO) can give you further was engaged and is ultimately accountable for justifying
information on the requirements for the service needs and the benefits identified in the
ICT-related gate reviews. options analysis.
» The Stage 2: Options Analysis and the economic, cost
and risk, financial and commercial assessments should
be independently peer reviewed and assured.

Page 16 | Business Case Development Framework – Stage 2: Options Analysis Guide

Content to include
Table 4 lists the required content and considerations for this section.

Table 4: Governance and assurance content considerations

CONTENT CONSIDERATIONS

Proposal development The governance arrangements should consider:

governance
» the proposal owner
» the project team, including roles and responsibilities for elements of the work
» the project steering committee, including central agency and, if appropriate, DSDILGP
representation
» a project control group
» working groups
» overall approach to developing the proposal.
When planning who should be involved, consider:
» The project steering committee should include representation of agencies/individuals
who can or may influence the outcomes/progress of the proposal in this and future stages
» The project control and/or working groups should include representatives who have
specific knowledge and expertise to guide the development of the options analysis,
including potential end-users.
» Governance structures for the development and approval of the proposal should align
with existing agency structures where possible.

Stage 2: Options Analysis » Approval governance should include agency approval processes, Cabinet Budget Review
approval governance Committee and, if appropriate, Cabinet.

Assurance mechanisms Assurance mechanisms may include:

» specialist reviewers to review both the approach and content of the document
» peer and technical review to ensure the analysis is reliable, accurate and effectively
supports a robust and transparent cost, risk, commercial and economic assessment.
The review should include:
› the methodology and approach
› data
› supporting assumptions
› modelling analysis.
» executive review
» project health and governance reviews
» focused technical reviews e.g. in response to an identified or perceived issue
» Gateway Reviews.

Outcomes
Governance and assurance should clearly explain your structures and arrangements to manage and oversee the proposal
development, as well as what approval processes and structures are needed. They should also communicate the approval
processes and structures.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 17

 A3 Service need

Purpose
This section should clearly explain the service need (problem The service need analysis should
and/or opportunity) you are addressing and the demand for be sufficiently detailed to convey to
the proposal. The service need analysis is a critical input into decision-makers the underlying reason
the base case and the key analysis in sections B, C and D. for the proposal.
The level of detailed demand analysis
Considerations you undertake should give a high
» The service need may result from a problem/opportunity, degree of confidence that the analysis is
which you should have identified in the earlier contemporary, robust and transparent,
stage analysis. while also clearly documenting any
» When describing the service need, consider the cause, limitations and constraints.
who/what (i.e. stakeholders) are affected and how.
Describe how stakeholders are affected. Include evidence
of the cause and impact of the problem/opportunity to
support the identified service need. Evidence should be
robust and current, and documented in the business
case, where appropriate. Describe the timing of the
problem/opportunity—is it immediate, interim, ongoing
or escalating?
» An investment logic mapping (ILM) workshop
involving relevant stakeholders will help craft a shared
understanding of the service need. Refer to the
Investment Logic Mapping (ILM) Guide for additional
guidance.
» Consider whether to continue with an initiative if the
proposal has been developed in response to a perceived
current problem or future opportunity (i.e. ‘nice to have’)
but cannot be supported by robust evidence.
» If you have completed a strategic assessment before the
options analysis, review the service need and identified
options to ensure they are still valid. Any changes since
the previous stage may affect the following options
analysis elements:
› current state, including the strategic context
› expected future benefits, costs or risks,
including demand
› options evaluation and selection of the preferred option
› stakeholders
› governance arrangements.
» If you have not completed a strategic assessment before
your options analysis, undertake the foundation of
service need, benefits and initiatives analysis in Stage 1:
Strategic Assessment.

Page 18 | Business Case Development Framework – Stage 2: Options Analysis Guide

A review of the service need should focus on:
Effectiveness
What impact does the problem/opportunity have on the effectiveness of service delivery? Provide:
» details of the effects of the problem/opportunity economically, socially and environmentally
(include evidence)
» demand analysis to help capture areas of need and any potential substitution effects

Regulatory
Is the service need a statutory/regulatory requirement? Provide:
» details of the relevant statutory, regulatory or organisational policy requirements and how they
are currently being met or failing to be met
» details of changes to statutory, regulatory or policy settings that have created an effect on
existing services

Service failure
Is the service no longer fit for purpose? Provide:
» details of the extent of service failure and the effect on customers/users

Extent
What are the broader links of the service need and the associated problem/opportunity? Provide:
» the geographic and demographic reach of the service need, including relevant maps and
supporting graphics
» details of how the service need aligns with relevant strategic initiatives, regional and local plans,
and the State Infrastructure Plan
» any matters of national significance; consider the involvement of Infrastructure Australia
» a summary of related projects and their potential impact on the benefits targeted by the proposal,
noting any potential opportunities for integration and coordination

Improved efficiency and reduced costs

Is the service need related to existing efficiency issues? Provide:
» details and evidence of how service delivery is affected by underperformance or lack of infrastructure
» quantified details of the impact of potential improvements, if the service need is met

Timing considerations
Why does government need to act now? Provide:
» explanation of any urgency in responding to the problem or seizing the opportunity
» the timeframe for any potential impacts.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 19

 Content to include
This section should include content as outlined in Table 5 below.

Table 5: Service need content and considerations

CONTENT CONSIDERATIONS

Approach » Document the approach used to identify the service need.

» Include details of any investment logic mapping exercise or research completed.

Service need statement A service need statement should include two main elements:
1. the problem/opportunity and how it will evolve over time
2. why the problem/opportunity needs to be addressed now.
The service need and supporting analysis should capture:
» the ‘root causes’ of the problem and effects, noting how they may change over time
(worsen or improve)
» whether changes in demand (anticipated or existing) will affect the problem/opportunity
(provide evidence)
» an outline of the rationale for the service need to be addressed
» risk and uncertainty, including climate change—refer Section A4: Base case
» assumptions used for any projections or modelling
» detail of the timing and extent of the problem/opportunity.

Stakeholders The options analysis is focused on risks and benefits. To understand the proposal impacts
(benefits and risks to be mitigated), it is important to know which key stakeholders will
(or may be) affected.
» Stakeholders may include those with an actual or perceived interest e.g.
environmental groups.
» Stakeholders who can influence the design or delivery of the proposal options should
be considered for all aspects of the options analysis.
» Stakeholder assessment should include:
› the stakeholders—who they are
› their level of interest
› when to engage them
› the type of information to share
› their needs and expectations, both process and outcome
› any needs or expectations that are mandatory e.g. accessibility requirements.
The stakeholder section in the service need chapter should summarise who is affected
by the problem/opportunity, including individuals and groups who will be affected by the
proposal either during construction or when it is in operation.
If it is not appropriate to consult with external stakeholders while developing the proposal,
you should consult representatives of stakeholder groups or staff who understand
stakeholders’ perspectives and needs.
The stakeholder analysis for the service need will support the development of the
following content:
» option selection and design (and, through this, cost and risks)
» social impact evaluation
» economic analysis
» public interest considerations
» sustainability assessment
» environmental assessment.

Page 20 | Business Case Development Framework – Stage 2: Options Analysis Guide

CONTENT CONSIDERATIONS

Current state The current state describes the conditions influencing the service need. It provides a baseline
from which the reader can understand what changes will happen if the proposal goes ahead.
Documentation may include:
» the stakeholders’ experiences
» the physical condition of the infrastructure
» performance issues
» potential future state, including climate change
» whole-of-life, whole-of-system implications.
This section may include a discussion on the need for government intervention, implication of
time delays, policy changes, changes in the proposal environment and any concerns with the
relevancy of data used in previous analyses i.e. strategic assessment and options analysis.
The current state analysis supports the development of the following content:
» base case
» options analysis, selection and design
» social impact evaluation
» economic analysis
» public interest considerations
» sustainability assessment
» environmental assessment.
There should be a strong relationship between the current state and the base case. The base
case should incorporate the service need analysis and include further refined analysis to
create the reference point for the social, economic (net incremental costs/benefits), financial
and commercial analyses.

Targeted benefits » Targeted benefits consider the intended benefits when responding to the service need,
problem/opportunity.
› Benefits should be expressed in relation to their effect on proposed beneficiaries.
› Benefits should be specific and relevant to the options.
» At the start of an options analysis, consider using an impact/benefits workshop,
incorporating key stakeholder input to establish an initial benefit register to help frame
further analysis.
» To understand the targeted benefits when addressing the service need, you may need
to consider and document:
› the intended outcome/s for the options and the benefits targeted
› likely beneficiaries and their potential needs and expectations
› an indication of any benefits that may be more highly regarded than others
› previous post-assessments or lessons learned from previous projects
› any assumptions that underpin the targeted benefits
› any dependencies that have been identified
› an indication of how critical the intended outcomes and benefits are
› potential disadvantages and risks to achieving the benefits (include this information in
the risk register).

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 21

 CONTENT CONSIDERATIONS

Implications of not Describe what is likely to happen if the proposal does not go ahead.
proceeding
» Implications might be social, economic, financial, environmental and sustainability focused
as well as related to the performance of the asset/service. Include any potential equity and
public interest concerns.
» Include the implications of delaying a response (e.g. capacity limits will be reached,
failure to meet government or legislative requirements, significant reduction in the level
of service).
» Frame the implications of not proceeding in terms of the effects on stakeholders.

Outcomes
The reader should understand the service need, the current state, benefits targeted and the implications of not proceeding.

Page 22 | Business Case Development Framework – Stage 2: Options Analysis Guide

A4 Base case

Purpose
The base case should set the critical baseline against which Within an investment proposal, the
you analyse the social, economic and financial/commercial projected performance of the option is
assessments. The base case should be an option in the compared with the situation expected
longlist developed at Stage 1: Strategic Assessment. to exist in the future (base case). The
At this stage, the base case should be further refined base case should describe the expected
and substantiated. performance and situation, and may
include an existing asset, program or
Considerations policy change.
Developing and analysing a base case is essential as it: The base case documents a forward-
looking baseline against which the
» shows the action and investment required by government
economic and financial/commercial
in the absence of the proposal
assessments of the investment proposal
» is both the first option, and a point of comparison for all are completed.
other options
» is the benchmark against which the shortlisted options will
be assessed.
The base case should be tightly specified and modelled on
a whole-of-system, whole-of-life basis including all expected » Consider foresighting/alternate futures—including
impacts, expenditures and benefits. scenario and/or sensitivity analysis testing for options
analysis and options design—to confirm resilience and
Developing and analysing a robust, transparent and sustainability in infrastructure investment (options
evidence-based base case sets the frame of reference for and design).
the social, economic, environmental and financial analysis
» Consider future trends, for example, as identified in
of the investment proposal. In all cases, developing a robust
Infrastructure Australia’s Australian Infrastructure Audit
base case needs very careful consideration. The principle
(2019), including:
that underlines any base case is that it represents a realistic,
practicable or workable assessment of the business-as-usual › quality of life and equity
(BAU) state of the world. › cost of living and incomes
› community preferences and expectations
The BAU base case should consider a whole-of-life, whole-
of-system, whole-of-state perspective. Where appropriate, › economy and productivity
you should consider the proposal within the context of an › population and participation
existing program (systems perspective). › technology and data
BAU forecasting should be a reasonable approximation › environment and resilience.
of what is anticipated in an uncertain future. Things to » Include, where appropriate, active consideration of
consider when assessing uncertainty include: climate change risks (adaptation and mitigation, supply
and demand impacts and opportunities).
» That uncertainty (technological change, climate change,
demographics, globalisation etc.) usually increases with These considerations feed into the analysis and
time, resulting in declining confidence in forecasts and documentation of the following, in some cases
projections. These factors need to be integral to all interdependent, variables:
aspects of your base case (and options) including:
» expected demand for and use of relevant existing
› setting the evaluation period and terminal values
infrastructure services
› benefit flows and sensitivity analysis
» cost—Capital Expenditure (CAPEX), Operational
› scenario analysis. Expenditure (OPEX), recurring CAPEX, rapidly
» The base case forecast/projections should not continue in declining service quality or significantly increasing
straight-line perpetuity if the service levels or factors are maintenance costs
unrealistic. This will determine the investment horizon at » social trends e.g. demographic trends
which a decision will need to be made.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 23

 » technological trends e.g. the emergence of electric – service quality is unsustainable
and automated vehicles – legal or regulatory requirements change.
» climate change impacts. › In some circumstances, BAU may represent a do-
» Practical examples of base case considerations include: minimum, CAPEX spend where the level of service is
sustainable from a social licence, legal or regulatory
› Keep safe and keep operating: minimum expenditure perspective. This may be linked to exploring other non-
to keep the asset/infrastructure operationally safe. infrastructure solutions and/or a specified, likely short,
For example, in the absence of the option, the evaluation period e.g. 7 to 10 years.
state will continue to fund the operational cost of
basic services like education, health, infrastructure › In some circumstances, the proposal may address
maintenance, prisons etc. into the foreseeable some elements of BAU, for example, it may fund some
future (beyond the forward estimates period). OPEX in BAU. In this case, the option will need to be
considered in the financial and economic analysis.
› Make safe and stop operating: minimum expenditure
to prevent any wider endangerment but without › In some circumstances, such as those requiring the
continuing to operate an asset in its existing fashion maintenance of absolute service levels, the state
or provide the current service. For example, asset may not have any non-infrastructure deferral options
classes subject to changing regulatory regimes or to maintain BAU to meet reasonable community
climatic variability that make them non-conforming to expectations, legal or regulatory requirements (which
continue operating into the future without additional may be in the very short term or immediate). In this
safety-related investment. Examples include bridge case, it may be possible that the BAU base case is in
and dam infrastructure. effect the option to ensure the most cost-effective
solution, using a cost effectiveness assessment (CEA),
› Reasonable changes: that could be ‘reasonably while also assessing how well the proposal meets the
expected’ to happen given statutory obligations and/ business-as-usual service standards.
or professional standards. This could include modest
spending to improve the effectiveness of existing » It is essential to account for current and future asset
assets and to maintain social licence to operate. performance, potential reduction in service level and
Within these constraints, the government could defer associated costs.
investment in infrastructure capital expenditure until » Elements in common across base cases:
it has considered other non-infrastructure solutions. › full life cycle benefits and costs including any actions
In such a case, the evaluation period may need to be which will be required in future to ensure the asset
truncated to the point in time where the investment can operate at the relevant service levels
becomes necessary. › should be consistent with most of the key assumptions
› Importantly, in this scenario, the state may eventually in the options except, for example, funding
need to invest in an infrastructure solution if the level › costs and disbenefits of the problem should, to
of service in the business-as-usual (BAU) base case the extent possible, be monetised for the cost
becomes unsustainable because for instance: benefit analysis (CBA) and the financial and
– public expectations change causing significant commercial analyses.
political and social licence risks

The base case should be well developed and articulated at the Stage 1: Strategic Assessment stage.
» At Stage 2: Options Analysis, the BAU base case should be reconfirmed to align it to contemporary
developments e.g. environmental or operating changes (legal, regulatory or policy). The base case
should also be refined to fully reflect expectations, including projected demand profiles.
» Significant inputs for determining a base case will originate from the service need assessment (nature
and composition of demand) and benefits analysis, and from the previous stage development (Stage 1:
Strategic Assessment). It is recommended to consult cost accountants, reporting units, strategic asset
managers, asset performance teams and portfolio analytical areas within your organisation to identify
and describe the base case.
» Use the most contemporary state and federal government statistical forecasts and projections
(social and economic parameters including demographics, population growth etc.).
» Use the most contemporary service delivery and asset performance forecasts and projections
from the proposal owner agency, statutory authority or commercial entity.

Page 24 | Business Case Development Framework – Stage 2: Options Analysis Guide

Content to include
This section should include content as outlined in Table 6 below.

Table 6: Base case content and considerations

CONTENT CONSIDERATIONS

Approach The approach to defining the base case including any limitations and assumptions.

Base case Base cases should be documented using the evidence base and information found in your
research to identify:
» current and future expected performance
» level of service provisioning
» regulatory requirements
» expected service levels
» expected degradation of asset
» service levels
» expected expenditures.
Include the following content in the base case section:
» full description of current performance
» full description of future expected performance
» interim solutions to be delivered in the absence of the proposal, including their costing
and impact on performance
» any reduction in the delivery of that performance (or level of service)
» complete and detailed costings of maintaining the business-as-usual approach.
Developing a base case is closely linked to the basis for setting the evaluation period, terminal
value and the assessment of the net financial and economic benefit flows. This means you
should agree key factors before starting to develop your proposal. These include:
» service need
» base case
» evaluation period
» methodology for the social, financial and economic analyses, including approach to cost
benefit analysis (CBA) and terminal value.
Review regulatory, legislation or policy changes, which may in some cases be embedded
in the options design. These considerations should have been fully explored in the earlier
stage analysis.

Base case statement All base cases:

» include full life cycle benefits and costs, including any actions that will be needed in future
to ensure service levels continue to operate
» are consistent with the assumptions in the proposal case/s
» have costs and disbenefits of the problem expressed in money terms for the CBA and the
financial analysis, as far as possible.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 25

 CONTENT CONSIDERATIONS

Link to other analysis and » Significant inputs for determining a base case will originate from the service need
documentation assessment (nature and composition of demand) and benefits analysis, and from your
previous stage development (Stage 1: Strategic Assessment).
» The economics (base case), social impact evaluation (baseline) and financial analysis each
need to clearly and transparently articulate the approach, analysis, and methodology used
in the base case determination.
» All three sections should be checked for consistency of application. The Queensland
Government SIE and CBA guides provide additional guidance for base case or baseline
analysis and documentation requirements.

Outcomes » includes current operational practice and other related

assets, for example the operation of multiple dam assets
A well-articulated base case: in tandem operating regimes
» provides information on what the situation will be in » highlights the expected ongoing effects that could
the absence of the proposed investment, program reasonably be expected or are forecast
modification, policy change or options being approved » describes the implications of not undertaking any
» documents how the base case has been developed additional change to the existing asset, program or
and refined from the earlier stage analysis (Stage 1: policy setting
Strategic Assessment) » provides a basis for comparison across options.
» provides a full description of the expected performance
of the existing asset, program or policy setting

Page 26 | Business Case Development Framework – Stage 2: Options Analysis Guide

Health check A

# HAVE YOU COMPLETED THE FOLLOWING TASKS? SECTION COMPLETED

1 Documented the proposal background A1

2 Reviewed the Strategic Assessment of Service Requirements (SASR)/Stage 1: A1

Strategic Assessment/Strategic Business Case (SBC) and/or other previous work

3 Documented any material changes since the SASR/Stage 1: Strategic Assessment A1

was completed

4 Documented governance and assurance arrangements A2

5 Documented the service need (noting any changes since the Stage 1: Strategic A3
Assessment)

6 Identified stakeholders, and had an engagement approach approved and A3

documented (if not previously completed)

7 Documented targeted benefits (noting any changes since the Stage 1: Strategic A3
Assessment)

8 Developed the longlist that was developed in the Stage 1: Strategic A3

Assessment. If not, develop a longlist in alignment with the Stage 1: Strategic
Assessment Guide

9 Defined the base case A4

10 Updated the benefits and risk registers Appendices

1 and 2

11 Included all sources of evidence underpinning the service need, base case or
options in the reference list for the Stage 2: Options Analysis.

# CRITICAL DECISION POINTS

1 Has the service need been reviewed to confirm that it is still the same now?

2 Is the proposal still valid after considering any changes to the general
environment, demand data or the introduction of other programs or initiatives
since your Stage 1: Strategic Assessment was completed?

3 Is the proposal subject to optimism/momentum bias?

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 27

Section B:
Options longlist to shortlist
Section B should reconsider longlist options and discuss the initial options assessment process.
It should give decision-makers a clear outline of the longlist of options, the process for filtering options and the
subsequent shortlist.

SECTION B: OPTIONS LONGLIST TO SHORTLIST

B1
Options longlist
BENEFITS

RISK
B2
Options longlist shortlisting

Figure 6: Overview of shortlisting

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 29

 B1 Options longlist

Purpose
This section should document the longlist options from If you have not generated options
your Stage 1: Strategic Assessment that you will analyse or completed a Stage 1: Strategic
in this stage. It should give clarity and understanding of Assessment, undertake this according
the range of options being considered and show clearly to the guidance in the Stage 1: Strategic
and credibly how your recommended options will deliver Assessment Guide before going further.
the targeted benefits.

Considerations
» If you have generated longlist options as part of Stage 1:
Strategic Assessment, then review them at this stage to
ensure they are still valid. Consider whether you should While there is a clear preference
identify further potential options. for non-build options in the SIP
» There is typically more than one way to solve a problem. hierarchy, in many situations multiple
As infrastructure is ultimately built to deliver a service, options will be needed to achieve the
explore non-asset solutions to service needs (such as desired outcome.
policy reforms or the better use of existing infrastructure)
as a priority before you consider asset-based solutions. For example, a combination of
» The options longlist should include all types of options better use and improving current
for improving service performance, as specified in the infrastructure could delay the need for
options hierarchy of the State Infrastructure Plan (SIP) new infrastructure, while reforming
Part A including: current laws in combination with new
› reform—typically non-asset initiatives (consider infrastructure could reduce the cost
regulation and legislative change) of new infrastructure.
› better use—influence demand i.e. not building
new capacity
› improve existing—relatively low-cost capital
works (compared to new build) to enhance
current infrastructure
› new—construct new infrastructure.

Page 30 | Business Case Development Framework – Stage 2: Options Analysis Guide

Content to include
This section should include content as outlined in Table 7 below.

Table 7: Options longlist content and considerations

CONTENT CONSIDERATIONS

Approach » Briefly document the approach used to identify the longlist options.
» Include details of any investment logic mapping exercise or research completed.

Options longlist » For each option, document (at a minimum) the following:
› description of how the option is intended to function, how it addresses the service need
identified and how it can best achieve the targeted outcomes
› other outcomes and benefits that would be achieved by the option
› stakeholders affected or required
› potential negative impacts and risks
› infrastructure and non-infrastructure requirements, noting the option types in the State
Infrastructure Plan hierarchy
› timeframe
› scalability.

Outcome
The options longlist will clearly articulate the details of each To ensure decision-makers have a broad
of the options to be considered for shortlisting. understanding of the features of each
option, give a detailed description to
include (where relevant):
» s­ ervice capacity
» ­service provider
» ­service level
» ­service hours
» ­operating model.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 31

 B2 Options longlist to shortlist

Purpose
Options shortlisting from your longlist should show a robust You should exclude options from the
and defensible assessment of the options longlist and how shortlist where they do not give feasible
you generated a shortlist of options to be analysed in more solutions in the context of wider
technical detail in Section C. political, social and legal environments,
or any other relevant contexts.
Considerations Any options you discard, and the
The shortlisting process to generate the final shortlist for rationale for this, should be shown in
analysis in Section C may involve a number of steps and this section.
considerations including:
1. an initial screening to consider whether any changes
in the investment context will make any of the longlist
options unacceptable
Using these key considerations to assess the feasibility of
2. a high-level assessment to consider how each option
the options longlist will inform the development of criteria
addresses the political and strategic context of the
for further analysis in step 3.
investment decision, including how it addresses:
3. Shortlisting—a detailed multi-criteria analysis to filter
a. strategic and policy alignment
options on the remaining longlist to generate an
b. legal and regulatory concerns options shortlist.
c. public interest considerations
d. strategic risk.

» Apply the longlist options

filter. This filter should
include evaluating potential
OPTIONS LONGLIST
options against key feasibility
considerations and shortlist using
a robust and defensible process.

Longlist options analysis

OPTIONS
SHORTLIST

Figure 7: Options shortlisting steps

Page 32 | Business Case Development Framework – Stage 2: Options Analysis Guide

High-level assessment
You should complete a high-level assessment to ensure that all options are feasible solutions before you progress to actual
shortlisting. Relevant considerations include:
» alignment to strategic objectives and existing policies
» alignment to the service need
» legal and regulatory considerations
» public interest considerations
» strategic, political and integration risks.
Specific considerations are shown in Table 8.

Table 8: Considerations in a high-level assessment

STRATEGIC CONSIDERATIONS

Strategic alignment » Consider how the potential options contribute to or are aligned to the
strategic objectives of the agency and government, and to the relevant
national objectives and programs (where appropriate).
» Consider the fiscal environment and industry context.

Policy issues » Consider the effect, if any, of existing policies and standards on the identified
options (or vice versa) within all levels of government, agency and relevant
stakeholder environments.
» Identify any limitations imposed by the policies and standards, and the known
effect on the options (such as any effect on benefits).
» Classify effects and limitations as either an advantage or disadvantage.

LEGAL AND REGULATORY CONSIDERATIONS

Legislative issues » Identify any specific legislative requirements or issues (both current and
foreshadowed) relevant to the options (or the ongoing operation of the
options) that may prevent, impede or have a significant impact. This
may include items such as state and federal government agreements,
planning, approvals, environmental considerations, native title or cultural
heritage considerations.

Regulatory issues » Identify any regulatory considerations relevant to the options that may
prevent, impede or have a significant impact. This may include matters that
influence market competition such as competition or pricing matters, or
jurisdictional responsibilities.

Other legal matters » Include any other legal matters which may influence the options, for example:
› standing agreements and existing contracts that may need renegotiation or
payment of compensation, or may restrict the actions of the government or
agency e.g. competitive dealings
› agreements or contracts that are in the process of being finalised or
renegotiated
› contractual disputes
› claims by third parties, including native title and cultural heritage claims
› court decisions that may impact the legislative powers of government
› legal or contractual issues associated with the proposed delivery strategy.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 33

 PUBLIC INTEREST CONSIDERATIONS

Public access and equity » Consider the public interest implications for each option.
» Review each option to ensure its design allows all groups in society to
effectively share its expected benefits. Options should be redesigned to
remove potential causes of inequity where possible. Document:
› any disadvantaged groups who may use the infrastructure or service and
how they will use it
› any areas of potential inequity of access caused by the proposed location
or pricing of services
› any social and economic impacts.

Impact on stakeholders » Assess each option for its potential effect on stakeholders, including individuals
and communities. Include a list of stakeholders, the area of interest or effect
and any engagement activities needed. Areas of public interest may include:
› property impacts
› environmental concerns
› access or use changes.
» Confirm the effects on all stakeholders (the community, service delivery partners
etc.) and explore any new concerns. The consultation process should establish
whether the community is likely to give the proposal a social licence to operate.

Consumer rights » Identify any potential consumer rights issues for each option. Outline where
each option does or does not provide sufficient safeguards, particularly for
those to whom government has a higher duty of care. This is beyond any
legal obligation and acknowledges government’s broad responsibility to the
community and service recipients.

Safety and security » Consider safety and security factors including corruption, crime, public-health
risk, quality and security of supply. Assess all options for any potential security
and community safety issues.
» Consider whether security of supply is a concern if the market is not mature.

Privacy » Identify any potential privacy issues for each option to give assurance that
users’ privacy rights are protected. Government obligations, whether in
relevant legislation or government policy, should also be highlighted.

RISK

Risks » Consider any strategic, political and/or integration risk that the potential
options may cause.
» Document the risks and note whether they can be mitigated.

Shortlisting
» Shortlisting involves evaluating the longlist of options You can use a range of decision-making
against robust and defensible criteria to generate a tools to filter options. Multi-criteria
shortlist of options for more detailed analysis, as detailed analysis is one tool. The purpose of
in Section C. a multi-criteria analysis is to assess
» The shortlisting criteria should include the considerations options using set objectives, which
in the high-level assessment as well as other option- align with: the key benefits and
specific criteria. outcomes targeted, the service need
to be addressed, and key feasibility
considerations. Sample tables for
performing multi-criteria analysis are
included in Appendix 4.

Page 34 | Business Case Development Framework – Stage 2: Options Analysis Guide

Criteria for shortlisting should be established in consultation with subject matter and technical experts,
and should be measurable and realistic. Sensitivity-test weightings to confirm your results are realistic and
defendable.

Table 9 lists the criteria to include.

Table 9: Options longlist content and considerations

CONTENT CONSIDERATIONS

Service need » How the potential options will address the service need (problem/opportunity)

Benefits » How the potential options deliver the targeted benefits

» Whether incremental benefits that align with the government’s strategic direction are
possible in the wider community—consider all levels of government

Specific option criteria » Whether the option addresses specific needs of the proposal in addition to addressing the
service need

Impact on stakeholders » How the options affect stakeholders, including individuals and communities, through any
concerns such as:
› property impacts
› environmental concerns
› access or use changes.

Public interest » Whether the options are in the public interest, including ensuring consumer rights, safety,
considerations security and privacy

Risks » Any strategic, political and/or integration risks caused by the potential options
» Whether the risks can be mitigated

Legal issues » How any specific legislative and/or regulatory requirements or issues (both current and
foreshadowed) or other legal matters relevant to the options (or their ongoing operation)
may prevent, impede or have a significant impact

Strategic and policy » How the potential options contribute to or are aligned with the strategic objectives of
alignment the agency and government, and the relevant national objectives and programs (where
appropriate)
» What impact, if any, existing policies and standards have on the identified options (or vice
versa) within all levels of government, agency and relevant stakeholder environments
» How the fiscal environment and industry context might influence the delivery of the
option

Policy issues » Any limitations imposed by the policies and standards, and their effect on the options
(such as any effect on benefits)

This section should clearly recommend potential options that will form the shortlist to take forward for
the next, more detailed technical analysis (Section C). If all identified options fail the considerations, tests
and filters, you will need to reconsider the proposal.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 35

 Content to include
This section should include content as outlined in Table 10 below.

Table 10: Options shortlist content and considerations

CONTENT CONSIDERATIONS

Approach » Document the approach used to shortlist the options.

» Include details of any workshops, including the attendees.
» Describe the assumptions, sources of information, and the supporting reasoning used
to evaluate and filter options.
» Check that your shortlisting has followed a common-sense process to selecting or
discarding options i.e. it should be easy to explain and understand.

Initial screening » Document the results of any initial screening and justify your decision for any options
no longer considered acceptable.

High level assessment » Document the results of the high-level assessment and justify any options discarded.

Shortlisting » Identify the shortlisted options that pass the comprehensive review and will be further
analysed at the next stage.

Summary » Summarise the shortlisted options and briefly describe the reasons for shortlisting or
discarding each option.
» The recommended options shortlist should be clearly presented and show your reasoning
for how the agency, government and community will benefit, and how the options will
achieve government objectives. Provide clear details for each remaining option including:
› intended outcomes—what the option will accomplish (i.e. objectives and benefits),
specifically noting how the claimed benefits for the option compare to the targeted
benefits
› scope—inclusions and exclusions, and how the option will address the service need
› a description of how the shortlisted options would be implemented
› any disadvantages of the options
› requirements for complementary infrastructure and/or opportunities for integration
and coordination with other proposals
› any infrastructure components of the options, canvassing a number of technical
solutions and engineering possibilities.
» Conduct a risk assessment for the shortlisted options.
» Rank shortlisted options according to how much they contribute to the targeted benefits.

Outcome
This section will produce a clear options shortlist for further analysis (in Section C) and will explain why other options were
discarded from further consideration.

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Health check B

# HAVE YOU COMPLETED THE FOLLOWING TASKS? SECTION COMPLETED

1 Considered and documented the strategic alignment with policy, legislation B2

and regulations that may affect options (or vice versa)

2 Considered and documented any public interest impacts of the options B2

3 Considered and documented strategic considerations B2

4 Explained any options amended or discarded in the light of high-level B2

considerations

5 Filtered longlist options to a manageable number in a robust and defensible B2

manner

6 Updated the benefits register Appendix 1

7 Updated the risk register considering Section B analysis Appendix 2

8 Updated the stakeholder engagement plan Appendix 3

9 Included all sources of evidence underpinning the service need, base case
or shortlisted options in the reference list for the options analysis

# CRITICAL DECISION POINTS

1 Have you identified any strategic, legal, regulatory, market or public interest
considerations that could result in the options not proceeding?

2 Are the options still valid considering any changes to the general environment
or demand data, or the implementation of other programs or initiatives since
the Stage 1: Strategic Assessment was completed?

3 Are any of the assessments showing optimism/momentum bias?

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 37

Section C:
Options analysis considerations
Section C should present key analysis you have conducted to support your evaluation of the shortlisted options. It will inform
the selection and recommendation of the preferred option/s.
The analysis of shortlisted options should focus on the following key factors:
» economic—benefit cost ratio (BCR), incremental BCR, internal rate of return (IRR) and net present value (NPV)
» social impact evaluation
» environment assessment
» sustainability assessment
» financial and commercial analysis
» affordability.
An outline of the recommended key analysis you need to complete in this section is shown in Figure 8.

SECTION C: OPTIONS ANALYSIS CONSIDERATIONS

C1
Social impact evaluation

C2
Environmental assessment

C3
Sustainability assessment
BENEFITS

RISKS
C4
Economic analysis

C5
Financial analysis

C6
Affordability analysis

Figure 8: Overview of shortlist filter

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 39

 C1 Social impact evaluation

Purpose
The social impact evaluation (SIE) should document: The Social Impact Evaluation Guide
gives detailed guidance on how to
» the social and other benefits of the options undertake a social impact evaluation.
» negative impacts to be mitigated
» opportunities to create additional social value for
the options.
The SIE provides an important input for the
economic, environmental, sustainability, financial and
commercial analyses.
The SIE focuses on three key areas:
Considerations » What value will the option achieve?
» The social impact evaluation documents the positive
» What negative effects need to be
contribution all infrastructure proposals make to society,
mitigated and, when mitigated, what
as well as ensuring that any negative effects are identified
is the residual impact?
and mitigated.
» The social value of an option is the change (increase) » What additional opportunities could
between the social impact baseline and the value that be designed into the option to create
the option is forecast to achieve. additional value?
» Where social benefits are included in the economic Social impacts should be considered and
analysis, ensure benefits are incremental to the base case. described in terms of their relationship to
» Social impacts do not need to be measurable to be the community stakeholders.
considered but you should try to quantify or monetise as
many social impacts as possible for inclusion in the cost
benefit analysis (CBA).
» All material qualitative and quantitative impacts and
benefits should be incorporated in the economics section
socio-economic narrative. They should also be considered
in the financial analysis and recorded in the risk and
benefits register. See example in Appendix 1.
» Identified social impacts can be divided into three
categories, as illustrated in Table 11.
› social impacts that can be quantified and monetised
(include in the CBA)
› social impacts that can be quantified and
not monetised
› social impacts that cannot be quantified or monetised.
» The type of social impacts and the evaluation approach
you should use is illustrated in Table 11.

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 The considerations and output of the social impact evaluation give valuable input into the economic,
environmental and financial analyses.
These analyses do not have a linear relationship but all contribute to each other. For a Stage 2: Options
Analysis, you should identify and describe the social impacts of shortlisted options in detail. This social
impact evaluation allows options to be compared for their value to the community.

Table 11: Relationship between social impacts and approach

RELATIONSHIP BETWEEN SOCIAL IMPACTS AND APPROACH

QUALITATIVE QUANTIFIED MONETISED APPROACH

Social impacts Include in SIE, economics, CBA, benefits

register and risk register

Include in SIE, economics, benefits register

and risk register

Include in SIE, economics, benefits register

and risk register

Where a proposal has had a social

impact assessment (SIA) included
as part of an environmental impact
assessment (EIA), you should review
the findings of the SIA and consider any
additional analysis required by a social
impact evaluation (SIE).

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 41

 Content to include
This section should include content as outlined in Table 12 below.

Table 12: Social impact evaluation content and considerations

CONTENT CONSIDERATIONS

Approach » Document how the social impact evaluation was undertaken.

» If you cannot quantify social impact, explain why in the approach section. It is useful to
briefly describe the steps needed to quantify social impacts for future reference. Analysis
of social impacts should be consistent across all the options you are assessing.
» Queensland Government has developed a three-step process for evaluating social impacts.
Further details on completing a social impact evaluation can be found in the Social Impact
Evaluation Guide.

Social impact baseline » Document the social impact baseline.

Evaluation » Document the outcomes of the social impact evaluation using the template provided.
Evaluate the options by:
› determining whether each identified social impact can be quantified and monetised
› determining the appropriate evaluation approach for each social impact
› ensuring all social impacts that can be monetised are incorporated into the CBA
› ensuring all social impacts that cannot be monetised undergo an impact risk
assessment.

Impact summary » Document:

› the value the options are expected to achieve
› the negative impacts and how they will be mitigated
› opportunities for enhancing positive impacts.

Outcomes
The reader should understand the following:
» the social value that the options are expected to create for different stakeholders
» how any social risks will be mitigated
» any other potential opportunities to create social value that are not currently included in the options design
and implementation plan.

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C2 Environmental assessment

Purpose » Any remaining (or residual) environmental impacts should

then be assessed. These residual environmental impacts
The environmental assessment should examine the can be divided into three assessment categories and
proposal’s environmental impact, including specific actions should be managed differently:
needed to meet all relevant policy, regulatory and legislative 1. Environmental impacts that can be quantified and
requirements, and any likely community concerns. This monetised should be included in the CBA.
ensures that the environmental impacts of all options are
clearly accounted for in the options analysis and decision- 2. Environmental impacts that can be quantified and
making process. not monetised should be included in the quantitative
environmental assessment.

Considerations 3. Environmental impacts that cannot be quantified

or monetised should be included in the qualitative
» For the Stage 2: Options Analysis, identify the environmental assessment.
environmental impacts of all shortlisted options and » The results of the environmental assessment for impacts
describe them in detail for comparison with the base case. that cannot be monetised should be reflected in the risk
The extent and scope of the analysis should provide the assessment and incorporated in the options filtering
decision-maker with enough information and evidence process as outlined in Section C7. This will help with
to make an informed decision about the environmental selecting an option/s to be potentially carried forward
benefits and risks of the preferred option/s. to Stage 3: Detailed Business Case.
» The environmental assessment should be based on a » Environmental impacts included in the CBA should
whole-of-system, whole-of-life, whole-of state approach, be documented in the environmental assessment
incorporating future trends, climate change, forecasting section. You will need to propose units of measure
and resilience analysis. for environmental impacts included in the quantitative
» Community expectations and/or government policy, environmental assessment. All environmental impacts
regulation or legislation may dictate that some of the should be described in detail.
environmental impacts of a shortlisted option/s are
avoided, mitigated or offset. The costs and benefits of this
should be included in the economic and financial analysis.

Environmental impacts should be

referenced in assessing deliverability,
sustainability, social impact evaluation,
risk assessment, and economic and
financial analysis.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 43

 Content to include
The environmental assessment should respond to all considerations in Table 13.

Table 13: Environmental assessment content and considerations

CONTENT CONSIDERATIONS

Approach Document how the environmental assessment was undertaken.

The process should include:
» identifying and reviewing information from relevant previous studies
» identifying all potential environmental issues and impacts
» including an assessment of how environmental issues and impacts may affect the options.
For each shortlisted option, identify and categorise the relevant environmental
considerations and impacts. An outline of potential environmental considerations is given
in the Stage 2: Options Analysis Template.
At Stage 2: Options Analysis, the level of analysis should aim to identify and broadly consider
any critical issues that may affect the viability of the proposal and each individual option.
It should also allow comparison of environmental impacts and costs across options to
contribute to filtering the options.
You will undertake more detailed consideration during Stage 3: Detailed Business Case
development if the proposal is progressed.

Assessment outcomes In the table included in the Stage 2: Options Analysis Template, document the outcomes
of the environmental assessment against all factors:
» legislation and permit requirements
» planning and land use
» property impacts
» topography, geology and soils
» water quality
» hydrology
» flora and fauna
» climate and air quality
» climate change
» noise and vibration
» natural resource management and use including energy and water
» landscape and visual amenity
» cultural heritage
» waste management.

Assessment summary In a table, compare the outcomes for each shortlisted option.

Outcomes
The environmental assessment should clearly explain and assess:
» the proposal’s environmental impact for each option
» specific actions needed to meet all relevant policy, regulatory and legislative requirements
» any community concerns.

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C3 Sustainability assessment

Purpose » Queensland Government requires sustainability

assessments for proposals with a capital value of more
The sustainability assessment should consider the design, than $100 million. Regardless of the capital value, it is best
construction applications, and operational arrangements of practice to look for opportunities to achieve sustainability
options to ensure they optimise governance, environmental, benefits throughout the proposal life cycle, regardless of
social and economic outcomes. any capital threshold, particularly in the case of building
projects which will often fall below this capital threshold,
Considerations but which may contain significant opportunities.
» The sustainability assessment should address how best » To assess sustainability opportunities that apply to the
to plan, design and deliver the options from a long- proposal, you should use either fit-for-purpose, nationally-
term, whole-of-life sustainability perspective. The overall recognised rating and certification schemes, tools and
sustainability of the proposal may influence whether the supporting technical expertise, or, at a minimum, apply
government chooses to fund it. the BCDF approach.
» The sustainability assessment should significantly Further guidance is given in Stage 3: Detailed Business
draw on the analysis undertaken throughout your Case Guide: Appendix 1: BCDF Sustainability Assessment:
proposal development, including the economic analysis, Approach and Templates.
environmental assessment and social impact evaluation.
These assessments should be based on a whole-of-life
view of the proposal, and where relevant, a whole-of-
system, whole-of-state approach. They should incorporate
future trends, foresighting and resilience analysis. Such
analysis might include considering forecast changes to:
quality of life and equity; cost of living and incomes;
community preferences and expectations; economy and
productivity; population and participation; technology and
data; environment; emissions reduction; and climate risks.

Sustainability analysis:
» supports the effective and efficient use of resources
» helps ‘futureproof’ proposals by considering future trends
» encourages innovation in planning, design and delivery
» considers opportunities to reduce emissions
» gives assurance to decision-makers that decisions are based on a comprehensive view
of governance, economic, social and environmental considerations
» ensures the costs and benefits assessment includes broader sustainability considerations.

Assessing sustainability early in the proposal life cycle will result in improved long-term outcomes
for the community and environment, and will highlight economic implications.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 45

 Suitable assessment tools include:
Queensland Government
» the Green Building Council of Australia’s (GBCA) Green
Star rating tools (Green Star—Design and As Built and
approach
Green Star—Communities), which are used for building Queensland Government has collaborated with ISCA and
projects (inclusive of any type of commercial building, the GBCA to develop an approach for internal project teams
health, education and other social infrastructure, rail to consider sustainability for both linear infrastructure
stations and residential apartment buildings), and and buildings.
master‑planned precincts and communities (see The approach includes completion of an assessment
www.gbca.org.au) template, which may need to be supported by a
» the Infrastructure Sustainability Council of Australia’s sustainability workshop/s to assess the materiality of the
(ISCA) Infrastructure Sustainability rating tools (Planning, criteria impacted by the options. Ideally, sustainability
and Design and As Built, Operations), which are mostly assessment considerations should be integrated
used on linear infrastructure such as transport (roads, with other business case development work streams
rail, ports and airports); utilities (such as networks, e.g. multi-disciplinary risk, co-design and/or value
pipelines, renewable energy assets); as well as green and engineering workshops.
blue infrastructure (waterways, reserves, recreation and
cycle/walkways)1. For example, the ISCA planning tool, The approach and supporting assessment templates can
which has general applicability throughout the proposal be adapted to support early stage options analysis and
lifecycle development, includes a scorecard to assess the comparison.
materiality of sustainability considerations. The scorecard The sustainability assessment templates and an example
can be accessed on the ISCA website at www.isca.org.au2. of how to approach internal validation and assessment,
These tools provide multiple frameworks to consider how including a description and guiding questions for the
to assess sustainability throughout a project life cycle, principles, are included in Stage 3: Detailed Business
and can also help inform the environmental assessment Case Guide; Appendix 1: BCDF Sustainability Assessment:
undertaken at a Stage 3: Detailed Business Case. They Approach and Templates.
provide a common language for project stakeholders to
understand what is required, and, where certification is The sustainability assessment templates are also included in
achieved, help deliver independent third-party assurance the Stage 3: Detailed Business Case Template.
to the community, investors, and government that For linear infrastructure the approach with ISCA has been
project outcomes promised are delivered. developed across four assessment themes and 17 categories
» Calling on sustainability expertise early in the proposal based on ISCA sustainability criteria as outlined in Table 14.
development phase and ensuring that documentation For building proposals, a collaboration with the GBCA has
(including risk and benefit registers) is carried forward developed a similar assessment tool aligned with the Green
to project delivery and operations can help if you need Star rating scheme. Principles to consider in your assessment
subsequent independent third-party certification. are included in Table 15: GBCA sustainability assessment
» Applying sustainability principles early can also maximise principles—buildings.
benefits and effectiveness. Helping determine what
should be built (a sustainable asset) and later how it is
built (a sustainability project) ensures you achieve optimal
outcomes at least cost.
» Ongoing sustainability assessment processes enhance
confidence that performance and long-term sustainability
outcomes will be delivered.

1
In modern cities, the boundaries between property and infrastructure are increasingly blended (such as integrated station or over station
developments). Therefore, ISCA and the GBCA have collaborated and released guidance for projects seeking dual certification. This is intended to
ensure efficient and streamlined certification of sustainability outcomes for both infrastructure and building projects within the infrastructure boundary.
2
Queensland Government environment and science agencies have additionally collaborated with ISCA to map longer-term policy objectives. The
ISCA Policy Mapping Matrix may provide agencies with helpful recommendations about how to reflect or incorporate sustainability objectives in a
business case.

Page 46 | Business Case Development Framework – Stage 2: Options Analysis Guide

Table 14: ISCA sustainability assessment principles—linear infrastructure

GOVERNANCE ENVIRONMENT SOCIAL ECONOMIC

Context Energy and carbon Stakeholder engagement Options assessment and

business case
Leadership and management Green infrastructure Legacy
Benefits realisation
Sustainable procurement Environmental impacts Heritage
Resilience Resources Workforce sustainability
Innovation Water
Ecology

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 47

 Table 15: GBCA sustainability assessment principles—buildings
PROJECT INDOOR
SETUP AND ENVIRONMENT LAND USE
MANAGEMENT QUALITY ENERGY TRANSPORT WATER MATERIALS AND ECOLOGY EMISSIONS INNOVATION
Green star Indoor air Greenhouse gas Sustainable Potable water Lifecycle Ecological value Stormwater Innovative
accredited quality emissions transport impacts technology or
professional3 Sustainable sites Light pollution process
Acoustic Peak electricity Responsible
Commissioning comfort demand building Heat island Microbial Market
and tuning reduction materials effect control transformation
Lighting comfort
Adaptation and Sustainable Refrigerant Improving on
resilience Visual comfort products impacts green star
Indoor benchmarks3
Building Construction
information pollutants and demolition Innovation
Thermal waste challenge3
Commitment to
performance comfort Global
sustainability3
Metering and
monitoring

Page 48 | Business Case Development Framework – Stage 2: Options Analysis Guide

Responsible
building practices
Operational
waste

3
These components are not applicable at this early stage of proposal development.
Outcomes The benefits register, risk register, stakeholder
engagement plan (where applicable) and the appraisal
The sustainability assessment, in combination with the summary table should be updated in response to the
socio‑economic, financial and environmental assessments, outcomes of this assessment.
give decision-makers evidence of how the options
will contribute to quadruple bottom line outcomes. Proposal documentation should highlight the results of this
Table 16 presents sustainability assessment content assessment to identify material positive or negative impacts
and considerations. that affect the targeted benefits or create disadvantages
that either cannot be managed or require very careful
Sustainability matters should be addressed in: ongoing management.
» the environmental assessment Where possible, include defensible analysis and
» the social impact evaluation documentation of the costs and benefits associated
» the risk assessment with the sustainability assessment, including future
accreditation activities.
» the economic analysis
» the cost estimate If sustainability elements are significant and potentially
important to inform decision-makers of key risks or further
» the deliverability assessment.
actions needed, they should be discussed in the conclusions,
recommendations and/or implementation plan.

Content to include
Table 16: Sustainability assessment content and considerations

CONTENT CONSIDERATIONS

Approach Document the approach and methodology used to identify material sustainability factors for
the options in order to understand and propose possible mitigation measures for immediate
and long-term effects e.g. the Queensland Government approach outlined in Stage 3:
Detailed Business Case Guide Appendix 1.

Assessment Document the outcomes of the sustainability assessment e.g. using the Queensland
Government's approach.
For proposals that are applying for an ISCA rating or Green Star accreditation, the
documentation may include a self-assessment against the applicable rating scheme tool,
including benchmark targets.

Summary Summarise and contrast the differences in assessed sustainability between the options.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 49

 C4 Economic analysis

Purpose
The economic analysis should develop a coherent You can find the BCDF guidance for
socio‑economic narrative of the qualitative and quantitative the economic cost benefit analysis,
costs and benefits of the options. It should be supported by approach, reporting, checklists and
a robust and transparent cost benefit analysis (CBA), which assurance requirements in the Cost
is a highly effective way to compare potential options. Benefit Analysis Guide.

Considerations
» The socio-economic (economic) analysis should create
a clear narrative about the quantitative and qualitative
economic benefits and the costs of the options. This
analysis should be informed by a robust and transparent » Consider future trends including:
cost benefit analysis, social impact evaluation, benefits › quality of life and equity
analysis, financial, commercial, sustainability and › cost of living and incomes
environmental assessments. › community preferences and expectations
» The balance of this qualitative and quantitative economic › economy and productivity
focus will vary between proposals, depending on the
purpose of the assessment and the availability of data › population and participation
and other resources. A fundamental part of economic › uncertainty and risk, including changes in technology,
analysis is identifying and documenting all material social demographics, climate and environment.
benefits and costs as comprehensively as possible. These » The goal of economic analysis conducted in the Stage
benefits and costs should focus on the effects on people 2: Options Analysis stage is to provide a strong basis for
and community, rather than on organisations or decision- filtering options and to document the economic merit
makers, and should be observable consequences that are of the preferred option/s.
material and/or measurable. › Identifying all costs and benefits is fundamental to
» This assessment should draw on your analysis undertaken any economic analysis.
throughout the life cycle of developing the proposal, › You can find specific guidance for the CBA in the Cost
including the financial analysis, environment, sustainability Benefit Analysis Guide.
and social impact evaluations. The assessment should
be based on a whole-of-life, whole-of-system, whole-
of-state approach, incorporating future trends,
foresighting and resilience analysis (including scenario
and sensitivity analysis).

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 It is important that the economic analysis considers whole-of-life, whole-of-system and whole-of-
state implications.
As the economic analysis involves forecasts of an uncertain future (due to technological change, climate
change, demographics, globalisation etc.) all aspects of the analysis should incorporate foresighting and
scenario-testing these uncertainties and risk. For example, in considering climate risk adaptation and
mitigation, you need to assess costs, benefits and risks for supply, demand and market developments,
as well as considering opportunities.
As uncertainty normally increases with time, resulting in declining confidence in forecasts and projections,
you will need to set a timeline for the evaluation period, capturing residual economic values (if any) and the
profile of benefit and cost flows.

Content to include
The economic analysis and documentation should include the content and considerations as outlined in the CBA Guide and
in Table 17.

Table 17: Economics analysis content and considerations

CONTENT CONSIDERATIONS

Approach Clearly document the approach adopted for the proposal CBA. This should be highly detailed,
transparent and include reference to and documentation of:
» all significant qualitative and quantitative benefits, costs and risks (including
sensitivity analysis)
» assumptions underlying the CBA e.g. base price year, discount rate, modelling and
forecasting assumptions including, where appropriate, consideration of resilience and
climate change risk sensitivity analysis and scenarios
» key inputs: costs, demand modelling for the analysis and key analytical observations
e.g. elasticity of demand
» detailed description of the base case and the analysed options.
Document how the assessment was undertaken, its assumptions and limitations.

Benefits Evaluate all qualitative and quantitative benefits for all options.

Costs Evaluate all qualitative and quantitative costs for all options.

Cost benefit analysis Undertake a robust CBA analysis for all options e.g. net present value (NPV), benefit cost ratio
(CBA) results (BCR), incremental BCR, internal rate of return (IRR), and sensitivity and scenario analysis.
Include the central case, full NPV profile, P50 and P90 (or equivalent) cost and the level of
design used.

Comparative economic Document a coherent economics narrative to incorporate the qualitative and quantitative
analysis narrative cost and benefit information in the SIE and the CBA. The economics narrative could be for the
overall proposal including a concise narrative about differences in the socio-economic and
CBA (BCR and NPV) outcomes between options. Consider using IBCR analysis to filter options.

Sensitivity and Conduct sensitivity analysis of all parameters (not a simple +/-20% or 30% etc.) as outlined
scenario analysis in the Cost Benefit Analysis Guide. Document scenario analysis including foresighting and
alternate futures.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 51

 CONTENT CONSIDERATIONS

Quality assurance Document the process and outcomes of the peer review analysis (and, where relevant, a
review results Gateway review) including robust and transparent consideration of how to resolve any issues.
Confirm CBA analysis against Section 6.1 Quality and 6.2 CBA Health Check in the CBA Guide.

Summary Summarise the difference between the options, and identify the preferred option.

Outcomes
A clearly explained, robust and transparent economic A well explained, transparent and
analysis provides: robust economic CBA gives a strong
basis for options filtering and a
» a coherent statement of the socio-economic effects
coherent narrative of the incremental
and incremental CBA results (BCR, IBCR, IRR and NPV)
net economic benefits for the
to support the options analysis
preferred option/s.
» information to incorporate into the options filtering
analysis, conclusions, recommendations and
executive summary
» detailed documentation of the methodology and all
the key assumptions
» detailed documentation of all benefits and cost cash
flows for all the years in the evaluation period
» analysis of uncertainty and risk including sensitivity
and scenario analysis
» assurance activities to support a robust and defensible
economic analysis.

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C5 Financial analysis

Purpose
The financial analysis should support robust and transparent Queensland Treasury should be consulted
options analysis by: for help with exploring the potential for
private sector funding and/or financing.
» developing sound budget estimates for capital and
operating cash flow to inform the budget viability of
the proposal
» analysing and quantifying proposal risks across options
to inform the uncertainty surrounding proposal costs
and benefits
» linking capital costs in the proposal budget to whole-
of-life costs for service delivery to inform the impact
on ongoing budgeting requirements for both operating
and maintenance costs
» evaluating against capital and operating budget or funding
constraints to determine whether the proposal can
achieve the service need within capital constraints
» developing and evaluating pre-feasibility commercial
investment metrics (if required) to determine whether
the proposal is commercially viable (if appropriate).

A well-articulated and robust financial analysis provides a strong basis for options filtering and also gives
decision-makers a clear understanding of the financial costs, revenues and risks of the options including,
where appropriate, critical information on commercial viability.
The financial analysis also provides critical cost and risk information for the economics, affordability and
delivery model analysis. Where appropriate, it includes full and transferable building information modelling
(BIM) information for the next stage of the proposal life cycle (procurement and delivery), if the proposal
proceeds to Stage 3: Detailed Business Case.
The options analysis should follow the proposal owner’s BIM requirements and clearly document how
these would be adopted. The costs of BIM analysis, including maintenance of a BIM model for the life cycle
of the proposal, should be considered.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 53

 Considerations
» The financial analysis consists of three different evaluations: The level of analysis and design should be
1. Budget analysis (mandatory) consistent for all options to allow like-for-
like comparison between options.
2. structuring analysis (to be developed depending
on the circumstances of the investment)
3. commercial analysis (to be developed for
commercial investments).
» Some of the key actions to support a robust, transparent › evaluating the budget analysis to determine both
and clearly explained financial analysis (financial analysis the absolute and incremental effect on the forecast
summary, report and appendices) include: budget for both the department and the state. Check
› clearly documenting the financial analysis approach whether the investment is within expected capital and
and analytical outputs needed for the economic cost operating constraints.
benefit analysis » As input into Section C6: Affordability analysis, evaluate
› evaluating the budget analysis and affordability possible financing and funding structures to determine
requirements for the proposed investment and, where the most appropriate approach e.g. government provision,
appropriate, a commercial investment evaluation joint venture, Public Private Partnerships (PPP). This will
(pre‑feasibility or feasibility assessment) include evaluating key contractual terms and conditions
› evaluating whole-of-life, whole-of-system and for proposed structures e.g. term sheets.
whole‑of‑state financial implications › Financing structures are linked to how the
› aligning with the analysis and methodology used infrastructure will be procured including government
in the economic analysis for the base case, service provision and Public Private Partnerships (PPP).
need (demand), evaluation period and terminal/ › Structuring analysis also determines the most
residual values appropriate funding structures including user pays e.g.
› calculating most likely outcomes (e.g. expected values), pricing, value capture and private sector contributions.
which are likely to be different from the P50 value. › Where user-pays structures are considered, the
Report the full profile of outcome including the P50 evaluation approach will need to consider different
and P90 (or equivalent) values, and level of design pricing approaches and the evaluation approach
(percentage or class etc.) utilised e.g. discount rate.
› fully analysing and justifying the rationale underpinning › The evaluation should identify the key risks/benefits
the methodology, data and assumptions. Where of each structure and recommend a preferred
appropriate, analyse their significance for the financial approach for the proposed investment.
investment evaluation e.g. use an assumptions book › The results of this will be input for Section C6:
in the financial modelling analysis Affordability analysis.
› fully analysing and justifying the rationale for all » Summarise the key points from the evaluation in a
parameters used in the financial analysis summary table including key financial parameters in
› fully analysing and justifying the rationale for risk nominal (budget) and net present value (NPV) terms.
quantification across all parameters including OPEX, » The output of the financial analysis is a key input into
CAPEX and revenue showing how they have been C7: Options analysis.
incorporated into the analysis. Include any residual risks
that require further consideration in the next stage of
the investment life cycle or may be material for the Financial risk considerations
investment decision. (See more details in the section » There are two broad ways to identify risk:
on financial risk considerations below.) 1. Qualitative risk assessment is the first step in risk
› undertaking sensitivity analysis to evaluate the assessment and involves determining, for each
key variables and assumptions that impact on the identified risk:
estimated financial and budget outcomes. They must a. the triggers of risk, their impacts and the likelihood
be evaluated to the lowest level for CAPEX, OPEX, of those occurring
revenue elements and risks to determine which
elements are most sensitive to changes b. the consequences of the risk and any risk mitigation
with revenue or cost consequences.
› undertaking scenario analysis to evaluate alternate
futures or other macro-influences. This is a key
input for the socio-economic, environmental and
sustainability analysis.

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2. Quantitative risk assessment involves assessing the using a probabilistic, Monte Carlo or other simulation,
likelihood of the risk happening and the associated which will give the probability of different revenue and
financial consequences. It combines: cost estimates.
a. the likelihood of costs, revenues and benefits being » Not all risks you identify will affect revenues or costs
different from the expected values but some risks may have wider implications for social,
b. the consequences i.e. the difference between environmental or economic outcomes.
the actual and expected values. » Undertake benchmarking of the risk allocation against
» The likelihood of the risk happening, and its consequences previous and similar projects (if available) to determine
determines the quantum of the risk, and the level of whether the proposed risk allocation is broadly consistent.
risk analysis and mitigation you need to undertake. Benchmarking helps give decision-makers further
The outputs of risk assessments can be simulated confidence that costs are realistic and unbiased.

Key considerations
A robust financial analysis includes the following key considerations:
» The evaluation period and methodology for determining terminal value should meet best practice
evaluation techniques and should be completed in the methodology section at the beginning of the
financial analysis. See Section A4: Base case and Section C4: Economic analysis.
» For true comparison, collect revenue and costs for the same base year (real values).
» ‘Real dollars’ are the value at a specific point in time (usually a specific financial year). When you
collect information from the cost estimator and other contributors to the analysis, you must agree
on the base year you are using.
» ‘Nominal dollars’ are real dollars after allowing for inflation and escalation. Escalation rates should
be clearly identified.
» Identify all current and future cash flows with supporting data (historical, forecast or benchmarked)
if possible.
» The discount rate is applied to nominal cash flows to account for the risk associated with the proposal
and the time-value of money (in all cases the discount rate used should match the cash flows it is
applied to).
» Ensure terminal value estimates (which in many instances will be very low or nil) comply with national
and international accounting practices e.g. consider accounting depreciation values in the context of
asset impairment, market-to-market values, uncertainty, and commercial and economic reality.
» In all cases, residual or terminal value estimates should include end-of-life capital and exit costs.
This means, in some cases, terminal value may be negative.

The approach to conducting a financial analysis should:

» identify all whole-of-life, whole-of-system and whole-of-state cash flows (i.e. capital and operating
costs) over the life of the option
» identify and assess the ongoing risks that might create, enhance, prevent, degrade, accelerate or delay
the expected cash flows
» risk-adjust all revenues and costs, as appropriate. Report Monte Carlo or other risk analysis summary
results including key risks, modelling and full financial NPV distribution profiles (including most likely
or expected case), P50 and P90 (or P90 equivalent) values. Note the level of design or class used
» consider budgetary impacts, as well as potential government (local, state and federal) funding sources
» conduct a stringent independent peer review of all financial analysis assumptions, methodology and
outputs, and resolve any issues to ensure a robust and transparent analysis.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 55

 Quality assurance review
Conduct an independent peer review of the financial analysis to assist its development and to confirm the
soundness and appropriateness of the methodology, technical procedures and processes associated with
the analysis and results. The review report should include a summary of the independent peer reviewer’s
findings, particularly in relation to the adequacy of rationale documentation, methodology, key risks and
uncertainties, assumptions and results.
Seek ongoing technical advice throughout the financial analysis process to ensure a robust and
transparent analysis.

Commercial considerations
Undertake commercial analysis in line with best-practice The analysis and its outcomes, including
investment standards while making sure it also meets the methodology, assumptions and
the needs of the investing parties and shareholding outputs, should be documented and
Minister’s department. independently peer reviewed.
The commercial analysis should include relevant stakeholder
input to ensure it facilitates informed investment decisions.
It should also include financial and due diligence information
to allow a robust, transparent, thorough and substantiated
evaluation of the proposal.
Consider the following when conducting the
commercial analysis:
» expected revenues including competitive environment,
market risk etc.
» contractual arrangements such as take or pay
arrangements etc.
» investment risk profile and associated risk-return profile
» competitive neutrality (as appropriate)
» regulated returns (as appropriate)
» pricing methodology
» financing structures, ownership structures etc.
» risk mitigation, back-to-back contracting etc.

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Content to include
This section should include content as outlined in Table 18 below.

Table 18: Financial analysis content and considerations

CONTENT CONSIDERATIONS

Approach Document the approach used in your analysis.

Financial analysis results Document the financial analysis results for each relevant shortlisted option, including:
» all revenues and costs (both capital and operating costs)
» a summary of the revenues and costs in nominal and present value (PV) terms, together
with any necessary commentary concerning specific associated issues. Calculate a financial
net present value (FNPV) applying an appropriate risk-adjusted discount rate. In all cases,
the discount rate used should be consistent with the type of cash flows it is applied to
i.e. real or nominal
» budgetary impacts, as well as potential government (local, state and federal) funding
sources for the shortlisted options
» adjusted revenues and costs for risk. Report Monte Carlo analysis summary results
including key risk, modelling assumptions (including level of design used) and report full
FNPV distribution profiles including most likely (or expected value), P50 and P90 or P90
equivalent values.

Sensitivity analysis Document the financial sensitivity analysis results of key parameters, including e.g. using
summary information from the Monte Carlo analysis. This should not be a simple +/-
percentage but results for all parameters noting the level of design or class used.

Quality and assurance Document the process and outcomes of any peer review analysis (and where relevant
Gateway review), including robust and transparent response to resolve any issues.

Building information The project team should follow the relevant proposal owners BIM requirements. Clearly
modelling document how these requirements will be adopted.
Costs for using BIM for options should consider:
» maintenance of the model for the life of the asset
» capacity and capability development, where there is an identified need for in-house
expertise (usually outsourced)
» efficiency benefits from using BIM.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 57

 CONTENT CONSIDERATIONS

Value capture Explore the opportunity for value capture to help in the funding proposal. Value
capture involves raising funding contributions from those who derive a benefit from the
infrastructure (other than users). Most commonly, value capture mechanisms are targeted
at capturing a portion of the uplift in land values attributable to infrastructure investment.
Appropriately designed mechanisms for value capture can help fund infrastructure proposals.
In some circumstances, they can have efficiency and equity advantages compared with
government contributions. A value capture assessment undertaken as part of an options
analysis should use the following 4-step process:
1. Identify beneficiaries and benefits
2. Estimate value uplift
3. Identify relevant value capture mechanisms
4. Evaluate mechanisms
If there is value uplift opportunity, evaluate the potential mechanisms to capture the
uplift against the following well-established principles:
» efficiency (economic and taxation)
» equity
» fairness (horizontal equity)
» materiality
» sustainability (stability and reliability).
Stakeholder consultation and support are critical to successfully activating value
capture mechanisms.

Outcomes
A well-articulated, robust and transparent financial analysis
gives decision-makers a clear understanding of the financial
costs, revenues and risks of the investment proposal
including, where appropriate, critical information on
commercial viability.
The financial analysis will:
» clearly highlight expected risk adjusted cost and
revenue estimates
» highlight the proposal risk and their implications for
the proposal
» link capital costs in the proposal budget to whole-of-
life costs for service delivery to inform the impact on
ongoing budgeting requirements for both operating
and maintenance costs
» evaluate and clearly articulate capital and operating
constraints to highlight whether the proposal can
achieve the service need within capital constraints
» consider finance and funding alternatives as part of C6:
Affordability analysis.

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C6 Affordability analysis

Purpose Funding principles

The affordability analysis should present information that There is currently no universal framework for
allows decision-makers to assess whether each option determining the optimal mix of funding sources for
is affordable over the whole of its life, by considering infrastructure investments. The characteristics of the
all sources of current funding, as well as additional industry, infrastructure and commerciality will affect
funding sources. the available funding sources. Consider these core
principles in assessing the mix of funding sources for
All infrastructure investments will need to be funded over each infrastructure investment:
the life of the infrastructure regardless of the mechanism
used to finance the investment. Funding is needed for » User pays mechanisms potentially allow infrastructure to
both the initial cost of the investment (construction) be provided cost-effectively and may increase willingness
and the ongoing maintenance and operation of the to invest in new infrastructure.
infrastructure service. » Value capture mechanisms can be considered where the
The initial investment can be funded either upfront (equity) infrastructure will benefit stakeholders who are not just
or over time (debt) through a series of repayments such as the direct users.
principal and interest. » Developer contributions are usually expected
for infrastructure that is necessary for land or
Considerations property development.
» Social infrastructure and/or infrastructure provided for
Proposal affordability is measured by the expected risk- the public is unlikely to have user pays or value capture
adjusted finance net cost (both direct and indirect) to the opportunities. Hence, government funding will likely
state of delivering the options through traditional delivery. be required where users do not pay and/or where
beneficiaries cannot be identified.
Overlaying these principles are a number of other important
considerations including:
» A funding mechanism may generate community cost
and not deliver net positive benefits.
» User-charging may only fund marginal private benefit
leading to the undersupply of infrastructure and limiting
the positive benefits to the wider community.
» The funding mechanism should consider public equity
effects of user charges or value capture mechanisms.
» Vertical equity should consider whether those on lower
incomes are bearing a relatively greater burden than those
on higher incomes.
» Horizontal equity should consider whether infrastructure
beneficiaries are bearing more of the funding burden than
those who do not benefit.
» Consider current community and industry acceptance
of funding methods e.g. user charges, developer
contributions and asset sales.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 59

 Funding envelope
The capacity to fund new infrastructure investments will be limited by the available funding options.
As such, funding sources are critical as the willingness of the public to pay either taxes/charges or accept a reduction in
the quality or quantity of government services will impact the quantum of new infrastructure development/replacement.

Content to include
This section should include content as outlined in Table 19 below.

Table 19: Affordability assessment content and considerations

CONTENT CONSIDERATIONS

Approach Describe your approach in undertaking the affordability assessment.

Funding options There are five common options for funding of infrastructure investments:
1. government appropriations
2. user pays mechanisms
3. value capture
4. developer contributions
5. asset sales.
Funding should consider both the initial cost of the investment (construction) and the
ongoing maintenance and operation of the infrastructure.
Provide clarity around the initial investment either upfront (equity) or over time (debt)
and consider a series of repayments.
(See Stage 3: Detailed Business Case Guide, Appendix 2: Funding options).

Analysis outcomes Present the results of the affordability assessment, acknowledging all underpinning
assumptions from the options analysis, including the implications of changing the preferred
delivery model.
Identify the affordability of the preferred option/s. This could include an assessment of
staging options, revenue sources (if applicable), preferred delivery options and funding
availability (both capital and operating costs), conditions and timing—acknowledging the
delivery options being considered will have implications for funding profiles.

Outcomes
» The affordability analysis should present information that
allows decision-makers to assess if the preferred option/s
is affordable over the whole of its life.
» Sources of existing funding, as well as additional
funding from other sources, should be fully investigated
and analysed.

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Health check C1

Before progressing further with the options analysis, complete the following checklist. If an item has not been completed,
include an explanation in the relevant section.

# HAVE YOU COMPLETED THE FOLLOWING TASKS? SECTION COMPLETED

1 Identified, described and categorised all potential social impacts for each option C1
(relative to the baseline)

2 Determined the ability to quantify and/or monetise social impacts C1

3 Completed an environmental assessment for each option C2

4 Completed a sustainability analysis for each option including C3

comparative analysis

5 Completed an economic analysis narrative and cost benefit analysis (CBA) C4

6 Completed key economic analysis according to the CBA guide, including C4

reporting IBCR, BCR, NPV using P50 and P90 cost for each option

7 Identified all option generated revenues and costs C5

8 Created a financial model that forecasts or projects the cash flow profile C5
generated over the full evaluation period

9 Completed value capture and user charging assessment C5

10 Determined the consequences of identified risks for the financial cash flow C5
estimates and/or wider benefit and cost estimates associated with each option

11 Undertaken Monte Carlo simulation (e.g. using Crystal Ball or @Risk software) C5
on the financial cash flows reporting full NPV profile, P50 and P90 values and
the level of design used
Is this level of design at an acceptable level and is the differential between P50
and P90 cost commensurate with this level of design?

12 Considered affordability of each option (considering all the previous analysis C6

performed in the options analysis)

13 Documented the methodology adopted for the affordability assessment C6

14 Updated the risk register to include risk assessments from C1 to C6 Appendix 2

15 Undertaken an independent peer review on the methodology, assumptions C4 and C5

and outputs of the assessments (particularly economic and financial/
commercial assessments)

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 61

 C7 Options analysis

Purpose » Where criteria cannot be quantified, a qualitative scope of

each option’s level of contribution towards each criterion
The options analysis section should consider the key analysis could be applied to supplement the analysis. Rules could
in Section C to enable you to shortlist and rank options be developed to convert quantitative and qualitative data
and identify the preferred option/s to progress to Stage 3: to a common scale to help give clear judgements for the
Detailed Business Case, if recommended. shortlist process.
» Where the options have been modified in Section
Considerations C, review the options to ensure the benefits initially
» The selection of the preferred option/s should be attributed to the investment continue to be achievable.
informed by the key economic analysis outcomes (BCR, This may affect the cost benefit analysis or social
IBCR, IRR and NPV) but should also consider criteria impact evaluation.
from Section C analysis including: » Document the priority of the proposal, including option
› social staging considered and a description of the key impacts
if the proposal does not proceed.
› environmental
» Where there is insufficient information or detail to
› sustainability confidently select a single option, you may forward
› financial and commercial4 several options to the decision-maker. The detail will then
› delivery and affordability be further assessed in a Stage 3: Detailed Business Case,
› strategic, legal and risk considerations. if progressed. (Note that proposals that are likely to be
considered by Infrastructure Australia include two options
for Stage 3: Detailed Business Case).
A suggested options analysis summary table is shown in
Table 20.

Table 20: Example options analysis summary

OPTION ASSESSMENT OPTION 1 OPTION 2 OPTION 3

STRATEGIC APPRAISAL

Alignment to objectives (state, Low Medium Medium

community, agency)

Effectiveness in addressng the service Low Low Medium

need and achieving the benefits sought

LY
Alignment with State Infrastructure Medium Low High

N
Plan options assessment—reform,

EO
better use, improve existing, new

SOCIAL, ENVIRONMENTAL AND SUSTAINABILITY APPRAISAL

M P L
EXA
Social impacts Positive (low) Positive (low) Positive (medium)

Environmental impacts Negative (low) Negative (low) Positive (low)

Sustainability impacts Low Low Low

ECONOMIC APPRAISAL

Benefit cost ratio 0.9 1.1 1.2

Net present value (NPV) -$xxm $xxm $xxm

4
For commercial entities or government-owned corporations, the primary consideration is commercial viability.

Page 62 | Business Case Development Framework – Stage 2: Options Analysis Guide

 OPTION ASSESSMENT OPTION 1 OPTION 2 OPTION 3

FINANCIAL AND AFFORDABILITY APPRAISAL

Risk Medium High Medium

Financial NPV $xxm

N LY
$xxm $xxm

EO
DELIVERABILITY APPRAISAL

Risk Medium

M P L High Medium

EXA
Financial NPV $xxm $xxm $xxm

Potential for Public Private Partnership Low Low Medium

(PPP) delivery

OUTCOME

Ranking 3 2 1

The preferred option/s should be documented and should include the information listed in Table 21.

Table 21: Preferred options matrix

PREFERRED OPTIONS

OPTION X: [OPTION TITLE]

Intended outcomes What the option will accomplish (i.e. objectives, benefits), specifically noting how
the benefits compare to the original benefits targeted

Affordability and value-for-money How the preferred option will deliver value-for-money

Scope Inclusions and exclusions and how the option will address the service need

Implementation A description of how the shortlisted option would be implemented

Disbenefits A summary of disbenefits of the option

Infrastructure A summary of any infrastructure components of the options, canvassing

a number of technical solutions and engineering possibilities

Other requirements Any requirements for complementary infrastructure and/or opportunities

for integration or coordination with other proposals

Risk assessment The results of the risk assessment conducted on shortlisted options

» Consider how the preferred option/s is likely to deliver

value-for-money and be affordable over the life of the
option, referencing: This section should present the
results of the key quantitative and
› the estimates of the preferred options costs
qualitative analysis to rank the
and benefits
shortlist options, giving a robust and
› socio-economic viability (BCR, NPV and IRR) defensible recommendation on the
› depth of technical investigations preferred option/s.
› scenario and sensitivity analysis
› market sounding and preliminary procurement strategy.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 63

 Table 22: Shortlist rank summary

FINANCIAL ECONOMIC SOCIAL ENVIRONMENTAL

SHORTLIST MONETISED MONETISED
OPTIONS FNPV BCR (NPV) QUALITATIVE (NPV) QUALITATIVE
Base case

Options 1

Options 2

Options 3

Options …

An initial benefits management plan may be developed for » stakeholders

each option if appropriate. The initial benefits management » KPIs/measures
plan should include details of:
» dependencies
» benefit description » high-level activities and timeframes to achieve the benefits
» benefit owner » reporting requirements.
» anticipated beneficiaries

Content to include
This section should include content as outlined in Table 23 below.

Table 23: Options analysis content and considerations

CONTENT CONSIDERATIONS

Approach Document your approach to ranking the options and selecting the preferred option/s, noting
any limitations and assumptions.

Analysis summary Summarise the outcomes of your analyses for each of the shortlisted options including:
» economic
» social
» environmental
» sustainability
» financial and commercial
» affordability
» strategic, legal and risk considerations.

Preferred option/s Document the preferred option/s noting how the preferred option/s is likely to deliver
value-for-money and be affordable over its life. Refer to the estimates of the preferred
option’s costs and benefits, socio-economic viability (BCR, IRR and NPV), depth of technical
investigations, sensitivity and scenario analysis, and other analyses outcomes.

Outcomes
The options analysis should clearly document a robust and transparent ranking of your shortlist options and should
recommend a preferred option/s to proceed for more detailed analysis in the Stage 3: Detailed Business Case.
The Stage 2: Options Analysis should also ensure that the recommended preferred options are viable across quadruple bottom
line considerations (economic, social, environment and financial).

Page 64 | Business Case Development Framework – Stage 2: Options Analysis Guide

Health check C2

Before progressing further with the Stage 2: Options Analysis complete the following checklist.

# HAVE THE FOLLOWING TASKS BEEN COMPLETED FOR EACH OPTION? SECTION COMPLETED

1 Documented all sources used, assumptions made, and methodology C7

adopted for selecting your preferred option/s (selection process is clear,
robust and defensible)

2 Completed documentation for preferred options of: C7

» intended outcomes
» socio-economic viability (BCR, NPV and IRR etc.)
» scope
» implementation
» disadvantages
» infrastructure considerations
» risk
» affordability and value-for-money
» any other requirements (e.g. commercial viability)

3 Described: C7
» key impacts associated with the preferred option/s
» priority of the preferred option/s
» implications of not proceeding with the preferred option/s

4 Explained what is required for the preferred option to successfully achieve C7

the targeted outcome

5 Summarised the service need or problem, outcome and targeted benefits,

and summarised the options analysis in the conclusion to the Stage 2:
Options Analysis

6 Updated the risk register Appendix 2

# CRITICAL DECISION POINTS

1 Have any issues been identified that could result in the shortlisted options
not proceeding?

2 Do any of the assessments show optimism/momentum bias?

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 65

Section D:
Preferred option/s implementation
considerations

Figure XX: Figure name

Section D should discuss the process for implementing the proposal. It should give decision-makers assurance that the
preferred options are an appropriate solution to address the service need and deliver value-for-money for the state.
Mitigate any risk issues raised or reconsider that option.

SECTION D: PREFERRED OPTION/S IMPLEMENTATION CONSIDERATIONS

D1
Market considerations
BENEFITS

D2

RISK
Delivery model analysis

D3
Next steps

Figure 9: Overview of shortlist implementation considerations

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 67

 D1 Market considerations

Purpose
This section supports: Market sounding can also be used to
gain feedback on ways to present the
» the investment decision-making process proposal to the market to increase its
» the development of a preliminary procurement strategy attractiveness and reduce obstacles.
» identification of opportunities and risks related
Queensland Treasury can assist
to procurement.
with the development of a Market
Sounding Plan if required.
Considerations
As the level of private sector involvement varies considerably
between proposal options, information should be sought
from the private sector concerning the proposal. This
may include:
» market information regarding market risk appetite, Where there are multiple projects
availability of contractors and any other major projects that draw on the same market and
that may compete for resources resources, the proposal should
» potential delivery models and issues concerning the seek to outline potential interfaces
proposal from an industry perspective between them and the resulting
» proposal options feasibility, appetite/attractiveness impact (i.e. strained market capacity
and risk sharing or potential for staged development).
» feedback on matters such as the proposal option’s scope
and specification, and any opportunities for design and
construction innovation.
Where the proposal option/s are highly sensitive to
assumptions about the attractiveness, likely involvement of
the private sector and the terms on which that involvement
might occur, those assumptions should be validated through
market sounding.
» Market sounding during proposal development
builds upon and provides more detail than Stage 1:
Strategic Assessment. It also identifies any changes
or impacts in the market since Stage 1: Strategic
Assessment completion.
» Subject to the type of option, market sounding may
be required to capture the design phase to increase
its effectiveness.
» Information provided by the market should be critically
evaluated if there is different or inconsistent feedback
and response. Care must be taken to ensure participant
expectations regarding implementation and options are
managed appropriately and with due regard for probity.
» Market consideration activities may include documenting
the results of a desktop review undertaken prior to, and
supporting, the market sounding activities.

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Content to include
This section should include content as outlined in Table 24 below.

Table 24: Market considerations

CONTENT CONSIDERATIONS

Market sounding Market sounding refers to the collection of activities to determine the market’s appetite
objectives for involvement and/or explore possible solutions. Document the objectives for market
sounding. They may include:
» obtaining market information including risk appetite and the availability of contractors
» acquiring feedback on matters such as proposal scope and specification, the opportunity
for design and construction innovation, timeliness for the bidding process and bidder
selection criteria
» providing information to the market e.g. on proposal requirements.

Market sounding This may involve detailed desktop market sounding of trends and issues including formal
approach requests for information. In some cases, this will involve conducting formal market sounding
processes using structured engagement with industry.
As market sounding should focus on the private sector as a whole rather than on any
individual company, structured engagement requires careful consideration regarding which
companies and industry groups to approach.
Planning and structuring the engagement is important to minimise the risks of providing
information to companies which may give them an unfair advantage during any future
procurement processes.
A clear probity protocol is required to assist in managing such risks. Probity protocols
should not prevent discussions with the market but they should ensure care is exercised so
no company has, or is perceived to have, received or provided information that offers them
an unfair advantage in any subsequent procurement process.

Market feedback Feedback typically includes:

» feedback on options and risk allocation
» market preference on size and staging (work packages).

Assessment of market Consider the market capability and interest including delivery or financing options.
capability This should include local market engagement during options analysis development
as well as delivery.
Where the local market is to be targeted during delivery, this should be reflected in the
economic and financial analyses.
Information from this section is used to inform the financial and risk assessment sections.

Outcomes
Document key market feedback information including risk, market capability and other considerations which will inform
deliverability assessment, environmental assessment, the social impact evaluation, the risk assessment and cost estimates.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 69

 D2 Delivery model analysis

Purpose
The delivery model analysis should evaluate potential Engage Queensland Treasury at the
delivery models and recommend a delivery model that earliest possible stage in the business
is likely to optimise value-for-money. The analysis should case process to explore options for
also consider packaging options for the delivery including private sector funding and/or financing.
private finance models (if appropriate). The objective of the
assessment is to identify the best-value delivery model that
will meet the service need.

Considerations » Evaluate whether private finance models are

suitable to procure the investment. As part of this
Treasury’s Project Assessment Framework mandates that
evaluation consider:
in all circumstances private sector procurement must be
considered for all proposed investments with an expected › ­the ability to derive output-based specification
capital cost greater than $100 million. This consideration › ­risk allocation between government and private
is facilitated through the delivery model analysis. sector providers
You can find further guidance on undertaking a value-for- › ­efficiency cost benefits
money assessment in the Project Assessment Framework › revenue opportunities
(PAF) and the National PPP Guidelines. Workshops will › market appetite and interest
be needed to explore the detailed assessment required › potential for innovative solutions.
to evaluate the delivery model, including packaging
considerations. » Develop qualitative criteria and associated weightings
for the delivery model evaluation.
The delivery model analysis should consist of the following » Shortlist delivery models for evaluation by considering:
multiple stages:
› proposal objectives
» Source and analyse data needed to undertake › agency capability
the evaluation, including proposal objectives and › efficiency cost benefits
requirements, risk, option characteristics (e.g. design,
operations, agency capability and market sounding › characteristics of the procurement model e.g. inclusion
analysis). You will need to develop detailed data to or exclusion of operations, similar investments locally
reach an informed evaluation of potential benefits. that set a precedent, comparable projects across
other jurisdictions and industries, and relevant
» Evaluate packaging to decide which elements of the historical experience.
investment should be included or excluded in the
evaluation e.g. operations and maintenance. Also » Determine appropriate cost criteria and associated
evaluate whether to break up construction into separate weightings consistent with relevant guidelines.
packages e.g. rail, road, signalling. » Undertake your evaluation in line with relevant guidelines
» The analysis should detail supporting evidence, analysis to justify the preferred procurement approach.
and rationale. Issues to consider include: » Undertake additional checks to confirm the preferred
› brownfield versus greenfield infrastructure procurement model. These checks could include a
sensitivity analysis and engaging the market to confirm
› discrete elements of procurement interest, capability and availability.
› easily separable portions of work e.g. geographically
The analysis should use value-for-money criteria to assess
› analysis of risks and interface issues
whether potential private financial procurement models
› operating environment could generate value for the state.
› site accessibility
Each potential procurement model should include some
› staging opportunities and requirements. form of private financing to fund infrastructure construction,
and should consider other variants of ownership,
maintenance and operations.

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Traditional delivery model
Traditional delivery models may include those listed in Table 25.

Table 25: Traditional delivery models

1 Design and construct including early contractor involvement and early tenderer involvement

2 Design, construct and maintain

3 Design, construct, maintain and operate

4 Alliance/competitive alliance

5 Managing contractor

Engage those with the experience and professional › details of the expected risks, analysing which party
judgement to help select the most relevant delivery models is best placed to manage those risks to determine
to evaluate. Not all of these delivery models may be suitable the optimal risk transfer
for the specific circumstances. Other delivery models may be › your assessment of cost certainty and the likelihood
evaluated instead or in addition to these options. of variations or scope creep
› whether private finance can cost risks efficiently,
Private finance delivery including an evaluation of the risk premium needed
model assessment »
to transfer these risks.
evaluation of potential cost efficiency benefits detailing
A private finance arrangement is a risk-sharing relationship what bundling benefits are expected and why those
between the public and private sectors to deliver public benefits are expected e.g. substantive operating cost
infrastructure (and associated services) with a component relative to the capital cost
of private sector finance.
» evaluation of all potential revenue opportunities that
could be developed to offset the expected capital and
Value-for-money operating costs
Value for money drivers may include: » assessment of the market appetite, interest and ability
to undertake the proposed investment. You need detailed
» option scale
evidence to support this assessment
» risk allocation
» investigation of innovative and creative solutions to meet
» whole-of-life costing the investment objectives.
» innovation
Other factors you need to evaluate include the contract
» improved asset utilisation term and the benefits of developing on a holistic basis
» economies of scale e.g. coupling infrastructure construction with maintenance.
» competitive process.
You should undertake the value-for-money evaluation using
a multi-criteria analysis. The analysis should detail supporting
evidence and rationale including the following:
» your ability or otherwise to develop an output-based
specification covering defined requirements and
performance indicators. You must justify your rationale
for being able to achieve this.
» how you have evaluated risk allocation between
government and the private sector. Show:

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 71

 Content to include » Undertake a packaging evaluation to determine which
elements of the investment should be included in the
Undertake the delivery model analysis in line with the delivery model evaluation and which should be sourced
approach below, which evaluates the preferred delivery independently (usually through government). The
model using a five step process. The evaluation should packaging evaluation should also analyse in detail whether
involve a number of workshops (at least two but could multiple construction packages would be suitable.
be up to four). Workshops should include: » Undertake all analysis necessary to inform economic
» internal government stakeholders with extensive evaluation of outcomes under different delivery models.
knowledge of the proposal and of the construction, » Investigate whether the proposal has scope to generate
maintenance and operational environment additional revenue streams.
» experienced and skilled advisors (where appropriate) » Determine the likely number of bidders for the proposal
» external consultants with private equity and private through market sounding.
sector construction, maintenance and operational » Undertake preliminary, detailed legal assessments on
experience in the relevant industry. whether a long term contract is suitable for the proposal.

STEP 1. DATA STEP 2. SHORTLISTING

Gather and analyse data to cover the following areas: Shortlist a selection of delivery model alternatives
(Workshop 1) using data gathered and analysis undertaken
» Confirm the proposal objectives i.e. service need or in step 1. Focus on the following for each delivery model:
opportunity (the objectives need to be adequately
defined to determine whether the delivery model will » ability to fully deliver the proposal objectives
affect their achievement). » suitability e.g. brownfield versus greenfield
» Confirm the proposal requirements (needed to inform » existing and proposed operating environment
market sounding).
» proposal recurrent budget or capital funding constraints
» Confirm proposal characteristics (needed to both inform
» operating model e.g. government-managed services
market sounding and to evaluate whether delivery models
will be affected). Evaluate the potential for innovation in » split between capital, operating, and maintenance
design, delivery, operation and maintenance, and whether costs agency capabilities
the proposal has easily definable output requirements » market appetite.
that could have performance measures.
» Undertake a transparent and independent evaluation of STEP 3. VALIDATION
whether your agency (with its network of personnel, skills, Validate your shortlisted alternatives by:
systems etc.) can manage the proposal’s implementation
across the different delivery model alternatives (e.g. does » comparing your analysis to previous investments delivered
the agency have the capability to undertake a Public in different jurisdictions, noting any differences that
Private Partnership). would be relevant to your selection of preferred delivery
model alternatives
» Revisit your market analysis for each stage of evaluation
e.g. pre-feasibility options analysis (initial discussions), » reviewing lessons learnt that have particular relevance
feasibility, detailed business case (preferred proposal) to the current proposal
and procurement development. » checking any structural or market changes e.g. market
» Undertake a detailed risk assessment for all investment preference for availability structures, interest rate
risks, such as financial, legal, technical, design, environment
environmental, social, etc. Each risk should be quantified » market sounding feedback.
(where possible) to allow an understanding of the
expected costs if delivery is retained by government STEP 4. ANALYSIS
or transferred to the private sector under an alternative This stage analyses the delivery models for the shortlisted
delivery model. alternatives (Workshop 2).
» Undertake a detailed evaluation of the whole-of-life You should determine appropriate criteria for the analysis
costings to understand: and allocate weightings based on each criteria’s likely
› packaging effect on achieving value-for-money. The same criteria and
› build and maintenance dependencies and synergies weighting should be applied to each shortlisted delivery
› capital versus operating costs model alternative.
› life cycle management for the proposal The delivery model analysis should be used consistently
› whether there are opportunities for cost savings whatever type of delivery models are shortlisted i.e. whether
under different delivery model alternatives. they are only private finance, traditional or a combination.

Page 72 | Business Case Development Framework – Stage 2: Options Analysis Guide

Value-for-money is determined by considering benefits COST
relative to costs. A delivery model choice can affect both the A criterion should only be included in the cost category
expected benefits and costs. Your delivery model evaluation where it will affect the expected cost of delivery (design,
should consider both the likely range of cost outcomes construction, maintenance and operation). All qualitative
(financial) and likely range of benefit outcomes (financial criteria should be assessed in the quality category. A cost
and non financial). Non financial outcomes can be assessed should also only be included where it is expected to be
using techniques such as economic and social evaluations. different in the different delivery model alternatives
The delivery model assessment should be focused on e.g. innovation in different delivery models may change
determining which alternative is likely to generate the construction costs, operational costs, maintenance
highest value-for-money outcome for the state. Value-for- costs or financing costs.
money is assessed using: The relative weighting of each sub-category should also
» Financial evaluations—focus on the costs to the state take into account its comparative value over the investment
that will affect the state’s cash flow profile, such as horizon of the proposal i.e. transaction costs relative to
capital and operating costs. whole-of-life costs.
› This category will also evaluate cost offsets such Example cost categories may include:
as revenue opportunities associated with different
delivery models. » capital costs (vary due to different competitive tension
in delivery model alternatives)
» Non-financial evaluations—focus on economic, social
and environmental benefits that could be achieved » operating costs (should only be included where at least
with different delivery models. one delivery model includes an operating component)
› This category should consider both disadvantages » maintenance costs (should only be included where at least
and costs e.g. noise, and advantages such as better one delivery model includes a maintenance component)
quality of life. » transaction costs (should only be included if the cost for
one delivery model is substantially different from the
To establish the cost and quality criteria, break down criteria other delivery models. If transaction costs are insignificant,
into the maximum number of sub-criteria that are relevant they should be excluded)
and can be evaluated. Each sub-criterion should then be
» risk of cost variation (only include this when the total risk
weighted based on its impact on value-for-money outcomes.
can be quantified and where the optimal risk allocation for
» The total weightings of all sub criteria (cost and quality) one delivery model is substantially different to the other
should add up to 100 per cent. delivery models). Individual risks should only be assessed
» The weighting split between cost and quality should be where one or more delivery models achieves optimal
based on the type of project. risk allocation at a significantly lower cost compared to
other models
» The importance of the qualitative criteria and their
effect on value-for-money should be used to decide an » other e.g. cost of environmental offsets.
appropriate weighting e.g. low non-financial values might All cost categories must be evaluated over the same
represent 20 per cent of the weighting. investment horizon.
Only criteria that are relevant to outcomes for all delivery
QUALITY
models should be included in the assessment. If impacts
are minimal, inconclusive or similar for all delivery models, The qualitative criteria will be determined by the type
exclude that criterion from the assessment. of investment. Only qualitative criteria that significantly
affect non-financial outcomes should be included in the
Trade-offs between outcomes will become obvious in assessment. For each qualitative criterion assessed, clearly
evaluating the alternative delivery models. It is unlikely explain its link to the investment’s objectives and non-
that one model will score highly in all categories. For financial outcomes e.g. social. Consider the following:
example, a high level of state control will potentially reduce
opportunities for innovation, or a constrained timeframe » Level of service: to maintain level of service at or above
for delivery may increase cost. Consider the relative priority minimum service standard over the economic life of the
of the proposal’s targeted objectives and outcomes when investment. This is unlikely to apply where delivery models
setting the criteria and weightings. do not include operations and maintenance.
› Only include this criterion where one delivery model is
expected to provide a higher level of service compared
to others. The level of service can be broken down into
multiple sub-categories as needed.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 73

 » Innovation: to improve investment non-financial
outcomes through innovative solutions.
If the recommended delivery option
› Only include this criterion where one delivery model
is a PPP with private finance, report
is expected to include innovative solutions that lead
to better non-financial outcomes compared to other the outcomes of the assessment
delivery models. (including the preferred PPP delivery
model) in accordance with the National
» Timing: to complete investment to align with a non-
PPP Guidelines and the Queensland
negotiable date or event. Note that deferring the
Treasury, Project Assessment
timing may generate considerable financial and non
Framework (PAF) PPP guidelines.
financial benefits.
› Only include this quality category if the economic
assessment shows that an early start will give significant
advantages and if one of the delivery models achieves
a worthwhile time difference.
» Environment: to minimise environmental impacts.
STEP 5. EVALUATE
Develop a tool for multi-criteria analysis (such as Multi
› Only include this criterion where one delivery model
Attribute Utility Theory) to evaluate and rank the delivery
is expected to achieve better environmental solutions
model alternatives.
than others.
» Equity: to improve equity through improved public Develop a spreadsheet or similar tool to undertake the
accessibility, consumer rights and security. evaluation (Workshop 3).
› Only include this criterion where one delivery model Score each criterion, either on a relative basis to each other
is expected to achieve better equity outcomes or on an absolute achievement basis. Get each participant to
than others. score each criterion independently first to gather diversity
» Sustainability: to achieve sustainability over the of opinion, then invite comprehensive discussion to find
investment’s economic life. This includes assessing scoring consensus.
whether the delivery models will use resources and energy
effectively while achieving social returns for stakeholders. » Each score should go through an iterative process and
sense checking.
› Only include this criterion where one delivery model
is expected to achieve better sustainability outcomes » Scores must be justified and have a supporting
than others. rationale given (preferably sourced from Step 1).
» Economic externalities: to minimise negative externalities » Spreadsheets and supporting rationale should be
and enhance positive externalities for stakeholders, circulated to participants for final consultation and
including how delivery models will perform for factors modification.
such as noise and pollution. » Use resulting scores to identify and rank preferred delivery
› Only include this criterion where one delivery model model/s.
is expected to achieve better economic outcomes
than others. Outcomes
» Flexibility: where a proposal’s operations are either not » Evaluating and analysing potential delivery models
suited to a long term contract or the output requirements results in the recommendation of a procurement model
are uncertain, then it may need flexibility to undertake that is likely to optimise value-for-money in delivering
modifications over the contract term or flexibility of the investment.
the operational phase contractual period. In this case, » The analysis explores packaging options for the
flexibility would be a valid criterion for evaluation. procurement as well as development of private finance
Decide on criteria weightings based on their effect on models (if appropriate) ensuring all options have
achieving value-for-money across all delivery models. been considered.
You can use mathematical approaches such as Rank
Order Centroid, Pairwise or Swing Weighting to set better
weightings. Whichever method you use for weightings,
you should have sufficient justification and rationale for
each weighting from the analysis and evidence developed
during Step 1.

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D3 Next steps

Purpose
This section should document the next steps in developing your proposal. This may include plans for progressing the proposal
to the Stage 3: Detailed Business Case.

Considerations
If your Stage 2: Options Analysis is recommending that a preferred option/s continues to a Stage 3: Detailed Business Case,
you will need to develop a high-level delivery and resource plan for Stage 3: Detailed Business Case.

Content to include
This section should include content as outlined in Table 26.

Table 26: Next steps content and considerations

CONTENT CONSIDERATIONS

Plan for developing a The plan should examine the requirements for a Stage 3: Detailed Business Case including:
detailed business case
» governance
» clarity regarding scope
» a list of required investigations
» resource requirements
» key proposal milestones, including date and responsible person
» proposed stakeholder engagement activities
» cost estimate for developing the detailed business case
» details of any urgency required.

Outcomes
The next steps section will clearly articulate the way forward for the proposal, including where appropriate, progress to
a Stage 3: Detailed Business Case.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 75

 Conclusions

Purpose Outcomes
Conclusions should draw together the key analysis findings The conclusions section should clearly explain and draw
from sections A, B, C and D. together the key findings from Section A, B, C and D.

Approach
Clearly articulate the outcome of the options analysis
filtering process including the economic, social, financial
and environmental merit of the proposal. Explain how the
preferred options meet the service need and delivers these
quadruple bottom line outcomes.
Summarise key issues that could affect the delivery of the
proposal and its benefits.
Document conclusions drawn from the following analyses
(where relevant):
» strategic considerations (government-level issues and
risks, and legislative issues)
» options analysis, incorporating socio-economic analysis,
including CBA results (BCR and NPV), financial/commercial,
sustainability and environmental considerations
» assumptions, limitations and constraints of the
options analysis
» any implementation issues including any approvals issues
and timeframes.

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Recommendations

Purpose Outcomes
The recommendations section should clearly outline the » The recommendations section should:
actions that decision-makers should consider further. › clearly note the proposal outcome i.e. whether the
preferred option/s is viable, rejected or modified
Considerations › clearly outline the actions required by the investment
» Document your justification for the proposal to proceed, decision-maker.
by incorporating all the aspects considered in sections B,
C and D, and particularly the socio-economic viability of
the proposal as outlined in Section C4: Economic analysis.
» If the recommendation is to proceed i.e. the preferred
option/s are viable, summarise the preferred option/s
to progress to Stage 3: Detailed Business Case.
» Summarise the recommended delivery option for the
preferred option/s.
» Complete the benefits and risks registers and note any
possible future risk and benefits activities.
» If the recommendation is to proceed to Stage 3:
Detailed Business Case, this section should also:
› seek approval for the implementation plan
(and associated documents)
› highlight significant issues or risks for decision-makers
(if appropriate)
› include recommendations about optimal timing.
» Factors from the options analysis that typically require
recommendations include:
› the viability and endorsement of the preferred option/s
(economic, social, environmental, financial, affordability
and commercial)
› progression to procurement and approval of the
implementation plan
› key activities/thresholds that need to be achieved
before the proposal goes ahead
› identification of significant issues or risks
› key timeframes, timing and governance arrangements.
» If the outcome of the options analysis concludes that a
non-infrastructure preferred option/s should progress,
the executive summary should include recommendations
about the governance arrangements, oversight and
ownership of the proposal in future.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 77

 Health check D

# HAVE THE FOLLOWING TASKS BEEN COMPLETED? SECTION COMPLETED

1 Reviewed and documented market considerations D1

2 Completed qualitative assessment of a range of potential delivery models D2

(traditional and PPP), determining which delivery model is likely to deliver
the best value-for-money

3 Documented the methodology adopted for the delivery model assessment D2

4 Summarised the outcomes of a traditional delivery model assessment D2

5 Summarised the outcomes of a value-for-money PPP assessment D2

6 Completed and documented a Gate 1 Assurance Review (if required) A2

7 Prepared a detailed delivery and resource plan for the Stage 3: Detailed D3
Business Case (if required)

8 Summarised the service need or problem, outcome, targeted benefits A3

and options analysis in the conclusion to the Stage 2: Options Analysis

9 Documented conclusions Conclusions

10 Documented recommendations Recommendations

11 Completed an executive summary Executive summary

12 Updated the risk register Appendix 2

13 Review the finalised options analysis to assess whether:

» it is complete
» the information is contemporary, reliable and reasonable
» it is robust, defensible and transparent
» it clearly documents ownership
» assessments and documentation enable the options analysis
to be compared to others.

# CRITICAL DECISION POINTS

1 Has refining the options during options analysis assessments resulted in any
benefits no longer being valid?

2 Is the proposal still valid considering any changes to the general environment,
underpinning service need demand or the implementation of other
programs/initiatives since the options analysis was completed?

3 Is the preferred option/s economically, socially and environmentally viable?

Page 78 | Business Case Development Framework – Stage 2: Options Analysis Guide

Glossary

Benefit A measurable improvement resulting from an investment perceived as an advantage by

one or more stakeholders.
Benefits might initially be stated in terms of the outcomes being targeted in response to
a problem/opportunity before being refined in terms of the potential benefits that will be
achieved from one or more options.

Benefits management The identification, definition, monitoring, optimisation and realisation of benefits.
Benefits management is a whole-of-life, whole-of-system process.
Benefits management involves measurable improvement resulting from the investment
in the potential option and contributes to one or more objectives sought by an agency or
government.

BCDF The Queensland Government Business Case Development Framework

https://www.statedevelopment.qld.gov.au/

Disbenefit An adverse impact illustrated through a measurable decline resulting from a negative
consequence of implementing a particular solution.

Outcome The result of change, normally affecting real world behaviour5.

PAF Queensland Government’s Project Assessment Framework

https://www.treasury.qld.gov.au/projects-infrastructure/initiatives/project-assessment-
framework/index.php

Stage 1: Strategic Previously referred to as Strategic Business Case.

Assessment

Stage 2: Options Analysis Previously referred to as Preliminary Business Case.

5
UK Office of Government and Commerce definition

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 79

 Appendix 1: Benefits register

Benefits identified during Stage 2: Options Analysis At Stage 2: Options Analysis stage, the benefits register is
development should be captured in a benefits register. Table used to ensure that options address the targeted benefits
27 presents an example of a benefits register. Initially, the and enable stakeholders’ needs to be incorporated into the
benefits register might only involve completed columns for: options design. The benefits register in the Stage 2: Options
Analysis should include information gathered (and retained)
» benefit description during Stage 1: Strategic Assessment, as well as the
» statement of problem/opportunity or proposed suggested category of the benefit, dependences, risks and
initiative the benefits relate to other relevant considerations. Further information on
» related stakeholder/s refining benefits can be found in the Benefits Management
» potential beneficiary Guide and the Social Impact Evaluation Guide.
» possible measures
» relative importance.

Table 27: Example benefits register

INITIAL BENEFIT REGISTER

PROBLEM/OPPORTUNITY
BENEFIT STATEMENT OR POTENTIAL RELATED POTENTIAL POSSIBLE RELATIVE
DESCRIPTION INITIATIVE STAKEHOLDER/S BENEFICIARY MEASURES IMPORTANCE

Page 80 | Business Case Development Framework – Stage 2: Options Analysis Guide

Appendix 2: Risk register

While developing a Stage 2: Options Analysis, risks should be captured in a risk register. Risk assessments are sometimes very
linear in their approach and fail to reflect links with broader system disruptors so think broadly for potential risks.
Initially the risk register might only involve completed columns for:
» risk description
» trigger
» impact.
At Stage 2: Options Analysis, the risk register is used to identify and shape options and to identify stakeholders. Further details
will be included in the risk register as the options are further refined in the Stage 2: Options Analysis. Table 28 presents an
example of a risk register.

Table 28: Example risk register

RISK REGISTER
RISK RISK CONSEQUENCE RISK CONTROL
CATEGORY DESCRIPTION TRIGGER IMPACT LIKELIHOOD OF RISK RATING STRATEGY
THERE IS A … CAUSED .. RESULTING
RISK THAT … BY … IN ..
Delivery There is a risk … caused by … resulting in Likely Major High Ensure the
construction is extended an extended schedule
delayed. periods of construction includes
rain. period which sufficient float
may impact to account
on … for potential
weather delay.

Demand There is a risk … caused by … resulting in Possible Moderate Medium Agency to

local growth new local lower traffic keep in close
strategies may councillors volumes and and regular
change under having a toll revenue. contact with
the newly stronger council.
elected local preference
council. for urban
containment.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 81

 Appendix 3: Initial stakeholder engagement plan

A stakeholder engagement plan includes the stakeholders At Stage 2: Options Analysis, the stakeholder engagement
relevant to the service need who should be considered plan should include:
during Stage 2: Options Analysis. The stakeholder
engagement plan should document the methods and » stakeholder name/description
frequency with which stakeholders will be engaged. » extent of stakeholder interest and influence in the
The stakeholder engagement plan is a living document service need/potential initiative
and should be adjusted throughout Stage 2: Options » proposed mechanism for stakeholder engagement
Analysis development. (i.e. inform, consult, active participation)
Stakeholder engagement is highly recommended. If you » risks of engaging (or not) with stakeholders
choose not to engage with stakeholders during Stage 2: » proposed strategies for managing stakeholder risks.
Options Analysis development, use a draft stakeholder
engagement plan to document stakeholder interests in See example in Table 29.
the initiative.

Table 29: Example stakeholder engagement plan

INITIAL STAKEHOLDER ENGAGEMENT PLAN

STAKEHOLDER PROPOSED RISK
NAME/ INTEREST LEVEL INFLUENCE MECHANISM MANAGEMENT
DESCRIPTION (H,M,L) LEVEL (H,M,L) AND ACTIONS RISKS STRATEGIES

Page 82 | Business Case Development Framework – Stage 2: Options Analysis Guide

Appendix 4: Multi-criteria analysis

The following tables provide examples for developing a

multi-criteria analysis to filter the options longlist, using
the supporting analysis undertaken. This is the first stage » These tables are provided as
of options filtering and results in an options shortlist. examples only.
» The assessment criteria should be
The process to set the criteria and criteria weighting for
tailored to individual proposals to
multi-criteria analysis is important. The right weighting
ensure the approach is relevant.
will support selection of the best options and avoid
later reworking. » The supporting analysis used
to evaluate the options longlist
Consider using numeric values for comparison and is critical.
selection of preferred options.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 83

 Table 30: Example multi-criteria analysis

BENEFITS SOUGHT
This assessment considers the degree to which the potential options realise the benefits sought [insert benefit].

DESCRIPTION SCORE

Y
The option: 0

ON L
» does not deliver the benefits sought.

E
The option: 1

P L
» partially delivers the benefits sought.

The option:

X A M 2

E
» partially delivers the benefits sought, with the possibility of increasing the degree of benefits
realised with further investment.

The option: 4
» fully delivers the benefits sought.

The option: 5
» fully delivers the benefits sought; provides additional incremental benefits for the wider community.

STRATEGY AND POLICY

This assessment considers the degree to which the potential options are aligned with other government initiatives.

DESCRIPTION SCORE

The option: 0
» does not support the delivery of other government initiatives, and.
» is not aligned with the timing of other government initiatives.

The option: 1
» partially supports the delivery of other government initiatives, or

N LY
EO
» is partially aligned with the timing of other government initiatives.

P L
The option: 3

M
» partially supports the delivery of other government initiatives, and

EXA
» is partially aligned with the timing of other government initiatives.

The option: 4
» fully supports the delivery of other government initiatives and is consistent with a whole-of-
government approach, or
» is fully aligned with the timing of other government initiatives.

The option: 5
» fully supports the delivery of other government initiatives and is consistent with a whole-of-
government approach, and
» is fully aligned with the timing of other government initiatives.

Page 84 | Business Case Development Framework – Stage 2: Options Analysis Guide

SERVICE NEED
This assessment considers the degree to which the potential options sufficiently address the service need.

DESCRIPTION SCORE

The option: 0

Y
» does not address the service need.

The option:

O N L 0

E
» partially addresses the service need.

The option:

M P L 1

A
» partially addresses the service need, with the possibility of fully addressing the service need with

E X
further investment.

The option: 4
» fully addresses the service need.

The option: 5
» fully addresses the service need, and
» provides additional incremental benefits for the wider community.

LEGAL AND REGULATORY

This assessment considers the degree to which the potential options are aligned with applicable legal and

Y
regulatory requirements.
DESCRIPTION

ON L SCORE

The option:

L E 0

MP
» does not align/meet the required legal and regulatory requirements.

The option:

The option: E X A
» partially aligns/meets the required legal and regulatory requirements.
1

3
» fully aligns/meets the required legal and regulatory requirements.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 85

 SUSTAINABILITY CONSIDERATIONS

Y
This assessment considers the degree to which the potential options contribute to the sustainability goals.

DESCRIPTION

O N L SCORE

The option:
» does not meet any of the outlined sustainability goals.
P L E 0

M
EXA
The option: 1
» partially meets the outlined sustainability goals.

The option: 3
» meets all the outlined sustainability goals.

MARKET CONSIDERATIONS
This assessment considers the degree to which the market can deliver the options.

DESCRIPTION

N LY SCORE

For the option:

L E O 0

P
» There is no market capability to deliver this option.

M
EXA
For the option: 1
» There is limited market capability to deliver this option

For the option: 3

» There is market capability to deliver this option.

Page 86 | Business Case Development Framework – Stage 2: Options Analysis Guide

PUBLIC INTEREST CONSIDERATIONS
This assessment considers the degree to which the potential options are aligned with the evaluated public interest
considerations. (i.e. public access and equity, impact on stakeholders, consumer rights, safety and security,
and privacy).

N LY
EO
DESCRIPTION SCORE

The option:

M P L
» does not meet any of the outlined public interest categories.
0

The option:

E X A
» does not meet all of the outlined public interest categories.
1

The option: 3
» meets all the outlined public interest categories.

Business Case Development Framework – Stage 2: Options Analysis Guide | Page 87

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