Radiology

Writing a good business case

Board of the Faculty of Clinical Radiology

The Royal College of Radiologists

Contents
Writing a good business case
What is a business case?
What makes a successful business case?
What makes projects unsuccessful?
Knowledge, personnel and skills required in constructing a business case
Key skills and functions
Key skill-holders your key partners in planning
The decision makers and the local and national decision-making processes
Project skills
Financial and accounting skills
Human resources (HR)
Information Management and Technology (IM&T)
Staff buy in
Phases of business case development
Project scales
The evolution of a fully sized business case
Phase I: strategic outline programme
Key outputs
To do list
Phase I consultation processes
Phase II: detailed planning the outline business case
Key outputs
To do list:
Phase II consultation processes
Phase III: procurement the full business case
Key output
Documentation required
Appendix 1. The Treasury Green Book, the Capital Investment Manual and the Scottish
Capital Investment Manual
Appendix 2. Treasury limits
Appendix 3. Foundation Trusts and Monitor
Foundation Trusts
Monitor
Appendix 4. Procurement and EU Public Contracts Regulations
Appendix 5. Project management
Why use PRINCE 2
PRINCE project methodology
Project roles
The trust board function
Project owner
Project sponsor
Project board
Project manager
Project team
Appendix 6. Funding options
Appendix 7. IT provision and costing checklist
Appendix 8. Information governance requirements
Appendix 9. Workshops in business case planning
Appendix 10. Assessing risk and sensitivity to risk

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Sensitivity analysis
Optimism bias
Appendix 11. Normalisation of costs for comparative purposes
Template 1. An abbreviated template for small projects
Template 2. A less abbreviated template for larger projects
Large business case templates
Bibliography
General references
Business case templates
Unsuccessful projects
PFI
Use of workshops in business case planning
Project management and methodology PRINCE 2
Software tools
INDEX

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Writing a good business case

Radiology is and always will be in a constant state of flux. Technological developments, changes in patient, political
and clinician perspectives and advances in knowledge and disease processes ensure that the need for radiology
services is always changing. Radiology must respond with robust business cases for projects which appropriately
meet the needs while best using the necessarily limited capital and revenue resources. To assist members, The
Royal College of Radiologists (RCR) has provided an update to our 1996 document Clinical Radiology Writing a
good Business Case, which has now been withdrawn.
Throughout this document, trust will be used to refer to the different types of health organisations delivering
healthcare in the UK.

What is a business case?

A business case should be considered as a proposal to a decision-making body to provide a new service or to
upgrade or maintain an existing service. In its fullest form, it summarises the detailed research required to allow the
organisation to come to an investment decision on a proposed project.
A business case documents the key analytic phase of a business plan, which is itself part of a wider trust strategic
plan.
The business plan is a broad entity consisting of three developmental phases:

Planning the business case

Project implementation
Project evaluation.

The business case evolves through three sequential iterative phases:

Scoping
Detailed planning
Procurement.

As a business case develops, informed decisions are made about the appropriateness of the case, before authority
is given to proceed to the next phase. The business case should, therefore, be considered as an evolving proposal
to a decision-making body to authorise a new service or to upgrade or maintain an existing service. The business
case should demonstrate that the proposed service is in tune with the strategic imperatives of the department, trust
and local health economy, that is a good use of capital and revenue; and that is affordable. From its outset, it
should express clear aims and objectives designed to respond to a business need. The business case should
develop with research, consultation and analysis, through a preferred way forward and a preferred overall solution,
to a detailed plan for project management, procurement, delivery and implementation.

What makes a successful business case?

A business case can reasonably be regarded as successful if:

It meets the above strategic, economic, business, financial and feasibility criteria
It is authorised by the appropriate body at each phase of its development
It results in a project judged retrospectively as successful by the parameters for success agreed during its
development.

It is much likelier to be successful if:

The documentation is designed to be read by the key decision makers

Key players in the decision-making, consultation processes, development and product supply have been
fully involved
Staff with specialist skills essential to the project are involved in its planning
Personnel using the new service and staff likely to undergo changes in role buy into the service
The documentation meets the parameters for assessment of business cases laid out in the Treasury Green
Book and the Capital Investment Manual or Scottish Capital Investment Manual (see Appendix 1).
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The documentation must be well structured and readable. This particularly applies to any summary
information provided. The physical layout of the documents must identify clearly:

The aims and objectives

The preferred overall way forward as well as alternatives to the preferred way forward

The preferred solution and alternatives to the preferred solution

The benefits and risks of these preferred and alternative ways forward and solutions

The benefits and risks of the status quo

The indicative costs in early phases of the business case, proceeding to detailed costs in later phases.

A clearly defined intended project methodology and plan, with clear project phases, dependencies and
interdependencies, milestones and completion dates, and control mechanisms
The project sponsor must be identified early and must take full ownership of the project
Lines of responsibility for the project must be explicitly stated and relevant responsible personnel identified.

What makes projects unsuccessful?

Projects fail. Failure can become apparent at any point during scoping, planning, procurement, implementation and
post-implementation assessment. Early failures result in relatively small resource implications. Failures which are
not recognised until implementation impact on human resources and staff morale; upon trust finances and the
public purse; and upon political and public perception.
Sometimes the reasons projects fail are unpredictable. Regrettably, however, many projects fail for predictable
reasons.
Predictable failures
Predictable failures generally occur because of errors in the business planning, project planning, project
management and procurement processes. Such failures can often be avoided by adherence to the processes
detailed in the Capital Investment Manuals produced by the Treasury and the Scottish Executive, the Treasury Five
Case Model, and the PRINCE 2 project management tools and methodology.
Unpredictable failures
The business case represents a planned response to a perceived business need at a particular moment in time.
Unpredictable project failures arise largely from changes in the business environment, the financial environment,
the clinical environment or the wider political environment. The larger the project and the longer the planned
schedule of the project, the greater are the risks of unpredictable failure.
To minimise and mitigate against unpredictable failures, the first step of each phase of the process is re-evaluation
of the strategic need, aiming to identify potential failure before large human and financial resources are expended.
Much has been written about project failures. For one succinct analysis and check list, see Common project
failures & remedies from the Scottish Capital Investment Manual (SCIM).

Knowledge, personnel and skills required in

constructing a business case
Business case development should be regarded as a mini project within the wider eventual project proper. It should
be approached with a clear understanding of the components required to bring the full project to a successful
outcome.
Key skills and functions

Organisational
Financial
Managerial
Project management
Technical
Human resource
Contractual and procurement
Estates and facilities
IM&T and information governance
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Clinical governance

Key skill-holders your key partners in planning

These include the following:

Clinical leads, general managers and executive directors within the trust
Regional and central funding bodies for larger projects
Clinicians who are most likely to benefit from the new service
Professional colleagues within the radiological department
Trust finance director and directorate accountant
Projects director and project manager
Estates manager
IM&T manager
Information governance manager
Clinical governance manager
Contracts or procurements manager
Human resources department
Any personnel group likely to be affected!

Remember that any change to the status quo may be driven or blocked by your potential partners. Ensure they all
feel part of the process of change.
The decision makers and the local and national decision-making processes
At each phase of business case evolution, a decision will be made whether to proceed to the next stage.
Diagnostic imaging is inherently capital and revenue intensive. Radiology projects may vary in size over several
scales of magnitude. Accordingly, depending on the size of the project, decisions regarding the acceptance of a
business case lie at various levels.
For small projects up to around 5,000, decisions may be made at the level of the department or directorate
general manager. For larger projects, most traditional or foundation trusts have a decision-making body below the
level of trust board.
For yet higher levels of project funding in non-foundation trusts, approval may be required by the trust board itself.
For very large projects, Treasury approval is required (see Appendix 2 for further details).
For foundation trusts, there is more leeway in the decision-making process, and precise decision mechanisms vary
between Trusts. Although the Strategic Health Authorities (SHAs) and primary care trusts (PCTs) have now been
abolished, local stakeholders should continue to be involved in the consultation processes, and Monitor, the body
responsible for overseeing foundation trust financial and clinical governance issues, will wish to be informed about
projects which could potentially adversely impact on the corporate or clinical stability of the trust or its local health
economy. Monitor will ultimately intervene and will insist on remedial action if a large or mission-critical project does
not proceed in accordance with plan, or if there are unanticipated over-runs on budget or timing (see Appendix 3.
Foundation trusts and Monitor).
When producing a business case involving procurements greater than around 100,000, one should also be aware
of the European Union rules on procurement which are updated on January 1 every two years (see Appendix 4. EU
Public Contracts Regulations).
Project skills
The business case should be approached with a clear understanding of project management, project hierarchy,
project methodology, and the skills and roles required to bring the whole project to a successful outcome. The
requisite skills are often readily available within a large NHS organisation and, for smaller projects, the general
manager, clinical lead, department accountant and other departmental staff may together possess these skills. One
must not, however, underestimate either the work required or the value of external expertise. This especially holds
for larger projects, particularly those involving construction or for more specialised installation. For a fuller account
of project management, see Appendix 5. Project management.
Financial and accounting skills
At each stage of its evolution, in accordance with the Treasury Five Case model, a business case is assessed for
affordability and good value for money. A radiology department uses a considerable proportion of trust revenue and
capital resources. Business cases can vary markedly in size and, accordingly, the decision making process may lie
at the level of department/directorate, trust, or the Treasury. Your directorate accountant and your trusts finance
department play pivotal roles in the construction of your business case.
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There are several models available for funding a project. Which model to use is dependent on project size,
lifespan, capital and revenue cost, and the availability of different sources of capital and revenue funding. A fuller
examination of available alternatives and their relative merits and demerits is given in Appendix 6. Funding options.
You should be aware that the national and EU rules about tendering for large and medium-scale projects should be
reflected in your business case (see Appendices 2 and 4).
Human resources (HR)
With all but the smallest projects, there are human resource implications. The issues involved may have important
human consequences and financial resource implications. Again, while many of the issues may be handled by
department staff, expert advice and support is available from your HR department. Issues include:

Employment
Change management
Staff training.

Employment
Your trusts HR department has experience in handling the human, legal and financial issues arising issues arising
from staff recruitment, deployment, redeployment, retention, reallocation and redundancy. In particular, they are
likely to have knowledge and understanding of employment law.
Change management
Staff may well feel threatened by the process of change and these issues need handled in an appropriate and
sensitive way. Use HRs expertise to plan the best strategies to handle these issues. Inept management will cost
you dear both in budget and the ultimate success of the project. Ensure that likely costs are foreseen and allow for
the unexpected.
Training
Any project may carry with it training issues. New equipment may require specialised training. In some instances,
providers of new equipment may provide some training. It is essential to ensure that required training will be given
and that it is contained within the overall budget.
IM&T
The IM&T implications of major NHS projects are frequently underestimated or overlooked and should be
considered early in the planning process (see Appendix 7).
Staff buy in
Existing staff within a radiology department should be regarded as key to the projects success. A project may well
also result in changes in practice and roles of clinicians, managers and other key staff groups. Staff should be
consulted very early in the project development.
If at all possible, one must endeavour to allow these key staff to own the project, by early consultation and by
involvement in project planning and key decisions.
Clinical governance
Most substantial projects carry a clinical governance payload. Key considerations include patient safety, patient
protection, patient data and patient involvement. Ensure your clinical governance groups know what is envisaged.
Information governance
If your proposed project uses, communicates, transfers, or stores patient or staff clinical or personal data, due
regard must be given to the means by which this data will handled and safeguarded.
There is extremely useful guidance on the NHS Connecting for Health website, with Information Governance
Toolkits tailored to various NHS organisations including acute NHS trusts at:
https://www.igt.connectingforhealth.nhs.uk/
The advice on the site is succinct, readable and comprehensive. An Information Governance Statement of
Compliance (IGSoC) and an Information Governance Assurance Statement should be completed
(http://www.connectingforhealth.nhs.uk/systemsandservices/infogov/igsoc/links). The latter is a mandatory
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requirement for connection to the NHS National Network (N3) and other Connecting for Health facilities. A fuller
discussion is given in Appendix 8.Information governance requirements.
Estates
Ensure that your estates department are involved early in the process. They have overall responsibility for any new
building work and the necessary infrastructure required within this.
Contracts and procurement
Most trusts have skilled contracts and procurement staff. They will often expect a business case to be expressed in
terms of preferred or shortlisted options in a common financial format, where each option can be satisfactorily
compared with the others. This is not a job for amateurs! They also have knowledge of the providers and possess
the negotiation skills to ensure robust contractual arrangements. In addition, they are familiar with the law on
contracts and national and EU rules on procurement and tendering. Their experience, knowledge and skills are
essential for your business case (see Appendices 2, 4 and 6 for more information).
Phases of business case development
Business case development should be considered an iterative process. In accordance with the best-practice
guidance given in the Treasury Green Book and the Capital Investment Manuals (see Appendix 1), a fully sized
business case is usually considered in terms of three phases:

Scoping phase, usually expressed as the strategic case

Planning phase, usually expressed as the outline business case
Procurement and detailed project planning usually expressed as the full business case.

Project scales
The size and cost of a project determines the rigour with which the full scoping, planning and procurement model is
followed. A small project may be expressed as a business case on one or two A4 sheets. A business case for a
much larger project requires considerably more detail with key outputs from each of the iterative stages.
Representative templates are given on pages 30 and 32.
The evolution of a fully sized business case
The phases and processes involved in business case development are detailed in the Capital Investment manuals,
the Office of Government Commerce, the Scottish Executive and in PRINCE 2 manuals in differing but parallel
terms. All adopt similar approaches; however, for the purposes of clarity, the key outputs from the three phases are
detailed below.
Project phase
Phase I. Scoping
Strategic outline programme &
Strategic outline case
Phase II. Detailed planning
Outline business case

Phase III. Procurement

Full business case

Output
The strategic context
The case for change
The preferred way forward
Indicative costs
Full five case model evaluation of the options to deliver
the preferred way forward
Detailed costs
The preferred option chosen
The likely contract
The overall plan for procurement the procurement
strategy
Details of the procurement process
Details of the management arrangements to deliver the
project
A document suitable for a final investment decision
A contract ready for signing

Phase I. Strategic outline programme

Having ascertained that there is a need for change, the strategic context and the case for change are explored, and
a preferred way found which meets the strategic imperatives of the trust, the local health economy and the
broader NHS.
Key outputs

The strategic context

The case for change
The preferred way forward
Indicative costs

To do list
Any project must match the strategic direction of the trust and the wider health economy. In general, a project will
seek to do one of the following:

Provide a new service

Expand or improve an existing service
Ensure ongoing provision of current service
Contract or curtail an existing service.

The strategic outline programme should state the strategic outline context and indicate that the proposed
development is in line with the strategic aims the strategic fit. Having indicated a case for change, that case
should be justified the strategic outline case. The eventual output from the scoping steps should include the
following:

The strategic context in terms of the trusts strategic plan

The key strategic service requirements
The funding bodys investment and business objectives
Expression of the key strategic requirements as SMART terms the objectives must be:
Specific
Measurable
Achievable
Relevant
Time constrained
The current market for the new service be aware that markets often change rapidly in accordance with,
for example, health perceptions, political expediencies and changing costs
The benefits and risks of the status quo
The benefits, risks and constraints of the proposed project
Key project dependencies
Key critical success factors
Long list of options for a way forward
Strengths, weaknesses, opportunities and threats (SWOT) analysis on basis of research and consultation
Shortlist of options for a way forward
The preferred way forward
Indicative costs.

Available options should be explored. A long list should be prepared and pared down to a manageable shortlist on
the basis of analysis and consultation (see Phase 1. Consultation processes).
As indicated above, the documents produced should refer to the Treasury Five Case Model and the Capital
Investment Manuals as in many cases this will form the basis on which the proposal is assessed (see Appendix 1).
In particular, it should follow the five arms of this model:

Strategic meets appropriate strategic aims and objectives

Economic is good value for money
Commercial makes good business sense
Financial is affordable
Managerial is achievable.

At the end of this first phase, the following should be met:

A clear strategic case should have been made

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The project should be commercially feasible and deliverable

The project should be affordable within an agreed budget
The project should meet clear, measurable management deliverables.

The strategic outline case should end with a recommendation signed by the project sponsor.
Phase I. Consultation processes
The decisions made in this process are crucial to the eventual project success, and should be owned by the whole
team. At key decision points, it is prudent to bring together the potential users, project staff and stakeholders at
brainstorming sessions. Typically, one would use a workshop to agree the following parameters:

Overarching business needs

Investment objectives
Scope of the project
Desired outputs an outcomes from the project
Critical success factors
Possible broad options, often expressed as a long list.

A second workshop is generally required to firm up the broad options into a usable shortlist. Conventionally, this
has been expressed in terms of:

A reference project often, but not always, taken forward as the preferred option.
A do nothing option
A less ambitious option
A more ambitious option.

Workshops are explored more fully in Appendix 9. Workshops in business case planning.

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Phase II. Detailed planning the outline

business case
Having re-checked the business parameters examined in Phase I to ensure that the strategic context and the
underlying commercial, financial, economic and managerial drivers remain valid, the outline business case
examines the preferred way forward in detail and generates a more detailed preferred option, a detailed draft of a
likely contract and an intended plan to procure the project.
Key outputs

Full financial, commercial, economic and managerial evaluation of options

Preferred option generated from shortlist options by strategic, economic, commercial, financial and
managerial option appraisal
Statement of commissioner/purchaser/stakeholder support
Likely contract
Procurement strategy.

To do list
A: Strategic, economic, commercial, financial and managerial option appraisal
I: Assess the options
For each of the five-case model parameters, assess the options from Phase I:

The status quo option; that is, no change

The reference project, generally the preferred project against which others are evaluated
A further, more ambitious option
A less ambitious option
Strategic assessment
Re-evaluation of strategic context and shortlist generated by Phase I
Full financial, commercial, economic and managerial evaluation of options
Review of the indicative costs stated in Phase I
Value for money (VFM) assessment including:
Full evaluation of costs
Assessment of risks including service risks and optimism bias, sensitivity analysis and
switching value (crossover value) analysis and scenario planning. For a fuller discussion on
these seemingly obscure terms, see Appendix 10. Assessing risk and sensitivity to risk.
Financial (affordability) assessment:
State treatment of the project on the balance sheet
Do full financial profile for each shortlisted option
Adjust all costs to net present value (NPV); see Appendix 11. Normalisation of costs
Assess non-financial risks and benefits
Assess uncertainties (sensitivity analysis)
Assess financial impact on the funding body.

II. Describe preferred option.

B: Procurement strategy

Detail preparations for potential contract

Detail procurement strategy
Specify whether regional procurement or other collaborative arrangement
Specify method of procurement/tender etc
Specify advertising project eg, local, national and international trade journals etc
Specify rules relevant to contract such as Official Journal of the European Union (OJEU) rules, Public
Contracts Regulations 2006 (see Appendix 4. EU Public Contracts Regulations).
Specify nature of negotiations
Specify timescales
Specify evaluation criteria for tender
Specify service streams
Specify apportionment of risk
Specify incentives and penalties for project completion and service delivery
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Specify service level agreement and penalty thresholds

Specify costs for increased volume of service
Specify costs and criteria for maintenance, hardware and software updating and other key contractual
issues
State standard form of contract to be used.

Phase II. Consultation processes

As in Phase I, consultation is the key to success. A workshop is usually used to assess each of the shortlist options
defined in Phase 1, looking at strategic, commercial, economic, financial and managerial parameters.
Conventionally, these are expressed as a grid, often prepared before the workshop, and subject to modification
and final agreement as an agreed option by the consultation group forming the workshop.
A second workshop is often required to explore the potential procurement options, the service specification and the
likely contract.
A final workshop should decide procurement strategy, project plan, post-project arrangements and postimplementation evaluation. Some of the functions performed by this stage may also form part of Phase III.
Workshops are explored more fully in Appendix 9. Workshops in business case planning.

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Phase III. Procurement the full business

case
Having fully developed the procurement strategy in the outline business case, the steps to date are re-evaluated to
ensure they remain valid. The intended procurement process is decided. The commercial, contractual managerial
and project management details are finalised in the light of negotiations with suppliers. A tendering process is
prepared and implemented. The tenders are evaluated. A final supplier is chosen. The final contact is prepared for
signing.
Key output

Final contract ready for signing.

Documentation required
A statement that a re-evaluation of project has been undertaken to ensure the project and preferred option
identified at Phase II remain strategically appropriate and affordable etc.

Details of procurement process

The contract itself
A statement of approval for signing by senior managerial team

I. Details of procurement process

The tendering process

The tendering criteria to be met by suppliers who wish to tender
The offers tendered
Details of tender evaluation and selection of a preferred supplier. Selection must be made on the basis of
explicit evaluation parameters and arrangements available to suppliers prior to tender.
Detailed economic appraisals of:
The offers at final tender
Costs expressed as full cost over contract period and lifetime investment corrected to current date (see
Appendix 11. Normalisation of costs)
Costs falling upon organisation on other public sector organisations from each option
Preferred choice chosen on basis of costings, non-financial benefits and risks, and sensitivity analysis.

II. The contract itself

The negotiated deal and contractual arrangements

The financial implications of the deal
The project management arrangements and plans
Full benefits realisation arrangement and plans
Full change management arrangement and plans
Risk management arrangements and plans including any risk-sharing arrangement
Full contract management arrangements and plans
The arrangements for any change in the contract
The contracted consequences of either party failing to meet contractual responsibilities
The arrangements for post-project evaluation

III. A statement of approval for signing by senior managerial team

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Appendix 1. The Treasury Green Book, the Capital Investment Manual and
the Scottish Capital Investment Manual
The Treasury Green Book (http://www.hm-treasury.gov.uk/data_greenbook_index.htm) is a definitive guide to the
preparation of public sector business cases, containing not only valuable advice on the calculation of the
investment related costs, but practical advice on the preparation of business cases.
A selection of the most relevant pages is given here.

Business case guidance home page

Public Sector business cases using the Five Case Model: guidance
Public Sector business cases using the Five Case Model: templates
A short plain English guide to assessing business cases

The Capital Investment Manual and its Scottish equivalent (the Scottish Capital Investment Manual) have been the
definitive guides to investment in small and large projects since 1994 and 1996 respectively. Each of these
provides sections on business case development from initiation to post-project evaluation, in either online or
downloadable format. While, south of the border at least, some of the mechanisms described have been
superseded by subsequent guidance, and both pre-date private finance initiative (PFI) and foundation trusts, both
contain links to relevant updates. These manuals provide invaluable advice in a highly readable format. Both are
worth a look as some readers may find one or other more digestible. Relevant links are given below.

Capital Investment Manual

Capital Investment Manual Business Case Guide
Scottish Capital Investment Manual
Scottish Capital Investment Manual Business Case Guide

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Appendix 2. Treasury limits

The limits for capital spends are defined by the Treasury and are regularly updated. At the time of writing, the most
recent documentation still refers to NHS bodies which are about to be dissolved. Relevant updates will appear on
the Department of Health website.
The arrangements for delegated limits for trust capital investment changed as of December 2010. Foundation trust
arrangements before this were defined by a trusts turnover and by its performance under Monitor scrutiny.
Since December 2010, a 3 million effective limit has been placed on non-foundation trusts limits to spend without
prior strategic health authority approval (SHA). For sums between 3 million and 35 million, SHAs may approve.
Above 35M, both Department of Health and Treasury approval must be given. These limits may be subject to
further constraint by the Department of Health.
It has been made clear by central government that all trusts will eventually assume foundation status. Capital
spending by foundation trusts limits will no longer be limited by turnover and performance. The figure they are
allowed to spend will be defined by adding sums they generate internally to their prudential borrowing limit (PBL),
this latter figure derived from a complex accountancy parameters for each individual foundation trust. See also
Appendix 3. Foundation trusts and Monitor.

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Appendix 3. Foundation trusts and Monitor

Foundation trusts
Foundation trusts were formed under the Health and Social Care (Community Health and Standards) Act 2003. It
was intended by the then government that decision-making processes should be devolved to individual healthcare
trusts. Foundation trusts are not under direct control of the Health Secretary, and have considerable freedom to
organise services as they (or more strictly, their Boards of Governors) feel is in line with their local needs.
Along with this operational freedom, foundation trusts have more financial freedom. Old-style trusts are limited in
their ability to fund and acquire funding for large capital projects. Foundation trusts can use innovative methods of
funding and can borrow money for large project outside the NHS. Their limit to spend is defined by the sum of
internally generated monies and their prudential borrowing limit (PBL). The PBL is determined individually for each
foundation trust on the basis of five accountancy parameters. For details, see Appendix 6. Funding options.
In time, while it is intended that all NHS trusts will become foundation trusts, it was recognised from the outset that
trusts varied in their corporate performance and their financial maturity. Trusts were only allowed to attain
Foundation status if they were able to prove their performance was satisfactory. In order to protect health services
and public money, an independent regulator, Monitor, was formed.
Monitor
Monitor ensures that foundation trusts provide service quality and financial stability. Each foundation trust reports
quarterly to Monitor, and is given two risk ratings, for governance (rated red, amber-red, amber-green or green)
and finance (1 is bad, 5 is good). These affect, amongst other things, a Trusts freedom to borrow. Significantly
poor ratings result in action plans and monthly reports. Good ratings result in a hands-off approach.
Monitors key documents are available on the Mandatory Guidance web page and includes pages on:

Information foundation trusts must supply to Monitor (Terms of Authorisation)

How Monitor assesses trusts against those Terms of Authorisation (Compliance Framework)
How trusts must report to Monitor (NHS Foundation Trust Annual Reporting Manual)
How trusts prudential borrowing limit is determined (Prudential Borrowing Code).

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Appendix 4. Procurement and EU Public Contracts Regulations

Public contracting authorities have a legal obligation to comply with the Public Contracts Regulations 2006.
The Department of Health (including the Dental Practice Board; National Health Service Strategic Health
Authorities; NHS trusts and the Prescription Pricing Authority) is clearly listed as a Central Government Body under
Schedule 1 of the regulations and therefore, when procuring over set financial thresholds, must comply with the
regulations in their entirety. The key principles of the legislation should also be followed for all purchases
regardless of financial value.
Key principles

Purchasers must behave transparently by advertising their requirements openly to encourage competition.
Discrimination is specifically forbidden.
Purchasing decisions must be objective and based on pre-set criteria relevant to the purchase.

EU thresholds are set every two years and, at the time of writing (1 January 2012 issue) are:

Supplies 113,057
Services 113,057
Works 4,348,350

Business decisions relating to how a purchase is to be financed and whether to buy, lease or outsource should be
taken by the organisation before any procurement exercise. It is necessary for the contracting authority to provide
the market with as much information as possible regarding their requirements/aspirations in the specification at the
start of the procurement process; this allows the market to respond appropriately providing for a robust final
contract.
Contracting bodies can face significant penalties for non-compliance with the regulations. Three particular areas to
consider are the following.

Evaluation criteria the contracting authority must provide the criteria to be used to evaluate any tender
submission. Once the criteria have been agreed and published, they must be used throughout the
procurement process. A contracting authority must not evaluate tenders using criteria other than those that
all tendering suppliers have been made aware of prior to submitting their tenders.
Calculation of contract value the value of the proposed contract must be estimated before undertaking a
procurement to determine which rules apply. The value of the contract is the total consideration to be paid
over its full term and not simply the estimated annual expenditure. Where the term of the contract is
indefinite or uncertain, the annual consideration should be multiplied by four years to give the total of the
contract. See also Appendix 11. Normalisation of costs.
Aggregation contracts of a similar nature should not be artificially split into different parts to avoid the
application of the organisations minimum threshold for the applicable EU Threshold. If there is doubt as to
whether contracts must be aggregated, advice should be sought from your organisations
procurement/supplies department.

Things to consider before commencing a procurement process

Is there a current contract/framework (nationally; regionally or locally) that may cover your requirement?
Your procurement/supplies department will be able to provide you with the appropriate information and
support.
Is the requirement specific to your department/business unit or may other areas of the organisation require
the same or similar? Your procurement/supplies department should be able to support further discussions.
Do you have a clear understanding of what your scope/requirements are? If not, speak to your
procurement/supplies department, they may be able to share contract data/specifications from other
contracting organisations and learn from lessons of others.
Do you know the market place you wish to work with? Again your procurement/supplies department should
be able to support your research and understanding.
If the contracting authority is carrying out a tender process sufficient time must be allowed, generally the
whole process can take approximately three to four months.

Useful links

www.dh.gov.uk/en/Aboutus/Procurementandproposals/index.htm
www.dh.gov.uk/en/Aboutus/Procurementandproposals/Tenders/index.htm
http://simap.europa.eu/buyer/forms-standard/index_en.htm
17

Appendix 5. Project management

Why use PRINCE 2?

PRINCE project methodology
Project hierarchy

Why use PRINCE 2?

Projects which are poorly organised fail. Examples of projects which have overrun in timeliness, cost, or project
deliverables include various NHS IT projects, the Passport Office and the Scottish Parliament building.
The project methodology used almost universally in UK public service projects is PRINCE (PRojects IN Controlled
Environments) now in its second edition PRINCE 2. PRINCE 2 is a UK government process-based, project
framework. It is free, readily available in both printed and web-based formats, user-friendly and rigorous in its
approach.
A successful project is one which delivers quality results by predefined parameters; delivers by the pre-agreed
time; and which delivers within budget. PRINCE 2 helps those running a project achieve this.
PRINCE project methodology
PRINCE 2 breaks down projects into easily manageable chunks. Projects are driven in an organised and controlled
linear manner along a clear path with defined phases and project milestones. PRINCE 2 mandates:

Clear project aims

A clear project commencement
A defined time span for the project
Prerequisites for the project
Who does what
What it all costs?

Its methodology includes:

A clear time line with organised and controlled start, middle and end
A clear management structure with defined project roles
Management by exception that is to say, at each level, those managing part of the process are set clear
boundaries, and refer upward where these would be exceeded.
A project board which has three key members:
Business or customer
User
Technical or specialist
Project assurance:
Business or customer assurance responsibility of business or customer representative on project
board
User assurance responsibility of user representative on project board
Technical or specialist assurance responsibility of technical or specialist representative on project
board
Project support this must be adequately staffed if the project is to succeed
Control mechanisms including:
Quality control
Risk management
Identifying and controlling changes within the project
Document control.

Project management is a subject in its own right, much of which lies well beyond the scope of this document`. For
more detailed information on PRINCE 2, there is readily available printed and online material (see References), or
attend a PRINCE 2 training course.
Project roles
The structure below may not be followed to the letter, and is not exactly as specified by PRINCE 2. It is essential,
however, that the individual responsibilities and the lines of responsibility are clear.

Trust board
Project owner or senior responsible owner
18

Project sponsor
Project board
Project manager
Project team
Team members and professional advisors

The trust board function

The trust board has overall organisational responsibility for the project. It ensures that the project meets the key
strategic, commercial, affordability, best value-for-money and achievability parameters required for any Health
Service project which uses public money. It has an ongoing responsibility to ensure that the project continues to
meet these parameters and has the authority to authorise financial and human resources to complete the project
and to postpone or shelve the project if it becomes apparent that it is unachievable, unaffordable, or otherwise
ceases to meet strategic or commercial drivers. Its functions are:

To be in overall charge of project

To ensure that project meets the key strategic direction and aims of the trust identified in scoping the
project
To have clear SMART objectives
To ensure the project remains commercially valid, affordable, achievable and manageable, that is, it
satisfies the treasury five case model
To maintain and ensure visible commitment to the project
To define the role of the project owner (generally the chief executive) in the project
To define and ensure all necessary support for project sponsorship
To monitor or report and act on project performance, most particularly in terms of costs, schedule and
quality issues.
To act as a final arbiter of decisions exceeding the authority delegated to the project owner.

Project owner
The project owner or senior responsible owner is a named manager, generally at trust board level, often the trust
chief executive or an overall trust project director, who appoints the project manager on behalf of the trust board.
He or she acts as the trust guarantor for the project, and must demonstrate to all that the trust supports the project.
The key responsibilities are:

To act on behalf of the trust board in the decision-making process

To ensure the business case meets the criteria given above for the trust board
To agree a budget for the project
To recruit a suitable project director
To put in place an appropriate project structure and lines of communication
To ensure a clear and agreed project brief
To ensure appropriate performance management, reporting and documentation
To arbitrate upon deviations from the agreed scope, costs, quality and schedule of the project
To report to the trust board on exceptions to the above where these would impact adversely
To demonstrate and promote commitment visibly to the project.

Project sponsor
The project sponsor initiates the project and must be a named individual. In some instances, he or she may also be
project manager but, especially for larger projects, another named individual, the project manager, will have the
necessary organisational skills to carry the project through.
Project board
The project board takes overall executive responsibility for turning the plan into reality, and for ensuring that all
goes in accordance with the plan. It is accountable to the project owner. It is delegated responsibilities by the
project owner and it reports to the project board on progress, resource variations beyond its delegated limits and,
deviations from agreed timelines. The financial, corporate governance, clinical governance oversight and reporting
roles of the board are generally taken by named individuals. In accordance with PRINCE 2 principles, it should
contain business, user and specialist representatives. In order to facilitate decision-making, most trusts use small
project boards, with individual members performing dual functions. The operational functions are passed down to
the project team by the project manager. As issues requiring specialist knowledge or skills arise, expertise on these
may be brought in to provide relevant advice.

19

Project manager
The Project Manager is the operational manager who runs the project team. He or she sits on the project board
and reports to the board on progress, resource requirements and any variations from project timeline and budget. A
project manager is appointed by the project board and should have the key experience and skills commensurate
with the project size and complexity. Ideally, the project manager for the full project should be chosen as early as
possible, and should play a key planning role in production of the business case. One should be aware however
that, on occasion, the specialist skills may be required to project-manage the subsequent full project may be a
scarce or bought-in resource, particularly with large or complex procurements.
The project manager is recruited by the chief executive or by trusts project director. The roles of the individual
appointed include:

Fully develop the business case

Fully develop the budget for the project
Produce the project the brief, project plan and project control and quality of procedures in line with the
PRINCE 2 principles
Lead the project team in bringing the project to a successful conclusion
Ensure co-ordinated planning of the project to meet project milestones and eventually delivery
Ensure adequate resourcing within agreed delegated budgets for the different parts of the project
Ensure satisfactory performance of external suppliers and contractors
Ensure proper monitoring of schedules, costs and quality arbitrate upon issues which do not substantially
impinge upon agreed costs, schedules or quality
Report to project board on issues which significantly impact upon cost schedules or quality ensuring
eventual satisfactory project delivery
Ensure satisfactory evaluation of eventual project benefits.

Project team
The project team consists of the key operational staff, who through staff they manage or hire, perform the key
groundwork in making the project deliver.

20

Appendix 6. Funding options

Trust or department capital allocation and revenue allocation
Traditionally, before the establishment of foundation trusts, most radiology project funding was obtained by a trust
allocation of capital and revenue generally derived from the Treasury. For a service department like radiology, that
allocation was decided on the basis of a trusts requirement for radiological imaging. In general, the trust had and,
continues to have, a body composed of clinical and managerial staff which prioritises the various calls upon the
trusts capital and revenue allocation. In more recent years, and particularly for foundation trusts, there is now more
freedom to find more innovative solutions for capital and revenue funding.
Capital provision from the private sector
Foundation trusts now have, within limits, freedom to borrow directly from the private sector for capital projects (see
also Appendix 2. Treasury limits).
Leasing
Under leasing arrangements, the capital funding of a project is taken over by an outside provider. The leasing
company is paid a revenue sum for the hire of the capital items, and generally accepts responsibility for
maintenance and replacement.
Such an arrangement can be advantageous all round. It can avoid a large capital expense for expensive
equipment. It devolves technical, maintenance and human resource issues to a secondary provider.
Its principal disadvantage is the revenue cost, although some very competitive arrangements can be available.
Leasing companies have considerable experience of dealing with individual capital items and can themselves
make (and pass on) greater economies of scale than individual NHS trusts.
Public private partnership
While there are some other alternatives, the public private partnership arrangement most commonly used is the
private finance initiative (PFI). PFI is particularly suitable for large capital schemes. A considerable amount of
advisory material is available on the Department of Health website. Typically, a private company takes over the
design, build, finance and operation of the scheme (DBFO). A major advantage to the public purse is the transfer of
the quite substantial risks arising from large capital projects. There are, of course, some disadvantages to this
approach. First, there is some loss of control of the service. This should be avoided by careful contract wording.
Second, at a time of rapid innovation, it is crucial that a service is responsive to emerging needs. This has not
invariably been the case with PFI arrangements. Third, and a source of some quite public criticism, a PFI project
can result in a heavy revenue burden over a prolonged time period. Be that as it may, for most large projects, PFI
must be considered. Several relevant links are given in the reference section.
Managed service
A service or a substantial part of the service is devolved to an outside company. Common examples include IT as a
whole, PACS and radiology information systems. The company providing the service, which will often have
considerable experience in its particular field, undertakes the provision, management, maintenance and regular
updating of the service.
The services provided can be very good, reflecting the experience of the companies of the field. It is in the best
interest of the suppliers to ensure good service. Advantages of scale should be evident for the supplier and
customer.
Penalties should be put in place for failure to deliver services. Even large suppliers can have difficulties in meeting
their contractual undertakings. One should also be aware that the size of the contracts, and the level of
commitment required in accepting a single service supplier, makes it very difficult to switch suppliers if the service
provided does not come up to expectations or even to contract.
In general, most arrangements are volume sensitive. Potential hazards include inaccurate estimates of volume, or
change in volume. IT and networking requirements can, for example, show geometric growth. It is notoriously
difficult to estimate future requirements yet an inaccurate assessment of these requirements will invariably result in
either service under-provision, an extra unexpected requirement for revenue, or revenue wastage. The
consequences of variations from contracted service volumes must be explicitly stated and understood by all
parties. Contracts must be worded very carefully to avoid subsequent misunderstandings and large unexpected
revenue and capital surprises.
21

Third sector capital funding

Third sector (charity) capital funding is frequently available for large capital items. Most healthcare-related charities
are willing to consider bids for capital funding in radiology departments. This can result in improved service
provision. There are some caveats. First, revenue funding is only rarely available. Most if not all capital items
require revenue expenditure. It is distinctly unwise to accept a donated capital item if the revenue requirements
cannot be met. Second, donated or partially donated capital items can impose a requirement for further capital
expenditure such as buildings and infrastructure. Again, these must be fully costed and, if possible, included within
the funds provided by the donor.
In-house charitable funds
Many trusts have access to funds derived from donated individual bequests, legacies and other donations.
Generally, again, these are usually, though not invariably, purely capital resources for which revenue implications
should be fully costed.
Revenue neutral and/or capital neutral schemes or part-schemes
As indicated in the main text, valid reasons for a business plan include cost reductions and efficiency gains. A
project can be made capital or revenue neutral by funding the services provided with savings from the efficiencies
gained. There are many available options which can be useful if capital or revenue funding is severely restricted. It
is essential to ensure, however, that the anticipated gains from efficiencies are not only fully estimated but also fully
realised!
Co-operative projects working with other departments, trusts and private companies
Examples of co-operative projects have included tertiary services, medical physics and radiotherapy. Trusts often
welcome an opportunity to share the high inherent revenue and capital costs of radiological services. Co-operative
projects can result in economies of scale, and in reductions in the inefficiencies of equipment usage often found in
the NHS.
Similarly, many private companies offer to reduce their charges for services they manage in return for their freedom
to use or sell unused slots in their services.
National and regional projects
Some large projects are sponsored by regional or national bodies and come with the necessary capital and
revenue funds. When applying for these funds, one must recognise that the revenue estimates and funding are
tightly controlled, that costs for items not included in the stated documentation will not be funded, that year-on-year
increases in costs are also unlikely to be forthcoming, and that time-limited funding for a service will leave a
revenue burden when the funding ends!

22

Appendix 7. IT Provision and costing checklist

Most radiology projects have significant IT implications. Many projects underestimate the costs of IT. It is advisable
to fully cost the IT implications of radiology projects. Many of the items listed below have both capital and the
revenue implications. Some of the costs may use existing equipment, but good business practice dictates that a
costing is applied to these. Even where existing infrastructure can easily manage the new project, taking account of
the opportunity costs can identify underuse of resources within the organisation, and can predict step costs in
future projects; that is, costs incurred where existing infrastructure cannot quite manage and a large step in
resourcing is required.
Enabling costs (required from initiation of service)

PCs and associated peripherals printers, scanners etc, PC software and licences
Servers to run system
Server software and licences
Backup equipment
Backup software and licences
Uninterruptible power supplies
Network infrastructure cabling, routers and switches, etc
Estates building and room costs, power points and other electrical supplies, air-conditioning, furniture,
desks, wall mounts and shelving etc
Stationery and other expendables

Project costs (required during project development)

Staff radiology, supplier, IT/other

Project management
Supplier software; project management

Support costs (ongoing costs once service is running)

Support for infrastructure, hardware, backups, maintenance, user training, user support. This requires:
IT staff
Department staff
Supplier staff
Maintenance costs
Upgrade costs

Costs should be expressed as full lifetime costs (five years, non-recurring and recurring)

23

Appendix 8. Information governance requirements (from the Connecting

for Health website Crown Copyright )
At the time of writing, all NHS trusts are, as a condition of connection to the NHS N3 network, signed up to the
Connecting for Health Information Governance Statement of Compliance (IGSoC). You should be aware that any
service you initiate which connects directly or indirectly to the N3 network must satisfy the IGSoC. Your trust
submits each year an Information Governance Toolkit Assessment and an Information Governance Assurance
Statement. You must therefore ensure that your trusts Information Department are fully aware of any new service
handling patient or staff information.
Some useful shortcuts are:

Connecting for Health Information Governance

Information Governance Statement of Compliance
Information Governance download page
Portal to explanatory Information Governance Toolkit material
Information Governance Toolkit

Information governance management checklist

There is an adequate information governance management framework to support the current and evolving
information governance agenda.
There are approved and comprehensive information governance policies with associated strategies and/or
improvement plans.
Formal contractual arrangements that include compliance with information governance requirements, are
in place with all contractors and support organisations.
Employment contracts which include compliance with information governance standards are in place for all
individuals carrying out work on behalf of the organisation.
Information governance awareness and mandatory training procedures are in place and all staff are
appropriately trained.

Confidentiality and Data Protection assurance

The information governance agenda is supported by adequate confidentiality and data protection skills,
knowledge and experience which meet the organisations assessed needs.
Staff are provided with clear guidance on keeping personal information secure and on respecting the
confidentiality of service users.
Consent is appropriately sought before personal information is used in ways that do not directly contribute
to the delivery of care services and objections to the disclosure of confidential personal information are
appropriately respected.
Individuals are informed about the proposed uses of their personal information.
There are appropriate procedures for recognising and responding to individuals requests for access to
their personal data.
There are appropriate confidentiality audit procedures to monitor access to confidential personal
information.
Where required, protocols governing the routine sharing of personal information have been agreed with
other organisations.
All person identifiable data processed outside of the UK complies with the Data Protection Act 1998 and
Department of Health guidelines.
All new processes, services, information systems and other relevant information assets are developed and
implemented in a secure and structured manner, and comply with information governance security
accreditation, information quality and confidentiality and data protection requirements.

Information security assurance

The information governance agenda is supported by adequate information security skills, knowledge and
experience which meet the organisations assessed needs.
A formal information security risk assessment and management programme for key information assets has
been documented, implemented and reviewed.
There are documented information security incident / event reporting and management procedures that are
accessible to all staff.
There are established business processes and procedures that satisfy the organisations obligations as a
Registration Authority.
24

Monitoring and enforcement processes are in place to ensure NHS national application Smartcard users
comply with the terms and conditions of use.
Operating and application information systems (under the organisations control) support appropriate
access control functionality and documented and managed access rights are in place for all users of these
systems.
An effectively supported senior information risk owner takes ownership of the organisations information
risk policy and information risk management strategy.
All transfers of hardcopy and digital person identifiable and sensitive information have been identified,
mapped and risk assessed; technical and organisational measures adequately secure these transfers.
Business continuity plans are up to date and tested for all critical information assets (data processing
facilities, communications services and data) and service-specific measures are in place.
Procedures are in place to prevent information processing being interrupted or disrupted through
equipment failure, environmental hazard or human error.
Information assets with computer components are capable of the rapid detection, isolation and removal of
malicious code and unauthorised mobile code.
Policy and procedures are in place to ensure that Information Communication Technology (ICT) networks
operate securely.
Policy and procedures ensure that mobile computing and teleworking are secure.
All information assets that hold, or are, personal data are protected by appropriate organisational and
technical measures.
The confidentiality of service user information is protected through use of anonymisation techniques where
appropriate.

Clinical information assurance

The information governance agenda is supported by adequate information quality and records
management skills, knowledge and experience.
There is consistent and comprehensive use of the NHS Number in line with National Patient Safety Agency
requirements.
Procedures are in place to ensure the accuracy of service user information on all systems and/or records
that support the provision of care.
A multi-professional audit of clinical records across all specialties has been undertaken.
Procedures are in place for monitoring the availability of paper health/care records and tracing missing
records.

Secondary use assurance

National data definitions, standards, values and validation programmes are incorporated within key
systems and local documentation is updated as standards develop.
External data quality reports are used for monitoring and improving data quality.
Documented procedures are in place for using both local and national benchmarking to identify data quality
issues and analyse trends in information over time, ensuring that large changes are investigated and
explained.
A robust programme of internal and external data quality/clinical coding audit in line with the requirements
of the Audit Commission and NHS Connecting for Health is in place.
A documented procedure and a regular audit cycle for accuracy checks on service user data is in place.
The Completeness and Validity check for data has been completed and passed.
Clinical/care staff are involved in validating information derived from the recording of clinical/care activity.
Training programmes for clinical coding staff entering coded clinical data are comprehensive and conform
to national standards.

Corporate information assurance

Documented and implemented procedures are in place for the effective management of corporate records.
Documented and publicly available procedures are in place to ensure compliance with the Freedom of
Information Act 2000.
As part of the information lifecycle management strategy, an audit of corporate records has been
undertaken.

25

Appendix 9. Workshops in business case planning

Consultative workshops should form part of every robust business case. Workshops bring together key participants
in the process. It is essential that only the correct individuals are present. It follows that all present should have not
only the requisite skills, but the authority to make decisions in their key fields.
Each workshop should contain a sufficiently small number of participants to streamline the decision-making
process. Core members in a workshop are:

Facilitator
External stakeholder or commissioner
User representative
Financial representative
Technical representative
Project manager.

In addition, at project initiation, senior representatives of the trust board and the trust programme direct should
attend the project must not proceed without their support.
As the project develops, this core group should call in as required any specialist support, as temporary members.
The workshops should be tightly managed with clear agendas and strict timetables. Considerable preparation is
mandatory as will be evident from the workshops suggested in the main text see Phase I. Consultation processes
and Phase II. Consultation processes.
A fuller description of workshops in given in the Capital Investment Manual, while the Scottish Capital Investment
Manual provides a useful table of workshop objectives, participants and key outputs see references under
Appendix 1. The Treasury Green Book.

26

Appendix 10. Assessing risk and sensitivity to risk

When evaluating options in Phase II of a business case to find a preferred option, one must be aware that any
estimate of the costs and benefits is subject to risks which can radically alter the rankings. Such risks can be due to
inherent uncertainties in assumptions made.
Sensitivity analysis, as used in the context of a business case, examines and quantifies how prone to error these
rankings might be to changes in the parameters assumed in the option appraisal process. It is, in essence, a what
if critical analysis of the relative scores given for the options examined.
Optimism bias arises where an over-optimistic assumption results in a cost overrun.
Sensitivity analysis
To perform a sensitivity analysis, it is necessary to examine the grids of benefits and costs agreed by an option
appraisal workshop:
I: Sensitivity analysis of benefits

Step 1. Tabulate parameters, weights, scores and weighted scores.

Table 1. Weights agreed by the workshop for the different parameters
Parameter
Increased accessibility
Reliability of service
Accuracy of service
Better use of scarce staff

Weight
40
30
20
10
100%

Table 2. Scores agreed by the workshop for a particular evaluated option

Relative benefit of an option
Increased accessibility
Reliability of service
Accuracy of service
Better use of scarce staff

Weight
40
30
20
10
100%

Score (max=10)
10
9
8
5

Weight Score
400
360
160
50
970

Table 3. Scores determined for all the options

Option
Option A
Option B
Option C
Option D
Option E

Weight Score
970
810
910
550
670

Step 2. For each option in Tables 1 and 2, determine upper and lower bounds for the scores. One way of
doing this is to look at disagreements about the scores between the workshop members.
Step 3. In a similar manner, apply upper and lower bounds for the weightings allotted to each parameter
examined. Be aware that alteration of a single weighting value affects the others the sum of all must be
100%.
Step 4. Recalculate the scores on the basis of upper and lower bounds.

II: Sensitivity analysis of costs

Capital and revenue costs anticipated may vary considerably! These variations rarely have a positive effect on
costs. Examples of commonly encountered sources of cost uncertainty include:

Increases in revenue costs such as maintenance and labour

Unanticipated cuts in revenue provision
Delay in realisation of benefits
Delay or failure of realisation of efficiency gains
Change in demand for service or in volume performed
27

Failure of project timescales.

These and similar uncertainties should be costed. By applying a measure of likelihood to each uncertainty, and
making allowances where uncertainties are interdependent, one should perform a what if type of analysis to the
various risks.
III: Switching value analysis (crossover point analysis) and scenario planning
It can focus the discussion of costings at option appraisal, if one can determine the point at which a key uncertain
parameter would have to change in order to alter the rankings (switching value analysis).
Similarly, optimistic, pessimistic and neutral scenarios can be subjected to analysis and their effects on cash-flow
calculations (scenario planning).
Both methodologies can provide invaluable assistance in assessing different workshop options. It also strengthens
the final decision reached if such an analysis does not alter the rankings.
There is a particularly helpful discussion on sensitivity analysis, switching (crossover) values and optimism bias in
Step 6 of the Capital Investment Manual Business Case Guide.
Optimism bias
For many, largely human, reasons, most projects underestimate costs. It is therefore recommended that costs have
a factor applied to make them more realistic! The Department of Health publishes two relevant guidelines, the first
applies to building projects, the second to IM&T projects.
Optimism bias for building schemes

http://www.dh.gov.uk/en/Managingyourorganisation/NHSprocurement/Publicprivatepartnership/Privatefinan
ceinitiative/Changestotreasurygreenbook/DH_4067488
http://www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/@dh/@en/documents/digitalasset/dh_409
3657.pdf

Optimism bias for IM&T schemes

http://www.dh.gov.uk/en/Managingyourorganisation/NHSprocurement/Publicprivatepartnership/Privatefinan
ceinitiative/Changestotreasurygreenbook/DH_4115144
http://www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/@dh/@en/documents/digitalasset/dh_411
5150.pdf

28

Appendix 11. Normalisation of costs for comparative purposes

Potential solutions to a business problem may differ widely in their lifespans and in their capital and revenue costs.
When examining these costs and values, due regard must be paid to the diminution in perceived value of a sum of
money with time. In simple terms, a pound in your pocket today is worth considerably more to you than a promise
of a pound in five years. In order to express the lifetime costs of potential projects and to allow valid comparison of
the relative costs of these projects, it is customary to express the values and costs in a normalised form, the net
present value. In order to do this, a discount rate set by the Treasury (currently 3.5%) is used to apply a discount
factor for each year of the project lifespan, the correction applied to values and costs at each year of a projects
lifetime and the result expressed as a figure designed to reflect lifetime costs at current values.
The actual determination of the net present value for these values and costs is slightly more complex, and is the
realm of your directorate or trust accountant. For those interested, much is written on the web, mostly in fairly
opaque prose intended for accountants. A relatively simple exposition of NPV is at:
www.ehow.com/how_2187130_calculate-net-present-value-npv.html
For those who are budding accountants, there are Excel spreadsheets to do the calculations see, for example:
www.vertex42.com/Calculators/npv-irr-calculator.html

29

Template 1. An abbreviated template for small projects

Small capital business case: outline or full
Proposal:
Business unit:
Dept/Ward:
Site:
Business case record of sign off/approval
Name

Signature

Date

Business Unit: Clinical

Director
Business Unit:
Executive Director
Business Unit:
Accountant
Clinical Lead
Capital Accountant
Estates
Facilities
Human Resources
IM&T
Information Governance
Fire Safety Officer
Infection Control
Supplies
Project management
Project Sponsor
Project Lead/Manager
1. Executive Summary and Recommendation

2. Introduction/Background

3. Strategic Context/Corporate Plan

4. Project Scope and Objectives

5. Key Benefits

6. Constraints

7. Risk Analysis

8. Options

9. Financial Analysis

10. Impact Analysis

30

11. Consultation/Stakeholder Support

12. Project Management/Delivery/Evaluation

13. Guidance/Legislation/Etc

14. Appendices

31

Template 2. A less abbreviated template for larger projects

Capital business case: outline or full
Proposal:
Business Unit:
Dept/Ward:
Site:
Business case record of sign off/approval
Name

Signature

Date

Business Unit: Clinical

Director
Business Unit:
Executive Director
Business Unit:
Accountant
Clinical Lead
Capital Accountant
Estates
Facilities
Human Resources
IM&T
Information Governance
Fire Safety Officer
Infection Control
Supplies
Project Management
Project Sponsor
Project Lead/Manager
1. Executive Summary and Recommendation
2. Introduction/Background/Case for Change
Provide some background information.
Describe existing service provision.
Provide an overview of the issues.
Describe how the proposal would address/improve the situation.
Describe the process that has been followed to reach this point.
Detail who has been involved and who is affected by the proposal.
3. Strategic Context / Corporate Plan
State relevant key business and service needs and priorities.
State how project fits in with these needs with the trust corporate plan, the business unit/directorate
plan/department plan.
State how the proposal will assist in the achievement of national / local target(s)
Target 1
Target 2 etc
Is a specific commissioner requirement or issue addressed by the proposal?
Does proposal improve use of resources? How?

4. Project Scope and Objectives

32

State in detail the scope of the project.

State key objectives in meeting service need. Objectives should be SMART:
Specific
Measurable
Achievable
Realistic
Timely.
State key benefits:
Measurable benefits
Qualitative benefits.
Specify benefits as:
Organisational
Clinical
Staffing Resources
Training / Skills
Financial
Equipment
Other.
Specify the workshops and meetings held to identify and scope objectives, measurable benefits and
qualitative benefits. Specify the involvement of key stakeholders in these consultative and analytic
processes. See also Section 10 below.

5. Constraints
Consider the proposal in terms of constraints and detail them. Consider constraints under the following
headings:
Organisational
Clinical
Staffing Resources
Training / Skills
Financial
Equipment
Other.
6. Risk Analysis
All risks associated with a proposal must be considered and quantified. State the risks identified under the
following risk categories and specify how they will be managed and mitigated:
Development risks
Implementation risks
Operational risks
Types of risks to consider are:
Staffing resources
Capacity
Changing working practices both within a service and involving other departments
New skills required
If the proposal was not implemented, what would the risks and/or possible implications be?
Infection control risks
Information governance and other data risks
Include formal risk assessment documents as appendices

7. Options
A range of alternative options must be formulated and examined as part of the process of considering a
proposal. Use Green Book parameters to express your options.
Describe each option considered.
Describe how each option would or would not achieve the proposals objectives.
It must be demonstrated that all options have been fully be explored to identify the optimal solution.
Criteria used to evaluate the options must be identified and described.
Identify the preferred option and explain why.
8. Financial analysis

33

Detail fully the financial implications of the proposal. Ensure you have fully liaised with any other service on
which your proposal depends. Services sometimes overlooked include:
Supplies
Estates
Finance
Facilities
IM&T.
If the proposal involves equipment you must explore the option of leasing equipment.
Capital, non-recurring and recurring costs must be fully investigated and detailed.
Describe how recurring costs will be funded. Has approval been given for funding?
Will the proposal have an impact on patient activity levels and income describe how and quantify.
What contingency provision has been allowed for quantify and describe assumptions.
A detailed breakdown of figures should be attached as an appendix to the proposal document including
any assumptions made.

9. Impact analysis
Describe what the consequences / impact of implementing the proposal will be. Include:
Activity
Income
Staffing
Clinical support services
Non-clinical support services: estates and facilities.
10. Consultation/Stakeholder Support
The extent of consultation undertaken will depend on the nature and scale of the proposal. There may well
be internal and external stakeholders.
Detail any correlation or overlap with any other trust or directorate service development proposals.
List any key stakeholders where not already mentioned.
Describe how stakeholders have been consulted in what forums has the proposal been discussed.
Detail all stakeholder involvement in workshops, meetings and other consultation processes.
Attach any relevant statements of support and details of any other relevant agreements.
Provide evidence that the proposal is supported (or otherwise) by the stakeholders.
11. Project Management / Delivery / Evaluation
Detail how the proposal will be project managed, delivered & evaluated, including:
The accountability arrangements
Project team membership, and the responsibilities of individuals.
Provide details of overall project timetable, include key milestones.
Describe how the projects progress will be monitored, in terms of timescales & financially.
Describe how the project will be evaluated.
How will you measure / demonstrate that the objectives/benefits have been achieved? Who will this be
reported to and when?
Terms of reference for project boards must be prepared detailing the above.
12. Guidance/ Legislation / Etc
Reference any relevant NHS or technical guidance, frameworks and legislation
13. Appendices
List & attach relevant appendices to the business case. Include:
Financial analysis
Clinical brief
Operational policy
Quotations
Project programme / timetable
Evaluations (eg: trialling of equipment)
Risk assessments

34

Large business case templates

Large business case templates vary in their complexity, size and content. Their layout is much more defined by
Treasury needs than by individual trusts. Where a capital project exceeds 35 million, the parameters laid out by
the Treasury must be followed. The Treasury Green Book site and the Capital Investment Manual recommend the
templates published by the Health Financial Management Agency (HFMA). These are copyrighted by the Treasury
(Crown copyright ) and available at: www.hm-treasury.gov.uk/d/greenbook_toolkittemplates170707.pdf
Training is also available from the HFMA itself. See www.hfma.org.uk

35

Bibliography
General
Many of the references are included in the main text, but are given here for convenience.
Treasury Green Book www.hm-treasury.gov.uk/d/green_book_complete.pdf
The Capital Investment Manual
www.dh.gov.uk/en/Publicationsandstatistics/Publications/PublicationsPolicyAndGuidance/DH_4119896
The Capital Investment Manual Business Case Guide
www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/@dh/@en/documents/digitalasset/dh_4122520.pdf
The Scottish Capital Investment Manual www.scim.scot.nhs.uk/
The Scottish Capital Investment Manual Business Case Guide www.scim.scot.nhs.uk/Manuals/BC_Guide.htm
Business case templates
Excellent templates for business cases are published by the Health Financial Management Agency (HFMA). They
are copyrighted by the Treasury (Crown copyright ) and available at www.hmtreasury.gov.uk/d/greenbook_toolkittemplates170707.pdf
Unsuccessful projects
Chapter 9 of the Scottish Capital Investment Manual Business Case Guide is a succinct summary of Office of
Government Commerce guidance about project failure. See
www.scim.scot.nhs.uk/PDFs/Manuals/BC/BC_Guide_6.pdf
Private finance initiative (PFI)
DH guide to PFI
www.dh.gov.uk/en/Managingyourorganisation/NHSprocurement/Publicprivatepartnership/Privatefinanceinitiative/in
dex.htm
Invaluable advice for planning a PFI case
www.dh.gov.uk/en/Managingyourorganisation/NHSprocurement/Publicprivatepartnership/Privatefinanceinitiative/P
FIguidance/DH_4108133
Advice on treatment of staff transferring under PFI arrangements
www.dh.gov.uk/en/Managingyourorganisation/NHSprocurement/Publicprivatepartnership/Privatefinanceinitiative/P
FIguidance/DH_4071530
Use of workshops in business case planning
Both the Capital Investment Manual and the Scottish Capital Investment Manual describe suggestions for the use
of workshops. Chapter 8 of the Scottish Capital Investment Manual Business Case Guide forms a useful summary
www.scim.scot.nhs.uk/PDFs/Manuals/BC/BC_Guide_5.pdf
Project management and methodology PRINCE 2
PRINCE 2 is the standard project management tool used to express, control and evaluate projects. Much of the
material is public domain and available online and widely available in printed format. Online, written and residential
training in the use of PRINCE 2 is available from the PRINCE 2 website. See:
http://www.prince-officialsite.com/
Published material
There is a wealth of published material both from the Stationery Office (TSO) and non-government publishers.
Below is a small sample. Style, content and readability vary.
Office of Government Commerce. Managing Successful Projects with PRINCE2. The Stationery Office 2009. ISBN
978 0 11 331 059 3
36

This is comprehensive, and suitable for those who want to study PRINCE2 in depth. It must be said that it cot
contains a great deal of material and is best suited to those who wish to explore project management in depth.
Nick Graham. Prince2 For Dummies. Wiley 2008 ISBN 978-0-470-51919-6
This is in much more digestible format, and perhaps less daunting than the above. Dont be misled by the title. This
probably contains all you need to know about PRINCE2.
Software tools
Microsoft Project or similar
Software tools are invaluable in expressing and documenting and charting project timelines, key deadlines,
dependencies and responsibilities. The charts produced (for example, Gantt charts) can be used as tools to help
drive forward a project. Microsoft Project is much more than a charting tool however. It is deceptively easy to use. It
is almost worth learning purely for the understanding of project management it imparts.

37

Index

Aggregation 17
Human resources (HR) 7

Business plan 4, 22

C
Capital Investment Manual 4, 5, 8, 9, 14, 26, 28, 35, 36
Scottish Capital Investment Manual 4, 14, 26, 36
Change management 7, 13
Clinical governance 5, 6, 7, 19
Connecting for Health 7, 24, 25
Connecting for Health Information 24
Consultation processes 4, 6, 9, 10, 12, 26, 34
Phase I 10, 26
Phase II 12, 26
Contract
contract value 17
EU Public Contracts Regulations 6
evaluation criteria 11
likely contract 8, 11, 12
procurement 8
Costs
lifetime costs 23, 29
net present value 11, 29
normalisation 11, 13, 17, 29
Crossover value 11, 28

IM&T 2, 5, 6, 7, 28, 30, 32, 34

Information
confidentiality 24, 25
Data Protection 24
information department 24
information governance 5, 7, 24, 25, 30, 32, 33
information governance statement 7
information governance toolkit 7, 24
Statement of Compliance 24

M
Monitor 6, 15, 16

N
NHS N3 network 24

O
Optimism bias 11, 27, 28
Outline business case 8, 11, 13

D
Discount factor 29
Discount rate set 29

E
Estates 5, 6, 7, 23, 30, 32, 34
EU Public Contracts Regulations 11, 17
Evaluation criteria 17

F
Foundation trusts 6, 14, 15, 16, 21
Funding
capital neutral 22
funding options 16, 21
in-house charitable funds 22
leasing 21, 34
managed service 21
national and regional projects 22
revenue and capital allocation 21
revenue neutral 22
third sector 22

P
Plan to procure 11
Preferred option 8, 10, 11, 13, 27, 33
Preferred way forward 4, 5, 8, 9, 11
PRINCE 2 5, 8, 18, 19, 20, 36
Procurement strategy 8, 11, 12, 13
Project
project board 18, 19, 20
project hierarchy 6, 18
project management 4, 5, 6, 13, 23, 30, 31, 32, 34, 36,
37
project manager 6, 19, 20
project owner 18, 19
project sponsor 5, 10, 19, 30, 32
project team 19, 20, 34
Prudential borrowing limit 15, 16
Public private partnership 21

R
Risk
assessing risk 11, 27
sensitivity to risk 11, 27

38

Scenario planning 11, 28

Secondary use assurance 25
Sensitivity analysis 11, 13, 27, 28
SMART 9, 19, 33
Strategic fit 9
Strategic outline case 8, 9, 10
Strategic outline context 9
Strategic outline programme 8, 9
Strategic plan 4, 9
Switching value 11, 28

Template for small projects 30

Treasury
five case model 5, 6, 8, 9, 19
green book 4, 8, 14, 26, 33, 35, 36
Treasury limits 15, 21

W
Workshops 10, 12, 26, 33, 34, 36
in business case planning 10, 12, 26

39

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The Royal College of Radiologists. Writing a good business case. London: The Royal College of Radiologists,
2012.
Ref No. BFCR(12)5 The Royal College of Radiologists, April 2012
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