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This guidance describes the steps needed to begin development of a business case at an activity level, either as the first part of a single-stage business case (SSBC) or as a separate indicative business case (IBC) phase.

Please note that core elements of this guidance are likely to be needed regardless of whether the business case is developed in a single stage or as a separate IBC and detailed business case (DBC).

Remember also that the level of effort should be fit for purpose, for example, the effort required to progress an SSBC is likely to be less than for a separate IBC or DBC, since lower levels of risk and complexity are involved in an SSBC. However, some steps, specifically those involving the submission of a separate National Land Transport Programme (NLTP) funding application at the end of the IBC, will not be needed if the activity is being addressed as an SSBC.

Read the SSBC guidance on how to decide whether a separate IBC and DBC might be needed

What is an indicative business case?

The indicative business case (IBC) involves revisiting and confirming (and modifying as appropriate) the strategic context and strategic assessment, and evaluating options to deliver the activity. If the decision is to proceed with the activity, a funding application to proceed to the detailed business case (DBC) is submitted.

The IBC needs to follow the key Business Case Approach (BCA) principles of investing for benefits, fit-for-purpose effort and clarity of intent, and the key behaviours of progressive development and informed discussion.

Read more about the BCA principles, behaviours and capabilities 

What is expected of an indicative business case?

The main purpose of the IBC is to continue the progressive case for investment and include a clear line of sight to all supporting evidence collected up to this point. The IBC must:

  • identify a longlist of options, ensuring a range proportionate to the complexity of the proposal is considered, and demonstrate that the options optimise value for money
  • identify risks associated with each option and allow trade-offs around acceptable risks for the benefit return
  • show how the shortlisted options align with other elements of a programme within a PBC and within the overall case for change
  • identify a preferred shortlisted option to progress to detailed analysis, including an indicative benefit–cost ratio (BCR)
  • provide assurance that the preferred option is the right approach to deliver the desired outcomes and is a solution to the identified problems
  • show that key stakeholders have been involved throughout its development, and any concerns have been recorded.

If it is carried out as a separate phase, that is, not part of an SSBC, the IBC must also include a funding request to proceed to a DBC.

Some key considerations

  • As in other phases of the BCA (when required), getting the right workshop facilitator is important – they need to manage the process, not the outcome. We recommend using external, independent facilitators, who have no stake in the outcome. Facilitators need to be able to lead informed discussions to express the workshop objectives and outcomes in plain language and concepts, and obtain agreement of all participants to the outcome of the workshops.
  • Use of ‘constraint’ mapping, also used in the PBC, is useful for this review. Constraint mapping can help identify no–go areas or acknowledge additional cost for a preferred solution. For example, what is the environment (physical, social)? How do locals use this environment? What is the context? What are the constraints? Set the scene for how problems impact on people and places in the area.
  • Keep talking to your Transport Agency investment advisor, who should have been engaged with from the beginning of the business case. By this phase, it is expected that the approach and early signals about the degree of alignment with the Government Policy Statement on Land Transport (GPS) and Transport Agency investment principles are clearly understood by everyone.

Putting your indicative business case together

1. Reviewing the strategic assessment and strategic context

If the IBC is for an activity that is part of a programme that was identified in a PBC, you must:

  • show how it fits within the preferred programme of activities and with the related business cases (IBCs, DBCs or SSBCs) of other activities within the programme, and
  • demonstrate which investment objectives it is linked to and provide a clear ‘line of sight’ from these investment objectives to the IBC.

Consider a ‘funnelling’ exercise to review the problem statement(s). The activity may now have a different strategic context, so be prepared to refine the problem statement(s) to something more specific as your focus narrows. You may need to hold another problem definition workshop, but keep in mind the BCA principle of fit-for-purpose effort and judge whether the complexity, risk and likely cost of the activity warrants a full workshop.

This ‘revisit’ of the strategic case at an activity level is necessary because programmes typically include multiple activities that may be brought forward for development over a significant period of time. Each IBC may only address a subset of the investment objectives for the overall programme, so this requires a level of detail about the activity that is unlikely to be included in the strategic case for the entire programme.

At the activity level, you need to:

  • Reconfirm the strategic context – has anything material changed since the programme was developed?
  • Test whether the investment is still needed – if other activities in the programme have already been implemented, have they had the desired effect?
  • Identify which problems are specific to this activity. For example, if the programme addresses safety improvements along a corridor, what are the specific causes and consequences associated with an individual intersection? Are there any other problems that are specific to this location that should be addressed at the same time?
  • Rethink the stakeholders involved. Often only a subset of the initial stakeholders for the programme will have an interest in an individual activity. Also, the individuals may need to change, for example if specialist skills or specific local knowledge is required to fully understand a problem.

Depending on the complexity and risk, you could also consider a workshop to discuss what is known and what has been found out to date as a way of bringing stakeholders up to speed ahead of developing a longlist of options to implement the activity.

Ideally, the need for different people to be involved as the business case develops will have been identified early in the process in an engagement plan.

Read more about stakeholder engagement and relationship management

2. Developing and assessing options

Once the strategic assessment and context has been confirmed, a longlist of options for the activity is developed. For example, if the activity is an intersection upgrade, some options may be to build a roundabout, make it a grade-separated intersection, or add traffic signals.

These options are then evaluated to identify a shortlist – this process is sometimes called ‘optioneering’. As always, apply the principle of fit-for-purpose effort. If the investment proposal is low risk and low complexity, it may be that a frontrunner option is obvious.

However, you may consider holding a workshop to develop options; ideally, that would involve key stakeholders, who then get an opportunity to review and contribute to the draft longlist. Having discussions documented clearly and transparently ensures the assessment and development of options is well understood by all.

As options are developed and considered, apply some ‘filtering’ so that  options where a fatal flaw is identified are not developed further. It is important to document when, and why, this is done.

  • Decide on the approach to be used for evaluating options. Multi-criteria analysis (MCA) is a tool that can be used to compare options and support a trade-off conversation, but a less formal or structured approach may work just as well for less complex activities. Criteria must be based on the investment objectives, but may also include more detailed criteria that are relevant to differentiate between options.
  • Options should be evaluated for their ability to deliver against investment objectives and other identified criteria, and also considering the following factors:
    • costs
    • risks (and uncertainty)
    • time to deliver
    • interdependencies
    • any other relevant factors.

The evaluation of these considerations must include discussions about trade-offs. For example, an option that isn’t lowest cost, or doesn’t deliver against all objectives, may be chosen because it has a more acceptable risk level than a lower-cost option that meets objectives.

  • In MCA, each option will be tested and ranked against the others.
    • This is typically done by the project team. You will need to consider how to keep investors involved in this process. For example, the project team could refine the stakeholders’ first cut and bring it back to investors for agreement. It is important for the investment decision makers to be involved here, as they need to identify if the proposal is still aligned to desired goals, and because this is where most of the potential for trade-offs will be.
    • It is also useful to look at an indicative range of BCRs for the options as you work through the longlist to the shortlist.
    • Think about getting the right expertise for the type of risk so informed judgements can be made.

Create a shortlist from the longlist assessment. Ideally, this would be just two or three options, including a ‘do–minimum’ option that you will compare the other options against. It is good practice to aim for a single, clear preferred option at the end of the shortlisting exercise – then you only need to do detailed analysis of one option, and the investor(s) can be clear about what type of solution is proposed. However, because the BCA is principles–based, there will always be exceptions.

There may sometimes be investments where the advantages/disadvantages, risks and accurate cost estimates for two or three options are hard to distinguish, meaning more work is required to identify the best solution. Doing more work to understand the risks and identify a preferred solution will help to make an informed decision and tell a clear story to the investor(s) as to why you are recommending a particular way forward.

Also think about whether further information is required to develop the shortlisted option(s) during the assessment stage. For example, if options will be circulated for public consultation, is more design work necessary?

Once you have confirmed your preferred option, put a ‘hold’ on the business case development and check the preferred option with the investor(s) to avoid heading down a wrong and/or expensive track. It is also an opportunity to get buy-in from investors and decision makers. Depending on complexity, risk and relationships, this check can be as simple as an informal phone call.

It is important to give decision makers the opportunity to engage with the thinking behind the investment as it develops, not just at the end. This means thinking about decision makers (or groups, committees, etc) within your own organisation as well as within the Transport Agency. The more costly and risky the proposed investment is, the more formal this check should be. It is also recommended that the preferred option is considered by any specific governance groups that may have been set up to oversee development of the business case. For example, you may need to take the proposal to a project advisory group, programme control board, or other relevant governance group.

Completing the indicative business case document

Add to and refine the IBC document as your knowledge grows. This includes continually applying the investment questions to ensure you have covered the key issues that will form the Transport Agency’s assessment of the business case. In addition, regular discussions with a Transport Agency investment advisor helps to ensure that the business case is robust, and there are ‘no surprises’ when it is assessed.

Find out more about the investment questions 

The IBC should confirm the case for change (the strategic case) and demonstrate that it optimises value for money (including the economic case). It should also include an outline of the:

  • commercial case, providing decision makers with some assurance on the likely commercial viability of the proposal
  • financial case, providing assurance that the preferred option is affordable
  • management case, addressing the achievability of the proposal and planning arrangements required for successful delivery and project risk management.

The detailed analysis of these cases will be done and reported in the DBC phase.

Refer to the DBC guidance for more details

A document information guide is available as an option for you to use and adapt when writing your IBC document to help tell your investment story.

Download the indicative business case document information guide [DOCX, 44 KB]

The following is a summary of the elements that should be covered in an IBC:

  • review of strategic assessment and context, including any changes or updates to the strategic case
  • activity context
  • overview of the process used to select the preferred option:
    • options identification
    • longlist options assessment
    • shortlisted options
  • outlines of the:
    • commercial case
    • financial case
    • management case
  • funding requirements to proceed to the DBC, as necessary.

Assessing readiness for support

The business case developer and the problem owner make an initial assessment of the strength of the business case, guided by the 16 investment questions, and evaluate the investment proposal against the Investment Assessment Framework (IAF). The results of this ‘self-assessment’ should be recorded in the IBC document.

Send the IBC document to all participant stakeholders for comment before submitting it to the Transport Agency for assessment of the business case. If there are co-investors, you will need to seek their support, which will likely involve going through their internal approval processes. The decision-making needs of each co-investor must be clear in the project plan and governance section of the IBC document.

When you decide that the IBC is ready for assessment by the Transport Agency, request support via the Transport Investment Online (TIO) system.

If you are seeking NLTP funding for the next phase, usually a DBC, you must submit a robust funding application for implementation in TIO, with the IBC uploaded as the supporting document.

Access TIO (external link)

What happens next?

The following steps are only required if the IBC and DBC are being developed separately, with a formal NLTP funding application prior to starting the DBC. If the business case is being developed in a single stage, development will be put on hold at this point until the approval of the Transport Agency has been obtained.

The nature of the hold point and level of approval required will depend on the cost, risk and complexity of the activity.

When the request for IBC support and DBC approval is received in TIO, the Transport Agency assesses the business case against the 16 investment decision questions and the criteria set out in the IAF to determine whether:

  • the business case is valid, and
  • the preferred option is aligned with the IAF.

Read more about the investment questions and the IAF

Read more about the information required at the hold point in the ‘What does a good indicative business case include?’ document [DOCX, 64 KB]

A recommendation is then made to the delegated decision maker to support the IBC or otherwise. If the Transport Agency investment advisor has been involved throughout development of the business case, there shouldn’t be any surprises that result from the decision.

Tools and templates

Template

Note that this is for guidance only, and should be adapted as necessary.

Tools

Learning modules

Online learning modules have been developed by the Transport Agency, and are available to our partner organisations. To request access to the modules, email nltp@nzta.govt.nz with your name, title, organisation and manager’s name.  

The ‘Activity-level business cases’ course covers single-stage, indicative and detailed business cases.

Go to the activity-level business cases learning module (external link)

To open the course, click the link above and then click ‘enrol’. You will be prompted to enter your log in.  Once you have logged in, you should be taken directly to the course. You can also find it by going to the catalogue and searching for ‘activity-level business cases’.

Information sheets

This information sheet is designed to accompany the learning module.

Need support?

Use our contact form to send us a question, or get in touch with your NZ Transport Agency investment advisor.

Go to the contact and support form

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