Business Case Analysis : Affordable Housing Project

 

ines and is based on the theories and propositions of general business cases. However, there are some differences between the approaches followed in this business case with the traditional project management literature.

In conventional business case literature, several factors are always mentioned that are to be fulfilled while preparing a business case report for a project. Some of these factors based on popular business case literatures are as follows.

Preparation of a Project Scope – Before execution of a project, the scope of the project must be analyzed and verified in order to identify the limitations of the project. Business cases are planned and executed in order to gain certain cost benefits in the future. Hence, determination of project scope is necessary during the planning phase of the business case. Again, according to Boyd (2013), while determining project scope, some assumptions are to be made. This is because, when a business project is planned, the parent organization expects some benefits. However, before the end of the project, the outputs cannot be confirmed and can only be estimated. Hence, some assumptions are made prior to the execution of the project and the end results are judged by these assumptions.

Analysis of the Possible Options – The success of a project depends on a number of factors including time schedule, available resources, project scope, modifications during projects and others. Hence, in spite of deciding on one particular target for the final deliverable of the project, the outcomes may differ based on the factors. For this reason, Squires and Hutchison (2014) suggested that some possible options must be determined before the initiation of a business project so that the final objective can be met. In other words, while preparing the business project, a specific project path is determined and during this phase, a number of other options regarding the project approach should be considered. This will provide more flexibility to the project and will increase the chances of success.

Cost Benefits (Estimated and Actual) – The ultimate objective of business projects (except some internal projects and charity causes) is to gain a significant amount of cost benefit for the parent organization. In these projects, firstly the end target is determined that will earn significant cost benefits for the company on a long term basis. However, according to Tan et al. (2014), in most cases, it is seen that the final deliverables often differ than the targeted ones i.e. the cost benefit earned is less than the estimated value. This provides negative effects on the outcome of the project. For this reason, Benecki, Andrew and Chan (2014) suggested that there should not be any particular value for estimated cost benefit. Rather, a wide range should be estimated as well as some project modifications should be proposed in case the actual cost benefit does not lie within the estimated range.

Roles of Project Stakeholders – According to Nardone, Cho and Moses (2012), the roles of stakeholders are the most important aspects of business projects. From planning of project to execution and closing of the project, different stakeholders are involved. Moreover, the success of the project depends largely on the efficiency of the stakeholders in managing different aspects of the project. Hence, Pronk et al. (2015) clearly stated that determination of the stakeholders of the project and appointment of the right personnel in the right project stakeholder role is necessary.

Cash Flow Statement – Cash flow statement is more related to accounting and is an important part of a business case. Cash flow statement is mainly prepared for keeping track of income and expenses encountered during a business activity or the course of the project. Willard (2012) said that preparing a cash flow statement is necessary in any business projects in order to keep track of the expenses encountered during the project. Since business projects are mainly based on earning significant cost benefits, keeping track of expenses during the project is necessary.

Analysis of Potential Risks – Finally, another most important aspect of a business project is the analysis of potential risks that might be encountered during or even after the project. Risks are integral parts of any project that lacks suitable risk mitigation plans. Some risks are very minor in nature while some others are so major that they can threaten to stop the progress of the project entirely. Hahn et al. (2014) emphasized on the fact that a risk analysis test must be conducted before the start of the project so that they can easily mitigated in case they are encountered during the course of the project.

According to the comparison analysis between the chosen case study and the business case literature explained in the above part, the following factors can be explained in detail.

Project Scope and Assumptions – In this particular case study, the project is based on the construction of some units of affordable houses for the people who do not have sufficient quality of living place. The project scope is limited within the construction of several house units that have been estimated prior to the execution. Moreover, for expansion of the project scope, it has been decided that some more units will be constructed to the initially estimated and as a result, the project will be conducted in a number of phases (Emsley et al. 2008). Also, it has been assumed that the total costs of the project will be covered by leveraged finances and the government fundings. It has also being assumed that Community Housing Limited and Willoughby Council will share the total number of house units in terms of ownership. Hence, this follows the general conception of scope and assumptions stated in the business case literature.

Options Analysis – From the literature review, it has been known that keeping some options open is important for any business project. The use of this concept has been observed in this business case as well in terms choice of land and availability of funds. In spite of securing sponsors for the project and estimating the final expenses for the project, the authority has made available several other funding options that might be used if the available funds are not sufficient for completion of the project. Again, the authority has already chosen a particular area of land for executing the construction project (Emsley et al. 2008). However, some other areas have also been chosen as options that might be used if the primary sites are not suitable for the project. Hence, this business case also follows the traditional concepts and also reduces the chances of failure of project due to non-availability of land or sufficient funds.

Anticipated Benefits – As mentioned previously, the ultimate objective of business projects (except some internal projects and charity causes) is to gain a significant amount of cost benefit for the parent organization. However, in this chosen business case, the project organization has not prepared for any estimated cost benefits and other related factors. Several objectives have been set regarding the end deliverable of the project. There have no anticipated cost benefit analyses done in the project and also the organization has nominated Community Housing Limited (CHL) for management responsibilities and debt liabilities (Emsley et al. 2008). This has made a huge gap in the outcome of the project because in spite of being a joint venture with availability of government funds, only the private organization will be held for any liabilities or issues that is not desirable at all. Moreover, the private organization may not agree with the terms and pull out from the project that will result in stopping of the project at an immature phase.

Stakeholder Roles – In the chosen business case, the stakeholders have not been specified in the right manner. There are only mentions of involved organizations and other personnel that are involved in the project for the description of their roles and requirements. However, specific posts have not been mentioned and no specific person has been appointed in a particular post for the project. This situation must be improved and the organization must appoint suitable personnel in specific stakeholder posts in order to execute the project in the right direction.

Cash Flow Statement – The organization in the chosen business case has prepared an overall summarized data sheets and asset values statement for the project. However, these are definitely not sufficient for the business project (Giordano and Fulli 2012). Preparation and updating of cash flow statements are necessary for keeping track of the expenses encountered during the project while the organization only manages a summarized expense sheet. This system must be changed in order to ensure positive outcomes from the project.

Risk Analysis - Risks are integral parts of any project that lacks suitable risk mitigation plans. Some risks are very minor in nature while some others are so major that they can threaten to stop the progress of the project entirely (Hockerts 2015). Similarly, in this project, there are several potential risks as well. However, as per the limits of the business case, the organization has not yet conducted a risk analysis that is very important for the progress of the project. On the hand, the organization does have prepared some options for the most risky aspects of the project and hence, risks can possibly be mitigated without any significant difficulty.

Conclusion

After conducting the literature review study and using it as the basis for critical analysis of the chosen business project, the following conclusions can be reached. Following the general conception of scope and assumptions stated in the business case literature, the business case organization has assumed that the total costs of the project will be covered by leveraged finances and the government fundings. It has also being assumed that Community Housing Limited and Willoughby Council will share the total number of house units in terms of ownership. Hence, this business case also follows the traditional concepts and also reduces the chances of failure of project due to non-availability of land or sufficient funds. This business case also follows the traditional concepts of keeping extra options for the project and reduces the chances of failure of project due to non-availability of land or sufficient funds. However, there have no anticipated cost benefit analyses done in the project and this has made a huge gap in the outcome of the project because in spite of being a joint venture with availability of government funds, only the private organization will be held for any liabilities or issues that is not desirable at all. The company has also not conducted any risk analysis test at all that might result in problems during execution of the project. It is recommended that in spite of keeping extra options, the organization should conduct a risk analysis test so that they can be mitigated easily if encountered.

References

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Emsley, S., Phibbs, P., Crabtree, L., Weber, L., Dephoff, M., Moline, H. and Lawler, S., 2008. Models of sustainable and affordable housing for local government: final report.

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Nardone, M., Cho, R. and Moses, K., 2012. Medicaid-financed services in supportive housing for high-need homeless beneficiaries: the business case. Center for Health Care Strategies, Inc., June.

Nichols, P.M., 2012. The business case for complying with bribery laws. American Business Law Journal, 49(2), pp.325-368.

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Willard, B., 2012. The new sustainability advantage: seven business case benefits of a triple bottom line. New Society Publishers.