PMQ501 Project business case:

Feasibility study

Assignment 3: Critique
Nik Linnell SN 10499881
Wordcount: 2,600

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Assignment 3: Business Case Critique Nik Linnell SN: 10499881
Contents
Introduction...........................................................................................................................................3
Project Overview...................................................................................................................................3
Feasibility of the Objectives to be Achieved..........................................................................................3
Objective 1: To establish a multi-purpose health and well-being campus...................................4
Objective 2: To be fully operational within three years of commencing the project...................4
Objective 3: To have a positive impact on the local environment................................................5
Objective 4: Be delivered within the project budget......................................................................6
Proposed Budget, Procurement Strategy, and Timeframe....................................................................6
Business Case Budget.......................................................................................................................6
Procurement Strategy......................................................................................................................7
Timeframe........................................................................................................................................7
Project Governance Structure...............................................................................................................8
Stakeholder Management.....................................................................................................................8
Risk........................................................................................................................................................9
Recommendations and Key Findings.....................................................................................................9
References...........................................................................................................................................10

Table

Table 1 - Process Groups.......................................................................................................................4

Table 2 - Project Budgets.......................................................................................................................6
Table 3 - Timeframes.............................................................................................................................7
Figure

Figure 1 - Ground Plan...........................................................................................................................5

Figure 2 - Project Approval Gates..........................................................................................................7
Figure 3 - Project Governance Structure...............................................................................................8

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Assignment 3: Business Case Critique Nik Linnell SN: 10499881
Introduction
The Sanctuary Health and Wellness Complex Project Business Case is an attempt to layout the
feasibility of a three year, $15 million project which is primarily construction based. The following
paper will put forward a critique of the Business Case which looks at the feasibility of the objectives
to be achieved, proposed budget, procurement and timeframe, project governance structure,
stakeholder management, and project risk. Before this critique can be conducted it will be useful to
provide an overview of the project. A business case is the document which looks at the benefits and
economic feasibility of a project (PMI, 2017). As the business case is referred to throughout the life
of a project and as such it should list the project objectives and reasons behind the project (PMI,
2017). The primary framework upon which the critique will be conducted will be the PMBOK (PMI,
2017), with particular reference to the Knowledge Areas that relate to strong project management
principles. A number of recommendations will be presented with a view to increasing the likelihood
of project success.

Project Overview
Divine Health Service (DHS) is planning the development of a new site for a healthcare facility
designed to relocate existing services. The project will deliver on a two hectare site, four primary
health buildings and an administrative centre with sundry services such as electricity, water supply
and recycling, carparking and service roads. DHS already has title of the land and approval by the
Minister for Health to utilise it for health services. The preliminary budget put forwards is $15 million
with an expected delivery date within three years. A program of works lays out eight interconnected
projects for delivery of the health and wellness complex.

Feasibility of the Objectives to be Achieved

Before any project should be approved ensuring that the project objectives can reasonably be
achieved is paramount (de Wit, 1988). Whilst there are any number of control techniques and
project control software to assist in the delivery of projects, if the fundamental assumptions around
the objectives are not sound then it is reasonable to expect either project failure or at the very least
cost and time blowouts (Olawale & Sun, 2010). When looking to define the quality of the project
objectives they can be grouped under four main aspects; project characteristics, contractual
arrangements, project participants, and interactive processes in the hierarchical model for project
success (Chua, Kog, & Loh, 1999). Clearly defining the project scope is a key aspect in ensuring
project objectives are met and align with deliverables, whilst minimising uncertainties (Atkinson,
Crawford, & Ward, 2006; Howell, Laufer, & Ballard, 1993).

The objectives of the program of projects are:

1. To establish a multi-purpose health and well-being campus

2. To be fully operational within three years of commencing the project
3. To have a positive impact on the local environment
4. Be delivered within the project budget

Engagement of project management process groups is recommended as they can facilitate the
achievement of project objectives (PMI, 2017). When looking at the DHS Business Case there is some
evidence that these Process Groups are considered (see Table 1).

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Assignment 3: Business Case Critique Nik Linnell SN: 10499881
 Process Group Evidence of use
Initiating  Identify stakeholders
Planning  Mention of the development of a Project Management Plan
 Mention of Scope within the Business Case
 Timelines which have approval gates built in
 A budget is defined
 Mention of a procurement plan within the Business Case
 A stakeholder management plan
Executing  Laid out briefly in the eight projects
Closing  Project close requiring the completion of all construction
Table 1 - Process Groups

The Business Case does not provide a clear definition of the Monitoring and Controlling Process
Group. This Progress Group allows the Project Manager to know how each aspect of the project was
achieved and relates to establishing the project performance and reporting systems (Wysocki, 2009).
Without project performance and reporting systems, quantifying deliverables is difficult.

The Planning and Process Group ensures that the Project Objectives are met, however the Business
Case does not touch on how the requirements are to be collected, there is no estimation of activity
duration, nor a cost breakdown outside of a few pieces of equipment and high level budget targets.

Objective 1: To establish a multi-purpose health and well-being campus

The Business Case lays out several aspects of the Sanctuary Health and Wellness Complex:
 Wellness Centre/Alternative Medical Centre
 Community Health Centre
 Serviced Residential Facility
 Sports Centre
Through reference to a needs assessment, or the highlighting of a business problem, a business case
is an opportunity to lay out the need for action (PMI, 2017). What is not spelt out in the DHS
Business Case is why this site is being developed. Other than already having title and the Minister’s
approval there is no evidence of a compelling case for change. For example, is this site more
economically viable compared to the existing sites; will this relocate DHS to an area where there is a
substantial existing customer base, will this complex link into wider health services like a new
hospital? So, whilst this Project Objective may deliver a number of buildings related to the services
DHS provides, it does not link into any defined strategic need.
Objective 2: To be fully operational within three years of commencing the project
The Business Case does define timelines for the delivery of Objective 1, however it does not define
what “fully operational” requires. There is an operational revenue KPI at $50 million per annum,
creating an assumption that the Complex will be working at capacity soon after project completion.
This Project Objective seems to relate to one aspect of the ‘iron triangle’ without reference to the
other two aspects of cost and quality. Only looking at one corner of the ‘iron triangle’ is considered
problematic due to not taking into consideration areas such as safety, efficient use of resources,
effectiveness, and satisfaction of stakeholders (Ebbesen & Hope, 2013; Toor & Ogunlana, 2010).

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Assignment 3: Business Case Critique Nik Linnell SN: 10499881
Objective 3: To have a positive impact on the local environment
The Business Case has set up a number of contradictions and extremely problematic solutions to
achieve this Objective. Including environmental solutions within a project is laudable, but these
outcomes should at least be governed by local, state and federal statutes whilst also contributing
towards economic realities with an in-depth feasibility study (Shen, Tam, Tam, & Ji, 2010).

A simple viewing of the proposed ground plan shows that the water recycling services are situated
within a few meters of the Serviced Residential Facility (see Fig. 1). The Business Plan does not state
if recycling will be grey or black water. If the levels of grey water exceed 3,000 litres per day
additional State Government approvals would be required (BCC, 2019). Under the Water Supply
(Safety and Reliability) Act 2008 there are stringent requirements regarding the use of recycled
water and the treatment of sewage (Government, 2017).

Figure 1 - Ground Plan

At the very least the Project Objective approval process should be mentioned within the Project
Risks. Any risk management should be tailored towards the organisation undertaking the risk and
other externalities, such as government regulation, taken into account (Baccarini & Archer, 2001;
Raz, Shenhar, & Dvir, 2002). A Project Objective decision support matrix and a way to maximise
project value might consider a set of options in regards to utilities such as power and water as a way
to mitigate this risk (Mahdi & Alreshaid, 2005).

The major contradiction within this Project Objective is the stated aim to be energy and water
neutral. However, within two of the sub-projects, the pool and the administration building, gas is
listed as an energy source. A fundamental aspect of a project business case is to align all necessary
assumptions, alternatives and constraints whilst avoiding internal inconsistencies (Kerzner, 2017).

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Assignment 3: Business Case Critique Nik Linnell SN: 10499881
Objective 4: Be delivered within the project budget
Further within this critique there will be a detailed review of the project budget. This is the second
of the ‘iron triangle’ objectives listed in the DHS project, and whilst important to state it could be
linked to other measures such as project efficiency, impact on customer, direct business success, and
preparing for the future (Shenhur, Levy, & Dvir, 1997). A project can be built around quality systems
such as Six Sigma and thereby remove the need for an explicit mention of cost due to the inherent
removal of variability (Banuelas Coronado & Antony, 2002). It has been shown that project
variability is an area where cost blowouts often occur (Montgomery & Woodall, 2008; Pyzdek, 2003).

The greatest risk of not achieving this set of interrelated projects lays in the overall
compartmentalisation of each project. By placing each building into a different project, the
overheads of duplication immediately start to play into the bottom line of the budget. There is value
in placing a number of interrelated projects into a program (PMI, 2017), but the Sanctuary Health
and Wellness Complex Project Business Case seems to lack of high-level planning which could track
the interdependencies and progress of individual projects. As an example, the Integrated
Commissioning and Operational Handover Works Project could be a strong approach to bringing all
the projects together. However, there is no acknowledge of the energy and water generation and
storage technology project which is key to ensuring all buildings have basic utilities.

Proposed Budget, Procurement Strategy, and Timeframe

Business Case Budget
One of the ten Project Management Knowledge Areas focuses on Project Cost Management (PMI,
2017). The PMI indicates that correct budget management is a cornerstone of strong project
management principles. Whilst the budget detail found in the Cost Management Plan comes after
the Business Case, it is the Business Case that is used to set the starting budget and as such sets a
baseline expectation by the project sponsor (Roberts, 2011).

Project Budget
Site Infrastructure and Enabling works $ 1,500,000
Wellness Centre / Alternative Medical Centre $ 2,500,000
Community Health Centre $ 2,500,000
Serviced Residential Facility $ 2,000,000
Sports Centre $ 3,000,000
Administration and Centralised Building Services $ 2,000,000
Community Engagement and Promotions $ 750,000
Integrated Commissioning and Operational Handover works $ 750,000
Total $ 15,000,000
Table 2 - Project Budgets

A quick review of the cost per square meter of Australian commercial buildings shows that a cost
between $2,900 and $3,800 per square meter is not unreasonable (LMI-Group, 2019; Washington-
Brown, 2019). The DHS Business Case allows $2,500 per square meter for the four largest buildings
(see Table 2), inclusive of specialist medical equipment.

Whilst the projected budget is not wildly off from market expectations there is little to no room for
any unexpected costs. Delivering on budget is the goal of most projects, but as the Business Case
states “there is no allowance for escalation”. If interpreted correctly this statement shows that there
are no contingency funds proposed. Traditionally a majority of construction projects exceed their

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Assignment 3: Business Case Critique Nik Linnell SN: 10499881
original budget (Shane, Molenaar, Anderson, & Schexnayder, 2009), therefore there is a major risk
built into the Business Case which could lead to either cost blowouts or project failure.

Procurement Strategy
How a project defines and implements its procurement strategy is one of the PMBOK Project
Management Knowledge Areas (PMI, 2017). A strong overarching procurement strategy should
deliver value creation whilst also providing strong relationships with supply chain alliances (Walker &
Rowlinson, 2008). With the structure of having eight different projects defined within the DHS
Business Case there may well be eight different procurement strategies. As each project has
permission to decide on timeframes and approaches to procurement there is a risk that this will lead
to project delays. In a project which is tied tightly to community stakeholders the procurement
strategy can be positively influenced by these participants (Walker & Rowlinson, 2008).

Timeframe
As might be expected project timeframes are covered by the Project Schedule Management
Knowledge Area in the PMBOK (PMI, 2017). The Business Case timelines forecast the program of
works to be finished within two years and nine months, inside the three years mentioned in Project
Objective Two (see Table 3).

Approval Gate Duration

Approval Gate 1 (AG1)
Approval Gate 2 (AG2)
Approval Gate 3 (AG3)
Program Close
Within 6 months after business case approval
Within 9 months after AG1
Within 24 months after AG2
Within 6 months after AG3
Table 3 - Timeframes

The use of approval gates (see Fig. 2) is a well-regarded project management practice for ensuring
the phased approach contributes towards improvements in project performance and success
(Besner & Hobbs, 2006). Attention should be paid to the execution phase, as several of the
construction projects cannot commence until the Site Infrastructure and Enabling Works sub-project
is completed. This sets up a critical path for the entire project.

Figure 2 - Project Approval Gates

The Critical Path method is a tool to develop and control Schedule Management to allow prediction
of timeframes, evaluation of alternative plans, provide the ability to check progress, and facilitates
the basis for project decision making (James E. Kelley & Walker, 1959). What is not considered
within the Business Plan is the timelines for delivering the additional project relating to the water
and power services. Ignoring a dependency within the Critical Path method can contribute towards
projects going overtime and often over budget and should be considered a project risk (Kliem &
Ludin, 2017).

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Assignment 3: Business Case Critique Nik Linnell SN: 10499881
Project Governance Structure
Linking Organizational Governance with Project Governance provides stakeholders with the
structure to ensure that project activities adhere to policies, standards and guidelines (PMI, 2017).
For this project DHS requires the aforementioned phase gates but excludes the Monitoring and
Controlling Process Group within its Governance Structure (see Fig. 2). The implication of this
decision has been discussed above.

Figure 3 - Project Governance Structure

There are several issues with the hierarchical nature of the Project Governance Structure (see Fig. 3),
the most influential is the weak link back into the parent organisation. Without providing a direct
link between the executive and the project there is a risk that projects may continue without
supporting the organisation’s strategy (Too & Weaver, 2014). Such misalignment may mean that the
PMO is unable to provide correct oversight and strategic reporting capabilities (Too & Weaver,
2014).

Stakeholder Management
The Stakeholder Management Plan is considered critical across four of the five Process Groups (PMI,
2017). However, several afterthoughts have been brought into the Business Case and present
additional risk to project success. For example, linking the sporting facilities to a local school which is
yet to be built. By bringing in this kind of community stakeholder without due consideration to the
overall organisational strategy of DHS, which is primarily a healthcare provider, considerable
stakeholder dissatisfaction could occur (Mallak, Kurstedt, & Patzak, 1991). Properly managed this
inclusion could add both value to the overall project and increase additional future clients.

The Stakeholder Management Plan does not consider the existing clients and their ability to access
the health services in the new location. This could present a possible hurdle in achieving the Project
Objective of realising an annual turnover of $50 million. Further, the list of stakeholders is minimal
as stakeholders such as a procurement company, the contractors, or DHS itself are not considered.
The decision to split Community Engagement and Promotions into a separate project ignores that
stakeholder management is a key component of each sub-project which could lead to mixed and
confused messages being delivered.

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Assignment 3: Business Case Critique Nik Linnell SN: 10499881
Risk
Throughout this critique a number of risks have been identified which are not covered in the
Business Case:

1. Project approval process

2. The sub-project delivering power and water
3. Overall compartmentalisation of each project
4. Lack of project options
5. A project budget without contingency
6. Separate procurement strategies for each project
7. Missing a critical path dependency for overall schedule delivery
8. A governance structure that does not consider organisational executives
9. A complex stakeholder management approach with unknowns outside of the project

Whilst many of these might not be considered normal construction project risks, if they are excluded
from the Business Case they may create project risks. Missing key risks at the initiation and planning
process groups can be detrimental to project success (Kliem & Ludin, 2017).

Recommendations and Key Findings

Throughout this critique of the DHS Business Case significant gaps have been identified and require
addressing. These gaps could contribute to significant cost, time and regulatory issues which may
lead to project delay or failure. The following four recommendations have been made:

1. Better identification of the strategic need for the new Complex, with an alignment to the
parent organisation’s ongoing strategy.
2. A reconsideration of the approach to supplying water and power to the final site, the level of
risk this introduces may be too high and severely impact on overall project success. At the
very least provide additional project options.
3. Consider bundling the construction sub-projects together to remove the siloed nature of
several processes, such as schedule and procurement management.
4. Reconsider the budget required to deliver the project on time. A larger budget with built in
contingency is suggested.

Whilst not addressed specifically throughout the critique through not addressing the four
recommendations the possibility of scope creep becomes a strong probability. As there is no
statement of project exclusions this risk becomes even more likely.

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Assignment 3: Business Case Critique Nik Linnell SN: 10499881
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Assignment 3: Business Case Critique Nik Linnell SN: 10499881