Business cases and value

Every project should be able to answer a simple question: why is this worth doing, compared with the alternatives, including doing nothing? The document that answers it is the business case. It is usually prepared before the project is chartered, owned by the sponsor and kept current as the project proceeds. In the 2026 outline, the Process task on value-based delivery asks project leaders to identify what makes up the value of a project, examine business value throughout the project and evaluate delivery options in terms of the value they demonstrate. Governance and change questions in the Business Environment domain often come back to the business case too: a large change, a new regulation or a market shift matters precisely because it changes the case for the project.

What a business case contains

Formats vary by organization and sector, but a sound business case covers the same ground. Public bodies often use a structured model with strategic, economic, commercial, financial and management sections; private companies may use a shorter template. On the exam, expect the content rather than any particular template.

The business case is not the same as the project charter. The charter authorizes the project and the project manager; it summarizes objectives, high-level scope, budget and success criteria and is signed by the sponsor. The business case justifies the investment and is the reference for judging whether the project remains worthwhile. In many organizations a benefits management plan sits alongside both, describing how and when benefits will be measured and who owns them. Lesson 3 covers that plan.

Value is more than money

For a company, value is often expressed in money: revenue, cost savings, return on investment. Even there, much of what matters is hard to price, such as brand reputation, customer satisfaction, regulatory standing or the option to enter a new market later. For a public library, financial return is not the point at all; value lies in access, literacy, digital inclusion, community connection and good stewardship of public money. A good business case says plainly which kinds of value it is counting and how.

• Financial value: cost savings, avoided costs, revenue or grant income.
• Customer or public value: access, satisfaction, outcomes for patrons or citizens.
• Strategic value: progress toward strategic goals, positioning for future options.
• Compliance and risk value: meeting legal duties, reducing exposure to harm or penalties.
• Social and environmental value: community benefits, emissions avoided, sustainability.

When some value cannot be priced, two approaches are common. Cost-effectiveness analysis compares options by cost per unit of outcome, such as cost per visit, without putting a dollar value on the outcome. Cost-benefit analysis does put a dollar value on outcomes, usually using an agreed or published figure, so that options can be compared on net present value. Larkfield's board agreed to use both: cost per visit as the main measure, and an illustrative value of $14 per visit for a cost-benefit comparison.

The financial measures you need

The PMP exam expects you to interpret, and occasionally calculate, a handful of measures. All of them compare money arriving or leaving at different times, so they rely on the idea that a dollar today is worth more than a dollar later.

Present value discounts a future amount back to today: a cash flow \(C\) received in year \(t\) at discount rate \(r\) is worth

Net present value (NPV) is the sum of the present values of all benefits minus the sum of the present values of all costs. A positive NPV means the option creates more value than it costs at the chosen discount rate; when comparing mutually exclusive options, the higher NPV is generally preferred.

Comparing the Eastgate options

The business case compared three ways of serving the east side over ten years. Option A was an expanded bookmobile service: low capital cost, but limited hours and collection. Option B was to lease and fit out a former retail unit: the project now known as Project Compass. Option C was to build a new branch on city land: a larger, permanent building that would take two years to build. The board used a real discount rate of 4 %, a common choice for public projects, and the agreed value of $14 per visit.

# Ten-year comparison of three ways to serve the east side of Larkfield.
# Costs and visits are invented planning figures; the value per visit is an
# illustrative figure the board agreed to use for comparing options.
RATE = 0.04            # real discount rate for public projects
VALUE_PER_VISIT = 14   # dollars of community value per visit (illustrative)
YEARS = 10
options = {
    #                 capital by year (year 0, 1, 2) $000, annual operating $000, visits per year (000)
    "A Bookmobile":   ([350, 0, 0],       280, [30] * YEARS),
    "B Lease Eastgate": ([2520, 0, 0],    950, [110, 130] + [140] * (YEARS - 2)),
    "C Build branch": ([4900, 4900, 0],   900, [0, 0] + [160] * (YEARS - 2)),
}
def pv(amount, year):
    return amount / (1 + RATE) ** year
print(f"{'Option':17}{'PV cost':>9}{'PV value':>10}{'NPV':>8}{'BCR':>6}{'$/visit':>9}")
for name, (capital, opex, visits) in options.items():
    cost = sum(pv(c, y) for y, c in enumerate(capital))
    cost += sum(pv(opex if v > 0 else 0, y + 1) for y, v in enumerate(visits))
    value = sum(pv(v * VALUE_PER_VISIT, y + 1) for y, v in enumerate(visits))
    total_visits = sum(pv(v, y + 1) for y, v in enumerate(visits))
    print(f"{name:17}{cost:9,.0f}{value:10,.0f}{value - cost:8,.0f}{value / cost:6.2f}{cost / total_visits:9.2f}")

Option             PV cost  PV value     NPV   BCR  $/visit
A Bookmobile         2,621     3,407     786  1.30    10.77
B Lease Eastgate    10,225    15,364   5,139  1.50     9.32
C Build branch      15,214    13,944  -1,270  0.92    15.28

Option B has the highest NPV, about $5.1 million, the highest benefit-cost ratio at 1.50 and the lowest cost per visit at about $9.32. Option C serves more visits per year once open, but its higher capital cost and two-year delay before any visits mean its NPV over ten years is negative at this discount rate. Option A is cheap but serves few people, so its NPV is positive but small. The analysis also shows how sensitive the answer can be: over a 40-year horizon a permanent building might look very different, which is why the business case named the horizon as a key assumption and noted that a permanent building could be reconsidered when the lease ends.

Assumptions, sensitivity and the do-nothing option

A business case is only as good as its assumptions. Good practice is to list them, say how confident the organization is in each, and test how much the recommendation depends on them. Sensitivity analysis changes one input at a time to see where the answer flips; scenario analysis changes several together (for example, a pessimistic case with lower visits and higher costs). For Eastgate, the recommendation held unless visits fell more than about a third below forecast, which the board judged unlikely given the population growth.

Every business case should also describe the do-nothing or do-minimum option honestly. Doing nothing is rarely free: in Larkfield's case it meant continued crowding at the nearest branch, growing travel times for east-side residents and a likely loss of the senior-government grant earmarked for new service points. Making the cost of inaction visible helps decision makers see the real trade-off.

Keeping the business case alive

The business case is written early, when uncertainty is highest, so it must be revisited. Typical review points are phase gates, major change requests, significant external changes and the annual budget cycle. In adaptive projects, the product owner effectively tests the case every iteration by ordering the backlog by value and by watching whether released features produce the expected outcomes. If the case weakens, the right response may be to change scope, change approach, pause or stop; continuing simply because work has started is not a valid reason.

The project manager does not own the business case, but is often the first to see evidence that it is changing. Raising that evidence early, with an assessment of its effect, is one of the most valuable things a project manager can do in the Business Environment domain.