Why should procurement professionals develop business case before seeking approval to purchase capital equipment?

Why should procurement professionals develop business case before seeking approval to purchase capital equipment?
A . Using business case will prevent new entrants from entering the supply market
B. A business case can be used as a replacement of purchase order
C. Business case is a tool that eliminates all risks associated with the project
D. Devising business case may prompt the procurement to consider different options

View Answer

Answer: D

Explanation:

A business case is developed during the early stages of a project and outlines the why, what, how, and who necessary to decide if it is worthwhile continuing a project. One of the first things you need to know when starting a new project are the benefits of the proposed business change and how to communicate those benefits to the business.

Preparing the business case involves an assessment of:

– Business problem or opportunity

– Benefits

– Risk

– Costs including investment appraisal

– Technical solutions

– Timescale

– Impact on operations

– Organizational capability to deliver the project outcomes

These project issues are an important part of the business case. They express the problems with the current situation and demonstrate the benefits of the new business vision. Making business case with multiple options and choices also prompts the procurement and senior management to consider alternatives. As a result, the organisation may opt out the best option.

The business case brings together the benefits, disadvantages, costs, and risks of the current situa-tion and future vision so that executive management can decide if the project should go ahead.

Reference:

– CIPS study guide page 19-21

– How to Write a Business Case – Template & Examples | Adobe Workfront LO 1, AC 1.1