Priority Based Budgeting [PBB] is a robust, participative process that enables organisations to achieve a balanced financial plan, even in the most challenging environments. PBB has been helping organisations achieve challenging financial and operational goals for over thirty years. Unsurprisingly it has seen a significant resurgence in interest and uptake since 2008 as organisations, around the world, have sought to manage the implications of downturn and fiscal austerity. PBB teaches managers, at all levels in an organisation, to manage their own destiny and deliver change that they and their teams truly believe in. Change which also, collectively, results in the achievement of the organisations wider goals.

1. Priority Based Budgeting
[PBB]
Overview
August 2015

2. The financial position of the UK Public Sector is challenging and likely to become
more so
Last week Chancellor George Osborne announced
the 2015 Comprehensive Spending Review [CSR2],
due to conclude on 25th November 2015, in a bid to
find an additional £20bn savings in public spending
Departments will be asked to consider scenarios of
25 per cent and 40 per cent savings in their
resource budgets by 2019-20 in real terms.
Following on from CSR 1, savings and efficiencies
will become ever more difficult to identify and
deliver.
It is highly unlikely that any “unprotected”
Government Department will be able to avoid
Service reductions during the coming four years

3. UK Police Forces, for example, responded to CSR 1 with a wide range of change
initiatives
The response of UK Policing to CSR 1 has been impressive. HMIC found only three forces in England and
Wales that “require improvement in their response to the spending review.”
The challenge however is to maintain the level of savings and efficiency achieved to date.
Challenges to achieving planned efficiencies and identifying sufficient new ones include;
i. Achieving projected savings for currently planned and in progress change
ii. Identifying additional changes now that “low hanging fruit” has been picked
iii. Maintaining, indeed increasing, officer and staff energy and commitment to ever more
challenging change
iv. Identifying and realising the numerous small scale improvements that can, collectively,
contribute significant savings

4. However, despite this apparent success, working with UK Forces since 2010 has
convinced me that:
1. Traditional, Transformation style, change initiatives [overall] have not and will not deliver all of the
Benefits anticipated for them; Reasons for these shortfalls include:
1. Original overestimation or double counting of Benefits by focussed project team
2. Resistance to what are considered “Corporate” change initiatives by officers and staff
3. Benefits cannot be fully assigned to responsible function managers, making tracking and
assurance difficult
2. The scale of change and cost reduction required by CSR 2 can only be achieved by mobilising the
energy and knowledge of all officers and staff within the force
3. Responsibility for resource and financial management must be assigned to officers and staff
responsible for managing operations and services.
4. Only by being directly involved in resource planning and budgeting will responsible managers
become skilled and competent in resource and financial management

5. PBB is a zero / priority based planning method of assigning limited resources based on risk and benefit
PBB directs scarce resources to priority activities across the organisation, focussing maximum available
resources on key services.
PBB is undertaken by the managers and staff who run the business. As a result these managers
develop new planning and implementation skills which are retained for future application
Highly successful deployments of PBB in the policing sector have been completed in Greater
Manchester, West Midlands, Western Australia and Cheshie, during the last five years.
The outcomes and feedback from establishing PBB are positive and consistent;
i. PBB enables an organisation to achieve a balanced budget
ii. The PBB process is remarkably open, honest and robust
Priority Based Budgeting [PBB] has a unique track record of producing robust
resource plans and budgets

6. Leading Change [What Leaders must communicate and deliver]
Need Vision Objectives Benefits Decisions
PPB Approach & Toolset
Department
Managers
identify and
design Change
Senior
Management
Review Panel
directs &
decides using
consistent,
robust
information
Consistent,
straight-
forward
analysis tools
& techniques
Planning
Guidelines
communicate
Vision &
Objectives
Structured
proposals
balance,
efficiency ,
cost reduction
and risk.
Clear process,
rapid
execution
[typically less
than 20 weeks
from start to
decision]
Deploys a full
range of
performance
improvement
tools and
techniques
Change is
implemented
by
Department
Managers
using planning
and execution
tools linked to
proposals
Adopting Change [Ref. Anthony Greenfield; 5 Forces of Change]
Certainty Purpose Control Connected Success
Sustainable change requires leaders to lead, for this they must know how to lead. Change also requires all
stakeholders to adopt change which requires all options to be robustly debated and fairly evaluated.
The PPB process, and the tools it deploys, provide the components required to achieve sustainable Change
and realisable savings. It enables leaders to lead with clarity, and it “feels fair” for all stakeholders.
Why is PPB so effective at delivering enduring change?

7. Agree objectives, including savings targets. Confirm cost and resource baseline . Define organisation level services.
The PBB project is formally launched by means of half day training workshops for all managers involved.
Baseline, participants and activities
Identify and confirm:
1. current cost baseline to be included
within PBB . Normally the current
year budget or actual expenditure, if
the budget does not represent
current spending.
2. identification of all participants in the
process, i.e. Budget Subject
Managers [BSMs], who will be
responsible for developing and
ultimately owning the budgets
agreed. The total in scope budget is
allocated to Budget Managers to
establish clear responsibilities for
each cost element and type.
3. identification of the services and
outcomes in scope. These high level
services will be further developed by
BSMs during the PBB process.
Objectives and guidelines
Agree and document objectives for the
PBB exercise:-
1. A financial improvement target, in
either cost or percentage terms,
e.g. The PBB process will be
required to produce an agreed
budget that is X % lower than 2014
/ 15 expenditure.
2. Guidance on currently planned ,
expected or required changes that
will [or may] impact the
organisation during the planning
period. e.g. major organisational
changes, reorganisation, revised
operating models.
3. Agree composition of the PBB
Review Panel. This panel will
challenge and ultimately approve
PBB proposals . The Review Panel
will need to comprise between
three and five members of senior
management.
Launch workshop
Half day briefing and training events for
all BSMs and Senior Managers. The
session will instruct the participants
how the PBB project will be
undertaken, their roles, the activities
they will undertake and the
deliverables they will be responsible
for
The session will include practical
guidance on how to complete the
various tasks required during PBB and
instruction on the forms and
spreadsheets to be used.
Following this session BSMs will be
equipped to commence the Analysis
stage of PBB.
PBB Pre-Project Phase

8. PBB – Indicative Project Plan
1. Service Definition
Analysis and Costing
2. Identify and
evaluate efficiency
improvements and
Service Level options
3. Service
Prioritisation and
selection
4. Service Design &
Implementation
Planning
5. Implementation
Project Management & Coordination
Training, support, challenge and provision of advice to BSMs
Phases
PBB workbooks [One per
Subject Area] analysing FTE
and other costs to services
Planning Guidelines
Panel Discussion
Draft Proposals – inc.
Benefits / costs of Method,
Volume and Service Level
options
Panel Discussion
Final proposals – i.e. more
detail of costs and impact
Panel Decision
Ranked list of prioritised
Service Levels
Agreed funding decision
[Drawing the Line]
Redesigned Services to
meet agreed priorities
Revised Operating Model
Implementation Plans
Implementation of all
changes required to
achieve the agreed
resource plan / budget
Outputs
Objective
Confirm resources
Define services
Set objectives and direction
Confirm Planning
Guidelines
Present improvement
opportunities
Agree structure and
content of Service Levels
Confirm direction
Approving or rejecting
proposed Method and
Volume Changes
Agreeing and scoring
proposed Service Levels
Agreed implementation
plans for all subject areas
Agreed organisational
design / configuration
Reconfiguration of in scope
Budget Subjects to meet
budget and performance
objectives.
Cross
lifecycle
activity
Panel 1
Early September
Panel 2
Mid-October
Panel 3 & Funding
End November Early February End May
Commence
ASAP

9. 1. Service Definition Analysis and Costing
A structured Activity Analysis in the first phase of a PBB project. Completing this
structured analysis of resources, costs and their application, ensures that all
participants develop a clear and consistent understanding of how resources are
currently utilised. In this manner Activity Analysis develops the structure and baseline
information that informs later stages of the PBB project and in particular, enables the
Review Panel to test and explore budget proposals and changes.
Budget Subject Area
Budget Subject Manager
Description Volume Description Description Volume
Key Service # 1
Key Service # 2
Key Service # 3
Key Service # 4
Key Service # 5
Key Service # 6
Key Service # 7
Key Service # 8
Key Service # 9
Key Service # 10
FTE £ (000's0
Police Officers 40.0 2,181.2
Police Staff 103.0 10,203.5
Other Costs 5,122.2
Income 686.3-
Total Budget Subject Expenditure 143.0 16,820.5
Improvement Opportunities
Services Provided
Improvement Opportunities
Description [Continued]
Inputs Received Activities Undertaken
Controls Applied
Improvement Opportunities
Improvement Opportunities
Resources Utilised
Improvement Opportunities
Priority Based Budgeting
Service Definition & Analysis
Using proven Activity Analysis tools Budget Subject
Managers quickly produce consistent and insightful
analysis of employee activity and cost data

10. 2. Identify and evaluate service improvements
Having established and quantified current services, outcomes and costs, each BSM works to develop a structured proposal which addresses,
Volume Changes. Method Changes and Service Level options.
Delivering services more efficiently and effectively
Step 1. Quantify changes in demand, i.e. Volume Changes
Demand for services may vary between years. Step 1
quantifies the impact of known or anticipated changes.
Step 2. Identify and evaluate “Method Changes”
Method Changes are efficiency improvements which will
provide the same service for a lower cost. Examples include,
improved processes , use of technology, procurement
savings and improved staff utilisation
Step 3. Identify and evaluate “ Service Levels”
Service Levels are packages of services, ranked for their
importance to customers and users. Service Levels form the
building blocks of a Priority Resource Plan. Service levels
are defined as ;
Minimum – statutory / legal requirement
Intermediate – practically deliverable Service Level, higher
cost and lower risk than Minimum,
Current – levels of Service currently provided but at lower
cost as a result of proposed Method Changes
Enhanced – Services, not currently provided but valuable
enough to be considered for additional funds.

11. 3. Service prioritisation and selection
Purpose and benefits
 Retain customer security clearance
 Secure environment for staff
 Minimise vandalism and theft
 Protect intellectual property
Method changes (£000)
Night security cover
Daytime access control
Daytime security rounds
24hr permanent manning
Automatic gates
CCTV for boundary
Electronic monitoring
-1
-1
-1
-30
-40
-30
M.
I.
C.
E.
1
2
1
2
50
76
35
80
(£000) RiskService levels
Total proposed
Current budget
6
8
241
298
81
100
%
-1 -37
(£000)Workload Changes
Project X ends (MOD)
Purpose and benefits
 Retain customer security clearance
 Secure environment for staff
 Minimise vandalism and theft
 Protect intellectual property
Method changes (£000)
Night security cover
Daytime access control
Daytime security rounds
24hr permanent manning
Automatic gates
CCTV for boundary
Electronic monitoring
-1
-1
-1
-30
-40
-30
M.
I.
C.
E.
1
2
1
2
50
76
35
80
(£000) RiskService levels
Total proposed
Current budget
6
8
241
298
81
100
%
-1 -37
(£000)Workload Changes
Project X ends (MOD)
Example: Security
1
2
3
4
5
6
7
8
9
10
Assessment of Service LevelRank
Essential to the business - unavoidable corporate or legal requirements
Critical - unavoidable without substantial loss or damage
Very attractive, important and productive increments of service
Important - hard to see how they could be dropped
Significant benefits but could conceivably be dropped
Desirable but first to be dropped if funding curtailed
Benchmark
Marginal but first to be supported if funding available
Possible but only if much increased funding available
Doubtful - not sufficient justification at present
Unlikely ever to be funded1
2
3
4
5
6
7
8
9
10
Assessment of Service LevelRank
1
2
3
4
5
6
7
8
9
10
Assessment of Service LevelRank
Essential to the business - unavoidable corporate or legal requirements
Critical - unavoidable without substantial loss or damage
Very attractive, important and productive increments of service
Important - hard to see how they could be dropped
Significant benefits but could conceivably be dropped
Desirable but first to be dropped if funding curtailed
Benchmark
Marginal but first to be supported if funding available
Possible but only if much increased funding available
Doubtful - not sufficient justification at present
Unlikely ever to be funded
Rank
1
2
3
4
5
6
7
8
9
10
11
Rating
10.0
10.0
9.0
8.5
7.2
6.7
5.2
4.5
4.2
4.2
3.0
Level of Service
M Statutory Accounting
M E.D.I. Customers
I Salespurchase records
M Record Keeping
C Debt collection
I Large accounts
I Advice to managers
E Debtor management
C Full service
C All customers
E Consultancy service
Subject
Accounts
Order Proc.
Accounts
Personnel
Accounts
Order Proc.
Personnel
Accounts
Personnel
Order Proc.
Personnel
No
1
1
2
2
1
10
5
2
4
4
2
£k
50
15
76
35
35
120
72
80
98
50
51
No
1
2
4
6
7
17
22
24
28
32
34
£k
50
65
141
176
211
331
403
483
581
631
682
%
7
9
20
26
31
48
58
70
84
92
99
Increment Cumulative
Funding
Line
The ranked Service Level listing provides a prioritised list of resource allocation
opportunities. Service Levels with higher scores are assigned resources before
lower scores. Available resources will inevitably be exhausted before all
potential [including Enhanced] Service Levels have been resourced. When this
occurs, those Service Levels falling “below the line”, i.e. not resourced, will be
those that management has assessed as less important. If un-resourced
Service Levels are, upon reflection considered vital, then a re-ranking will be
required to correctly balance requirements with available resources
Each BSM completes the standard [spreadsheet based] PBB documentation,
quantifying the impacts of Volume Changes, Method Changes and Service
Level Options, for their assigned subject area
The standard forms fulfil two vital roles:
1. Provides the Review Panel with consistent information, enabling comparison
between proposals
2. Ensures that all proposals are numerically correct
The Review Panel applies a robust scoring
method to each Service Level for each
Budget Subject to produce a ranked
list of every Service Level proposal
that is both logical and transparent.

12. 4. Service Design & Implementation Planning
Once the final funding line has been agreed each BSM will produce an Implementation Plan for all approved Volume, Method and
Service Level Changes within their Budget Subject.
These Implementation Plans are prepared using a standard PBB Planning Template; as illustrated below.
Upon completion each BSM will submit their Implementation Plan to their Department Head for review and initial approval
Once the Budget Subject plan has been authorised by
the Department Head , BSMs may commence
implementation
Upon completion of all SMA plans for their
Department,, each Department Head will prepare a
Department summary, using a standard Template, that
defines the key Milestones and Risks for the
implementation of all Department changes
Each Department Head will present their Department
plan summary to the Executive Team for final
approval.
Once approved the Department summary plans will
form the baseline for managing and reporting
implementation progress and benefits realisation
Department Heads will present progress and
achievement to the Executive Team every four weeks

13. PBB Roles & Responsibilities
Governance Structure Roles Review Panels
Command Team /
Review Panel
Department
Heads
Budget Subject
Managers
[BSMs]
Review
Managers
 Train
 Question
 Challenge
 Link SMEs
 Workbooks
 Support
• Set objectives
• Provide guidance
• Final funding decision
• Provide direction
• Support to "BSM's“
• Link common subjects
• Review & challenge
• Analysis of current activity
• Generation of options
• Presentation of proposals
• Implementation of change
• Challenge and sharing ideas
• Resolution of linked ideas
and interdependencies
• Panels preparation and
rehearsal
Command
Team; PCC
Officer
Each BSM has a three
20 minute Review
Panel meetings
during the course of
PBB to:
– present findings
– explore
opportunities
– validate findings
and assumptions
– redirect effort
– request / receive
Panel support

14. Example PBB Project Timetable
7/6/14
14/6/14
21/6/14
28/6/14
5/7/14
12/7/14
19/7/14
26/7/14
2/8/14
9/8/14
16/8/14
23/8/14
30/8/14
6/9/14
13/9/14
20/9/14
27/9/14
4/10/14
11/10/14
18/10/14
25/10/14
1/11/14
8/11/14
15/11/14
22/11/14
29/11/14
6/12/14
13/12/14
20/12/14
27/12/14
3/1/15
10/1/15
17/1/15
24/1/15
31/1/15
7/2/15
14/2/15
21/2/15
28/2/15
Priority Based Budgeting - Project 16-Jun-14 21-Feb-15
Planning & Team Development 16-Jun-14 28-Jun-14
Data and Workbook Preparation 23-Jun-14 12-Jul-14
SME Training 07-Jul-14 19-Jul-14
SME Data Gathering & Activity Analysis 21-Jul-14 16-Aug-14
Standardisation & Validation 18-Aug-14 23-Aug-14
Practice / Mock Panel 25-Aug-14 30-Aug-14
Panel Review I 01-Sep-14 06-Sep-14
SME Draft Proposal Preparation 08-Sep-14 04-Oct-14
Standardisation & Validation 06-Oct-14 11-Oct-14
Practice / Mock Panel 06-Oct-14 11-Oct-14
Panel Review II 13-Oct-14 18-Oct-14
SME Final Proposal Preparation 20-Oct-14 15-Nov-14
Standardisation & Validation 17-Nov-14 22-Nov-14
Practice / Mock Panel 17-Nov-14 22-Nov-14
Panel Review III 24-Nov-14 29-Nov-14
Draft [pencil] funding line 01-Dec-14 06-Dec-14
Review impact and interdependencies 08-Dec-14 10-Jan-15
Consult re. Draft funding outcomes 08-Dec-14 10-Jan-15
Confirms final [pen] funding line 12-Jan-15 17-Jan-15
Implementation Planning 19-Jan-15 14-Feb-15
Implementation Plan Approval 16-Feb-15 21-Feb-15
Jan. 2015 Feb. 2015AugustJulyJune November December
Start End
September October

15. Contact Details
If you require additional information about how PBB can enable your organisation to develop a
robust and coherent response to funding and resource challenges, lese contact:-
Malcolm Anthony at ProjectProject Limited
Email :- malcolm@projectproject.co.uk
Mobile :- +44(0) 7712 777 641
In addition to extensive experience of delivering successful PBB initiatives, ProjectProject has a
complete suite of the tools and learning resources required to enable you and your
colleagues to develop a robust, deliverable, balanced budget and resourcing plan.

16. Appendix -Tools and Resources to support PBB Delivery
The PBB process is supported by standard tools and extensive documentation that has been
developed and refined through numerous successful projects.
• Generic PBB project plans and timetable
• PBB Team Member training
• Budget Subject Manager training
• PBB Activity Analysis & Proposal Workbooks, inc. completion instructions
• Service Level identification tools and techniques
• Method improvement identification tools and techniques
• Panel Member roles, responsibilities and training materials
• Ranked priority listing and selection tool
• Implementation planning templates, inc. guidelines and instructions
• Implementation “readiness assessment” tools and guidelines
• Implementation reporting templates