STRATEGIC ASSET MANAGEMENT




Project Initiation
     Process
                     For Capital Works




              DO...
Acknowledgements

The Project Initiation Process developed for South Australia acknowledges
the work undertaken by other p...
FOREWORD

The Government of South Australia is committed to the efficient and effective
delivery of essential services to ...
CONTENTS
     FOREWORD

1.   GOVERNMENT STRATEGIES AND KEY DIRECTIONS ........................................... 1
     1...
6.     PROJECT DEFINITION PHASE ........................................................................... 35
           ...
1. GOVERNMENT STRATEGIES AND KEY DIRECTIONS
1.1 GOVERNMENT STRATEGIES

      The South Australian Government is committed ...
1.3     BENEFITS

                                 The project initiation process will have the following benefits.

     ...
1.5   AGENCIES REQUIRED TO COMPLY WITH THE PROCESS

      In July 1995, Cabinet endorsed the project initiation process wh...
1.8     KEY FEATURES OF THE PROJECT INITIATION PROCESS

                                 Agencies have responsibility for ...
1.8.2 Content of submissions to Cabinet or the agency’s Minister

     CABINET SUBMISSIONS

     The requirements for the ...
The Department of Treasury and Finance and Services SA are to
                                      be given a minimum of ...
2. IDEAS TO MEET NEEDS
The project initiation process provides a structured and accountable approach
to the planning and d...
2.1     SCOPE OF THE PROJECT INITIATION PROCESS

                                 The process outlines the principles and ...
2.2.2 Existing assets

            An agency’s prime asset management responsibility is to maximise
            the servic...
10   PROJECT INITIATION PROCESS
3. CORPORATE PLANNING PHASE

In this phase, an agency systematically analyses the demand for its services,
considers metho...
3.    CORPORATE PLANNING PHASE
              DETAILS OF DOCUMENTS AND WRITTEN APPROVALS FOR THIS PHASE

       AGENCY’S CO...
3. CORPORATE PLANNING PHASE
The Corporate Planning Phase involves the following activities:

3.1   REVIEW CORPORATE PLAN F...
CORPORATE PLANNING PHASE


                                        • the key assumptions being made;
                     ...
CORPORATE PLANNING PHASE



      Broad estimates of capital and recurrent costs can be assessed in this
      phase, base...
CORPORATE PLANNING PHASE


                          3.6     PROJECT CONCEPT TO BE CONSIDERED FOR THE
                    ...
CORPORATE PLANNING PHASE


3.8   MODIFICATIONS TO PLAN IN RESPONSE TO STATE WIDE
      PRIORITIES

      After Cabinet has...
18   PROJECT INITIATION PROCESS
4. CONCEPT DEVELOPMENT PHASE

In this phase an agency moves from its broad, strategic asset development
plan to individual...
4.    CONCEPT DEVELOPMENT PHASE
                 DETAILS OF DOCUMENTS AND WRITTEN APPROVALS FOR THIS PHASE

           PRO...
4. CONCEPT DEVELOPMENT PHASE
4.1   APPOINT THE PROJECT STEERING COMMITTEE TO DEVELOP
      AND MANAGE THE CONCEPT PHASE

 ...
CONCEPT DEVELOPMENT PHASE


                                  DAIS (Services SA) is developing and will maintain a registe...
CONCEPT DEVELOPMENT PHASE


     o What are the concept/project objectives, including service
       delivery life?

     ...
CONCEPT DEVELOPMENT PHASE


                                  4.3.3 Identify statutory, planning and environmental issues
...
CONCEPT DEVELOPMENT PHASE


4.4   DEFINE THE PROJECT PARAMETERS, QUALITY STANDARDS AND
      BUDGET ESTIMATE

      Benchm...
CONCEPT DEVELOPMENT PHASE



                                  Agencies should refer to DAIS (Services SA) for risk manage...
CONCEPT DEVELOPMENT PHASE




Contract delivery options should be considered at this stage as the
method of delivery can a...
28   PROJECT INITIATION PROCESS
5. CONCEPT EVALUATION PHASE

This phase involves quantifying and costing the difference a project will make
to the communi...
5.    CONCEPT EVALUATION PHASE
                 DETAILS OF DOCUMENTS AND WRITTEN APPROVALS FOR THIS PHASE


           STR...
5. CONCEPT EVALUATION PHASE
5.1   AGREE ON THE SCOPE OF THE EVALUATION BRIEF
      (PRELIMINARY CONCEPT PLAN)

      From ...
CONCEPT EVALUATION PHASE


                                  o Prepare project option cash flows. These cash flows should ...
CONCEPT EVALUATION PHASE



            • impact on the State Budget;
            • economic evaluation of the preferred o...
Project Initiation Process
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  1. 1. STRATEGIC ASSET MANAGEMENT Project Initiation Process For Capital Works DOCUMENT UNDER REVISION Key areas under review include: reference to the aquittal requirements of Government's Prudential Management Framework and the Department of Premier and Cabinet's Circular No. 15, June 1998 on 'Procedures for Submissions Seeking the Review of Public Works by the Public Works Committee'. roles and Responsibilities of the 10 Portfolio Agencies minor changes to clarify details associated with the text and process Government of South Australia January 1996
  2. 2. Acknowledgements The Project Initiation Process developed for South Australia acknowledges the work undertaken by other public works authorities and associated organisations. Specific acknowledgement is given to: • WA Building Management Authority and the Treasury of Western Australia. Acknowledgement is given also to the following organisations: • Commonwealth Government • Construction Industry Development Authority (CIDA) • National Public Works Council • Department of Public Works and Services, New South Wales • Administrative Services Department, Queensland ISBN 0 7308 4755 1 Published by the Government of South Australia, January 1996 Produced by Treasury and Finance/DAIS (Services SA) Project No. 009 Layout, graphics and design - GDFX Print Management - Sprint © Government of South Australia, 1996 Reproduction of this publication is encouraged, provided that due acknowledgement is given to the Government of South Australia.
  3. 3. FOREWORD The Government of South Australia is committed to the efficient and effective delivery of essential services to the community. To achieve this objective Cabinet has endorsed the Strategic Asset Management Framework and the Project Initiation Process for Capital Works, which will assist government agencies and private sector providers. The Strategic Asset Management Framework provides information to guide the direction and management of the State’s investment in assets in ways which will maximise benefits to the community and minimise costs to government. The Project Initiation Process for Capital Works is a component of strategic asset management. It highlights the need to carefully consider and justify proposals for new or replacement services and the most appropriate means of service delivery. When new or additional assets are under consideration, and before initiating any capital works projects, agencies are expected to consider all options for service delivery, taking time to examine a range of alternatives before making a firm commitment. The Department of Treasury and Finance and DAIS (Services SA) will both offer their assistance to people in agencies to apply the process. Stephen Baker MP Wayne Matthew MP Deputy Premier Minister for State Services Treasurer PROJECT INITIATION PROCESS
  4. 4. CONTENTS FOREWORD 1. GOVERNMENT STRATEGIES AND KEY DIRECTIONS ........................................... 1 1.1 Government strategies ............................................................................................. 1 1.2 The importance of the Project Initiation Process ......................................................... 1 1.3 Benefits .................................................................................................................. 2 1.4 A consistent process ................................................................................................ 2 1.5 Agencies required to comply with the process ........................................................... 3 1.6 Application of the government’s risk management framework .................................... 3 1.7 Adaptation of the process to meet individual needs ................................................... 3 1.8 Key features of the Project Initiation Process .............................................................. 4 2. IDEAS TO MEET NEEDS ....................................................................................... 7 2.1 Scope of the Project Initiation Process ....................................................................... 8 2.2 Application of the Project Initiation Process ............................................................... 8 2.3 Responsibility, accountability and management ......................................................... 9 3. CORPORATE PLANNING PHASE ....................................................................... 11 Documents and written approvals .......................................................................... 12 3.1 Review corporate plan for consistency with government priorities .............................. 13 3.2 Define service delivery needs and broad time frames .............................................. 13 3.3 Examine demand management and non-asset strategies ......................................... 14 3.4 Examine existing asset performance ....................................................................... 15 3.5 Establish project concepts by rigorous testing of assumptions ................................... 15 3.6 Project concept to be considered for the government's forward program ................... 16 3.7 Ministerial approval of the agency’s five year strategic asset procurement plan ......... 16 3.8 Modifications to plan in response to State wide priorities ......................................... 17 3.9 Authorisation of expenditure for planning and design .............................................. 17 4. CONCEPT DEVELOPMENT PHASE ..................................................................... 19 Documents and written approvals .......................................................................... 20 4.1 Appoint the project steering committee to develop and manage the concept phase. .. 21 4.2 Appoint the project team to develop the concept ..................................................... 21 4.3 Develop project concept to meet service delivery needs ........................................... 22 4.4 Define the project parameters, quality standards and budget estimate ...................... 25 4.5 Identify all reasonable service delivery options (including “no build” option) ............. 25 4.6 Identify procurement options - financing and contract delivery ................................. 26 5. CONCEPT EVALUATION PHASE ........................................................................ 29 Documents and written approvals .......................................................................... 30 5.1 Agree on the scope of the evaluation brief (preliminary concept plan) ...................... 31 5.2 Evaluate concept options ....................................................................................... 31 5.3 Analyse short-listed options .................................................................................... 31 5.4 Select the preferred project concept option ............................................................. 32 5.5 Describe the preferred option in an evaluation brief (final concept plan) ................... 32 5.6 Seek Ministerial endorsement of the concept proposal ............................................. 33 5.7 Seek Cabinet approval of the concept .................................................................... 34 5.8 Referral to the Parliamentary Public Works Committee ............................................. 34 PROJECT INITIATION PROCESS
  5. 5. 6. PROJECT DEFINITION PHASE ........................................................................... 35 Documents and written approvals .......................................................................... 36 6.1 Appoint project design team utilising the consultants' register ................................... 37 6.2 Provide the project design team with the detailed definition brief .............................. 37 6.3 Confirm contract method ....................................................................................... 37 6.4 Develop a cost plan for the project ......................................................................... 38 6.5 Develop detailed project timelines .......................................................................... 38 6.6 Confirm that the proposal satisfies endorsed concept parameters ............................. 38 6.7 Check to confirm that the project meets the needs of the agency .............................. 40 6.8 Identify approvals required for the project ............................................................... 40 6.9 Endorsement to proceed to the delivery phase ........................................................ 40 7. PROJECT DELIVERY PHASE ............................................................................... 41 Documents and written approvals .......................................................................... 42 7.1 Review definition phase of the design ..................................................................... 43 7.2 Approval to proceed with contract documents ......................................................... 43 7.3 Prepare contract documentation ............................................................................. 43 7.4 Define required quality standards for the contractor ................................................. 43 7.5 Confirm the agreed and endorsed parameters ........................................................ 44 7.6 Initiate and facilitate approvals related to the Development Act ................................ 44 7.7 Obtain pre-tender estimate and associated cash flows ............................................ 45 7.8 Utilise contractors' register to select tenderers .......................................................... 45 7.9 Approval to call tenders ......................................................................................... 45 7.10 Call tenders and obtain tender comparison estimate ............................................... 45 7.11 Prepare tender appraisal and recommendation ....................................................... 46 7.12 Processing the tender call and final approval for awarding the construction contract . 46 7.13 Award the construction contract ............................................................................. 47 7.14 Manage the construction contract .......................................................................... 47 7.15 Commission and hand over of the completed project .............................................. 48 8. REVIEW PHASE ................................................................................................. 49 Documents and written approvals .......................................................................... 50 8.1 Post completion review .......................................................................................... 51 8.2 Update asset information systems ........................................................................... 51 8.3 Post occupancy evaluation (POE) ........................................................................... 51 8.4 Management review .............................................................................................. 52 APPENDICES APPENDIX 1 Non-commercial sector agencies .............................................................. 53 APPENDIX 2 Roles and responsibilities of stakeholders ................................................... 55 APPENDIX 3 References for the project initiation process ................................................ 57 GLOSSARY ...................................................................................................... 61 PROJECT INITIATION PROCESS overview .............................. inside back cover PROJECT INITIATION PROCESS
  6. 6. 1. GOVERNMENT STRATEGIES AND KEY DIRECTIONS 1.1 GOVERNMENT STRATEGIES The South Australian Government is committed to the efficient and effective delivery of essential services to the community and obtaining best value from new and existing built assets. The Strategic Asset Management Framework and this Project Initiation Process for Capital Works define the government’s commitment to this process. The Project Initiation Process is part of the Strategic Asset Management Framework, endorsed by Government in July 1995. The Strategic Asset Management Framework describes the context within which decisions are made. The asset management process (incorporating the project initiation process) covers the broad range of activities which follow from the initial idea that an asset may be required, to the provision of a service and to the disposal of an asset when it is no longer required. The project initiation process concentrates on the planning of services and, where necessary, the procurement of assets required for the delivery of those services. The process should ensure that additional assets are provided only after service needs have been identified, investigated thoroughly and substantiated. The project initiation process emphasises the need for quality corporate planning and robust evaluation prior to any firm decision being made to acquire or replace assets. The best solution may not necessarily require built assets. As part of this process, Ministerial or Cabinet approval of projects is now required at an early stage, once the concept for service delivery has been developed and evaluated. 1.2 THE IMPORTANCE OF THE PROJECT INITIATION PROCESS The project initiation process encourages the most detailed planning by agency management, especially in the initial phases. This will help achieve a more objective analysis of needs and documented evidence to support the case for providing additional services, especially if they involve acquiring or replacing assets. The process will ensure that agencies are able to justify funding requirements for infrastructure or infrastructure alternatives from the capital budget. The process will confirm with confidence that a service is required and that its procurement will be cost effective, appropriate and accountable. PROJECT INITIATION PROCESS
  7. 7. 1.3 BENEFITS The project initiation process will have the following benefits. o It aims to achieve the most beneficial outcome for government by requiring a full needs analysis and the consideration of a wide range of options before the project concept is approved. o Government support for a proposed project can be obtained at an early stage once the concept development and evaluation phases have been completed. o The process should ensure the clear definition and documentation of the criteria used to test the viability of the project, for the project justification, post completion reviews and for future planning. o It provides a distinct and consistent process to rank priorities on a state wide and agency basis. o It allows for improved allocation of time and resources for proper project planning and assessment. o It encourages early planning, including innovative options such as: • market solutions developed in conjunction with the private sector; • using technology to achieve required outcomes; • “no build” strategies to meet service delivery needs; and • “end use” planning so there are alternative uses for the asset. o It clarifies the process to procure additional assets, or upgrade or replace existing assets. Agencies with only occasional building needs will benefit from a well documented process which they can adapt to their projects. o The process encourages regular procedures through which well planned projects with documented justification can meet all government requirements. 1.4 A CONSISTENT PROCESS The project initiation process follows a form similar to that developed by the Construction Industry Development Agency (CIDA), which represents best practice within the building and construction industry. CIDA standards are used by the South Australian Parliamentary Public Works Committee as a benchmark when verifying that due process has been followed. 2 PROJECT INITIATION PROCESS
  8. 8. 1.5 AGENCIES REQUIRED TO COMPLY WITH THE PROCESS In July 1995, Cabinet endorsed the project initiation process which is to be implemented by government agencies within the broad framework of the Strategic Asset Management Framework. The general principles of the process apply to all government agencies. Details of the process apply particularly to non-commercial sector agencies in the public sector as listed in Appendix 1. While the overall process has been developed for all types of building and construction projects, the specific details have been designed primarily for non-residential building works. It may also be necessary to modify some aspects to meet the special requirements of agencies which carry out engineering construction projects. The process does not apply to major plant and equipment purchases, although the basic principles remain valid. 1.6 APPLICATION OF THE GOVERNMENT’S RISK MANAGEMENT FRAMEWORK The project initiation process encompasses elements of the government’s risk management framework for built assets. The Department for Building Management was established in 1994 to provide a central policy and advisory role to government for asset and risk management of built assets. Services SA, established 30 October 1995, assumes this role and incorporates a wider range of responsibilities. For those agencies required to use the risk management services provided by DAIS (Services SA), the activities designated as DAIS (Services SA) responsibilities are identified in the charts and overview which summarise each phase of the process. Detailed risk management policy guidelines will be published and further details of the processes to be followed will be provided as Treasurer’s Instructions. 1.7 ADAPTATION OF THE PROCESS TO MEET INDIVIDUAL NEEDS The process is adaptable to a tailored project-by-project approach to ensure that the individual needs of agencies are met. The amount of effort and attention required will vary depending on the size and complexity of the project and agency circumstances. Agencies need to consult with the Department of Treasury and Finance and DAIS (Services SA) to determine a minimum standard or approach which best suits the agency, the project and general circumstances. PROJECT INITIATION PROCESS 3
  9. 9. 1.8 KEY FEATURES OF THE PROJECT INITIATION PROCESS Agencies have responsibility for the management of their asset portfolios and should follow a disciplined approach in the early stages of planning to substantiate needs. The project is approved by the Minister or Cabinet at the end of the concept evaluation stage. Central agencies such as the Department of Treasury and Finance and DAIS (Services SA) provide greater support to agencies by developing and advising them of policies and guidelines for improved asset management. 1.8.1 Delegations for approval of projects o Cabinet approval is required for any project which has an estimated capital cost of $4 million or more when all stages of construction are complete. o Cabinet approval is also required for any project which has an estimated capital cost of $1 million on completion and is not included in a budget approved by Cabinet. o Ministers are authorised to approve projects within limits prescribed by Cabinet: • projects with an estimated capital cost of up to $1 million can be approved without restriction; and • projects with an estimated capital cost between $1 - 4 million, and which have been included in a budget approved by Cabinet. o All submissions seeking Ministerial approval of projects are required to include written advice from the Department of Treasury and Finance, particularly on budgetary provision, and from DAIS (Services SA) on building related issues. o Office accommodation projects with an estimated cost of $1 million or more and Information Technology projects costing more than $500 000 require Cabinet approval. o In accordance with Treasurer’s Instruction 302 - Authorities for Expenditure, Ministers are authorised to delegate approval for projects up to $500 000. Ministerial approval is required for amounts above $500 000. 4 PROJECT INITIATION PROCESS
  10. 10. 1.8.2 Content of submissions to Cabinet or the agency’s Minister CABINET SUBMISSIONS The requirements for the preparation and presentation of Cabinet submissions are detailed in the Cabinet handbook. For major capital projects, the following contents are expected to be included: • a statement of the objectives for the proposed project, including details of the underlying assumptions and measurable objectives; • a justification for the proposal, including an economic evaluation in accordance with Treasurer’s Instruction 9105 - Guidelines for the Evaluation of Public Sector Projects; • estimates of capital and recurrent costs required to operate the asset over the whole of its life; • estimated construction commencement and completion dates; • a report by DAIS (Services SA), where applicable, commenting on the proposal; • comments by the Parliamentary Public Works Committee, if the project has been referred and reported upon; and • a statement on the sources of funds including the impact on the Budget. SUBMISSIONS FOR MINISTERIAL APPROVAL Submissions seeking Ministerial approval should include details similar to the contents of a Cabinet submission. Where applicable, submissions may also need to include written statements from the Department of Treasury and Finance and DAIS (Services SA). The Department of Treasury and Finance will include comments on: • the budgetary provision for the project; • the justification of the proposal; • costs to other agencies; and • any other relevant issues. DAIS (Services SA), where it has a role in the project, will include comments on: • risk assessment and management of risk; • specific issues raised through the value management studies, including compliance with the brief, buildability, statutory requirements and agreed standards for building design and construction; • life cycle implications, including ongoing maintenance requirements; and • any other relevant issues. PROJECT INITIATION PROCESS 5
  11. 11. The Department of Treasury and Finance and Services SA are to be given a minimum of three clear working days to provide agencies with these reports. 1.8.3 Financial threshold for project approval The financial threshold for submission of projects for approval will be based on the capital cost of the project, regardless of whether the funds are provided by the public or the private sector. This requirement is for all built assets, including those leased from the private sector. The estimated cost to be used when seeking approval will be based on the capital cost on completion (ie it will include an estimate for inflation). The estimated capital cost also refers to the cost when all stages of construction are complete. While staging of projects needs to be considered to ensure the efficient provision of services, agencies must not stage projects in a manner which avoids submitting the proposal for approval at a higher delegation. In addition to the capital cost, the submission will include the calculation of whole of life costs associated with the project. 1.8.4 Responsibilities for specific components of the project initiation process Individual agencies have the primary responsibility for all assets under their control. This includes responsibility for the planning of specific projects to meet service delivery needs. The Department of Treasury and Finance has the responsibility to advise Government on the implications for expenditure on the Government’s assets and to ensure that appropriate policies and processes are in place to assist agencies in the management of their assets. DAIS (Services SA) provides a central policy and advisory role to Government for asset and risk management of Government’s built assets. DAIS (Services SA) will undertake risk management for specific projects for those non-commercial agencies required to use its services. This applies to all projects over $150 000. More details of the responsibilities and roles of the stakeholders in the project initiation process are included in Appendix 2. 6 PROJECT INITIATION PROCESS
  12. 12. 2. IDEAS TO MEET NEEDS The project initiation process provides a structured and accountable approach to the planning and delivery of state services. It aims to improve the ability of all agencies to clearly demonstrate the needs and benefits of a particular project, and ensure the delivery of essential services in the most appropriate and cost efficient way. The asset management process The asset management process includes activities ranging from the identification of the government’s key directions and strategies for the delivery of services to the divestment of an asset when it is no longer required. The project initiation process is a key element in the overall process which includes the initial planning of assets, the delivery, and evaluation of their use. The importance of good planning in the early stages The greatest potential for identifying and achieving capital and recurrent savings is in the early planning phases of a project (see the diagram below). Significant savings can be made by government if the need for built assets is analysed carefully from the outset, exploring a wide range of options, before any commitment is made. PROJECT INITIATION PROCESS 7
  13. 13. 2.1 SCOPE OF THE PROJECT INITIATION PROCESS The process outlines the principles and the processes which follow from a decision that built assets may be required to meet service delivery needs. It describes the strategic planning to be undertaken prior to initiating a proposal for the procurement of built assets. It requires agencies to develop strategies to meet service delivery needs, to seek government approval of the concept as the preferred option, and to secure formal agreement to proceed to design, documentation and delivery if the concept is endorsed. The basic principles of the process apply to all aspects of asset management and procurement. 2.2 APPLICATION OF THE PROJECT INITIATION PROCESS 2.2.1 Provision of new services In the past, planning for built assets has been based on the assumption that this will be the most appropriate way to provide services to the community. Now agencies are required to undertake a more rigorous process to determine needs, explore options and identify the most appropriate action. This process provides the framework and defines the responsibilities. All non-commercial sector agencies are expected to follow the project initiation process when planning and developing assets required to deliver services (refer to Non-commercial sector agencies, Appendix 1). It will be appropriate, however, for agencies to tailor the process to fit in with the management and planning processes applying within individual agencies. While commercial sector agencies are not required to follow the process, it is considered that the basic principles underlying the process can be applied for commercial projects although some aspects of project evaluation and approval are likely to be different. The process is designed primarily for major projects costing more than $150 000. Where the total project cost is less than $150 000, agencies should follow the Minor Works Guide, Checklists and Manual published and distributed by DAIS (Services SA). 8 PROJECT INITIATION PROCESS
  14. 14. 2.2.2 Existing assets An agency’s prime asset management responsibility is to maximise the service delivery potential of existing assets in the most cost effective ways. This document describes the process to follow when planning for the creation of additional service capacity and when considering the replacement or upgrading of existing assets. Asset rationalisation provides opportunities for government to restructure and reallocate resources. Agencies are required to review asset performance and utilisation and ensure that any assets retained are essential to the delivery of high priority services. Agencies are also required to identify and address building related hazards in accordance with legislative requirements under the Occupational Health, Safety and Welfare Act. 2.3 RESPONSIBILITY, ACCOUNTABILITY AND MANAGEMENT The process identifies primary responsibilities and indicates where to seek advice for each phase of the process. It also indicates the key points at which approvals to proceed must be sought from the Minister or Cabinet and when review by the Parliamentary Public Works Committee is required. The process assumes that agencies have well-developed corporate plans. However, agencies are at different stages in the development of corporate plans and it is accepted that some agencies may need time to achieve the level of planning required by this process. Agencies are expected to work through each phase of this process for each project and to develop documentation which will provide an audit trail for future reference. The degree of detail to be documented will vary. Major high cost projects, those with a high degree of risk and projects of critical importance to the government will require intensive scrutiny while repetitive projects may only require routine checking to ensure that due processes are followed. A project may be progressed through different phases simultaneously. The agency will be responsible for the progress of its project through the phases and for seeking necessary endorsements at the appropriate times. PROJECT INITIATION PROCESS 9
  15. 15. 10 PROJECT INITIATION PROCESS
  16. 16. 3. CORPORATE PLANNING PHASE In this phase, an agency systematically analyses the demand for its services, considers methods for delivery of the service and prepares a five year or longer service delivery strategy or a long term corporate plan. Agencies should have a range of ideas about the ways they can deliver the services which the community requires, but no specific options will have been confirmed. Govt Strategies Ideas to Corporate Concept Concept Project Project & Key Directions 1 Meet Needs 2 Planning 3 Development 4 Evaluation 5 Definition 6 Delivery 7 Review 8 Process Gov't Treasury Agency DAIS Action can be taken in various phases at the same time Cabinet & Finance (Services SA) Minister 3.1 Review corporate plan for consistency with Government priorities 3.2 Define service delivery needs and broad time frames 3.3 Examine demand management and non-asset strategies c 3.4 Examine existing asset performance c 3.5 Establish project concepts by rigorous testing of assumptions c 3.6 Project concept to be considered for the Government's Forward Program 3.6.1 Use criteria for ranking of project concepts c 3.6.2 Ranking of project concepts c 3.7 Ministerial approval of the Agency's five year strategic asset procurement plan 3.8 Modifications to plan in response to State wide priorities c 3.9 Authorisation of expenditure for planning and design Code: c Responsibility In Consultation Partnership PROJECT INITIATION PROCESS 11
  17. 17. 3. CORPORATE PLANNING PHASE DETAILS OF DOCUMENTS AND WRITTEN APPROVALS FOR THIS PHASE AGENCY’S CORPORATE PLAN Each agency needs to have a corporate plan which outlines the scope and direction of the core services and the assets and resources required to meet service delivery needs. DAIS (Services SA) can contribute to the development of the plan, especially in the development of asset management plans and the asset performance and rationalisation plan which involve long term strategic planning as well as the development of ideas and options to meet immediate service delivery needs and the use of BLAMS data. An agency’s corporate plan will include: • key assumptions (eg service demand, policies etc); • mission/role/service charter; and • resource implications. It will include a strategic asset management plan which makes reference to: • the Metropolitan Development Plan which includes the Urban Development Coordinating Committee (UDCC) projections of demography, land releases, urban renewal programs, etc; • an asset performance and rationalisation plan, land purchase and disposal plan; • the agency’s five year strategic asset management plan; • an ongoing maintenance plan arising from data provided through BLAMS; and • the current financial year capital works program for the agency, including the assets to be procured. PROJECT CONCEPT ARISING FROM THE IDENTIFICATION AND QUANTIFICATION OF SERVICE DELIVERY NEEDS The project concept arises from the ideas which have been developed to meet the agency’s service delivery needs. Design details for the preferred concept option will not have been developed at this stage and precise costings will not be available. It details the functions or services to be provided by an agency for the community or a particular section of the community. The project concept also describes the extent and nature of the services and the justification for all aspects of the proposal. CRITERIA FOR ALLOCATING PRIORITY TO PROJECTS (A WEIGHTED INDEX FOR PROJECTS) Agencies need to use a recognised system which describes the criteria and methods used to allocate priority to projects. The method used should ensure projects of highest priority are identified and that an accurate record of the criteria used for allocating priority to projects is available for future reference. The range of criteria is likely to vary from agency to agency and reflect the priorities which are important to the individual agencies. There is also a need to consider overall government priorities such as economic development and broader community benefits (or costs) in developing appropriate criteria. The development of appropriate criteria with relative weightings will enable each agency to rank its projects in a consistent and objective manner. This will assist Treasury and Finance when it develops the State-wide program. PRIORITISED 5 YEAR CAPITAL PROGRAM, INCLUDING CAPITAL WORKS PROCUREMENT The agency formulates a five year plan, based on the projects which have priority and the order of priority. Some projects will not require capital works solutions (“no build”, use of technology etc) while others will follow the capital works procurement process outlined in this document. The program will draw together all of the elements of an agency’s capital works requirements. This is expected to include committed and uncommitted major works and minor works, plant and equipment purchases, land purchases, motor vehicles and information technology acquisition and development. 12 PROJECT INITIATION PROCESS
  18. 18. 3. CORPORATE PLANNING PHASE The Corporate Planning Phase involves the following activities: 3.1 REVIEW CORPORATE PLAN FOR CONSISTENCY WITH GOVERNMENT PRIORITIES Well executed corporate management processes should result in a corporate or business plan that defines the agency’s service delivery objectives and strategies, including: • government policies and priorities applicable to that agency; • program statements; • the service delivery charter; • long term strategic directions (five to ten years); and • the current business plan. 3.2 DEFINE SERVICE DELIVERY NEEDS AND BROAD TIME FRAMES Service delivery strategies need to be supported by reliable data on present and future demand for services. This will require an agency to: • provide evidence of demand for services from the community, substantiated by research and analysis; • describe the nature of the service demands; • detail its statutory service obligations (eg provision of schools, prisons); • describe community service obligations; • analyse other relevant services within government; and • quantify levels of service that can be achieved. Specific attention should be given to the agency’s strategic asset management plan. This should take into account asset maintenance and replacement forecasts and asset upgrading programs. It will also nominate any additional assets to be provided. The additional capacity provided, and any new policies being developed which will have an impact on the need for assets and resources, should be detailed as part of the plan. To help address these issues, agencies will need to consider: • government policies and stated objectives (eg economic development for the state); • the strategies and forecasts included in the government’s metropolitan and regional planning strategy, the Metropolitan Development Program and other relevant local and regional planning documents; • information from key stakeholders (including consultation with the community as well as agencies); PROJECT INITIATION PROCESS 13
  19. 19. CORPORATE PLANNING PHASE • the key assumptions being made; • emerging issues and trends identified through research, from reviews, and examples of best practice; • agreed service standards and benchmarks; • market research; and • financial forecasts. Assumptions and assertions about the demand for services will need to be tested and supported by empirical evidence. If the need for additional services has been substantiated, consideration should be given to alternative delivery options. These include: • market solutions such as BOO/ BOOT schemes (Build Own Operate/Build Own Operate Transfer); • leasing; and • greater community involvement and ownership (eg the capital works assistance scheme which requires financial commitment from the community). 3.3 EXAMINE DEMAND MANAGEMENT AND NON-ASSET STRATEGIES The project initiation process requires agencies to consider other ways of managing demand or satisfying or redefining service delivery objectives to minimise or avoid demand on capital and its associated debt servicing. Examination of demand management and non-asset strategies includes options such as: • resource sharing with other agencies or levels of government or community groups; • the use of technology instead of infrastructure; • modifying pricing policy to reduce, redirect, delay or eliminate demand; • changing service standards; • the redesign of service delivery; • rescheduling of service delivery; • changing policy or legislation; • education programs to reduce demand on service delivery; and • private sector provision of services essential to the agency. Agencies should always ensure that the “do nothing” option is fully investigated and that the consequences are outlined, costed and documented for future reference. These strategies will begin to define the real options for service delivery and to test the need for additional assets. 14 PROJECT INITIATION PROCESS
  20. 20. CORPORATE PLANNING PHASE Broad estimates of capital and recurrent costs can be assessed in this phase, based on standards such as the cost per hospital bed, or cost per student place in a school. 3.4 EXAMINE EXISTING ASSET PERFORMANCE To meet service delivery demand, agencies should: • review existing asset performance in terms of function, quality and utilisation rate across the agency’s portfolio; • investigate options to better utilise existing facilities to meet additional demands; and • identify and rationalise under-utilised facilities. Agencies will require an up-to-date asset register and an asset management information system to examine existing asset performance and rationalise facilities. Most asset management information requirements for built assets can be met through the use of the Building Land and Asset Management System (BLAMS) which is managed by DAIS (Services SA). Agencies should note that Cabinet has confirmed (in July 1995) that prior to any development of an alternative asset information system to BLAMS, the agency will be required to obtain agreement from the Department of Treasury and Finance and DAIS (Services SA). 3.5 ESTABLISH PROJECT CONCEPTS BY RIGOROUS TESTING OF ASSUMPTIONS The agency, as a result of the reviews described, will have established whether there is the need to provide additional or replacement services. Further investigations will determine the optimum service delivery solution and whether the service delivery need is best met by built assets or through “no build” solutions. Rigorous testing of the ideas put forward to meet service delivery needs will be required. Value management techniques can greatly assist agencies to develop and prioritise projects according to need, to identify program and project risks and to test assumptions about service delivery requirements. The process can help present a clear set of client/customer objectives for a project and define the key functional needs early in the planning process. PROJECT INITIATION PROCESS 15
  21. 21. CORPORATE PLANNING PHASE 3.6 PROJECT CONCEPT TO BE CONSIDERED FOR THE GOVERNMENT’S FORWARD PROGRAM Following this review process in the early phases, the project concept should be developed to a stage where the proposal can be included in the agency’s forward program and consideration can be given to the proposal’s priority at government level. 3.6.1 Use criteria for ranking of project concepts Agencies, particularly those with large procurement programs, need to rank project concepts from the most important to the least important. Weighted decision-making criteria based on the key outcomes relevant to the agency should be developed and used in a consistent and objective manner. Knowledge of the decision-making criteria and their weighting is most helpful to Treasury and Finance when they advise on priorities across government and recommend a forward program to Cabinet. 3.6.2 Ranking of project concepts Agencies with several concepts under consideration should rank them through the use of the weighted decision-making criteria. This process should include a revision of the priority of proposals already included in agency procurement plans. The ranking of individual projects will assist each agency in the development of a five year strategic asset procurement plan and provide a clear indication of priorities. 3.7 MINISTERIAL APPROVAL OF THE AGENCY'S FIVE YEAR STRATEGIC ASSET PROCUREMENT PLAN Each agency’s five year strategic asset procurement plan (capital works forward plan) is to be revised annually as part of the normal budget cycle. The plan will provide the government with a strategic view of future plans and priorities. Prior to providing strategic asset procurement plans as part of the budget process, agencies will obtain Ministerial approval, ensuring that any Ministerial priorities are reflected. 16 PROJECT INITIATION PROCESS
  22. 22. CORPORATE PLANNING PHASE 3.8 MODIFICATIONS TO PLAN IN RESPONSE TO STATE WIDE PRIORITIES After Cabinet has determined the budget allocations and forward estimates, agencies will need to review their strategic asset procurement plans to ensure that they are in line with the approved estimates and reflect any changes in project priorities determined by Cabinet. 3.9 AUTHORISATION OF EXPENDITURE FOR PLANNING AND DESIGN At the completion of this corporate planning phase, the proposal will have been developed to the stage where work can commence on the development of the concept. Before proceeding to the next stage, agencies should formulate a budget for the subsequent planning and design phases and seek approval of proposed expenditure from the Minister or delegate, in accordance with Treasurer’s Instruction 302 - Authorities for Expenditure. PROJECT INITIATION PROCESS 17
  23. 23. 18 PROJECT INITIATION PROCESS
  24. 24. 4. CONCEPT DEVELOPMENT PHASE In this phase an agency moves from its broad, strategic asset development plan to individual concepts and projects which may need to be included on the agency’s strategic asset procurement plan. Govt Strategies Ideas to Corporate Concept Concept Project Project & Key Directions 1 Meet Needs 2 Planning 3 Development 4 Evaluation 5 Definition 6 Delivery 7 Review 8 The feasibility study for the project includes the Concept Development and Concept Evaluation phases. Process Gov't Treasury Agency DAIS Action can be taken in various phases at the same time Cabinet & Finance (Services SA) Minister 4.1 Appoint the project steering committee to develop and manage the concept phase c 4.2 Appoint the project team to develop the concept 4.3 Develop project concept to meet service delivery needs c 4.3.1 Analyse needs and market research in detail c 4.3.2 Clarify the functional objectives of the project concept c 4.3.3 Identify statutory, planning and environmental issues c 4.3.4 Identify cultural and heritage issues c 4.4 Define project parameters, quality standards and budget estimate c 4.5 Identify all reasonable service delivery options (including "no-build" option) c 4.6 Identify procurement options finance delivery options c contract method options c Code: c Responsibility In Consultation Partnership * Note that a strategic value management study is to be undertaken during the concept development phase and that a strategic value management report is required when seeking approval of concept. PROJECT INITIATION PROCESS 19
  25. 25. 4. CONCEPT DEVELOPMENT PHASE DETAILS OF DOCUMENTS AND WRITTEN APPROVALS FOR THIS PHASE PROJECT DEMAND STUDY Demand management aims to reduce asset creation by influencing the community’s demand for services and by identifying those services which are essential (ie public needs rather than wants). The responsible agency undertakes research to ensure there is a justifiable need for the proposed project. This research is documented as part of the information to justify the proposal. COST BENCHMARKS Cost benchmarks for services arise from the costing of comparable services or from calculations of the cost of delivery in new and innovative ways. Cost benchmarks for construction arise from construction standards and from comparisons with the level of service delivery and construction costs provided by comparable organisations. RISK MANAGEMENT PLAN Risk management is a structured way of identifying potential risks, analysing their consequences, devising responses and implementing strategies to manage the successful delivery of the project. DAIS (Services SA) is the government’s risk manager for building assets and is responsible for developing a risk management plan in conjunction with the service delivery agency. STRATEGIC VALUE MANAGEMENT STUDY REPORT A strategic value management study is a structured, systematic and analytical process undertaken in the concept development phase to quantify and verify need and assist with the concept evaluation. Value management studies are undertaken by qualified independent experts who work in conjunction with the client agency, DAIS (Services SA) and other interested parties. The strategic value management study will question underlying assumptions about need and require evidence to substantiate the need for services. It will provide a documented report which will form part of the information required in subsequent stages. EVALUATION BRIEF (PRELIMINARY CONCEPT PLAN) The evaluation brief (preliminary concept plan) describes the concept and establishes criteria for the specific project. This is a refinement of the project concept following the development work in the concept development phase including the strategic value management study. The evaluation brief sets the parameters for the proposed project, and provides information which is used in subsequent phases. It is prepared by the agency in conjunction with Services SA. The information required includes: • defined needs, consistent with the corporate business plan; • concept objectives for the project; • concept description for the project (relationship diagrams, plans etc); and • a preliminary estimate of the capital and operating costs for the project concept. FUNCTIONAL ANALYSIS A functional analysis is undertaken by DAIS (Services SA) or an appropriate consultant to determine whether the client’s requirements as described in the client brief have been met. ACTION PLAN The action plan outlines the key activities which have to be undertaken and sets timelines for these events. Each project requires cost and timeframe targets for each element. The cost and time plans are used to control all design and development activities and are measured against the standards established early in the life of the project. 20 PROJECT INITIATION PROCESS
  26. 26. 4. CONCEPT DEVELOPMENT PHASE 4.1 APPOINT THE PROJECT STEERING COMMITTEE TO DEVELOP AND MANAGE THE CONCEPT PHASE In the corporate planning phase, the project has generally been supported by the agency's senior executive or a senior manager responsible for implementing the agency’s asset program. At this stage, large and complex projects require the appointment of a project steering committee while routine projects may only require a project team. It is also an appropriate time to provide any other liaison or support arrangements. The project steering committee provides general direction to a project team of professionals who will develop concept options and costings. The role of the project steering committee and project team is to assign project responsibilities, seek all relevant approvals and control the project to its completion. The project steering committee ensures that the necessary skills are in place to assist in undertaking the concept development and concept evaluation phases and subsequent steps in the project initiation process. o DAIS (Services SA) will be represented on the steering committee as it has responsibility for management of building construction aspects, on behalf of government. o The Department of Treasury and Finance, the Economic Development Authority and the Crown Solicitor, may be represented, particularly if private sector provision or financing is being considered or where specific legal issues may arise. 4.2 APPOINT THE PROJECT TEAM TO DEVELOP THE CONCEPT The project team is responsible for development of the concept and the daily administration of the project. It allocates project responsibilities, seeks all relevant approvals and generally supervises the project to its completion. Where applicable, it reports to the project steering committee. DAIS (Services SA) is responsible for the management of the government’s building and construction related risk. It also manages the engagement of all private sector consultants (eg consultants for architecture, engineering, cost management etc) including those on the steering committee and the project team. PROJECT INITIATION PROCESS 21
  27. 27. CONCEPT DEVELOPMENT PHASE DAIS (Services SA) is developing and will maintain a register of all consultants who undertake work on behalf of government for urban planning, building design and construction. The Consultants’ Register will enable the selection of professionals with relevant expertise and experience and is part of an agreed quality assurance process. Consultants’ registers for other infrastructure services such as roads, water and power are maintained by the respective agencies. 4.3 DEVELOP PROJECT CONCEPT TO MEET SERVICE DELIVERY NEEDS A perceived need by an agency for an asset is translated into a service delivery concept. The development of the concept with reference to agency service delivery requirements is critical to the achievement of value to government over the life of the asset. This assumes that strategic planning for the business enables a comparison of measurable concept objectives with broad program objectives. The agency should develop the concept detail so that the project can be compared with its strategic directions, and so that it is able to quantify the difference that the project is expected to make. 4.3.1 Analyse needs and market research in detail Systematic and accurate needs analysis is critical to determining what is really required to deliver the essential services. Most market or service needs analysis has historically relied on basic information such as: • historical trends (eg past enrolments or past history of service delivery); • comparable area standards (eg square metres per office worker, student or prisoner); and • forecasts including demographic data from the ABS census (which may not reflect changes which have occurred since the last census). The real purpose of the needs analysis in the project initiation process is to ensure that only those projects that meet the criteria for demonstrated need will be provided. This process involves asking the following types of questions. 22 PROJECT INITIATION PROCESS
  28. 28. CONCEPT DEVELOPMENT PHASE o What are the concept/project objectives, including service delivery life? o What is the state of the market (in terms of price/demand, etc) and in particular what are the expectations and plans of likely users and client/customers? o Which business or service needs are met by the concept/ project? o How will the claimed benefits of the project be measured over time? 4.3.2 Clarify the functional objectives of the project concept All parties need to clearly understand the objectives of the project. The strategic value management process can be used as a way of presenting a clear set of client/customer objectives for a project and to address the key functional requirements early in the process. For all major projects, in particular those in excess of $4 million, a strategic value management study needs to be carried out to assist agencies to clarify their requirements. DAIS (Services SA) will assist agencies to carry out strategic value management studies. Needs assessment requires a ranked set of functional objectives which describe what the project must do. Analysis of objectives will result in the following documentation. o A service delivery needs analysis. o Detailed function needs and outcomes (what the asset must do). o Prioritisation of objectives and functions. o An explicit evaluation of project objectives against strategic business or service plans. o An action plan for the following phases, identifying both actions and gaps; as well as risk assessment and a risk management plan. PROJECT INITIATION PROCESS 23
  29. 29. CONCEPT DEVELOPMENT PHASE 4.3.3 Identify statutory, planning and environmental issues At this point, agencies should also be aware of other similar activities being planned and should consult with Commonwealth Governmnent, Local Government and other State Government agencies and relevant organisations about their medium-term strategies for related service provision. This consultation will enable the agency to review again any possible sharing arrangements (eg sharing a school site between the government and non- government sectors). In addition, agencies should consider ways in which a whole of government approach can be enhanced. Proper identification of any other constraints at this stage can help test alternative concepts and identify the impact of environmental and planning approval procedures on the timelines for the program. The questions to be asked include: o Does the concept completely conform with planning policies and regulations? o Does the concept require changes to planning policies and regulations? o Will the project require utility or infrastructure adjustments? o Is the project environmentally sensitive and subject to forms of environmental evaluation? Long timeframes can sometimes be associated with evaluation of these issues and may limit the development of some options and/or identify additional cost elements. 4.3.4 Identify cultural and heritage issues Any plans for significant work on - or adjacent to - buildings, gardens or public places may involve heritage issues, including those relating to Aboriginal people. In these instances, the agency should contact the appropriate government authority. 24 PROJECT INITIATION PROCESS
  30. 30. CONCEPT DEVELOPMENT PHASE 4.4 DEFINE THE PROJECT PARAMETERS, QUALITY STANDARDS AND BUDGET ESTIMATE Benchmark standards can be used to define the parameters of the proposed project from the earliest stages of a project’s development, including: • the quality standard to be adopted; • project cost; and • project time frame. Benchmarks developed by DAIS (Services SA) for a range of building types can be used in this process. For example, if there is a need for fifty new prison places in a particular location, it is possible to quickly define (within a range) building and site size, total project cost, operating costs and likely project timeframe. The work undertaken to define the scope of a project becomes part of the evaluation brief to be assessed in detail in the evaluation phase for each project. 4.5 IDENTIFY ALL REASONABLE SERVICE DELIVERY OPTIONS (INCLUDING “NO BUILD” OPTION) For almost every problem there is more than one solution and in most cases a range of variations within a solution. However, the one-off nature of projects often results in the “one right answer” being locked in too early in the process. Sometimes there is a reluctance to spend time and money on the development of options when the solution seems obvious, but the development of meaningful options can be used to identify real needs and viable solutions, saving both time and money. Group processes, expert input and the project management team should use well defined project objectives and functions to help them generate a range of options for analysis and consideration. Not all options will require detailed examination but consideration of some meaningful options may provide a means of assessing the risks associated with the project and help add flexibility. Different options can have significantly different levels of risk, which need to be identified. PROJECT INITIATION PROCESS 25
  31. 31. CONCEPT DEVELOPMENT PHASE Agencies should refer to DAIS (Services SA) for risk management advice and assistance in the development of a risk management plan for building projects. Where the cost of the project is estimated to be in excess of $150 000, risk management by DAIS (Services SA) is mandatory for those non-commercial agencies required to use these services. The identification of options is very important and requires input from members of the agency and DAIS (Services SA). Community consultation forums may sometimes be appropriate. A brief assessment using strategic value management techniques may assist. 4.6 IDENTIFY PROCUREMENT OPTIONS - FINANCE DELIVERY AND CONTRACT METHOD OPTIONS Within each option there may be a range of sub-options for financing and delivery. For example, options could include the design and building of a new regional office, the purchase of an existing office or a developer lease-back arrangement. Private sector funding of capital investment in community assets is an important consideration. A broad range of private sector financing options is available. Agencies need to consider the “build, own and operate” options in various combinations, and whether or not assets will transfer to the government at some future time. All costs to government need to be identified and documented to demonstrate the “whole of life” cost of the proposal and enable proper analysis of the value of the project to be undertaken. “Whole of life” costs include construction, maintenance, and refurbishment as well as equipment, operating and disposal costs (including salaries and utilities costs). The documentation of these costs forms part of the probity and accountability requirements of government. The project initiation process is applicable to all built asset projects, regardless of whether the funding is provided by the Commonwealth, private sector or funding from internal or recurrent sources. Commonwealth/State financing arrangements can represent multiple combinations requiring evaluation. Where there are Commonwealth funding and approval processes, agencies must ensure that Cabinet is fully informed and able to make its decisions before any commitments are entered into with the Commonwealth. 26 PROJECT INITIATION PROCESS
  32. 32. CONCEPT DEVELOPMENT PHASE Contract delivery options should be considered at this stage as the method of delivery can affect other decisions including the appointment of the project team and the risk management process. Delivery options for built assets include: • the traditional form of government finance, and a plan, design, and construct process; • construction management process; • design development/construction and novation packages; • developer lease-back arrangements, which must include capital and all recurrent cost implications; • developer funded initiatives for the built component only; and • purchase of existing properties or services, including any costs associated with refurbishment or upgrading. Options such as BOO/ BOOT (Build Own Operate/ Build Own Operate Transfer) or a leasing option need to be considered and a preferred option recommended. Where private sector provision or financing of infrastructure is being considered, agencies need to be aware of the Economic Development Authority (EDA) publication Guidelines for the Private Sector Provision of Infrastructure. Reference should be made to the Department of Treasury and Finance publication Contracting Out Financial Guidelines. Early consultation with the EDA, the Department of the Premier and Cabinet (Office of Project Coordination) and with the Department of Treasury and Finance is desirable. Agencies should note that contracts for the construction or acquisition of major assets must be certified by the Crown Solicitor or the Crown Solicitor’s delegate as being commercially competent and sound. DAIS (Services SA) has several approved standard form contracts to assist agencies. The standard contract currently in use is NPWC Edition 3. This is under review and it is anticipated that a suite of standard form contracts based on Australian Standard 2124 -1992 will be introduced in 1996. Government has adopted the Code of Practice for the South Australian Building and Construction Industry. This Code and its Implementation Guidelines applies to all building and construction projects that are fully or partially funded or managed by the Government of South Australia. Treasury and Finance can advise or assist agencies to undertake the detailed analysis required in the evaluation phase with reference to the Treasurer’s Instruction 9105 - Guidelines for Evaluation of Public Sector Projects and Treasury Information Paper No. 90/1 Guidelines for Evaluation of Public Sector Projects. PROJECT INITIATION PROCESS 27
  33. 33. 28 PROJECT INITIATION PROCESS
  34. 34. 5. CONCEPT EVALUATION PHASE This phase involves quantifying and costing the difference a project will make to the community by analysing the benefits of the options in terms of program or sub-program objectives and performance indicators, and selecting the most cost effective option. Govt Strategies Ideas to Corporate Concept Concept Project Project & Key Directions 1 Meet Needs 2 Planning 3 Development 4 Evaluation 5 Definition 6 Delivery 7 Review 8 Process: Gov't Treasury Agency DAIS Action can be taken in various phases at the same time Cabinet & Finance (Services SA) Minister 5.1 Agree on the scope of the evaluation brief (preliminary concept plan) c 5.2 Evaluate concept options 5.3 Analyse short-listed options c 5.4 Select the preferred project concept option c c 5.5 Describe the preferred option in an evaluation brief (final concept plan) 5.6 Seek Ministerial endorsement of the concept proposal >$150,000 to <$4.0m; Minister or delegate to approve c c 5.7 Seek Cabinet approval of the concept, $4.0m and >$4.0m c c 5.8 Referral to the Parliamentary Public Works Committee, if > $4.0m c Code: c Responsibility In Consultation Partnership * Note that approval at the Concept Evaluation phase is a change in procedure, and that the threshold for approval by Cabinet has been increased to $4 million cost on completion, with all stages included. PROJECT INITIATION PROCESS 29
  35. 35. 5. CONCEPT EVALUATION PHASE DETAILS OF DOCUMENTS AND WRITTEN APPROVALS FOR THIS PHASE STRATEGIC VALUE MANAGEMENT REPORT A strategic value management study is a structured, systematic and analytical process undertaken in the concept development phase to quantify and verify need and assist with the concept evaluation. Value management studies are undertaken by qualified independent experts who work in conjunction with the client agency, DAIS (Services SA) and other interested parties. The strategic value management study will question underlying assumptions about need and require evidence to substantiate the need for services. It will provide a documented report which will be form part of the information required in subsequent stages. RISK ASSESSMENT AND A RISK MANAGEMENT STRATEGY, INCLUDING ALLOCATION OF RISK AND RESPONSIBILITY Project risk assessment aims to ensure all risk variables are identified and managed. DAIS (Services SA) is the Government’s risk manager for building assets and operates in conjunction with specific agencies to identify risks and develop a plan for the management of risks associated with procurement of assets. ECONOMIC/FINANCIAL ANALYSIS OF OPTIONS, INCLUDING LIFE CYCLE COSTING OF OPTIONS This is a systematic way of analysing all the costs and benefits of the various methods by which a project objective can be met. It takes into account all major costs associated with the project, including capital and recurrent costs. The economic and financial analysis will identify the option which is most cost effective when all costs and benefits are taken into account. This analysis is part of the value management process. Reference should be made to Treasurer’s Instruction 9105 Guidelines for the Evaluation of Public Sector Projects and Treasury Information Paper 90/1 Evaluation of Public Sector Projects. PROJECT PLAN (OR FINAL CONCEPT PLAN) FOR THE PREFERRED OPTION The project plan provides precise details about the specific project. The following details should be included in submissions for approval of the project (eg submissions to the Minister, Cabinet, and to the Parliamentary Public Works Committee). The service delivery agency and DAIS (Services SA) are major contributors to the project plan. The project plan (or final concept plan) for the preferred option will include: • the project definition brief (schedule of accommodation, site works etc); • the proposed procurement method (lump sum contract, design/construct, construction managed); • financing arrangements (agency or alternative funding); • a detailed cost estimate (based on established benchmarks); • a time estimate (based on previous experience and the market); and • a land acquisition/rationalisation plan confirmed by the agency. MINISTERIAL ENDORSEMENT OF CONCEPT Ministerial endorsement of the project concept is required. Projects which are within the Minister’s delegations will be approved for ongoing work. Projects requiring higher levels of approval require Ministerial endorsement for referral to Cabinet. CABINET ENDORSEMENT OF CONCEPT Cabinet endorsement of the project concept is required if the estimated cost is $4 million or more. INQUIRY AND REPORT BY PARLIAMENTARY PUBLIC WORKS COMMITTEE (IF REQUIRED) Projects with an estimated capital cost exceeding $4 million are referred to the Public Works Committee. The report from the Committee forms part of the essential documentation for the project. 30 PROJECT INITIATION PROCESS
  36. 36. 5. CONCEPT EVALUATION PHASE 5.1 AGREE ON THE SCOPE OF THE EVALUATION BRIEF (PRELIMINARY CONCEPT PLAN) From the information and ideas developed in the corporate planning and concept development phases, an agency should develop an evaluation brief, outlining the: • concept definition; • concept objectives; • impact of the concept on program and service delivery objectives; • financial/economic evaluation approach to be pursued; and • accommodation needs (where relevant). To complete the evaluation brief (preliminary concept plan) the agency should seek agreement from Treasury and Finance on the scope of the proposed evaluation. 5.2 EVALUATE CONCEPT OPTIONS An agency first needs to evaluate each option in terms of its total impact on the community and the government system. Economic evaluation aims to take a perspective which goes beyond any one agency and seeks to place values on costs and benefits to the community. Economic evaluation includes two types of analysis: • cost benefit analysis which is the preferred technique provided the major benefits and costs of a project can be valued in money terms; and • cost effectiveness analysis which is the technique to be applied where the major benefits or costs are of an intangible nature. Selection criteria have to be established to determine the most promising options. Agencies need to reach agreement and document the selection criteria after careful debate to avoid problems further into the process. The options can be ranked by a process of weighting functional objectives and rating each option’s performance. This is an extension of the value management techniques used in the concept development phase. 5.3 ANALYSE SHORT-LISTED OPTIONS Short-listed options need to be subjected to further analysis to determine their cost impact. PROJECT INITIATION PROCESS 31
  37. 37. CONCEPT EVALUATION PHASE o Prepare project option cash flows. These cash flows should be based on a life-cycle basis to reflect both capital and recurrent costs associated with the project. o Prepare indicative project management information including project time schedules. o Prepare present value analysis of the project options including sensitivity analysis. o Complete risk assessment of project options, and a risk management plan. 5.4 SELECT THE PREFERRED PROJECT CONCEPT OPTION Having considered benefits, function, value, cost and delivery options, the best option is selected from the short list, based on the analysis of the data. o Well described, quantified and documented decision-making criteria is required. o The process and results are to be described in sufficient detail to enable the criteria to be externally verified. o The balance between quantitative and qualitative factors needs to be clearly explained to demonstrate the validity of the selection. All this provides project definition and a check to confirm how well the preferred project option fits the previously agreed business plan and functional objectives. If the option is other than build (eg lease existing space, make use of existing infrastructure or make use of technology) the agency should consult with the relevant government agencies such as the Real Estate Management unit of DAIS (Services SA), the Department of Information Technology and the Department of Treasury and Finance. 5.5 DESCRIBE THE PREFERRED OPTION IN AN EVALUATION BRIEF (FINAL CONCEPT PLAN) This involves describing the option in the following terms: • program objectives; • asset function objectives; • scope and quality of proposed works; • capital and recurrent financing requirements; 32 PROJECT INITIATION PROCESS
  38. 38. CONCEPT EVALUATION PHASE • impact on the State Budget; • economic evaluation of the preferred option including quantified non-financial costs and benefits; • delivery and procurement method; • cost and time estimates; • land acquisition plan; • statement of risk to government, including risk assessment and a risk management plan; • rationalisation plan where appropriate (eg plan for disposal of various schools, following rationalisation and upgrading of the remaining schools); • statutory planning and environment issues; and • cultural and heritage issues. 5.6 SEEK MINISTERIAL ENDORSEMENT OF THE CONCEPT PROPOSAL Agencies need to obtain Ministerial endorsement before a project can proceed. This requirement is subject to the Ministerial delegation, as detailed in Treasurer’s Instruction 302 - Authorities for Expenditure. The submission needs to be accompanied by independent reports from the Department of Treasury and Finance, and, if it is a building project, from DAIS (Services SA). The Department of Treasury and Finance will include comments on: • the budgetary provision for the project; • the justification of the proposal; • costs to other agencies; and • any other relevant issues. DAIS (Services SA) will comment on: • risk assessment and management of risk, including the procurement method, the program of works and the impact of the proposed works on the construction industry; • specific issues raised through the value management studies, including compliance with the brief, buildability, statutory requirements and agreed standards for building design and construction; • life cycle implications, including ongoing maintenance requirements; and • any other relevant issues. The Department of Treasury and Finance and DAIS (Services SA) are to be given a minimum of three clear working days to provide agencies with their reports. PROJECT INITIATION PROCESS 33

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