2016 10 23_Asset Management Conference_FINAL

1 CH2M_20151 CH2M_2015
Government & Enterprise Asset Management Congress
Dubai, October 2016
Strategic Capital Planning in
an Era of Fiscal Constraints

2 GEAM | Dubai | October 2016
Strategic Capital Planning in an Era of Fiscal Constraints
Steve Scott
Director of Project Development
MENAI Region
25+
years
International
Experience Strategy and
Planning
Project
Development

Here’s the challenge

The changed economic landscape

A significant impact on
capital investment…

NEED
Region is committed to
economic diversification; this
requires continued
investment
CONSTRAINT
Reduced fiscal balances are
constraining the ability to
invest
RESPONSE
Short-term re-alignment of
budgets
HOW?
The investment dilemma…

THE GOOD…
Greater prudence
Justification
Value for money
THE BAD…
Cost cutting
Pro-rata reductions
Limited rationale
THE UGLY…
Short-termism
Reduced economic
development
Long-term impacts

The Key Question
Our VisionOur VisionOur VisionOur Vision
The prioritisation of capital investment towards high impactThe prioritisation of capital investment towards high impactThe prioritisation of capital investment towards high impactThe prioritisation of capital investment towards high impact
projects, defined as those which best help achieve its goals andprojects, defined as those which best help achieve its goals andprojects, defined as those which best help achieve its goals andprojects, defined as those which best help achieve its goals and
objectives.objectives.objectives.objectives.

Making the right
investment decisions

Asset Lifecycle
Where…

The need for strategic capital planning
Without a strategic approach, capital
investment planning / decisions:
Result in inflated budgets and poor
value
Lack realistic financial planning, ‘wish-
list’ planning
Are not transparent
Fail to align budget and spend
Reduce delivery confidence

Strategy
CAPITAL
PLANNIN
G
Projects
• What must be achieved when
• Long term approach
• What is worth doing
• When & what cost
• Medium term approach
• Service delivery
• Project delivery
• Immediate term actions
Tactical Capital Planning…

13 SMART SALES SOLUTIONS | Internal | March 2016
Four principles
of good capital planning
Challenge
and review
Clearly
defined
responsibilities
Flexibility
Establishing
priorities
Tactical Capital Planning…

The role of effectiveThe role of effectiveThe role of effectiveThe role of effective prioritisationprioritisationprioritisationprioritisation within the overall capitalwithin the overall capitalwithin the overall capitalwithin the overall capital
planning process is critical. It is here that projects are aligned toplanning process is critical. It is here that projects are aligned toplanning process is critical. It is here that projects are aligned toplanning process is critical. It is here that projects are aligned to
best achieve the strategic and local level objectives driving thebest achieve the strategic and local level objectives driving thebest achieve the strategic and local level objectives driving thebest achieve the strategic and local level objectives driving the
leadership vision.leadership vision.leadership vision.leadership vision.

Fundamentally this means moving the process from a purely budgetary decision
to one based on value for money – namely examination of the wider benefits
sought from investment
Moving from cost to ‘value for money’ basis
Cost-basis
planning
Value for
money

Prioritising projects
Why is it needed?
Consistent way
to sort diverse
projects
Establishes
what is important
to focus, and
which, if any,
could be put on
hold.
Value for money
outcomes by
aligning strategy,
budget and
spend.
Challenge and
scrutiny to the
capital planning
process.

Supports structured decision-making
Reduces planning subjectivity.
Quantifies projects with numeric rankings.
Facilitates agreement and decision-making.
But, it is a TOOL and NOT
the decision-maker!
Prioritising projects
Benefits of a prioritised approach

Guiding
Principles
Easy to use – to maximise use
Make the capital planning process easier
Robust and consistent outputs – a common approach
Graphic and easy to digest analysis
Remember – it is one tool in the process
As with any planning tool, its success lies in its adoption and use. If it is cumbersome, complicated and
hard to use it won’t be used!
Developing a prioritisation tool

Project name
Project Characteristics are
required to identify and track
projects, but also provide the basis
for matrix analysis to develop the
capital plan portfolio
Unique ID
Municipality
Project Owner / Entity
Municipal Sector
Asset Class
New Capital / Maintenance Project
Project TAGS provide the ability
for decision-makers to promote
projects independent of the
priority score
TAG 1:
Projects promoted
by leadership
TAG 2:
On-going, approved,
not-approved, etc.
TAG 3: Project
Identifier(s)
Tags to be used and
agreed by user level
to reflect key
agendas
Components of a prioritisation framework

Multi-Criteria Prioritisation Framework
Priority Driver 1 Priority Driver 2 Priority Driver 3 etc…
Key drivers that
drive priority
Driver Scoring Criteria
A set of 3-4 criteria
related to the driver to
assess and score
projects against
assess and score
projects against
assess and score
projects against
etc…
Criteria under each
driver that are
scored 1 – 5 based
on normalizing
statements
35% etc…15% 20%
Weighting the
priority between
drivers
Weighted priority scores for each project to inform decision making
Final Scores
(Index out of 100)
Components of a prioritisation framework

21 SMART SALES SOLUTIONS | Internal | March 2016
Key drivers of prioritisation
The objectives sought by could
(should) include:
The need to achieve spend
The need to provide value for
money
Balancing a portfolio within an
overall programme
Improving deliverability of planned
project
Transparency in decision making
‘Internal’ organisation drivers
But in certain circumstance,
particularly government sector, they
could (should) also include drivers
like:
Supporting economic growth
Improving sustainability
Meeting political imperatives
External ‘strategic’ drivers

Vision &
Strategy
Broad
Economic
Sustainability Deliverability
Risk and
Criticality
Importance to
OPEX
Decreasing importance to CAPEX
Increasing importance to OPEX
Five-driver model

Vision &
Strategy
Broad
Economic
Risk and
Criticality
Rationale
Alignment to strategic objectives (internal and external) should be a key part of any prioritisation approach. Developing
criteria that challenge projects on their contribution to strategy and goals will help prioritise those projects that provide
greatest contribution to strategy.
Criteria VS1: Does the project contribute to Emirate vision and agendas?
Criteria VS2: Is it aligned to achieving Organisation level objectives?
Criteria VS3: Does the project maximise outcomes?
Vision and strategy driver

Vision &
Strategy
Broad
Economic
Risk and
Criticality
Rationale
All projects are governed by economic/financial objectives, i.e. spend, value for money, or investment returns. This driver
captures these metrics but also provides scope to capture wider socio-economic criteria that are more important to public
sector projects.
Criteria EC1: Does the project have identified need and demand?
Criteria ES2: Will the project contribute to economic impacts?
Criteria ES3: Is it good value for money?
Broad economic

Vision &
Strategy
Broad
Economic
Risk and
Criticality
Rationale
Sustainability drives both public policy and corporate social responsibility. Projects should be assessed against the positive
impact they may have on health, safety and environment; in terms of the direct impacts they may have on environmental
assets/eco-systems; and if a physical project the credentials of the construction and operation of assets.
Criteria SS1: What impact is made on the environment?
Criteria SS2: Does the design meet sustainability criteria?
Criteria SS3: Is it financially sustainable?
Sustainability

Vision &
Strategy
Broad
Economic
Risk and
Criticality
Rationale
A key objective is to prioritise those projects able to be delivered. The prioritisation process needs to look at the complexity of
the project, whether there are factors (such as stakeholder agreements, approvals, etc.) which are necessary for progress,
or indeed whether the project can realistically be delivered to time and budget (in order to provide budget certainty).
Criteria SS1: Is the project design-ready?
Criteria SS2: Are stakeholders aligned?
Criteria SS3: Is delivery dependent on external factors outside of control?
Deliverability

Incorporating risk

Risk & criticality
Risk and criticality is important in priortising investment / expenditure for a number reasons
Financial impacts
Delays to time or programme
Reduced performance
Critical failure
Customer impacts
Vision &
Strategy
Broad
Economic
Risk and
Criticality

Risk & criticality
Risk = (consequence x likelihood)
How severe are the consequences of
asset failure?
How likely is it for the asset to
fail?
Health & safety implications
Financial impact
Regulatory compliance
Public confidence/ image
Service delivery
Levels of
service
Condition of asset
Performance of asset
Effectiveness of O&M protocols
Maintenance history
Condition
and criticality

In conclusion …

The Key Question
Our VisionOur VisionOur VisionOur Vision
The prioritisation of capital investment towards high impactThe prioritisation of capital investment towards high impactThe prioritisation of capital investment towards high impactThe prioritisation of capital investment towards high impact
projects, defined as those which best help achieve its goals andprojects, defined as those which best help achieve its goals andprojects, defined as those which best help achieve its goals andprojects, defined as those which best help achieve its goals and
objectives.objectives.objectives.objectives.

2016 10 23_Asset Management Conference_FINAL

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to 2016 10 23_Asset Management Conference_FINAL

Similar to 2016 10 23_Asset Management Conference_FINAL (20)

2016 10 23_Asset Management Conference_FINAL