Procurement Perspectives: Delivering major capital projects right

0 117 Government

by Stephen Bauld

There is no magic solution to delivering major capital projects successfully, but there are common sense recognized guidelines.
Procurement Perspectives: Delivering major capital projects right

They are typically based on proven management principles that can ensure the decision to proceed with a major capital project is made on a sound business basis and that the major capital project itself has more than a reasonable chance of being delivered on time and within budget. At the highest and most abstract level, there are in reality only two "best practices" for carrying out a major capital project: selecting the right project for development and managing the project from conception through to implementation in a sound business-like manner. The question of whether the right project has been selected is one that should not be lightly overlooked. Indeed, it is a critical concern, because few municipal capital facilities are able to operate on a self-sustaining basis.

At the municipal level, major capital projects frequently relate to such items as highway construction, new public housing projects, new library facilities, the creation of a light rail or subway system and other transportation services, the construction of a new city hall, opera halls, performing arts centre, art galleries, as well as many other municipal buildings.

It is often not appreciated that municipal expenditures on such capital items invariably involve long-term commitments of operating support. Few of these projects lead to the generation of net income. Across the country, municipally-owned facilities often are able to remain open only through the provision of tax subsidies. Public transportation systems, which are anything but underutilized, illustrate the extent of this obligation. It is essential to incorporate into the major capital project approval process some form of rigorous reality checking system. However, relatively few municipalities seem to have any formalized set of standards that would provide even the most general guide as to the kind of capital improvements that should be undertaken. Such standards are necessary if the intent is to link major capital procurement to a coherent and consistent strategic plan.

The District of Columbia in the United States has done so, but as with many guides of this kind, the language used tends to offer only limited direction.

Still, it is better to have something than nothing. Capital planning requires choosing between wastewater treatment, the management of storm water and the sourcing and supply of clean drinking water.

An overall capital plan should give a clear indication as to where priorities lie among these similar yet distinct types of initiatives.  No municipality can afford to build everything. One of the critical responsibilities of an elected council is to decide where priorities lie.  Confirmation of the net benefit that will result from a major capital project is critical at a time of tight municipal budgeting. However, a further reason for a proper balance of cost and benefit, demonstrating a reasonable likelihood that perceived gains will result, is also necessary in view of the extent to which political concerns influence decision-making at municipal and other levels of government.

Ever sensitive to the shifting focus of public concerns, many politicians have lately begun trying to put forward a wide range of initiatives that are supposedly supportive of sustainable development.

The results are often controversial — not only as to whether environmental concerns are being balanced against other equal public concerns, but even whether the proper environmental calculation has been made.

Complaints by businesses and developers in relation to ill-considered decision-making in the interests of protecting the environment are perhaps to be expected. However, when even environmentalists begin to question initiatives, there is a self-evident reason to reconfirm that initial estimates of the benefit to which a scheme would lead are reasonably likely.

Stephen Bauld is a government procurement expert and can be reached at Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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