Management Approaches to Resource Allocation

• Previous page
• Table of contents
• Complete text
• Next page

2. Introduction

2.1 Background

In 2005, under the guidance of Treasury Board Ministers, the Treasury Board Secretariat (TBS) committed to renewing policies that govern the Government of Canada’s programs and services. TBS introduced the Policy Suite Renewal Initiative (PSRI) as one of its key management initiatives to support accountability and excellence in the management of public service.

The objectives of the policy suite renewal initiative are to:

• clarify, through a renewed policy suite, the management responsibilities and accountabilities of ministers and deputy heads;
• establish a clear distinction between their duties and those of functional experts;
• create an integrated, streamlined and consolidated policy infrastructure; and
• establish an organizational structure to ensure that policies remain current, relevant and clear.

As part of this initiative, in 2007 the Treasury Board (TB) Ministers approved two new policies under the Policy Framework for the Management of Assets and Acquired Services: the Policy on Investment Planning-Assets and Acquired Services, which replaces the Policy on Long-Term Capital Plans; and the Policy on the Management of Projects, which replaces the Project Management Policy, the Policy on the Management of Major Crown Projects and the Project Approval Policy.

The Policy on Investment Planning recognizes the relationship between departmental spending on investments^{See footnote [1]} in the form of assets^{See footnote [2]} and acquired services^{See footnote [3]} through projects and procurement activities, including real property transactions, and presents a holistic and strategic approach to departmental planning and priority setting activities over a five-year horizon. The Policy requires that deputy heads ensure that appropriate management practices and oversight mechanisms are in place for their planned investments and that TB approval of these plans is sought every three years at a minimum. 

The Policy on the Management of Projects supports a risk-based approach to project approval and oversight. Project approval authority limits are based on the assessed capacity of the department to manage projects and the risk and the complexity of those projects. Projects determined to be above the organization’s capacity (due to their risk and complexity) require TB approval. In support of the Policy on the Management of Projects, two Standards—one for Organizational Project Management Capacity and one for Project Complexity and Risk—are administered through two assessment tools.

Prior to the introduction of these policies, the approach to capital expenditure planning was project-focused. At the time, only 18 of 95 departments with significant capital votes (budgets) were required to submit a five-year capital plan that covered assets. Departments were also required to seek TB approval for any projects that exceeded their authority. For most departments this threshold value was $1M. Ministers often had limited departmental context in which to understand projects other than what was provided in the individual project submission. Departmental decisions to invest in significant service contracts were not visible unless the services contract itself required TB approval.

Currently, 104 federal departments and agencies are subject to the new policies, which reflect a risk-based approach to determining project approval limits and TB oversight.

The expected results of these policies are:

• More consolidated approach to investment planning and the management of projects;
• Risk-based approach to the management and oversight of projects;
• Investments and resource allocation explicitly linked to program outcomes and government priorities;
• Ministers provided with a holistic picture of departmental investments at the enterprise level, as well as advance notice of planned projects;
• Ministers strategically positioned to allow for early oversight and direction to departments.

2.2. Objectives

Since the introduction of the new policies in 2007, TBS has completed a number of studies which focused on implementation challenges, lessons learned and the federal experience. The Secretariat is now looking to compare and contrast the management expectations established in the Policy on Investment Planning in the Government of Canada with other approaches to resource allocation over a cross-section of public and private sector organizations to asses if and how corporate or departmental practices were impacted by their approach.

2.3. Methodology

TBS contracted the services of Tiree Facility Solutions to conduct this study. The key purpose of the study was to research and document the range of corporate practices currently in place over a cross section of organizations, to identify which of those organizations integrate resource allocation decision-making at an enterprise level, and to see if and how organizational investment practices were impacted by the implementation of an integrated investment planning approach.

The selection of potential organizations to participate in the study and be interviewed was based on their sector, asset mixes and business delivery functions. The study also included academics whose research focuses on the management of publicly-owned real estate and on resource allocation in health-care decision making.

Participation was voluntary and key informants assured that the study would not seek specific or potentially strategic information.

The study was qualitative in nature and comprised of 13 structured telephone interviews with representatives of the selected organizations and two semi-structured interviews with the academic sources. Secondary sources of information obtained from Google, TBS web site and policy-related documents informed the study. 

Collected responses were compiled side-by-side in one document and organized for easy comparison across different organizations and sectors. This was the basis for the analysis and interpretation of the content of this report.

Appendix B contains the interview guide and the glossary of relevant terms distributed to informants in advance of a scheduled telephone interview.

Section 3 of this report contains key findings identified in the course of this study. Section 4 summarizes the data collected during the survey of 13 organizations and two academics, comments on similarities and differences, and comments on how practices in other organizations relate to policy requirements for federal government departments. Section 5 directly addresses the impact of formal processes on investment planning practice, as well as challenges encountered in implementation. Section 6 details international experiences in risk-based investment and project approval processes. Section 7 identifies innovative practices found in the participating organizations. Section 8 offers concluding statements on the study’s findings. Finally, Section 9 is a bibliography containing works that were used in the process of this study and may be of further interest to TBS.

2.4. Organizations Surveyed

Seven sectors were identified for this study, however only respondents from four sectors participated in the study: Government; Municipal, Universities, Schools and Hospitals (“MUSH”); Financial Services; and Retail. No organization from the Utilities or High Tech sectors responded. From each sector: 6 participants were from Government, 4 from MUSH, 2 from Financial Services, 1 from Retail. 

Capital budgets ranged in size from $37.5 million to $17.6 billion. Asset classes for almost all organizations included real estate, fleet, equipment and IT. 

A brief description of the sectors and mandates can be found in Appendix A.

2.5. Data Assumptions and Limitations

The study assumed that a sampling of this small size (<15 organizations) would nevertheless yield qualitative findings reflective across a broad cross-section of Canadian government and industry. There was some selection bias as the organizations were not randomly chosen and participation was voluntary.

The study was limited in terms of:

• Time and resources allocated to undertake the study
• Selection and size of sample
  • Resource and time constraints imposed limitations on the selection and sample size.
  • Organizations not randomly chosen: organizations selected based on sector, asset mix, and business delivery function.
  • Degree of self-selection among respondents: participation was only on a voluntary basis.
• Language and terminology, although defined in the interview guide, led to some challenges:
  • The understanding of the terms “investment” and “capital asset investment”, as used in relevant TB policies, was not consistent among respondents.
  • Many respondents did not understand the meaning of “acquired services” and how it related to their expenditure planning and resource allocation process.
  • Varying interpretations of the concept of an integrated approach to the management of projects and investment planning.
• Government of Canada policy limitations on asking opinion-based questions restricted the type and variety of questions in the Interview Guide.
• Varying nature of assets held by organizations (real estate, IT, scientific equipment, healthcare) and variances in how organizations are allocating resources to different business lines make it difficult to aggregate and compare total spending.
• Varying nature of scope and value of asset base, capital and operating budgets of the organizations (capital budgets that ranged from $37.5 million to $17.6 billion)

• Previous page
• Table of contents
• Complete text
• Next page