Management Approaches to Resource Allocation

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3. Key Findings

The findings reveal that:

• Almost all organizations had some type of formal capital planning process instituted in the last five years—evidence of a broad and cross-sectoral trend towards more integrated investment planning;
• Almost all organizations used some sort of priority setting process. Factors influencing prioritization of investment allocations are associated with government priorities, risk, program/business requirements, asset conditions, demographics;
• Accountability for investment decisions (both the plan and the process) resided with the most senior person in the respondent organizations;
• Elected officials in public sector organizations were responsible for the approval of the plan;
• Board of Directors and/or Senior Vice Presidents were responsible for approving investment decisions in private sector (depending on the size and complexity of the investment decision);
• Those organizations who have implemented a formal planning process have experienced a more informed decision making process;
• Respondents indicated that formal planning has allowed them to plan for and smooth out spikes and valleys in spending, and has increased Deputy Head/Senior VP awareness/visibility on investment decisions and where their capital dollars are being spent;
• Organizations with formal planning processes have also created internal processes and committees and some have had to assign staff to manage the planning process;
• Almost all organizations have experienced process, structural or behavioral changes;
• Both the UK and Australia introduced the idea of risk-based oversight and governance for major projects between 2001 and 2006. Although not all of these governments exercise their oversight through limiting expenditure authority in the approval of projects by a central agency as that of the Canadian government, the concept of a tailored approach considering project risk and complexity and organizational capacity has been reflected either in the project approval process or in the project implementation;
• Prevalent use of spreadsheets and databases to prepare and monitor the capital planning process – no commercial off-the-shelf (COTS) or enterprise solution in use;
• There were a variety of metrics used to measure both corporate (program/business objectives) and operational performance (project or asset specific) but only the federal government appears to measure the performance of the investment planning process itself;
• With the exception of the federal government respondents, most organizations have committed to a software solution and a methodology (building condition assessment of facility condition index) that provides an understanding of the state of their physical assets including replacement costs, life cycle analysis, and funding needs;
• Almost all organizations integrate risk management at some level of their investment planning process;
• Project Risk and Complexity tools are not unique to the Canadian federal government – similar practices exist in the UK and Australia.

These findings are further discussed and expanded-upon under their respective sub-headers in Section 4, Interview Summaries.

Of the 13 organizations interviewed, 3 are subject to the federal government’s new investment planning policies. The remaining 10 organizations have almost all instituted a formal planning process for their capital assets.  The following summarizes the key differences and commonalities:

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