B-02

The Public Spending Code: B. Expenditure under Consideration

The Planning Stage

B-02 

Document Update Log

Document Summary: This stage moves the preferred option that was been approved in principle after appraisal to the point where contractors put a price on delivering a fully specified solution and the Sponsoring Agency selects the one that it would place a contract with. This stage has a number of checkpoints and if expected costs or environmental conditions change a reappraisal and re-approval may be required

The planning stage involves seven steps. These are

– establishment of project management structure;

– preparation of a project brief;

– detailed planning and design;

– review of proposal, using information provided by the planning process;

– obtaining approval of the Sanctioning Authority to go to tender;

– obtaining tenders for projects; – review of proposal, using tender prices.

1. Management of Projects

The scale and complexity of the project should be reflected in its management structure and information system.  Unless it already exists (e.g. for ongoing capital programmes) the management structure should always be identified and established once approval in principle has been obtained. In some cases, it may be possible to outline the proposed structure, filling some of the roles immediately and leaving others to be filled later on, as appropriate. However, the senior decision-makers for the project, and the senior managers should all be identified clearly at the outset, and their involvement and relative role clearly agreed. Three issues should be carefully considered. These are:

– what kind of management structure would be suitable for the project?

– who is to be accountable for what aspects of the project?

– what kind of reporting systems should be installed?

The management of the project should usually be organised along the following lines:

Sanctioning Authority

The Sanctioning Authority (Government, Department, Local Authority, etc.) is responsible for conveying approval to a project, within specified cost, to specified standards and time limits, etc.

Sponsoring Agency

The Sponsoring agency has overall responsibility for the proper management of the project, including its detailed planning; for obtaining necessary approvals from the Sanctioning Authority and for ensuring that the project proceeds along the lines approved by the Sanctioning Authority. Usually, the Sponsoring Agency is the body with whom the contractor(s)/supplier(s) will have a legal commitment.

Steering Group

A Steering Group has the responsibility for overseeing the execution of the project. A Steering Group will usually be required on a complex and large scale project and particularly where a number of bodies are interested or involved in the project. It should usually be chaired by a representative of the Sponsoring Agency. The group should include appropriate professional staff e.g. architect/engineer/quantity surveyor. The Group may include a representative from the Sanctioning Authority and/or the Department of Public Expenditure and Reform.

Project Co-ordinator

The Project Co-ordinator is the person who is responsible for the execution, on time to the requisite quality and within budget, of the decisions taken by the Steering Group, or by the Sponsoring Agency in the absence of a Steering Group (where the project is small). For very large projects it may be necessary to appoint a professional firm to take on the task of actually managing the project. It would report to the Project Co-ordinator (who in turn would report to the Steering Group, and/or Sponsoring Agency, as appropriate) and it would be responsible for ensuring that the project came in on time and within cost.

Design Team Leader

A Design Team Leader should normally be appointed for every project with more than one technical consultant. The Design Team Leader would report to the Project Co-ordinator or, where a project management firm had been appointed, to that firm.

Information Flows The following should be established as early as possible:

– The information needs at various levels of the management structure.

– The format that should be used for presenting this information. In this connection the standard forms in National Standard Building Elements and Design Cost Control Procedures should be used wherever these are appropriate. However, particular projects may require special forms which vary from those standard forms

– The frequency of the submission of reports.

– Who is responsible for supplying and for compiling information? The information system should reflect the nature of the project but should deal with all of these points.

2. Project Brief

The project brief is essentially a description of the project option which has been approved in principle, detailing the objectives and parameters to be taken into account by the planning professionals. All the client’s requirements should be set out in appropriate detail (e.g. for buildings, specify schedule of accommodation and room sizes etc.).

The project brief should not call for over-elaborate designs and/or the specification of standards which exceed the minimum necessary to achieve a satisfactory and cost-effective end product. The programme for the completion of the work specified in the detailed appraisal should also be given. The services to be provided by consultants, architects, engineers, etc., should be clearly identified.

Cost limits/targets for the project should be included in the project brief. Estimated costs for the project itself and for project planning will have been included in the detailed appraisal. These should be used as the permitted expenditure limits.

3. Detailed Planning and Design

Once design has commenced on the basis of the project brief, changes in the scope or objectives of the project should not be made unless absolutely necessary, or unless the proposed changes could reduce the overall cost of the project. If changes are to be made, the cost implications (including the effects on design costs) and the effects on the timing of the project should be fully appraised, and the express approval of the Sanctioning Authority sought, before an amended design brief is given to consultants.

Employing Consultants

Depending on the type of project and the availability of skills within the Sponsoring Agency, it may be necessary to engage the services of consulting architects, engineers, quantity surveyors, etc. Outline guidance on selecting consultants is contained in Appendix 1.

Costs

In managing the design process, it is important to consider regularly how the information being produced is likely to affect the estimated cost of the proposed project.

Departments and public bodies will be in a position to develop and update standard costs of providing typical projects or elements of projects. These will be used as a benchmark for appraising project costs. Regard should be had to national and international benchmarks for larger and more complex projects.

If the designs furnished by consultants to the Sponsoring Agency exceed the cost limit(s) set in the project brief, they should be referred back to the consultants by the Sponsoring agency to ensure that costs are reduced to stay within the said overall cost limit(s). Significant changes in specification to achieve cost reduction should be notified to the Sanctioning Authority for approval, with information on any change in the quality of the works being undertaken.

Data Gathering for Evaluation

It is during the detailed Planning & Design stage that the data, required for the subsequent monitoring and evaluation, should be specified. Failure to specify data gathering requirements from the start of implementation should be the subject of critical comment in any subsequent VFM or similar evaluation.  Many evaluations fail to reach conclusions on the value of an investment/expenditure programme due to lack of data. This can lead to years of further wasteful expenditure while data is gathered.

Changes in Circumstances/Time Scale

Changes which are relevant to a project, and which may make it more or less beneficial for the economy, may occur at any time (e.g. developments in technology, fluctuations in the availability or cost of raw materials or other inputs, changes in the domestic and international economies, legal changes). Such changes may alter radically the needs to be met, the priority which they are to be given, the scale on which they should be met, and the feasibility of possible alternative solutions. Under or over-estimation of relevant factors, notably cost, may be discovered during detailed planning following approval in principle, or when tenders are received.

Changes in the time scale of a project can also have very significant effects. Unscheduled delays (due, for example, to time overruns on particular stages or to delays in reaching decisions) may result in circumstances changing so as to alter radically the case for a proposal. Similarly, decisions to delay a project (i.e. to change the time profile) may result in significant changes in factors affecting decisions made. When significant alteration of the planned time scale occurs, it is particularly important to reassess fully the basis on which earlier decisions were made.

The detailed appraisal is the framework against which the impact of changes can be assessed. In setting it up, it is important to identify clearly factors which are so significant to the appraisal that unexpected changes in them would warrant speedy reappraisal, and corrective action, if necessary.

Indefinite Postponement of Project

If a decision is taken to defer a project indefinitely, then it should be fully reappraised before being started again. For instance, a project deferred indefinitely after architectural or engineering plans have been drawn up should not subsequently be proceeded with, without returning to the detailed appraisal stage.

4. Pre-Tender Review

When plans and designs have been finalised, the project proposal should be reviewed, taking into account any major changes in relevant circumstances and the more precise information generated by the design process. In particular, if the expected total cost of the project has increased, then the project should be re-examined and reductions achieved without lowering the quality standard of the project below acceptable levels, in order to bring the project within the approved limit. Works should not be omitted so as to achieve reductions if they will have to be reintroduced later as being essential for the completion of the project, or for the generation of its full benefits, or if they significantly change the nature of the project. The Sanctioning Authority should be notified of any significant changes.

The pre-tender review is necessary to provide the information required by the Sponsoring Agency and the Sanctioning Authority to decide whether or not to approve the project and to allow it to proceed to Request for Tender.

Planning Permission Requirements

If a project requires planning permission, a final decision to proceed with it should not be taken until permission is obtained from the appropriate Planning Authority or An Bord Pleanála. The implications of any conditions attaching to the planning permission should be fully assessed, going so far, if warranted, as to consider whether the project should be abandoned. Before these steps are carried out financial exposure in respect of the project arising, for example, out of contracts, should be minimised. Similar considerations should apply to the requirements of various statutory codes operated by local authorities and other bodies, e.g. Building Control (Fire Safety Certificate), Air or Water Pollution Licence, Waste Permit, or Integrated Licence (Environmental Protection Agency). Under Design and Build Contracts responsibility for obtaining planning permission may be assigned to the successful contractor.

5. Obtaining Approval of Sanctioning Authority

Approval of the Sanctioning Authority is required before tenders are invited.

6. Tendering

Tendering should, as appropriate, be invited in accordance with national procurement guidelines or where the costs exceed EU thresholds on the basis of the procedures set out in EU Directives.

7. Review using Tender Price

When a tender price and other relevant information become available, the case for proceeding with the proposal should again be reviewed. The analysis contained in the detailed appraisal once again provides the framework for undertaking this review. The award criteria in the tender document will be used to select the best proposal received.  The best proposal is then compared with what was expected at the Approval in Principle point. If the costs and output from the best proposal do not match the costs and benefits that led to the Approval in Principle then the Appraisal decision may have to be reviewed.

If tenders exceed the approved budget, the project should be re-examined and reductions achieved without lowering the quality standard of the project below acceptable levels, in order to bring the project within the approved limit. Works should not be omitted so as to achieve reductions if they will have to be reintroduced later as being essential for the completion of the project, or for the generation of its full benefits, or if they significantly change the nature of the project. The Sanctioning Authority must be informed of all significant works omissions.

If serious additional costs have arisen, the sanctioning authority should require the Sponsoring Agency to undertake, as appropriate, a revised cost-effectiveness analysis or cost benefit analysis having regard to the increased costs. Where a revised cost-effectiveness analysis or cost benefit analysis has been carried out and the project is either no longer affordable or the best value option, the procurement should be terminated and the resources diverted to more worthwhile projects.

If tenders are over the approved limit re-appraisal may be required to determine whether the project should be abandoned or proceeded with. If this re-appraisal suggests proceeding at higher cost the approval of the Sanctioning Authority to a raised financial limit must be sought before contracts are placed. If it is decided that the project should be abandoned at this post-tender stage, and if substantial amounts have already been spent on planning etc. at this stage, the position should be reviewed to determine why the project came to proceed to this stage and was then abandoned.

Proceed to Implementation

It is at this point that the bulk of the spending on the project itself (spending will have been incurred at the appraisal and planning stages in relation to design fees, planning fees environmental assessments, site investigations etc.) can be sanctioned. (Once this point has been passed, it is often very difficult to withdraw from the project without incurring very large costs.) An explicit amount should be sanctioned.

Figure 4 summarises the various steps that are required during the Planning Stage.

Appendix 1 Employing consultants for construction contracts ________________________________________________________________

If the necessary resources are not available within the public sector to fully appraise a project the employment of outside consultants may be considered.

  • Management consultants may be required to undertake detailed studies/appraisals.
  • Technical consultants may be needed to give technical advice at various stages.

The first priority in engaging consultants is to ensure that the best quality of professional service is provided. It is essential that every authority which engages consultants should establish formal systems for monitoring and assessing the effectiveness and efficiency of consultants in the discharge of their contracts.

A comprehensive brief for consultants is of fundamental importance. All the clients requirements should be set out in proper detail, together with a tentative programme for the completion of the work. The service to be provided by each of the consultants must be clearly identified.

Separate agreements are required for consultancy tasks at the appraisal stage and at the planning and implementation stages of a project and that the contract under which consultants are engaged for particular tasks must make it clear that, if the project proceeds, they may not necessarily be engaged on later tasks. Fees should be sought on a competitive tendering basis.

The importance of complying with these requirements in employing consultants can be illustrated in a situation where, for instance, a project has proceeded to the planning stage. If, at this stage, circumstances warrant revising or abandoning the project, it is important that provision has been made in consultants’ contracts for termination without incurring undue costs/liabilities.

Departments should try to anticipate their likely needs for consultancy services for project appraisal and planning purposes. Allowances for such services should be included in annual Departmental Budgets.