Municipalities spend a great deal of time looking at the types of capital projects to build.
The question of whether the right project has been selected is one that should not be lightly overlooked.
Indeed, the selection of the right project 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.
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. Due to this fact, 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.
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 clear indication where priorities lie among these three 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.
As we all know, 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. On the other hand, 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.
Most people would agree that a major capital project is usually considered to be a success when it satisfies the following criteria: it is completed on time, on budget, with all the features and functions originally specified and it addresses the problem at which it was aimed.
However, in the interest of maximizing value for money, it is equally important to consider whether a proposed solution is the optimal approach for addressing those problems.
To do so, the proposed solution must be subjected to a process of critical review before any measure is taken to implement it.
The senior management of any municipality must take reasonable steps to confirm that the proposed solution is the best solution in terms of the municipality’s long-term interests.
There are a variety of methods that may be employed for this purpose. Generally, the more exacting the demands that a proposed project will place on the revenues and resources, the more rigorous the methods that should be employed to confirm that the right decision is being made.
Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.
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