EXECUTIVE SUMMARY - British Columbia



INNOVATION BUSINESS CASE REPORT CAPITAL ASSET REFERENCE GUIDE: TEMPLATE 6Ministry of Advanced EducationVersion 1.2March 31, 2014TABLE OF CONTENTS TOC \o "1-1" \h \z \u EXECUTIVE SUMMARY PAGEREF _Toc347859289 \h iii1.0PROJECT DESCRIPTION PAGEREF _Toc347859290 \h 42.0BACKGROUND INFORMATION PAGEREF _Toc347859292 \h 63.0STRATEGIC ALIGNMENT PAGEREF _Toc347859294 \h 74.0ENVIRONMENT ANALYSIS PAGEREF _Toc347859295 \h 95.0PROGRAM DELIVERY OPTIONS ANALYSIS PAGEREF _Toc347859296 \h 106.0DETAILED FINANCIAL ANALYSIS PAGEREF _Toc347859297 \h 187.0PRELIMINARY RISK ASSESSMENT PAGEREF _Toc347859298 \h 228.0CONCLUSIONS & RECOMMENDATIONS PAGEREF _Toc347859299 \h 239.0IMPLEMENTATION STRATEGY PAGEREF _Toc347859306 \h 24OTHER RESOURCES FOR THE INNOVATINO BUSINESS CASE REPORT PAGEREF _Toc347859307 \h 28APPENDICES FOR THE BUSINSES CASE REPORT PAGEREF _Toc347859308 \h 29EXECUTIVE SUMMARY Provide a summary for each section of the Innovation Business Case Report PROJECT DESCRIPTIONBACKGROUND INFORMATIONSTRATEGIC ALIGNMENTENVIRONMENT ANALYSISPROGRAM DELIVERY OPTIONS ANALYSISDETAILED FINANCIAL ANALYSISPRELIMINARY RISK ASSESSMENTCONCLUSIONS & RECOMMENDATIONSIMPLEMENTATION STRATEGYPROJECT DESCRIPTIONProject ObjectivesCategory 5: Innovation Projects are driven by the need to improve efficiency in the delivery of core programs and yield a net positive financial return over the lifecycle of the capital asset. Please refer to Section 3.0 Categories of Projects of the CARG for more details. Identify and state the project objectives in the context of the strategic and business drivers as stated in the Institutional Accountability Plan & Report. Drivers can be related to demographics, program changes, technology, economic or business changes, environmental, social changes, or legislation. For example, accommodate 25% of the forecast demand of trades and technology workers in the region, in the next 5 yearsFor example, the project will provide new access for a certain number of FTEs annuallyFor example, reduce deferred maintenance backlog in the chemistry buildingObjectives must be clear and measurable within a specified timeframeProject ScopeDescribe the project scope , which will be used to determine the preliminary project cost estimates, including total project capital and operating costsProvide an initial estimate of the space requirements based on user needs (student surveys, interviews, workshops, etc.), Translate the user needs into space requirements using the Ministry’s budget model and space standards:Post-secondary Institutions Capital Budget Model BC Universities Space Manual BC College, University College, and Institute System Space Standards ReviewInclude the number of FTEs the project will accommodateFor projects where the scope/design is not well defined, provide cost estimates based on comparable projects Project OutcomesDescribe the concrete results necessary to meet the project objectivesRESOURCESInstitutional Accountability Plan & Report5 Year Capital Plan FTE and space utilization rat2353945102870eMinistry’s Space StandardsMinistry’s Budget ModelFor example, new academic programs are required to meet forecast demand for ## workers. As a result, an academic building of XX square meters must be completed by YYYYBACKGROUND INFORMATIONCurrent SituationDescribe the events leading up to the opportunity presented Section 1.1 Opportunity DescriptionDescribe the risks of maintaining status quoFor example, unable to meet regional demand for trades and technology graduatesDemandDescribe the need and indicate the current and forecast demand for the proposed capital assetAnalyze relevant reports, data, or trends using tables/figures relating to the opportunity, including those identified in the following:BCStats Population Projections (P.E.O.P.L.E.)Provincial data on labour trends RESOURCES265049030480BCStats Population Projections (P.E.O.P.L.E.)Provincial data on labour trendsSTRATEGIC ALIGNMENTStakeholder IdentificationList stakeholders (both internal and external) and provide a description of why they are/should be invested in this opportunityInclude other ministries with similar goals and objectives Table STYLEREF 1 \s 3 SEQ Table \* ARABIC \s 1 1. Stakeholder IdentificationStakeholderInternal/External(I or E)RoleThe MinistryStakeholder #2Stakeholder #3Stakeholder #4Stakeholder #5Stakeholder #6Stakeholder AlignmentRefer to each stakeholder’s strategic initiatives and business plan to identify how the proposed project supports their goalsImpact refers to the degree to which the proposed project facilitates the stakeholder’s goals2520950170180RESOURCES Ministry Business PlansCross-ministry initiativesTable STYLEREF 1 \s 3 SEQ Table \* ARABIC \s 1 2. Stakeholder AlignmentThe Ministry GoalHow the Institution’s Opportunity Supports the Stakeholder’s GoalsImpact(High, Medium, Low)1.2.3.STAKEHOLDER #2GoalHow the Institution’s Opportunity Supports the Stakeholder’s GoalsImpact(High, Medium, Low)1.2.3.STAKEHOLDER #3Goal`How the Institution’s Opportunity Supports the Stakeholder’s GoalsImpact(High, Medium, Low)1.2.3.ENVIRONMENT ANALYSISEnvironment Scan Identify similar initiatives to the proposed project and summarize the findings in the table belowTable STYLEREF 1 \s 41. Similar Initiatives in Other Jurisdictions SummaryPost-secondary Institution/Project NameType of Project (New Build, Expansion, Maintenance, etc.)Programs DeliveredScopeCostRisksImpact on Job CreationInstitution #1Institution #2Institution #3Institution #4Institution #5Lessons LearnedSummarize the lessons learned from the environment scan exercise performed in 4.1 Similar Initiatives in Other Jurisdictions Summary Table STYLEREF 1 \s 42. Lessons Learned SummaryPost-secondary Institution/Project NameLessons LearnedInstitution #1Institution #2Institution #3Institution #4Institution #5RESOURCES2469515271780Post-secondary institutions and similar clients in BC and other jurisdictions (provinces, states, international) PROGRAM DELIVERY OPTIONS ANALYSISThe program delivery options analysis can be summarized in three steps, as follows:Step 1– Identify All Options: List all capital and non-capital options including status quo. These are evaluated against mandatory criteria to determine which options are viable and should undergo further analysisStep 2 – Evaluate Viable Options: Options that meet mandatory criteria undergo vigorous testing:Options are compared using quantitative (cost/benefit) and qualitative (advantages and disadvantages) analysisIdentification of financing sources for each viable optionPreliminary risk assessment for each viable optionStep 3 – Summary of Options: The options analysis will be used to selecet one option as “preferable”, for which an implementation strategy will be developed Table STYLEREF 1 \s 5 SEQ Table \* ARABIC \s 1 1. Options Analysis Methodology Step 1: Identify All OptionsList all options (both capital and non-capital options) and describe how each option may meet the demand/opportunityInclude “do nothing” as an option to identify the costs and disadvantages of maintaining status quoTable STYLEREF 1 \s 5 SEQ Table \* ARABIC \s 1 2. Summary of Options OPTIONSOptionType of ProjectCapital (include category of project) or Non-CapitalDescriptionStatus QuoOption #1Option #2Option #3Identify mandatory criteria that the options must meet. For example, mandatory criteria may include:Infrastructure Improvements: FCI improvement and/or reduction of life safety & occupational health risksCost Effectiveness: Funding partnerships and/or cost benefits throughout lifecycleInnovation: Demonstrates sustainable solutions and/or collaborationStrategic Alignment: Alignment with government priorities (e.g. Ministry Service Plan) and Institutional priorities (e.g., mission statement, master planning etc.)Quality Education: Improves student learning outcomes, and/or improve access to learning and/or student full time equivalents (FTE) and space utilization ratesOptions are evaluated against mandatory criteria to determine if any options can be dismissed. For example:Strategic – the option does not conform to the Institution’s master plan etc.Quality Education – the option does not accommodate the FTE forecast at maximum student full time equivalents (FTE) and space utilization rateProjects greater than $50 M must be evaluated by Partnerships BC for public private partnership (P3) viability during the Concept Plan Report activity. Institutions are instructed to coordinate with the Ministry for any services provided by Partnerships BC. While it is not mandatory to use PBC’s services to plan, deliver and oversee project delivery, they do offer those services.?For more details, refer to Section 9.0 Governance of the CARG and . Step 2: Evaluate Viable OptionsOptions that meet mandatory criteria are evaluated through quantitative (cost/benefit) analysis, qualitative (advantages/disadvantages) analysis, financing, and preliminary risk assessment Quantitative (Cost/Benefit) AnalysisA quantitative analysis provides a preliminary estimate of annual capital and operating costs, including program/service delivery and facility lifecycle costs Prepare a net present value cash flow analysis for the shortlisted viable options. The term of the cash flow analysis should equal one of the following:If asset is financed with debt – use the term for the debt/mortgage.If no debt financing required – use the expected life of the new asset.Include detailed assumptions for revenue and cost estimatesInclude schedules detailing the annual principal and interest payments to accompany the cash flow forecast, as well as for total capital cost estimateThe cash flow analysis should reflect the total ‘incremental’ costs and revenues associated with each project option being evaluated, not the ‘full cost’ including existing programs and facilities. However, in cases where the new project/program also results in additional costs or cost savings in existing facilities or programs, these amounts are also to be included in the project incremental cash flow. Table STYLEREF 1 \s 5 SEQ Table \* ARABIC \s 1 3. Summary Table of a Quantitative Cost/Benefit AnalysisCASH FLOW FORECAST – Viable Option 1Inflow/(Outflow)OPERATING YEARYear 1201xYear 2201xYear 3201xYears4….19Year 20201xOperating Cash FlowsIncremental program revenues, by source$ xxx$ xxx$ xxx……..$ xxxIncremental program costs, by source$ (xxx)$ (xxx)$ (xxx)……..$ (xxx)Incremental facility operating costs, by source$ (xxx)$ (xxx)$ (xxx)……..$ (xxx)Interest expense on new debt financings *$ (xxx)$ (xxx)$ (xxx)……..$ (xxx)Total Operating Cash Flows$ xxx$ xxx$ xxx……..$ xxxInvesting (Capital) Cash FlowsTotal capital cost$ (x,xxx)----Annual capital renewal, by source$ (xxx)$ (xxx)$ (xxx)……..$ (xxx)Total Investing Cash Flows$ (xxx)$ (xxx)$ (xxx)……..$ (xxx)Financing Cash FlowsNew debt financing$ x, xxx----Internal financing$ xxx$ xxx$ xxx……..$ xxxExternal financing$ xxx$ xxx$ xxx……..$ xxxAnnual debt repayments *$ (xxx)$ (xxx)$ (xxx)……..$ (xxx)Total Financing Cash Flows$ xxx$ xxx$ xxx……..$ xxxNet Cash Inflow/(Outflow)$ xxx$ xxx$ xxx……..$ xxxNet Present Value – 20 years at x % $ xxxA supporting schedule detailing the annual principal and interest payments should accompany the cash flow forecast. For example:LONG TERM DEBT – Continuity ScheduleDEBT TERMYear 1201xYear 2201xYear 3201xYears4 to 19Year 20201xLong term debt, opening balance$ xx,xxx$ xx,xxx$ xx,xxx……..$ x,xxxAnnual debt payment:Interest expensexxxxxxxxx……..xxPrincipal repayment (xxx) (xxx) (xxx)…….. (xxx)Long term debt, closing balance *$ xx,xxx$ xx,xxx$ xx,xxx……..$ -* Closing balance = Opening balance less Principal RepaymentA supporting schedule detailing the total capital cost estimate should also be included. For example:CAPITAL COST ESTIMATECONSTRUCTION YEARTOTALYear 1201xYear 2201xYear 3201xLand:Acquisition costSite preparationParking and improvements$ xx,xxxx,xxx-$ -x,xxxxxx$ --xx,xxxxx,xxxx,xxxxx,xxxTotal Land Costs$ xxx,xxx$ xxx,xxx$ xxx,xxx$ xxx,xxxBuildings:Hard costs (construction materials and labor)Soft costs (design, engineering, PM/CM etc.)Construction contingency$ x,xxx,xxxxxx,xxxxx,xxx $ x,xxx,xxxxx,xxxx,xxx $ x,xxx,xxxx,xxxx,xxx x,xxx,xxxxx,xxxxx,xxx Total Building Costs$ x,xxx,xxx$ x,xxx,xxx$ x,xxx,xxx$ x,xxx,xxxFurniture, Fixtures & EquipmentFurniture and fixturesEquipment$ x,xxxxx,xxx--$ xx,xxxxxx,xxxxx,xxxxxx,xxxTotal F,F&E$ xxx,xxx$ xxx,xxx$ xxx,xxx$ xxx,xxxSub-totalAdd: Inflation during construction$ xxx$ x,xxx$ xx,xxx$ xx,xxxAdd: Construction financing costs$ xxx$ x,xxx$ xx,xxx$ xx,xxxTotal Capital Cost$ x,xxx,xxx$ x,xxx,xxx$ x,xxx,xxx$ x,xxx,xxxQualitative AnalysisA qualitative analysis is required to evaluate the non-financial costs (disadvantages) and benefits (advantages) of each viable option, including physical, social, environmental, and risk considerations Determine a list of qualitative criteria. Examples include:Operational – criteria related to expected facility or program operational improvements, such as:ability to meet student needs and enrollment demandability to attract new learners (e.g. First Nations, out-of-country)improved staff recruitment and retentionintegration of new and existing programsability to implement new technologies and learning methodologiesimpact on other areas of the Institution such as parking, food services, recreation, housing, student, and health servicesimproved operations and maintenance facility costs, e.g energy efficiency, improved FCIPhysical – criteria related to increased or decreased facility functionality, efficiency etc., such as:effectiveness of facilities for meeting existing and new program needsintegration with existing facilitiesimproved access and mobilityflexibility to adapt to changing demands in the futureEnvironmental – criteria related to the impact that the project and subsequent operations is expected to have on the local environment, such as:increase/decrease in noise levelsIncrease/decrease in local traffic levelsImpact on GHG emissions, waste levels etc.Political – criteria related to impact that the project and subsequent operations is expected to have on key stakeholders, such as:government education and training goalsresponse to industry requirementsattracting research funding now or in futureprogram or Institution prestigepublic/student perception of the program(s) and/or the Institutionpublic and private sector perception of the Province/the Ministryperception of other provincial and national institutions For each viable option, compile qualitative analysis findings in a summary table. For example:Viable Option 1: NAMESummary of Qualitative AnalysisAdvantagesDisadvantagesOperationalPhysicalEnvironmentalPoliticalViable Option 2: NAMESummary of Qualitative AnalysisAdvantagesDisadvantagesOperationalPhysicalEnvironmentalPoliticalStep 3: Summary of Options Typically, the preferred option is the lowest net cost option on a net present value basis. However, other considerations including those identified in the qualitative analysis, financing, and risk assessment may surface another viable option with a high net cost as the preferred option Summarize the results from Sections 5.1-5.2, providing advantages, disadvantages, and key findings to select a preferred optionKey FindingsViable Option 1Viable Option 2Net Present Value$$Qualitative AdvantagesQualitative DisadvantagesDETAILED FINANCIAL ANALYSISThe preferred option identified in Section 5.0 Program Delivery Options Analysis is further defined in this section, and includes the following:Capital budgetAnnual operating costs (including operating cost reductions)Annual base and incremental revenuesReturn on investment Capital BudgetIdentify preliminary capital cost estimates for the project, including costs and underlying assumptions related to the:DesignSite preparationConstruction or developmentSpecialized equipment/IT systemsContingencyEscalation allowancesDescribe why this project cannot be undertaken within the ministry’s current capital plan and/or funded entirely by other partners/beneficiaries, and include supporting evidence E.g., funding proposed project within current capital plan would require either deferral or cancellation of other high priority projects, including recent Throne Speech and Budget CommitmentsIdentify the proposed provincial government capital funding amount and timing of cashflowsIdentify an non-provincial government capital funding sources for the project (e.g., capital contributions from federal and local governments, industry, etc.) and the expected contribution amounts and timing of cashflows from each funding sourceIndicate if firm commitments been secured from the non-provincial government funding sourcesTable STYLEREF 1 \s 6 SEQ Table \* ARABIC \s 1 1. Capital Funding Sources/Cashflows$ millions2012/132013/142014/152015/162016/17TotalsProvincial Government:Sub-Total:Non-Provincial Government:Sub-Total:Annual Totals:Annual Operating CostsIdentify all annual base and incremental operating costs, including program/service delivery and maintenance costsState assumptions for the cost estimatesIdentify any expected annual operating cost reductions (e.g., reductions in staff and related wage/benefit cost savings, decreased energy costs, etc.)State assumptions for the estimated annual operating cost reductionsNote: that there will be a subsequent review of any forecast annual operating cost reductions and use(s) of these fundsTable STYLEREF 1 \s 6 SEQ Table \* ARABIC \s 1 2. Operating Costs and Proposed Reductions$ millions2012/132013/142014/152015/162016/17TotalsOperating Costs:BaseProgram/service deliveryMaintenanceIncrementalProgram/service deliveryMaintenanceAnnual Totals:Operating Costs Reductions:Identify specific source(s) of savings (e.g., staff reductions, decreased energy costs, etc.)Annual Totals:Annual Base and Incremental RevenuesEstimate annual base and incremental revenues to Government (if any) that are a direct result of the proposed capital projectBase and incremental revenues may include additional royalties, fees and lease payments received by Government and do not include potential increases in corporate and personal income tax revenueState key assumptions and supporting rationale for each of the estimated annual base and incremental revenue streams E.g., forecast annual fee/price and demand estimates, source/basis of estimates)If applicable, describe how forecast annual incremental revenues have been adjusted to account for risks identified in Section 7.0 Preliminary Risk Assessment Table STYLEREF 1 \s 6 SEQ Table \* ARABIC \s 1 3. Base and Incremental Revenues$ millions2012/132013/142014/152015/162016/17TotalsRevenuesBaseIdentify specific revenue source(s)Sub-Total:IncrementalIdentify specific revenue source(s)Sub-Total:Annual Totals:Return on InvestmentIn order for the proposed project to be eligible for funding through the Capital Innovation Fund, it must provide financial return to the Province over the lifecycle of the capital asset that exceeds the provincial contribution towards capital expenditures, related cost of borrowing and any incremental operating costsDemonstrate how the proposed project will generate sufficient operating cost savings and/or incremental revenues to the Province that exceed the project’s total capital expenditure, related cost of borrowing and incremental operating costs (if applicable)The specific financial metric used should be reviewed with the Ministry, and may include simple payback, cost/ benefit ratio, and net present value. Below is an illustration of a net present value (NPV) analysis comparing investment costs to investment returns over the service life of the assetTable STYLEREF 1 \s 6 SEQ Table \* ARABIC \s 1 4. Illustration of Net Present Value Return on Investment($ Millions)2012/132013/142014/152015/162016/17Etc.Investment CostsProvincial Contribution Towards Capital Expenditures (as per Part A of Table 6-1)Annual Provincial Borrowing Cost (3.85%)Incremental Operating Costs (as per Part A of Table 6-2)Program DeliveryMaintenanceTotal Nominal Value of Investment Costs:Total Present Value of Investment Costs1:Investment ReturnsOperating Cost Reductions (as per Part B of Table 6-2)Incremental Revenues (as per Part B of Table 6-3)Total Nominal Value of Investment Returns:Total Present Value of Investment Returns1:Return on Investment (B – A ) 1:1Present value should be calculated using a discount rate equal to the province’s current long-term borrowing cost. Refer to the BC Municipal Finance Authority for details. PRELIMINARY RISK ASSESSMENTFor the recommended option, complete the risk register by identifying and evaluating the risks in terms of probability, impact, risk owner, and mitigation strategies. Include risks related to achieving annual operating cost reductions or forecast annual incremental revenuesExample of incremental revenue risk: For an infrastructure project that supports the production and/or distribution of a particular resource commodity, there may be a medium-high risk of decreased market demand for the commodity and resulting declines in provincial production of the commodity and fees/royalties received by the ProvinceA risk register is in accordance with project management best practices as described in the Ministry’s Risk Management Guide . Refer to CARG Template 9: Risk Register for further details and examples of risk identification, evaluation, and responseNote that risk response, risk monitoring & control, and risk evaluation (with response) are completed in the implementation phase of the proposed project RISK IDENTIFICATION(Inherent)RISK RESPONSERisk Identification DetailsRisk Response Details Risk Monitor & ControlRisk Evaluation(With Response)Risk Evaluation (Inherent)Table STYLEREF 1 \s 7 SEQ Table \* ARABIC \s 1 1. Risk Register- Risk Identification & Response252222088265RESOURCESMinistry’s Risk Management Guide Ministry’s Risk Register (CARG Template 9)Capital Project Risk Screen Tool (CARG Template 8)At this stage of the planning phase, Institutions should engage the Province to determine the level of oversight and approval required. Complete the Capital Project Risk Screen Tool (CARG Template 8).CONCLUSIONS & RECOMMENDATIONSConclusionsList major conclusions Summarize findings for the recommended optionRecommendationsList recommended next steps to advance the opportunity to the next activity, obtaining the Ministry and Ministry of Finance approvalsAn implementation strategy is developed for the recommended option identified in Section 8.0 Conclusions & RecommendationsIMPLEMENTATION STRATEGYProject Delivery Models Provide a preliminary analysis of alternate project delivery models (e.g., design-bid-build, design-build, construction management, P3, etc.)Summarize findings to arrive at a preferred project delivery model for procurement purposesRefer to Project Delivery Options Analysis Tool (CARG Template 13)Table STYLEREF 1 \s 9 SEQ Table \* ARABIC \s 1 1. Summary of Procurement ModelsProject Delivery Models Advantages DisadvantagesProcurement Model 1Procurement Model 2Procurement Model 3Preliminary ScheduleCreate a Gantt chart that identifies the expected duration of each project phase leading to implementation, including planning, approval, procurement, construction/development, commissioning and start-upIdentify factors that may impact the schedule, such as permitting, weather, government priorities, etc.Table STYLEREF 1 \s 9 SEQ Table \* ARABIC \s 1 2. Examples of Schedules Based on Project Delivery ModelProject GovernanceThe appropriate project governance structure is based on the complexity and size of the project. Figures 9-1 and 9-2 provide examples of organization charts for a small and large project The organization structure identifies relationships and communication lines between project members, and is intended to:Encourage appropriate input from a wide range of sourcesFacilitate timely decisionsFulfill all Institutional, the Ministry, and Ministry of Finance requirementsEnsure good business practice in accordance with government contract guidelines and financial and signing authority controlsFocus on making design and equipment decisions within the boundaries of key project parameters such as budget, schedule and project scopeA project board may be required depending on the scope, complexity and risk profile of the project, and may include members from the Institution, the Ministry and/or Ministry of Finance. The requirement of a project board will be identified upon completion of the Capital Project Risk Screen Tool (CARG Template 8), which identifies both organizational and project risks. Whereas the Capital Project Risk Screen Tool determines the level of oversight required by the Ministry, a project risk register is project specific and is updated in each phase of the project lifecycleFigure STYLEREF 1 \s 9 SEQ Figure \* ARABIC \s 1 1. Example of an Organizational Structure for a Small ProjectFigure STYLEREF 1 \s 9 SEQ Figure \* ARABIC \s 1 2. Example of an Organizational Structure for a Large ProjectOTHER RESOURCES FOR THE INNOVATION BUSINESS CASE REPORTInstitutional Accountability Plan & Report5 Year Capital Plan Master Plan/Long Range Development Plan Student full time equivalents (FTE) and space utilization rate Ministry’s Space StandardsMinistry’s Budget ModelBCStats Population Projections (P.E.O.P.L.E.)Provincial data on labour trendsMinistry Business PlansCross-ministry initiativesPartnerships BCMinistry’s Risk Management Guide APPENDICES FOR THE BUSINESS CASE REPORTInitial Programming InformationConcept Options/DrawingsEngineering Pre-feasibility StudiesBC Budget Model OutputCapital Project Risk Screen Tool (CARG Template 8) ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download