Effective 1 January 2024, the newly published Infrastructure Guidelines act as the new centralised source of guidance from concept to completion of a capital project in Ireland. Comprising a suite of six documents totalling 55 pages, the guidelines replace the previous 2019 Public Spending Code (PSC) for evaluation, planning and the management of public investment projects. The previous PSC had a gated approvals and review process for projects and programmes and this has not substantially changed. Further clarity has, however, been provided the level of detail required and what should be submitted and assessed at each stage of the process. In addition, there is a new concept of a ‘Detailed Business Case’, which we will discuss further below.
Timely decision making
One key point to note from the commentary of the Infrastructure Guidelines is the need for timely governance and decision-making. It emphasises “a necessity to ensure that projects are delivered in a timely manner and that there are no unnecessary administrative delays hindering this”. The approach of each Government Department and Agency charged with delivering these programmes and projects will be critical to realising this ambition. The implementation of the previous guidelines often led to business cases being submitted into an administrative vacuum with no clear understanding of how long the assessment, assurance reviews or approvals would take. The Sponsoring Agencies and Approving Authorities together with DPENDR and its National Investment Office, who are responsible for overseeing the implementation of these guidelines, will need to ensure that decisions are made in a much more timely way and in some instances, projects are allowed to continue to be developed while decisions are being made.
Changes and clarifications of note resulting from the publication of the Infrastructure Guidelines include:
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Approving Authority consideration of the strategic assessment prior to further development of the preliminary business case;
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Clarity on the Approving Authority and Sponsoring Agency roles;
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Clarity of existing and additional requirements within a preliminary business case;
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Enhancement of the External Assurance Process and the business case; and
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The introduction of the detailed business case.
The Strategic Assessment
Under the new guidelines, Sponsoring Agencies are now required to submit to their Approving Authority a strategic assessment of a project or programme which must outline:
- Investment rationale;
- Objectives;
- Strategic alignment with Government policy;
- Preliminary demand analysis; and
- The long-list of potential options.
This effectively requires a Sponsoring Agency to submit what were previously the initial aspects of a preliminary business case for initial consideration by the Approving Authority and green light for continuation to develop the remainder of the preliminary business case, submitted at the newly named Approval Gate 1.
The introduction of the strategic assessment interestingly is not a full reversal to the previous strategic assessment report and Decision Gate 0, which was abolished under Circular 06/2023 in March of last year. Rather this requirement is in effect a lighter version and allows an Approving Authority and Accounting Officer to have an earlier say in the preliminary business case development process. While it is not a full approval gate, it is likely that earlier sight of initial aspects of a preliminary business case was preferred to keep an Approving Authority informed and allow them to request amendments to these more strategic aspects, providing early commentary and avoiding Sponsoring Agencies completing a comprehensive preliminary business case that does not meet the expectations of their Approving Authority and ultimately may not pass the approval gate.
Notwithstanding the need to inform the Approving Authority, it is important that this requirement does not slow down progress of projects and preliminary business cases are allowed to progress with the approving authority being afforded an opportunity to input at the early stages of development.
Clarity on the Approving Authority and Sponsoring Agency Roles
The Infrastructure Guidelines provide clarity on the roles of both the Sponsoring Agency and the Approving Authority. The Sponsoring Agency is the agency tasked with delivery of the capital investment and is typically responsible for the business case (at each stage), procuring, planning, implementing and reviewing the capital investment. The Approving Authority is the Government department funding the project and the Accounting Officer is the person responsible for the safeguarding of public funds related to the capital investment. This is typically a Secretary General who is then accountable to a Minister. The guidelines do state that in certain instances, as part of a delegated sanction agreement the role of day to day Approving Authority may lie with a body under the aegis of a Government department. However, the ultimate responsibility for the project still lies with the Accounting Officer of the Government department. This is important, particularly in the context of the governance for major projects and it is therefore key that the Government departments (and their officials) are accountable for the successful delivery of capital investment, which means being involved or at least informed of day-to-day Approving Authority functions.
Clarity on Existing Requirements and Additional Requirements within a Preliminary Business Case
The Infrastructure Guidelines have made the requirements clearer for the level of analysis required for initial procurement, implementation plans and risk assessments. For risk assessments, it is not sufficient to just develop a risk register. A more detailed understanding of risks, quantification of them (where possible) in addition to allocation and/or mitigation is required. In relation to procurement, options need to be considered as well as timescales, capacity of the Sponsoring Agency and the market to deliver including arrangements for governance and for commercial management of the contracts chosen. This detail had been lacking in a number of previous preliminary business cases.
The Infrastructure Guidelines has also introduced new aspects to the preliminary business case. The key additions of note are:
- Consideration of the level of planning objections expected for major projects;
- Assessment of construction productivity requirements, in particular the use of modularity for major projects; and
- Detailed incorporation of the climate and environmental performance of the proposal, including impact on greenhouse gas emissions and resilience of the proposal to climate change.
Consideration of Planning Objections and Assessment of Construction Productivity for Major Projects
The consideration of planning objections as part of the preliminary business case will require public and stakeholder engagement as part of the early stages of the project. It will help to inform and refine the options available and will hopefully mitigate planning issues at a later stage in the project. Assessment of options for construction productivity including modularity is a welcomed addition and should strengthen the ability to achieve value for money. When projects do not seek modularity, there is a significant risk of cost overrun due to the uniqueness of design and the challenges associated with it. This was evident in the National Children’s Hospital.
Climate and Environmental Performance
While almost all public capital investment criteria at present notes climate and environmental reasons as core objectives and steps towards achieving our targets under the Climate Action Plan, progression from a core objective to a detailed breakdown of how the proposal results in greenhouse gas emission changes (reduction or indeed increases) and also its resilience to the impacts of climate change represents a new area for any Sponsoring Agency to assess and quantify. The Guidelines call out the ability to do so qualitatively if it is not feasible to quantify. However, there is also reference to the intention to align with the International Cost Management Standard 3rd Edition (ICMS 3), which provides a common reporting framework showing the interrelationship between construction costs, life cycle costs and embodied carbon emissions.
While we await the further guidance noted to be coming from the Office of Government Procurement (OGP) in relation to the use of ICMS 3 in order to determine its true impact on the development of a preliminary business case, it is clear that this requirement will be beyond the capability of most Sponsoring Agencies and will result in procurement of technical advisors for this specific request.
Enhancement of the External Assurance Process and the Business Case Document
We are aware that DPENDR recognise the value in the External Assurance Process and the work of the Major Projects Advisory Group (MPAG) in providing quality assurance and oversight at Approval Gate 1 for major projects. It is not surprising as a result to see that DPENDR took the opportunity when drafting the new Infrastructure Guidelines to enhance this process and the role of MPAG.
Where MPAG previously issued a review note on the areas of concern, positive aspects of the proposal and recommendations at Approval Gate 1 prior to the Approving Authority seeking Government approval, the new Guidelines also permit MPAG to request further consideration by them again at Approval Gate 2 if outstanding issues are presented at the initial External Assurance Process stage.
The enhancement of the External Assurance Process highlights the importance for a Sponsoring Agency to be satisfied that each preliminary business case they are submitting to their Approving Authority, not only for a major project but for all, is robust, meets all the outlined requirements and front loads as much of the required details as possible in order to ensure smooth progression at Approval Gate 1.
There is a recognition throughout the Infrastructure Guidelines that the business case is an evolving document. While there are now officially three types of business cases: the preliminary business case (AG1), the new detailed business case (AG2—see below) and the final business case (AG3), developing your preliminary business case at an early stage with as much detail as possible and scope to iterate can make the Infrastructure Guidelines process a lot less onerous. This is reinforced in the guidance for the final business case which states that, “in many cases diligent investment proposal preparation at the earlier phases of the project lifecycle will mean that there will be little change at this point and completion of the final business case report will be routine”. While this concept has been embraced by some Sponsoring Agencies and good progress is being made with project and programme delivery, there are others who still view the process as a ‘necessary evil’, often treating the business case process merely as a cost-benefit analysis or an academic exercise. Key to the success of the Infrastructure Guidelines will be how they are developed by each sector and operationalised by the Sponsoring Agencies.
Detailed Business Case
The Infrastructure Guidelines have introduced the concept of a detailed business case. This was an area of detail that was not well developed in the 2019 PSC but now essentially sets out the need for a document as part of the pre-tender project design, planning and procurement strategy stage (AG2) that includes a detailed business plan with detailed costs, a detailed design brief, a risk management plan, a benefits realisation plan, commercial and management arrangements and a procurement strategy. Further guidance is given on the level of detail and robustness required at this stage. If developed well, the preliminary business case should be a good starting point for this stage which will follow into more detailed analysis on commercial arrangements, risk allocations, forms of contracting and plans to realise the benefits. The document aims to be “the full and complete statement of the investment proposal expressed in output requirements. It defines all design requirements for a project or programme including performance standards and quality thresholds. It is the benchmark for measuring the development of the project and later becomes the basis for the construction contract”. However, reference continues to be made to the Capital Works Management Framework throughout, which is due to be updated in line with the new Infrastructure Guidelines. The document states that, “all works projects delivered under the Exchequer funded element of the National Development Plan (NDP) must be procured via the Capital Works Management Framework (CWMF)”.
The current suite of CWMF contracts are fixed price lump sum in nature and typically only allow for restricted or open procedures of procurement which have limited engagement with contractors in the process. The CWMF suite is suitable in certain less complex settings but for major projects above €200m, it is likely a derogation would be needed as these projects are typically higher risk and more complex. Consideration of more innovative forms of contracting and market engagement (pre and during procurement) is required for major projects to be deliverable and achieve value for money.
Conclusion
The publication of the Infrastructure Guidelines has taken some time since their announcement in March 2023 to their publication in December. While we understand there has been extensive engagement with Approving Authorities, Sponsoring Agencies and wider Government, there have not been any dramatic changes to the requirements. There has, however, been additional clarity provided, particularly in relation to what is needed to produce a more robust preliminary business case, clarification of the role of the Approving Authority and the Sponsoring Agency and inclusion of a detailed business case to enable consideration of procurement and methods of contracting in more detail, in advance of a procurement process.
Now that we have the Infrastructure Guidelines, it is important that they are ‘operationalised’ in an efficient way and that projects progress to delivery in a timely manner.
Key Terms:
- Sponsoring Agency: The Sponsoring Agency has primary responsibility for evaluating, planning and managing public investment projects within the parameters of the Infrastructure Guidelines. The Sponsoring Agency may be a government department, local authority, state agency, higher education institute, cultural institution or other state body.
- Approving Authority: The Approving Authority is the body funding the programme / project, in almost all cases this is the Parent Department.