PART 2: INFORMED DECISION-MAKING

Princess Alexandra Hospital (Image courtesy of CFL Photography)Building Queensland | Infrastructure Pipeline Report | December 2016

IDENTIFYING PRIORITIES

Prioritising the projects that will meet the needs of the state and deliver the greatest return requires not only robust Business Cases but a solid appraisal methodology that confirms a clear need. Building Queensland's Prioritisation Framework is intrinsically linked to the Business Case Development Framework. The Prioritisation Framework balances a set of four criteria (see Figure 3). The first criterion, strategic, must be satisfied for a proposal to appear in the Pipeline. This criterion considers a proposal’s strategic alignment, underlying need and the identification and assessment of options. As a proposal progresses through more detailed development, it is considered against the financial and economic, social and environmental viability, and deliverability criteria.

Building Queensland undertakes a rigorous and independent appraisal process for each Pipeline update. If Building Queensland finds a proposal to no longer be a priority, it is expected that this will occur at the completion of a stage—such as when a proposal completes the Strategic Business Case and is ready to commence a Preliminary Business Case. For example, it may become apparent that a non-infrastructure solution could better address the need and provide an improved value-for-money outcome. The non-infrastructure solution would be removed from the Pipeline—saving the Queensland Government, and ultimately taxpayers, development costs as an infrastructure solution is not required.

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Figure 3. Building Queensland’s Prioritisation Methodology

For later-stage proposals, was the quality of the planning sufficient to give Building Queensland a reasonable level of confidence the proposal is ready for delivery and the proposed benefits will be realised during the procurement, delivery and operational phases?

Economic and Financial

Social and Environmental

Strategic

Deliverability

What is the proposal's potential to deliver enhanced quality, sustainability or capacity?

Do the social and environmental benefits outweigh any detrimental effects?

Does the proposal demonstrate extensive understanding across key social factors and consider any associated environmental studies and approvals?

Does the proposed infrastructure have good-quality cost estimates in line with Business Case Development Framework requirements?

Does the proposal demonstrate benefits that justify the cost of the response (cost benefit)?

Is the proposal strategically aligned with relevant strategy documents, such as national, state, regional and sector plans, regulations and service standards?

Is the need for the proposal justified by sufficient evidence, such as robust demand forecasts based on current population estimates? What cost does the need impose on Queensland?

Is the proposed solution appropriate—were all relevant options (infrastructure and non-infrastructure) considered and fairly assessed to ensure that the recommended option best addressed the need?

AN INDEPENDENT PIPELINE

Building Queensland is responsible for developing and independently prioritising major infrastructure proposals. This two-pronged approach means Building Queensland plays a key role in shaping infrastructure outcomes for the state.Building Queensland’s role is significantly different to our interjurisdictional peers. Although we give advice, we are not tasked with developing infrastructure policy and planning for the state government. The State Infrastructure Plan sets the government’s vision

for infrastructure policy and planning and outlines a committed program of projects for the next 1–4 years.

Before the establishment of Building Queensland, infrastructure proposals were planned by the relevant government entity taking into consideration demand, existing infrastructure assets, long-term infrastructure requirements and potential to unlock economic opportunity. These infrastructure proposals were largely managed on a departmental basis and, as a consequence, the government’s ability to drive the best outcomes was limited as the standard of proposals varied, impacting government’s ability to then prioritise.

Having involvement in infrastructure proposals over $50 million, Building Queensland ensures proposals get fair consideration by bringing a rigorous and consistent approach to proposal development and prioritisation. Building Queensland’s Pipeline is a key input informing government investment decisions which are reflected in the State Infrastructure Plan's 1–4 year Program (see Figure 4) and the State Budget.

Queensland Public Safety Agencies (Image courtesy of Department of Science, Information Technology and Innovation)

Building Queensland | Infrastructure Pipeline Report | December 2016

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UNFUNDED

FUNDED

FURTHER DEVELOPMENT

Figure 4. Project Development: Building Queensland and the State Infrastructure Plan

State Infrastructure Plan 1-4 Year Program

State Infrastructure Plan 1-4 Year Program

BUILDING QUEENSLAND’S INFRASTRUCTURE PIPELINE

Priority Proposals >$50 million

OTHER

Proposals <$50 million

Queensland Government agencies

Government Owned Corporations

Statutory Authorities

PROJECT DEVELOPMENT

Queensland Public Safety Agencies (Image courtesy of Department of Science, Information Technology and Innovation)

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FRAMEWORK FOR DEVELOPMENT

All major infrastructure proposals led by Building Queensland move through our Business Case development process. Ultimately, the Business Case provides an objective assessment of the proposed project by identifying both the benefits sought and problems to be solved, as well as ascertaining the best way to achieve the desired outcomes.

Building Queensland has created a best practice Business Case Development Framework that complements state and federal processes to bring a consistent and rigorous approach to infrastructure proposal development.

The framework comprises a suite of interconnected guides that span from the earliest stages of identifying the service need right through to a detailed Business Case on the preferred option. The foundation for the Business Case Development Framework is the Queensland Government's Project Assessment Framework (PAF). Building Queensland's framework supplements the PAF by providing enhanced guidance on how to complete the required assessments to develop robust Business Cases (Figure 5).

The Framework is intended to be a living suite of documents that will be periodically refined and enhanced as we continue to engage with stakeholders and respond to changes in international best practice and the economic landscape. The Framework can be accessed on Building Queenland's website.

SUPPORTING GUIDES

The Business Case Development Framework is supported by the Cost Benefit Analysis Guide and Social Impact Evaluation Guide. Cost Benefit Analysis is a mandatory element of the assessment of projects in Business Cases led by Building Queensland. It is an analytical technique used to determine the economic viability of proposals. It helps inform the allocation problem of assigning scarce funding among competing investment choices.

Social impacts that cannot be incorporated in the Cost Benefit Analysis must be considered as part of the Social Impact Evaluation. Social Impact Evaluation is an emerging area of economic and social analysis and incorporates key concepts such as impact risk assessment, social baseline study and mitigation strategies. The goal of this evaluation is to drive improvements that increase the value of infrastructure to the people it serves.

Some types of social impacts include: community, cultural, health and quality of life impacts.

Southern Queensland Correctional Centre (Image courtesy of Queensland Corrective Services)

Building Queensland | Infrastructure Pipeline Report | December 2016

QUEENSLAND GOVERNMENT’S PROJECT ASSESSMENT FRAMEWORKFigure 5. Building Queensland’s Business Case Development Framework

STRATEGIC BUSINESS CASEDefines the service need or opportunity to determine the outcome required and then validates it as a priority, relative to other needs.

PRELIMINARY BUSINESS CASEAssesses the financial, economic, social and environmental viability of options. At the completion of this stage, the state government decides whether to invest in fully developing a Detailed Business Case.

DETAILED BUSINESS CASEAnalyses the preferred option in detail, including a full Cost Benefit Analysis and Social Impact Evaluation. This stage identifies the delivery model most likely to achieve the service requirement and provide the best value for money.

Strategic Assessment of Service Requirement Preliminary Evaluation Business Case

BUILDING QUEENSLAND’S BUSINESS CASE DEVELOPMENT FRAMEWORK

Supplementary Guidance

BUSINESS CASE DEVELOPMENT FRAMEWORK

DETAILED BUSINESS CASETEMPLATE AND GUIDE

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BUSINESS CASE DEVELOPMENT FRAMEWORK

PRELIMINARY BUSINESS CASETEMPLATE AND GUIDE

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BUSINESS CASE DEVELOPMENT FRAMEWORK

SOCIAL IMPACT EVALUATION GUIDESUPPORTING BUSINESS CASE DEVELOPMENT

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BUSINESS CASE DEVELOPMENT FRAMEWORK

COST BENEFIT ANALYSIS GUIDESUPPORTING BUSINESS CASE DEVELOPMENT

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BUSINESS CASE DEVELOPMENT FRAMEWORK

STRATEGIC BUSINESS CASETEMPLATE AND GUIDE

APRIL 2016 | RELEASE 1

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Spirit of Queensland (Image courtesy of Queensland Rail)

PRIVATE SECTOR INVOLVEMENTAs part of leading Business Case development, Building Queensland investigates a range of delivery models for project implementation, such as alliances, public-private partnerships, design-build-operate-maintain arrangements and other models. A key source of input for these delivery models is Building Queensland’s engagement with the private sector through market sounding processes—an important element of every Detailed Business Case that Building Queensland leads.

The market sounding process helps Building Queensland understand the potential for private sector involvement in projects and informs the scope of delivery packages. These elements can be determined by a range of factors considered during the market sounding process, such as risk allocation, opportunities for innovation, availability and capacity of contractors and other major projects in the Pipeline.

Market sounding supports decision-making and developing a procurement strategy. It can also be used to gain feedback on ways to present a project to market to increase its attractiveness or to reduce obstacles for investment. Certain projects also require more detailed engagement with the market to identify specific solutions to a problem, and potentially to provide financial/cost information where private sector parties may have different or innovative offerings to provide.

Building Queensland’s first completed Detailed Business Cases—ETCS Inner City and Cross River Rail—provided recommendations to the Queensland Government that included delivery models tested through the market sounding process. Building Queensland will continue engaging with the private sector to identify, investigate and assess project delivery models that promote innovative solutions and drive value for money outcomes for Queensland.

We want our Business Cases to lay the foundations for successful project procurement and delivery when an investment decision is made. In a dynamic infrastructure environment, input from the private sector is key to ensuring market interest, capacity and views on the delivery method are captured in the Business Case.

Building Queensland | Infrastructure Pipeline Report | December 2016

GETTING THE BUILDING BLOCKS RIGHT

During the past six months Building Queensland has undertaken an intensive education program to improve the way the Queensland Government develops its infrastructure proposals. Building Queensland has provided feedback to agencies on the first Pipeline and focused on providing support in their early stage investigations to ensure the correct fundamentals underpin proposals. This has resulted in the addition of early stage proposals now being identified as priorities in the December Pipeline.

Building Queensland acknowledges that it is during these early stages that it can exert influence and save the government and taxpayers money by preventing the progression of proposals that cost a significant amount of money to develop but may not address a clear need for the state.

As part of our focus on early stage proposal development, Building Queensland has formally introduced the Investment Logic Mapping process to the Queensland Government. This process ensures a strong understanding of the need before any detailed project development is progressed. The output is an agreed visual representation of the logic underpinning the proposal on a single page. It identifies a wide range of initiatives for addressing the problem ranging from non-asset solutions to major capital asset solutions. It forms the core of the Strategic Business Case—the early, strategic case for making an investment.

CASE STUDY: INVESTMENT LOGIC MAPPINGBuilding Queensland held an Investment Logic Mapping workshop with the Department of Education and Training to help inform planning for the expanding state school network. Rapid growth in some regions is adding to the school age population and resulting in enrolment pressures on local schools. The Investment Logic Mapping workshop was used to test for the factors contributing to this scenario and whether the responses should be limited to building new assets. Potential enrolment pressures typically necessitate an asset solution and the Investment Logic Mapping process clearly articulates the need for the investment. However, through detailed analysis, a number of associated issues were also identified. These findings can inform policy settings and analysis by the agency and will contribute to planning and investments in future schools.

The Department of Education and Training saw great value in the Investment Logic Mapping process to inform: » benefits identification

» refinement of policy settings

» potential infrastructure solutions

» shared understanding across key stakeholders

» investment planning.

Building Queensland continues to work closely with our partners in the Department of Education and Training and other agencies to support proposal development.

The Investment Logic Mapping workshop proved to be a great process to identify and confirm options and solutions for state school infrastructure planning.Infrastructure Services, Department of Education and Training.

VISIBILITY OF MAJOR INFRASTRUCTURE

In delivering independent advice to government, Building Queensland is also providing industry and the community with visibility of infrastructure proposals currently being considered. Building Queensland publishes proposal summaries where we lead the preparation of a Business Case or assist an agency in developing an infrastructure proposal—some of which are not included in the Pipeline.

For example, the Lower Fitzroy River Infrastructure Project and Nullinga Dam Business Cases are currently

being led by Building Queensland. These proposals are not included in the December Pipeline as Building Queensland is continuing to assess demand for water in the respective regions, as well as the economic, financial and technical viability of the proposals.

To further increase visibility of government investment decisions, Building Queensland publishes Cost Benefit Analysis summaries for the Detailed Business Cases we have completed.

Full Business Cases are not released as ultimately major infrastructure projects require competitive tender

processes. Premature release of information has the potential to prejudice the state's commercial position and procurement process which would be at the expense of taxpayers.

By increasing visibility of proposals under development, taxpayers can be assured that the projects the Queensland Government takes forward are the most compelling proposals that boost productivity, provide the best value returns to the state and ultimately meet the needs of the community.

Port of Gladstone (Image courtesy of Gladstone Ports Corporation)Building Queensland | Infrastructure Pipeline Report | December 2016

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