Step 2 - FUNDING APPROVAL

A decision has been made to construct an asset. The procurement process starts with defining the project scope. A preliminary procurement strategy is formulated and preliminary risk, stakeholder and change management plans developed.

The investment decision needs to be justified. Depending on the value of procurement, a business case (investment justification) is developed with relevant information such as project scope, economic appraisal, financial impact statement and potential suppliers. The business case includes the evaluation of various procurement options and a cost benefit analysis to identify the optimal strategy for funding approval.

• Key Documents
• TC08-7 Revised Project Size/Risk Thresholds for the Submission of Business Cases and Gateway Reports
• TPP04-1 NSW Government Procurement Policy (Agency Accreditation Scheme for Construction)
• Key Guidelines
• TPP08-5 Guidelines for Capital Business Cases
• Procurement Methodology Guideline for Construction (2005)

Define project scope and objectives

A clear definition of the project is developed, including a concise statement of its scope and objectives, the proposed timeframes and resource requirements.

For projects valued at $1m or above, the agency must apply the Gateway Project Profile Assessment Tool to determine whether the proposed project is low, medium or high risk.

For low risk projects valued at less than $50m, any agency can proceed with the planning phase.

For projects assessed as medium or high risk, or valued at $50m or more, agencies not accredited under the Agency Accreditation Scheme for Construction are required to obtain expert procurement support at this point.

Develop preliminary procurement strategy

A preliminary procurement strategy is developed to identify the best method of achieving the project objectives. It takes into account risks and constraints, and market and agency capabilities.

Develop preliminary risk, stakeholder and change management plans

Every project requires a risk management plan. The plan identifies risks to the project including the wider government and community context. It will assess the likelihood and consequences of risks eventuating, propose measures to deal with them and allocate associated responsibilities.

Stakeholder and change management plans are developed to manage stakeholder expectations and maintain support, helping to avoid time and cost overruns.

These plans are updated and used for monitoring and management through the life of the project.

Develop business case and funding request

Irrespective of the source of funding for the project, the investment decision must be justified and approved. If funding is required through the State Budget, a detailed business case is required. As part of developing this business case, a number of key activities need to be performed:

• cost benefit assessment of options
• market assessment that evaluates economic, social and environmental impact of the procurement and assesses the supply market segment.
• a Gateway Business Case Review, if the estimated cost of the project is $10 million or above, or the project is assessed as high risk using the Gateway Project Profile Assessment Tool

  The business case/ investment justification and funding approval request must then be submitted for approval. Funding for minor projects is approved in accordance with an agency’s internal approval procedures.