Day 2 - · (covers period of M&E replacement) Appraisal - Financial Analysis • Cash flow for both capital and revenue expenditure compiled • Each year discounted by factor from

Water Supply Data Management, Infrastructure Planning & Asset Management

Peter Styles26th July 2011

Day 2Capital Investment Programming

• Why do we need a program?

• How does it fit together?

• Stages of project development

• Reporting

Contents

STRATEGICPLANNING

New development

PROJECTAPPRAISAL

What to do withassets

PROGRAMMEMANAGEMENT

Making or replacingassets

Strategies Team Programme Team

Planning functions

ASSETMANAGEMENT

Existing assets

3

Why do we need a program?

•Enables us to manage projects

•Demonstrates progress

•Summarises information in one place

•Provides basis for reports

•Provides a record of what has been done(and not done!)

New Policiesand Standards

•Asset data•Performance•Condition•Valuation

LONG TERM (25 yr) PROGRAM

•Projections•Policies•Financial profile

FIVE YEARPROGRAMME

APPRAISALPROCESS

CONSTRUCTIONDELIVERY OFOUTPUTS

INVENTORY

STRATEGIES

DemandForecasts

AMPData

Knownprojects

Data

Asset Management Cycle

• Long term plan – covers next 25 years(mainly used for financial planning)

• Medium term plan - covers next 5 years(used for project delivery)

• Service/outputs driven• Records costs• Plans timescales• Assigns responsibilities

Capital Investment Program (CIP)

• Cover full life of the assets

• Provide an Audit Trail

• Results in optimum solution

• Provides framework for programme management

Project procedures

• Identification of need

• Stage 1 Feasibility/appraisal

• Stage 2 Detailed design

• Stage 3 Construction

• Stage 4 Commissioning

• Stage 5 Post Appraisal

Stages of a project

Where does it come from?

• from operators• from surveys• from strategies/action plans• from customers

Identification of need

• Records problems that needs investment

• NOT request for specific work

• Request to investigate problem

• Defined in terms of Levels of Service, Policy, Performance/Condition or legal requirement

Identification of need

• Problem confirmed with need for capital• LoS deficiencies quantified• Demand forecast• Alternative solutions identified• Solutions compared and costed• Financial analysis carried out• Preferred solution proposed • Approval sought

Stage 1 – Feasibility / Appraisal

• Results of any feasibility study

• Evaluation of the options

• Financial analysis

• Recommends solution

• Seeks approval to next stage

Appraisal - Business Case

• Standard format

• Alternative solutions analysed and compared:- Net Present Value (DCF)- Cost/benefit- Profit/Loss

• Horizon 25 years(covers period of M&E replacement)

Appraisal - Financial Analysis

• Cash flow for both capital and revenue expenditure compiled

• Each year discounted by factor from DCF table

• Sum of the DCF’s gives Net Present Value

• The recommended option normally lowest NPV

• Sensitivity checked with different discount rates

Appraisal - Net Present Value (DCF)

• Takes costs from project

• Takes benefits from investment

• Calculates ratio:

total cost of projecttotal benefits from project

Appraisal – Cost / Benefit

• Gross profit or loss calculated as:

Income less expenditure

• Income is charges received plus grants and contributions

• Expenditures are interest, depreciation, costs and overheads

[Mostly used by private sector who have shareholders]

Appraisal - Profit and Loss

• Environmental Impact Analysisall aspects of the option are scored

• SWOT analysisStrengths, Weaknesses, Opportunities, Threats

• Whole life costing [DCF]

Acquire, operate and dismantle

Appraisal – Other Issues

Examples of Option Appraisals

SWOT Analysis:• Strengths• Weakness• Opportunities• Threats

Environmental Impact Impact (-5 to +5)Land take +2Resource use / waste generation -3Proximity of WTW to sources +5Energy usage -2Location / Visual Impacts +4Bathing water quality +5Repairs and Maintenance +1Transportation -3Nuisance +3

Option 20 year OPEX

Total 20 year CAPEX and OPEX

Net Present Value (6% p.a. discount rate)

Option 1Increase Bellozanne WTW £103 million £269 million £224 million

Option 3Retain Bellozanne WTW+ La Rosiere

£105 million £292 million £242 million

Option 6Relocate to La Collette £99 million £282 million £231 million

• Consultation with Operators on – Timing– phasing

• Project Manager appointed

• Design brief compiled

• Designer appointed

Stage 2 – Detailed Design

• Contract estimates approved

• Contractors selected to tender

• Tenders assessed

• Contract let

• Construction

Stage 3 - Construction

• Construction completed

• Assets commissioned

• Handover to Operator

• Checks on outputs and benefits

• Records and Procedures updated

Stage 4 - Commissioning

• Benefits achieved?

• Timescales?

• Costs within budget?

• Special problems?

• Lessons learned?

Stage 5 – Post Appraisal

Actions

• Monitor

• Control

• Report

Parameters

• Costs

• Timescales

• Outputs

Program Management

• Programme to Board for approval• Programme to Government for agreement• Projects to Agencies for ‘no objection’• Outlines costs, timescales and outputs• Monthly expenditure profile• Based on updated AM Plan• Programming Margin built-in

Annual Reporting

• Normally a Government requirement

• Covers costs, dates, outputs by scheme

• Provides monthly cash profile forecast

Quarterly Report

• Internal report for management and Board• Up-to-date review of capital programme• Covers all expenditure in current year and

next year• Reported by individual projects• Contains latest and projected costs• Contains timescales and key dates

Monthly Reporting

• Monthly reports on: costsdatesoutputs

• Report at the ‘contract’ level

• By location within a Contract or Project

Funding Agency Reports

Strategies+ Asset Management Plan+ Project Appraisal+ Programme Management

= Capital Investment Program

Summary

Points for Discussion

• Do you undertake infrastructure planning?

• Is there an Investment Program?

• Are projects appraised?

• What techniques are used?

• Is post appraisal undertaken – yourself?by funding agencies?