capital project planning and appraisal.pdf

7/24/2019 capital project planning and appraisal.pdf

1/41

Capital Planning & Project Approval Procedures

A. Scope & Definit ion

A1. Scope & Definition 2A2. Definition of a Project 2A3. Maintenance 3

B. Planning

B1. Linkage to Universitys Strategic Plan 4B2. Integration with Financial Planning 4B3. Governance & Management 5B4. Financial Treatment with College 5B5. Major Projects 6

C. Project Appraisal & Approval

C1. Appraisal & Authorisation 6C2. Authorisation Limits & Processes 7C3. PP & RFA Forms 8C4. Revised RFA 8C5. Post project Appraisal & Evaluation 9

C6. Projects over 10m 10C7. Role of the Committees 10C8. Procurement 14C9. Strategic Goals 15C10. Self-Funded Schemes 15C11. Indicators of Success 16C12. Cost & Income 17C13. Operations Costs & Incomes 18C14. Inflation 19C15. Discount Rates / Rates of Return 19C16. Reviewing Alternatives 20C17. Appraisal Narrative 21C18. Risk mitigation & Avoidance 22

C19. Project Team Competences 24

D. Monitoring

D1. Definition & Purpose 26D2. Project Management Groups 26D3. Roles & Responsibilities 27D4. Request for Authorisation (RFA) 27D5. Project Status Log 28D6. Financial Management 28D7. Project Expenditure Profile 28D8. Project Monitoring Reports 28D9. Review of Project Monitoring Reports 31D10. Approval of Variations 31

D11. Consolidated Plans 31D12. Infrastructure Co-ordination Group 31

Appendices

C1. Definition of terms 32C2. Role of signatories 34D1. Investment appraisal tools 36D2. Investment appraisal narrative guidance 37E1. Project monitoring groups TORs 41


2/41

______________________________________________________________________________________________________

Capital Planning & Project Approval Procedures Page 2 of 41

CAPITAL PLANNING & PROJECT APPROVAL PROCEDURES

This document sets out the procedures to be adopted in connection with the planning,appraisal, approval and monitoring of University Capital Investment Projects.

The document is broken down into four sections covering Scope & Definition (section A)Planning (B); Project Appraisal and Authorisation (C); and Monitoring (D).

These procedures will be reviewed periodically to take account of changes in requirementsand ensure practicality of application.

A SCOPE AND DEFINITION

A1 Scope of Projects

These procedures are to be used for all major projects in the University includingcapital and long-term maintenance projects within the University of Exeter which willrequire appropriate approval to proceed. Therefore, all projects involving new build,

refurbishment or other building, grounds or estate related work and equipment,irrespective of the funding source, should follow these procedures.

These procedures will therefore specifically include:

New build or refurbishment activity

New information systems or major upgrades to same

Equipment purchases >25k (except wholly and externally funded researchequipment see below)

Finance Leases for land, buildings and equipment with a PV exceeding 25k

Substantial works to the Universitys grounds

Backlog or long term maintenance as defined in the Estates Development Service(EDS) Service Level Agreement.

In respect of equipment purchases for research or consultancy contracts, theseprocedures will do not need to be followed where the purchase of the equipment iswhollyfunded by an external research grant. The exception to this rule is where thepurchase of equipment requires significant new build, refurbishment or ITinfrastructure development. The total gross value of the equipment and theassociated additional works will determine the project value and therefore theauthorisation limit. All research equipment purchases funded from internal sources, infull or in part, (for example, Science Strategy or RKT Strategy etc) are required tofollow these capital procedures.

If a purchase meets the definition of a project, the means of funding does not excludea project from following these procedures, except as outlined above. Theseprocedures therefore apply to outright purchase, leases, hire-purchase agreementsand any form of financing the project.

A2 Defini tion of a Project

Major projects are those that cost in excess of 25,000.

Defining the distinction between ordinary operating activity and project activity can bedifficult but in general terms the definition of a project in the context of the University


3/41

______________________________________________________________________________________________________


of Exeter is set out below, although the Infrastructure Coordination Group (ICG) is thefinal arbiter in deeming whether something is a project or not.Projects are defined as:

Initiatives with a beginning and an end

Having a determinable implementation period

Having a determinable implementation cost

Having measurable and pre defined objectives / initiatives to achieve

A group or portfolio of projects, which together achieve a set of defined objectives andwhich are selected, planned and managed in a co-ordinated way are known asProgrammes. Whilst a programme may be submitted for consideration in a masterplan or strategy led exercise it may not be authorised for expenditure, only projectsmay attain authorisation.

Projects may include sub-projects or specific work streams and these should beauthorised as part of a main project.

Where a series of projects are brought forward independently, it will be ICGs decision

as to whether these should be considered as one project. An example would be thevarious elements of the Forum project.

A3 Maintenance

The only exception to the programme rule noted in the definition of a project is themaintenance programme of the University, which will be authorised annually as aprogramme so long as no single activity (capable of definition as a project by itself)exceeds 200k. Where such items are included in the maintenance budget then theywill be authorised through the normal project authorisation route as set out in theseprocedures.

Normal reactive, cyclical and planned preventative maintenance budgets will be dealtwith through the revenue budget planning process.

MaintenanceProject value>= 200K?

Follow Capital

Planning procedures:obtain appropriateauthority.

Treat as part of

programme: nofurther authority.

Y N


4/41

______________________________________________________________________________________________________


B PLANNING

B1 Linkage to the Universitys Strategic Plan

The UniversitysStrategic Plan emphasises the main infrastructure themes and high-level aims, and also at a high level the Strategic Plan articulates the approach tofinancing the Infrastructure Strategy. More detailed explanation of the approach tofinancing is contained in the Finance Strategy. Associated with the Strategic Plan

there is an Annual Operating Plan approved by Council for each academic/financialyear. Major infrastructure objectives (including milestones for major longer-termcapital projects) will be included in this plan, progress against which is reported toCouncil on a regular basis through the year.

All projects must be developed and appraised within the Universitys stipulatedplanning procedures and timescales. These procedures cover three types of projects:

Projects itemised in the infrastructure strategy;

Smaller projects not mentioned in the infrastructure strategy;

Opportunistic projects funded from external sources or from theInfrastructure Strategy strategic fund contingency (i.e. in allocated

funds within the infrastructure fund).

The two documents that support the infrastructure strategy are theEstate Strategyand the Computer and IT Strategy.

B2 Integration with Financial Planning

Infrastructure planning should be integrated within the normal annual financialplanning timetable.

These plans should be over the same five-year period as the current revenueplanning process; that is, the current year plus four further years. The impact of theseplans on the revenue performance of the University should be incorporated, includingthe impacts on the income and expenditure account, balance sheet, cash flows,colleges and services performance and reserves.

A holistic University plan should be presented to Council and include the impact ofinfrastructure expenditure. It should be noted that the inclusion of a project orprogramme with in the Universitys budget does not lead to it being author ised;rather it ensures that a financial provision has been made to fund it, subject to it beingsubsequently authorised.

In addition to the full 5 yearly revisions, the infrastructure strategy will be reviewedannually by senior management.

In order for bids to be considered formally, they will need to have been pre-screenedby appropriate sections of Corporate Services, Academic Services and StrategicPlanning & Change and then by the Project Accountant. This screening will beundertaken on behalf of the two principal executive committees of the University,charged with considering and recommending for approval all Universitys CapitalInvestment. These are the Infrastructure Co-ordination Group. and the InfrastructureStrategy Group Project sponsors need to first seek the approval in pr incipal toproceed with either feasibility work or to establish the strategic fit of their
http://www.exeter.ac.uk/about/management/strategies/StrategicPlan2007.pdfhttp://www.admin.ex.ac.uk/be/estatestrategy.shtmlhttp://www.admin.ex.ac.uk/be/estatestrategy.shtmlhttp://www.admin.ex.ac.uk/be/estatestrategy.shtmlhttp://www.exeter.ac.uk/about/management/strategies/StrategicPlan2007.pdf


5/41

______________________________________________________________________________________________________


project. This approval is sought on the Project Proposal form, which will be submittedto ICG.

B3 Governance and Management

The Universitys dual assurance model provides for accountability, responsibilitiesand input for lay-members, management and members of staff / students. TheRegistrar & Secretary and the responsible Pro Vice-Chancellor are the management

and lay leads respectively for Infrastructure and the capital programme, with theRegistrars Executive Officer being the third party recorder.

The Registrar, under dual assurance, has convened a group the InfrastructureStrategy Group to help to provide high level input to his work. The membership ofthis group and its action notes can be accessed at theInfrastructure & CapitalProgramme pages.

The Infrastructure Co-ordination Group (ICG), provides a first level of screening ofproposals, ensures that the programme of works is well co-ordinated, and also hasparticular responsibility for the backlog maintenance programme. The ICG has a keyrole in the planning process. It will be the first formal point of receipt and

consideration of plans from a multiplicity of sources. The appropriate managementapprovers will have scrutinised proposals for alignment, synergies and duplication.ICG will take a view on the relative merits of the proposals from colleges, servicesand from the Project Co-ordination Group, on the bases of the indicative fundingallocations set aside, and on an assessment of how the projects will support the unitand institutional strategic priorities.

Factors such as management capacity, resourcing issues and other practicalities willneed to be taken into account when the plans are drawn up, discussed and ultimatelyapproved at college/service planning groups (SPGs) and in accordance with theplanning cycle. Input from Professional Services colleagues to these unit-levelstrategic plans will be required. Projects should be included regardless of the source

of funding. Strategic Planning and Change staff will ensure that there is cross college/ service communication across the SPGs and at common points in the planningcycle.

B4 Financial treatment within College/Service plans and links to the InfrastructureFund and risk

Colleges and Services will either in full or in part resource capital works, the balancewill come from either the college / service reserves or the Infrastructure fund: the finaldecision will be determined by the ICG. The college / service contribution to fund

capital works will be made by transfer from that colleges / services account into theInfrastructure Fund. As the item will be capitalised, it will take place at the reservemovement level (and will not directly affect the in-year historic cost position).

The overall infrastructure programme itself will be retained as part of the InstitutionalRisk Register.

The Risk Management Committee will periodically consider whether individualprojects of the highest levels of impact should be placed as individual items on therisk register at University level, or on College/Service risk registers where more
http://www.ex.ac.uk/about/governance/business_areas/infrastructure/index.shtmlhttp://www.ex.ac.uk/about/governance/business_areas/infrastructure/index.shtmlhttp://www.ex.ac.uk/about/governance/business_areas/infrastructure/index.shtmlhttp://www.ex.ac.uk/about/governance/business_areas/infrastructure/index.shtml


6/41

______________________________________________________________________________________________________


appropriate. The Universitys approach to risk management can be viewed in theStrategic Planning and Change web pages.

There are opportunities for the raising of significant funds from alumni and otherdonors towards high profile projects, and the Infrastructure Strategy will make certainassumptions on the level and timing of contributions from DARO activities. In somecases, major donations will be made on the basis of specific usage and these willneed to be earmarked as such.

B5 Co-ordinating and Planning for Major Projects

An important stage in planning will be a pragmatic and practitioner-informed review ofthe timing of major projects. Considerations (other than financial resources) willinclude: management capacity, availability of contractors, physical site limitations,proximity to major events and PR aspects.

There will be prioritisation issues when large numbers of project customers seekworks at similar times. Where difficulties are encountered the Chair ofICG will makethe final decisions.

There are a number of internal and external inputs to infrastructure planning.Examples include current and recent data on space occupancy and usage (bothplanned and actual), scenarios planned around projections of staff and studentnumbers, future patterns of space use, information on successes and failures (seelearning). Information will be provided by Strategic Planning and Change and madeavailable through the intranet.

Lessons learned and good practice will be adopted and disseminated as appropriate.

There are two main planning cycles within the University:

1. The broader Infrastructure Strategy inputs are drawn across a horizon of more

than a single year, and will be to a large degree based on corporate initiativeswhich will have seen extensive discussion within the University community.

2. The annual timetable that will apply in most years, drawing primarily fromproposals from Colleges, Services and the Project Co-ordination Group.

C PROJECT APPRAISAL AND APPROVAL

C1 Appraisal and Authorisation

The Universitys Strategic Plan will be the key feed on criteria for appraisal. In

addition to the major themes set out in the Strategic Plan are a small number of keyperformance indicators through which targets are set out and performancesubsequently monitored. The contribution of projects towards these KPIs or metrics,which may change over time, will be a fundamental part of the appraisal process. Apassword to retrieve data onPerformance Indicators can be obtained from StrategicPlanning and Change.

The first activity for any project is the screening process. This is designed to identifyearly on any proposals that should not proceed or are in need of radical revision.Typical aspects examined during initial screening are funding availability, risk,management capacity, conflict co-ordination with other projects, deliverability, extentof feasibility work required. Screening will be undertaken by appropriate management
http://www.admin.ex.ac.uk/academic/planning/risk/risk.shtmlhttp://www.admin.ex.ac.uk/academic/planning/risk/risk.shtml


7/41

______________________________________________________________________________________________________


approvers (see Table 1, in C2), who will produce summary reports for considerationby the ICG.

C2 Author isation limits and process

The process required to obtain authorisation for a major project under theseprocedures (see A2 for the definition of a project) is dependent upon the level of riskthe University is taking. For simplicity, risk has been assumed to vary with gross

expenditure. As such, if the estimated gross expenditure required by the project isknown then the authorisation route and the process to be completed is noted below.

Where a project is considered to be high risk, novel, contentious or otherwise unusualthe Infrastructure Coordination Group (ICG) may request a more onerousauthorisation route. Table 1, below, sets out the key authority routes for projects:

Project grossexpenditure

Management approval /initial screening

Author isation

Author isation

bandsPCG

Dean ofCollege/ HeadofService

DVC or

RegistrarICG ISG Council

College / Servicefunded projects

ITProjectsOnly

From To

25k 100k Head of College / Service Yes Yes For Info100k 200k DVC / R & S Yes Yes For Info200k 500k VCEG Yes Yes500k 2m VCEG Yes Yes Yes

2m+ VCEG Yes Yes Yes Yes

Infrastructure Fundfunded projects

ITProjectsOnly

From To

25k 100k Head of College / Service YesAll Infrastructurefunded projects needto be approved byICG for co-ordinatingpurposes.

Yes

100k 200k DVC / R & S Yes Yes

200k 500k VCEG Yes Yes

500k 2m VCEG Yes Yes Yes

2m+ VCEG Yes Yes Yes Yes

Table 1

NOTE on IT Projects:All IT projects need to be initiated through the Projects Office,in Academic Services, using their procedures prior to proceeding to ICG, ISG andCouncil. Contact the Project Office for details of their procedures.

IT projects earmarked in the Infrastructure Fund, can be authorised by the Project Co-ordination Group (PCG) up to a value of 200k, but still need to be sent to ICG for co-ordination.


8/41

______________________________________________________________________________________________________


IT projects making a new call on the Infrastructure Fund can be recommended byPCG but can only be authorised by ICG / ISG / Council.

A project is not authorised until it has been authorised by the appropriate authorisingcommittee.

Al l Projects:The form of appraisal that projects will need to undertake is set out below:

Project Grossexpenditure

Project

Proposal

Form

Requestfor

Authority

form

Investment

Appraisal

Postproject

appraisal

From To

25k 200k Yes Yes Basic Basic

200k 1m Yes Yes Limited Limited

1m+ Yes Yes Full Full

Table 2

The rationale for the different levels of appraisal work required for different sizedprojects is one of cost / benefit.

In terms of the above levels of Investment Appraisal refer to Appendix D2 fordefinition and content.

C3 Project Proposal form (PP) and Request for Author ity form (RFA)

A Project Proposal form (PP) is a dual purpose document. It may be used simply togauge whether a project aligns with the Universitys overall strategy, in which case itneed not include detailed information of cost or funding, but is likely to be a high-levelindicator of the intended merits of undertaking the project. Secondly, the ProjectProposal form can be used to request authorisation for feasibility / appraisal funds.

In both cases Project Proposals must be submitted to the appropriate managementapprover, per Table 1 in C2 above.

Once strategic fit is approved or feasibility studies are completed, a Request forAuthority Form (RFA) needs to be completed, giving a fuller description of the project

and seeking authorisation to proceed.

C4 Revised Request for Author ity

Once authority has been appropriately received for a project no further authorisationis required unless:

It becomes foreseeable that the authorised budget for the project will vary by thelower of 10% or 250,000 (or otherwise agreed in respect of projects in excess of3m).

Where a project increases in value such that it crosses an authorisationband.


9/41

______________________________________________________________________________________________________


It becomes foreseeable that the due completion date for the project will slip by 6months or more after the critical completion date.

It becomes foreseeable that one or more of the key deliverables identified in theoriginal investment appraisal is no longer attainable to a material extent.

It becomes apparent that the risks of not achieving the project become materiallymore onerous such as to jeopardise the prospect of achieving the project.

The authorising committee / body requires additional authorisation at somemilestone or event.

Elements of subjectivity exist with respect to the above. The ProjectManager isresponsible for determining whether a project requires revised authorisation. Inaddition, where aProjectGroup is required, the Project Group may require a RevisedRequest for Authority form (RRFA).

In the event that a further authorisation is required then the RRFA needs to becompleted. This form can refer to the previously authorised RFA. The reviseddocumentation need only refer in detail to the revision that has led to the requirementto seek a new authorisation.

Where revision is in respect of value and the increase in the value now puts the

project in a higher authorisationband, a RRFA needs to be completed for the newvalue.

Where a RRFA is required work may continue on the project with the followingcaveats:

A RRFA should be provided for re-authorisation and . should be sent to theearliest available meeting of ICG and then onto ISG and Council if appropriate

All new commitments raised prior to the approval of the RRFA must be authorisedby the chair of the ISG or the chair of the ICG. In the absence of both of theseofficers such new commitments must be authorised by the Director of Finance &Deputy Registrar.

Where revised authorisation is required by Council it should be authorised byVCEG prior to submission through ICG and ISG.

Where an expected under spend exists on a project, if the Project Manager or Groupwishes to utilise the under spend on new related expenditure not included in theoriginal appraisal then a RRFAis required to obtain such authorisation. Theauthorisation levels required for this are calculated by considering the incrementalspend that is required, but it should be noted that the ICG, or the appropriatecommittee must authorise all such proposed incremental expenditures.

C5 Post Project Appraisal & Evaluation

Postprojectappraisals need to be carried out on all projects.

A postprojectappraisal determines the extent to which a project met the budget,timetable and the key deliverables.

Project appraisal is presumed to be scheduled to take place 12 months after thecompletion of the implementation expenditure for a project. However, this will need tobe considered for each project.

Post project appraisals should be completed by the Project Manager and shouldidentify:


10/41

______________________________________________________________________________________________________


The final project cost, which should be compared with both the latest authorisedamount and the original authorised amount. Explanations of all variances shouldbe noted.

The actual completion date of the implementation stage of the project, whichshould be compared with the latest authorised completion date and the originalcompletion date. Explanations should be given for the variances.

The delivered key deliverables, which should be compared with the latest

authorised key deliverables and the original key deliverables. Explanations shouldbe given for significant variances.

Any lessons to be learnt from the project, and how these will be embedded infuture.

C6 Type of post-project appraisal

Under 10m

For projects under 10m the post project appraisal and evaluation should follow theguidance in Estates Development Service or the Academic Services Project Office.

Over 10m

Al l pro jectsgreater than 10m should follow the guidance set out by the Associationof University Directors of Estates. Project sponsors / managers should view the"Guide to Post Occupancy Evaluation".

Non-building projects in excess of 10mshould follow the general principal as setout in the above document.

C7 Role of the Commit tees

In addition to specific signatories, minute references and dates are required fromvarious meetings (refer to table 1 in C2 for the approval routes):

C7.1 VCEGThe VCEG acts as the first screening of Project Proposals and Investment Appraisalsabove 200k and ensures that they are sufficient to be progressed through theauthorisation route.

C7.2 Infrastructure Coordination Group (ICG)

This Group is the custodian of the Infrastructure Fund.

ICG will co-ordinate ALL projects irrespective of size.

Projects up to 200k which do not require funding from the Infrastructure Fund can beauthorised by the Dean of College / Director of Service or DVC / Registrar (see tablein C1). ICG will still need to receive these projects for information and recording.

Projects over 200k, which are not seeking Infrastructure Fund funding, are stillrequired to be authorised by ICG.

ICG need to authorise anyexpenditure from the Infrastructure Fund, irrespective ofvalue.
http://www.aude.ac.uk/info-centre/poehttp://www.aude.ac.uk/info-centre/poe


11/41

______________________________________________________________________________________________________


ICG need to receive all project proposals seeking advice regarding strategic fit andwill determine whether such PPs need to be forwarded to higher committees.

Although a project may be detailed in the Infrastructure fund, this does not preclude itfrom following these authorisation routes.

Projects with a gross cost in excess of 500k will need recommendation for approval

from ICG before they proceed to the next stage of the approval process.

The role of the ICG can be divided into several distinct areas:

Planning (Refer to B2 and B5)

Monitoring (Refer to D12)

Checking

Coordinating

Authorising

Checking role of Infrastructure Coordination Group

The checking role of the ICG involves the collection of the other data/informationwhich is assessed, conclusions drawn and action decisions made. The list below isnot exhaustive but reflects the main issues the ICG will consider:

Planning are projects committed to in the planning process coming forward forauthorisation as expected (timetable, funding requirements, key deliverables)?

Funding does the Infrastructure Fund have the resources expected, is it able tosustain the current and expected levels of activity or are further resourcesavailable such that projects rejected during the planning process may now beincluded in the Infrastructure programme?

Monitoring are authorised projects progressing as expected, are they on time, tobudget and expected to provide the key deliverables, are revised authorisationsrequired, does the Project Manager need to explain performance?

Monitoring/planning is the phasing of resource use (especially funding) asexpected? Does the phasing need revisiting and what is the impact on theInfrastructure Programme and the wider University?

Post project appraisal/evaluation what projects are coming up for review, whatconclusions can be drawn are the key deliverables being achieved?

Strategy is the overall Infrastructure Programme delivering the Universitysstrategy, in what areas is it over performing and where is it underperforming, andhow can this be addressed?

Fundraising what opportunities for fundraising are arising from the Infrastructure

Programme, are these opportunities being taken, and how is performance againstcurrent fundraising initiatives?

Procurement are projects utilising the procurement tools of the University, bothon an individual project basis and as an overall Infrastructure Programme basis?

Reporting what matters need reporting to the VCEG and Council? Are theybeing so reported?

Coordinating role of Infrastructure Coordination Group

Projects not requiring funds from the Infrastructure Fund and not requiring theauthority of the Vice Chancellors Executive Group will not be authorised by the ICG.


12/41

______________________________________________________________________________________________________


However, ICG will need to minute receipt of the appraisal and will, to assist in theorderly management of the overall infrastructure programme, need to check thedocumentation, ensure that adequate monitoring arrangements are in place, confirmthe projects status in the planning process and ensure the project is coordinatedalongside the remainder of the infrastructure programme.

When coordinating a project the ICG will consider:

That the project is properly authorised. The linkage between this project and other authorised projects or projects

committed to by the planning process, in order to maximise any procurement orother operational efficiencies.

The adequacy of non-financial resources (e.g. staff resources) available to deliverthe project.

The impact on the wider University of the timing of the delivery of the project witha view to mitigating any adverse consequences arising from its implementation.

Following its coordination role the ICG may instruct as to how and/or when a project isimplemented.

Authorising role of Infrastructure Coordination Group

When authorising a project, the ICG will consider:

Does the project provide best value in the use of University resources?

Is the project consistent with the sponsoring colleges / services and theUniversitys strategic outputs?

Is the project documentation fully and properly completed?

Are resources (including funding and project team) available to see the projectthrough to completion?

Does the evaluation of the post implementation income and expenditure streamsindicate a sustainable future outcome for the project deliverables, thecollege/service and the University?

Are the risks to the project adequately explained, considered and appropriatemanagement routes indicated?

Are the procurement routes properly considered?

The ICG has three possible options for action following the above considerations:

Authorise a project.

Enter into dialogue with the Project Sponsor and Manager regarding the mattersof concern, and request a change to the proposed project or the project

documentation. Reject a project.

C7.3 Infrastructure Strategy Group (ISG)

All projects above 500k need to be authorised by the ISG.

The Infrastructure Strategy Group (ISG) will consider the same issues as the ICG,however, they will rely on the earlier work performed by the ICG and will tend toconsider the strategic and longer term impacts of the matters below:


13/41

______________________________________________________________________________________________________


Planning are projects committed to in the planning process coming forward forauthorisation as expected (timetable, funding requirements, key deliverables)?

Funding does the Infrastructure Fund have the resources expected, is it able tosustain the current and expected levels of activity or are further resourcesavailable such that projects rejected during the planning process may now beincluded in the Infrastructure programme.

Monitoring are authorised projects progressing as expected, are they on time, tobudget and expected to provide the key deliverables, are revised authorisations

required, does the Project Manager need to explain performance? Monitoring / planning is the phasing of resource use (especially funding) as

expected? Does the phasing need revisiting and what is the impact on theInfrastructure Programme and the wider University?

Post project appraisal / evaluation what projects are coming up for review, whatconclusions can be drawn and are the key deliverables being achieved?

Strategy is the overall Infrastructure Programme delivering the Universitysstrategy, in what areas is it over performing and where is it underperforming, andhow can this be addressed?

Fundraising what opportunities for fundraising are arising from the InfrastructureProgramme, are these opportunities being taken, and how is performance againstcurrent fundraising initiatives?

Procurement are projects utilising the procurement tools of the University, bothon an individual project basis and as an overall Infrastructure Programme basis?

Reporting what matters need reporting to the VCEG and Council? Are theybeing so reported?

In addition the ISG will also consider and control:

The internal and external communication of the Infrastructure Strategy to theUniversity community, local and regional stakeholders.

The stewardship of major (in excess of 2m) projects.

The ISG when authorising a projects will consider:

Does the project provide best value in the use of University resources?


Is the funding and management capacity available to see the project through tocompletion?

Is the project, including its impact, financially sustainable?

Are the project risks appropriately managed such that no material adverseconsequences may arise to the University?

Is the project consistent with the longer-term vision of both the Infrastructure andthe University Strategies?

The ISG has three possible options for action following the above considerations:


Refer the project back to the appropriate point in the process, highlighting thematters of concern.

Reject a project.


14/41

______________________________________________________________________________________________________


C7.4 Council

Council is the supreme governing body of the University. Council is responsible forapproving the University's budgets, forecasts and key strategies. As part of thisresponsibility Council approves the Infrastructure Strategy and the Finance Strategywhich identify the University's investment priorities and the financial envelope forinfrastructure investment. Council monitors the delivery of its approved budgets,forecasts and strategies to confirm that University resources are utilised in

accordance with its approvals.

In addition, all projects above the ISGs authority level of 2m need to be authorisedby Council.

Council when authorising a projects will consider:


Is the management capacity available to see the project through to completion?

Are the project risks appropriately managed such that no material adverseconsequences may arise to the University?

Is the project consistent with the longer-term vision of the University? Other matters, as appropriate.

Council has three possible options for action following the above considerations:


Refer the project back to the appropriate point in the process, highlighting thematters of concern.

Reject a project.

IT projects only

C7.5 Project Co-ordination Group (PCG)

The PCG determines the strategy, timing and prioritisation for all IT-related projects,including the replacement of, or major upgrade/enhancement to, the Universitysinformation systems as defined by the PCG.

The role of the Project Co-ordination Group is divided into:

Planning

Approving / recommending for approval

Monitoring

The Project Coordination Group can approve IT projects up to a gross cost of 200kwhere they are earmarked in the Infrastructure Fund. The Project Co-ordinationGroup can recommend to ICG any project over 200k and projects of any sizerequesting Infrastructure Fund funding where they are not already earmarked in theInfrastructure Fund as per Table 1 in C2.

C8 Procurement

All projects must comply with the UniversitysProcurement Procedures.
http://www.admin.ex.ac.uk/corporate/procurement/policies.shtmlhttp://www.admin.ex.ac.uk/corporate/procurement/policies.shtmlhttp://www.admin.ex.ac.uk/corporate/procurement/policies.shtml


15/41

______________________________________________________________________________________________________


It is important for Project Sponsors and Project Managers to discuss procurementarrangements with Procurement Services. The preferred method of initial contact isby [email protected].

Contact with Procurement Services should be made at the earliest opportunity andcertainly prior to the Project Proposal or Request for Authority being submitted forconsideration by the Committees.

Procurement Services have the authority to vary the terms under which purchasingmay be undertaken at the University in the interest of best value. This variance mustbe agreed in writing by Procurement Services, noted in the investment appraisalnarrative, and be compliant with UK and EU legislation and regulations.

C9 Link to University and college or service strategic goals.

All projects undertaken must be consistent with both the Universitys and the collegesor services strategic objectives. The investment appraisal must be able to evidence

that the projects outputs will have a positive impact on the strategies of the Universityand the budget centres.

It is important to bear in mind when evaluating the positive impact of a project onstrategic goals that colleges, services and the University have limited resources. Assuch it is probable that some projects with positive impacts on strategic goals may berejected. This is not because they are not good projects, but that with limitedresources capacity exists only to fund the best projects.

The Universitys corporate strategy and objectives are set out in the Strategic Plan.

Projects that have a positive impact on one or more of the following will be considered

so long as they do not have a negative impact elsewhere.

The strategic goals are aimed towards Top 10 by 2012. The strategic measures canbe found on the Strategic Planning and Change web pages.

The investment appraisal should also be considered against the college and servicestrategic objectives as set out in the college or service five-year plans.

C10 Self funded schemes

A self-funded scheme is one where the total funding for the scheme is acquired fromexternal sources specifically for that scheme, i.e. there is no need for the use of theInfrastructure Fund. These projects still require the same authorisation process as forother projects, as assessed on the basis of gross expenditure or the level of riskinvolved.

The reasons for this are:

That following these procedures will lead to the adoption of best practice andensure that the University is complying with HEFCE guidance and the HEFCEFinancial Memorandum.
mailto:[email protected]:[email protected]


16/41

______________________________________________________________________________________________________


All major projects need to be consistent with the Universitys overall strategy; thisprocess gives a methodology to check that projects are consistent.

Whilst the project may not be expected to require Infrastructure Fund monies if itwere to overspend then the Infrastructure Fund may become the funder of anyoverspend.

By reviewing major projects at various levels opportunities arise for improvementsto be identified and incorporated into the project plans.

Any non-external funding will require University cash balances to satisfy external

contractors, this cash needs to be managed on a whole University basis. Theadoption of these procedures will provide a basis for good cash management.

Where a project is externally funded it is the University that will be legallycontracted. These procedures provide a route to advise the University of theassets, liabilities and risks under the contract.

Thus, all self-funded schemes should follow the same procedural route as othercontracts using these procedures.

C11 Key deliverables / indicators of success

The University has limited resources (including financial and staff resources) withwhich to undertake projects. As such, a mechanism is required in order to evaluateprojects. This process will need to establish two key issues:

Firstly, a project will need to indicate that on balance the overall impact isbeneficial to the colleges / services and Universitys strategic missions.

Secondly, as the University does not have sufficient resources to undertake allprojects that are beneficial to the University, it will be necessary to rank in order ofgreatest to least benefit those projects that pass the beneficial test hurdle.

Other areas of these procedures identify the costs and risks of the proposed project.The Project Sponsor and Project Manager need to identify the key deliverables andthe key indicators of success. The achievement of these will be assessed after thecompletion of the project using the post project appraisal or post project evaluation(for larger projects).

All projects have three core key indicators of success:

Did the project satisfactorily end at the planned project completion date?

Did the project use less than the originally identified net of implementation costsand incomes?

Did the project achieve the identified key deliverables at the identified time?

The Request for Authorisation form (RFA) needs all of these to be specified. Toenable the Project Accountant to complete a thorough pre-screening of theinvestment appraisal, all supporting calculations, spreadsheets and assumptionsshould be submitted with the Project Proposal / Request for Authorisation /Investment Appraisal.

A major projects achievement of the Universitys priority strategic key deliverables willimprove the prospects of a project achieving funding from the Infrastructure Fund,although this does not exclude the prospect that other deliverables may also qualify aproject for funding. Other key deliverables are (for example):


17/41

______________________________________________________________________________________________________


Improving staff student ratios.

Improving environmental sustainability.

Improving efficiency of business processes.

When assessing the key deliverables of a project it is important to quantify theimprovement the project will deliver, and to phase when these improvements willoccur. The performance of the project against these will be assessed after thecompletion of the implementation stage of the project using post project appraisals or

post project evaluations (for larger projects).

C12 Implementation costs and income

Implementation costs and income are those expenditures and incomes associatedwith the implementation stage of the project. These expenditures and incomes areidentifiable by the fact that they are directly related to the delivery stage of the project,temporary and not recurring in nature. They are required to create the conditions forand to facilitate the achievement of the key deliverables of the project.

These cost and revenue streams usually carry the most risk as they are ad hoc andnon repetitive in nature. As a result limited opportunities exist to learn and adapt from

past experience. It is important that the appraisal recognises this fact and engages insignificant consideration of these expenditures and incomes.

All implementation costs should be included in the Invest column of the OptionAppraisal form. All implementation revenues should be included in the Incomecolumn of the Option Appraisal form. Costs and incomes should notbe netted off asthey have different risk characteristics, even if the total amount of income equals thetotal amount of expenditure.

Provision should be made for contingencies see below.

With respect to inflation the normal basis of calculation of implementation costs and

income is to do all calculations at todays prices. Exceptions to this are noted in theinflation section.

C12.1 Implementation expenditure gross expenditure

It is important to analyse this expenditure between its constituent parts / activities asthey normally have different phasing and risk characteristics. The appraisal shouldinclude a table in the narrative setting out all material cost / activity elements. Theseshould be grouped so that dependencies between them can be identified. Forexample all preliminary exploratory works and fees should be grouped together with asub total where necessary.

A suitably qualified individual or team should be engaged at the earliest opportunity toestablish the cost estimates for a project; the appraisal should refer to this person orteam. An important method of assessing the validity of cost estimates is to determinehow they have been calculated and considering the underlying assumptions.Additional reliance will be given to cost estimates if they can be benchmarked againstprevious similar projects / activities. Finally assurance of cost estimates may begained from an external validation of some or all of the gross expenditure. Theappraisal should note what work has been undertaken to assure the accuracy of anymaterial / risky or uncertain cost estimates.


18/41

______________________________________________________________________________________________________


In addition it is likely that different teams will deliver different categories of work.Where risky or uncertain work / activity is a material part of the cost estimate then theappraisal should note how this work is to be undertaken and the additionalreassurance that can be placed on this category of work being delivered to the valuenoted in the appraisal.

C12.2 Contingencies

Contingencies included within the gross expenditure should be identified.

C12.3 Implementation income external income

Where external income is a material component of the funding of a project it isimportant to identify from whom the income is coming, what (if any) are the conditionsupon its receipt, the form such funding will take (e.g. cash, donation, in kind), therisks to its receipt and the conditions which govern when it will be received.

Where external income is to come from more than one source each should beconsidered separately. If dependencies exist between certain external incomesources then these should be highlighted (for instance if one donor will only give

match funding or if some funding by one party is dependent upon funding by anotherparty).

Where a source of external income is from fundraising it is important to note thestatus of any fundraising initiative, e.g. have the monies been raised and received bythe University, is some of the total sum pledged but not as yet received, have somemonies yet to be raised? A table should be included in the appraisal setting out thefull position on the fundraising initiative.

C13 Operational costs and income

All projected cash flows arising as a result of the Option appraisal modelling need to

be included. Many of these cash flows will be incorporated within implementationcosts and incomes (above); all others are included here.

Non-implementation cash flows need to be included on the Option Appraisal formunder the respective option. All cash inflows should be included under the incomecolumn and all cash outflows under the spend column. Cash flows must not benetted off.

Items which do not lead to real, actual cash flows should not be included, (i.e.depreciation).

The impact of taxation should be included in costs and revenues, the most relevanttax cost is expected to be VAT. Unless strong information to the contrary exists itshould be assumed that current taxation legislation, regulations and rates will remainconstant.

With respect to inflation the normal basis of calculation of operational costs andincome is to do all calculations at todays prices. Exceptions to this are noted in theinflation section (C14).

A particular difficulty with operational cost and income is the length of time thesecosts and revenues may be incurred, potentially over 20 or 30 years.


19/41

______________________________________________________________________________________________________


Where costs and income are expected to experience a period of growth and thenremain static, the period of growth should be identified and, using best judgement andhistoric experience, the costs and income should be included within the OptionAppraisal form under the appropriate heading.

Some costs and income are erratic in nature, for example lifecycle costs linked to themaintenance of a building or specialist items of equipment. In such cases, where the

amounts involved may be material (where material is defined as where not allowingfor the inflation differential may lead to an incorrect decision to approve a project thatshould otherwise have been rejected, or conversely a project that should have beenapproved being rejected) best judgement and historic experience should be used toreflect when these costs and income may crystallise and what their value will be atthat point. The estimated amount should be included within the Investment Appraisalform under the correct heading and point in time. Care needs to be taken not todouble count costs already included on the Option Appraisal form.

C14 Inflation

Implementation costs and income may occur over several years, and operationalcosts and income may very well be recurring in nature. Operational costs and incomemay occur over the maximum 25 year period in the Option Appraisal form. Theseoperational costs and income should be calculated at todays prices, which are pricesthat are not inflated. The discount rates used are on the assumption that no inflationis included within the cash flow analyses.

The only time where some inflation may be included is where the different cost andincome cash flows will be subject to different inflation rates. For example constructioncost inflation may be materially different to those of pay. Materially in this context isdefined as where not to allow for this inflation differential may lead to an incorrectdecision to approve a project that should otherwise have been rejected, or conversely

a project that should have been approved being rejected. If such a situationregarding inflation arises then you may either:

Set a standard rate of inflation, probably the current RPI, and allow for inflationonly to the extent that it differs from this, and then only by the extent it differs fromthis. The standard approved discount rates should be used in this situation; or

Apply actual inflation to all of the various components of the project cash flows.This may mean that several different rates of inflation are required. Thesedifferent rates should be noted as assumptions in the appraisal narrative. If thisoption is used then the discount rates used in the Option Appraisal form should beincreased by the current RPI.

C15 Discount rates and expected rates of return

Discount rates are used on the Option Appraisal form. They are used to determinethe Net Present Value of a project (NPV). The only issue is that no clear guidanceexists on what is an appropriate discount rate.

Discount rates are used to assess three factors:

The value society attaches to present, as opposed to future consumption.

The time value of money, for example if offered 100 today or 100 in one yearstime it is rational to accept the 100 now as you could invest the money in a low


20/41

______________________________________________________________________________________________________


risk asset (e.g. building society account) and have more than 100 in one yearstime.

Risk: in the option above if offered 100 now in repayment of a debt of that value,or 200 in a years time, then, assuming the individual offering the money wasvery trustworthy you may be inclined to accept the 200. Alternatively if theindividual was not trustworthy then you may be inclined to take the 100 now.Whilst this is a very simplistic example it indicates that when assessing the valueof money over time we also assess the risks arising from the income source.

Discount rates endeavour to do this.

For projects between 0 and 30 years the risk freediscount rate will be the Bank ofEngland base rate; the actual rate(s) used by the University do need to be higher thanthis and the discount rate used to evaluate projects will be the risk free discount rate +the RPIX.

For the purposes of the University capital procedures Council has agreed that threemain discount rates should apply to the University (the current rates are shown on theOption Appraisal form):

Core activities.

Core activities are those related to mainstream teaching and research activities. Itis also to be used for infrastructure developments largely focussed developing themainstream teaching and research activities.

Non-Core related activities

These are activities linked to or supporting the mainstream and teaching activitiesbut are not vital to be undertaken by the University and / or carry different riskcharacteristics. Included in here are projects related to student residences andinternational students.

Other rates

For projects where the driver is to generate a surplus or where the risks aresignificantly higher the project manager in association with the ICG will need toagree a suitable discount rate. In these circumstances the investment appraisalnarrative should explain the choice of the rate and explain its suitability.

The current applicable rates are shown on the Option appraisal form within theProject Authorisation Workbook.

C16 Reviewing alternatives

When considering how to achieve the objectives of a project several options may beidentified. Of these, some will be disregarded for a variety of financial and otherreasons. The remainder should be the subject of an appraisal to determine theoptimum method of attaining the projects goals.

It is important to bear in mind throughout this process that the ultimate objective of aproject is unlikely to be a new building or a new computer system, although this maybe an outcome. The objective of a project is to attain a goal that will assist in theachievement of a strategic University, college or service objective. The developmentsof a new software package, the construction or refurbishment of a building are


21/41

______________________________________________________________________________________________________


facilitators of these goals, not usually objectives in themselves. When consideringalternatives it is important to maintain this clarity.

The normal methodology when considering and comparing alternatives is to look onlyat the cash flows that are caused by the project option being considered. Thisensures that all of the options are directly comparable and that the resultant NPV isthat of the project options alone and not pre-existent or other incidental activities.

To be included in the NPV calculation the cash flows should satisfy all three of thefollowing criteria:1) They are cash flows. (e.g. Depreciation is not a cash flow)2) They are incremental (this can be positive or negative)3) They are in the future (ignore costs already incurred)

In larger projects, with more diverse options, achieving the objectives becomes morecomplex. The different options require different resources, put varying strains on theUniversity, college or service involved, and have different opportunity costs. In thesecircumstances, and normally in respect of the larger 1 million plus projects only, it isacceptable, if the ICG approves, to consider the whole of a budget centres cashflows. If this approach is adopted then some pre-existing cash flows will also be

included in the option appraisal. It is vital that all options are treated in exactly thesame way. The adverse impact of this approach is that whilst the resultant optionNPVs can still be used to compare between projects, they no longer give the NPV ofthe project alone. This is because the NPV includes some pre-existing non-projectactivities. If this approach is adopted it should be disclosed in the appraisal narrative.

C17 Appraisal narrative

The appraisal narrative plan notes the item to be included. The objective of theappraisal narrative is to allow ICG, ISG, VCEG, and Council to approve therecommendations made in the appraisal and supporting documentation. To achievethis it is important that the documentation needs to:

Be easy to read: avoiding unnecessary complexity and immaterial or irrelevantinformation.

Be concise: the most complex appraisal narrative should not exceed ten pages,including one page for an executive summary.

Include an executive summary: the members of the above committees and groupsare busy; the documentation should provide them with a one page summary ofthe key issues.

Be clear: remember that the projects objectives are probably not (say) a newbuilding but other strategically aligned outputs.

Be specific: with quantities and timings for costs, income, risks and key outputs

wherever possible.

The groups are being asked to authorise a substantial amount of expenditure, theyneed to be reassured that all options have been considered, all risks identified andmanaged, and that the team identified is able to achieve the project deliverables totime and budget. A long, badly written, rambling and incoherent appraisal will fail inthis regard.

The appraisal narrative plan repeats some issues (such as risk) several times. Thisdoes not mean that the same narrative should be included at each point. Forexample, in the executive summary a bullet point list of the key risks only may berequired, together with reassurance that they have been managed (assuming they


22/41

______________________________________________________________________________________________________


have). In the initial investment section there is, again, reference to risks. Here theapproach may be to focus on just the initial investment risks and how they have beenresolved. Finally, in the key risks to the delivery of outputs section it may be decidedto refer only to the risks in delivery of the final projects objectives. When writing theappraisal the appraisal narrative plan is designed to provide guidance and a broadtemplate. It does not need to be rigidly adhered to, but bear in mind it is the standardtemplate and will be what the above groups and committees are accustomed tousing. Therefore, serious consideration should be given to deviating from the

template, and this should be done only where there is sensible cause.

The following points are not mentioned in the appraisal narrative plan, but, whererelevant, these must be included in the narrative:

Where a non-standard discount rate has been used. The rate used and thereason for it should be noted.

If a full budget centre appraisal has been used rather than just looking atincremental cash flows. Again, the reason for this should be noted together withsome additional information giving the authorisers of the project some indicationof the scale of the project alone.

All departures from the capital procedures need to be noted in the executivesummary and then commented on in more detail later in the appraisal. Theauthorisers need to be reassured that the quality of the appraisal, and hence theirdecision, has not been impaired by any such departures.

Where the option selected for approval by the authorisers is not the mostfavourable NPV option the reason for this needs explaining. Where this is thecase, it needs noting in the executive summary.

C18 Risk mitigation and avoidance

All projects carry with them risk, where risk is in reality referring to uncertainty. Theimportant risks to a project need to be identified and discussed. Methods of avoidingor mitigating the risk should be considered and articulated in the project appraisal.

It is necessary to consider the risks arising from the performance of the project forthree main reasons:

If a project is to be delivered in line with a plan then consideration needs to begiven to those issues that may throw the plan off course. These issues (risks)need to be addressed in the most appropriate way.

The authorisers of projects need to have confidence that the key deliverables can

be delivered on time, and to budget, with an acceptable level of risk. If the performance of a project would be materially affected by an event it will be

advantageous to the Project Manager to have previously identified and explainedthis risk to the authorisers of the project.

Important risks in this context are risks that could lead to:

A material increase in the resources required in achieving a project: principallyfinancial resources but these could also include other resources such as staff ormanagement time.

A material increase in the amount of time taken to complete the implementationperiod of a project, or the time taken to achieve the goals of the project.


23/41

______________________________________________________________________________________________________


The prospect that some or all of the key deliverables of the project may, to amaterial extent, not be achieved or be achieved later than planned.

A material change is one which would have led to a change in the decision toauthorise the project had such an outcome (higher costs, longer period to completethe project, fewer deliverables at the end of the project) been seen as a probableoutcome when the project commenced.

All risks or uncertainties, which have the potential to have a material impact, asoutlined above, need to be considered. Having concluded that they may have amaterial impact the next issue to consider is how probable are they to occur. Thegreater the prospect of a risk arising, the greater the need to consider the avoidanceor mitigating actions.

The table below notes the key decision points:

Impact Probability Action

Risk 1 High High Identify avoidance or mitigatingsolutions for the risk.

Risk 2 High Medium

Risk 3 Medium High

Risk 4 High Low Use judgement to decidewhether to comment only onrisk (as below) or to identifysolutions to the risk (as above).

Risk 5 Low High

Risk 6 Medium Medium

Risk 7 Medium Low Comment only on the risk andnote that it is not consideredlikely to have a material impacton the project and as such nofurther work has beenperformed.

Risk 8 Low Medium

Risk 9 Low Low

The existence of risk when performing a project is inevitable. All actions and projectsinvolve risk. The key issue is how they are monitored and managed and whatchanges can be made to the project plan to minimise the prospect of the keydeliverables being thrown off course by the risks.

All risk management exercises will involve changes to the way the project isresourced or delivered or to the outcomes of the project.

With risks that need addressing one solution is to avoid the risk altogether. Forinstance, if a risk exists such that the performance of a project may detrimentallyimpact upon the normal term-time operations of the University, it may be possible toavoid the risk by undertaking the project in the summer, or at night when normalUniversity operations are not ongoing.

In some instances it may not be possible to avoid a risk. The next considerationshould be how to mitigate a risk. Risk mitigation does not eliminate a risk. Mitigationreduces the probability or reduces the impact of a risk.


24/41

______________________________________________________________________________________________________


It may be impossible, or very disruptive to avoid or mitigate all risks. In thesescenarios it may be appropriate to consider increasing the level of monitoring that isundertaken with respect to a risk. If the use of monitoring is the chosen method ofmanaging a risk then the appraisal needs to make clear what action will be takenshould the risk crystallise.

Actions that may be considered in order to manage risks include:

Changing the way the project is delivered.

Changing the timing of the project or particular activities within a project.

Entering into discussions with colleges or services impacted by projects toascertain whether certain levels of disruption may be acceptable.

Considering the use of suppliers or contractors with key skills or products.

Insuring against particular risks.

Introducing more rigorous monitoring arrangements for the project or particularactivities in a project.

Considering the competency sets of the project team members.

The above list is not exhaustive and project teams are encouraged to consider all

methods of managing risks.

Having identified a method of managing a risk, its impact on the project needs to beconsidered. What are its resource / cost / time implications and impact on the projectdeliverables? Is it the best solution? In some instances it may be better to live withthe high risk and introduce more rigorous monitoring: only using the proposedsolution if this indicates that the risk is likely to materialise.

C19 Project team competencies

Different types of projects require different competency sets for the team managingthe project. It is important for the appraisal to consider the competencies required bya project team to carry out a project proficiently and with an acceptable level of risk.

Care should be taken to avoid building up a project team that is too large to manage.Where a project team becomes large due to the scale and complexity of a projectconsideration should be given to separating the operational project delivery team (theproject team) from those with stakeholder duties (the user and Universityrepresentatives).

The stakeholder role could be formed into a separate group that meets with theProject Manager at suitable times, although this would only normally be suitable forthe riskiest and largest projects.

Key issues to be addressed when considering a project team are set out below. Forsmall less risky projects one or two individuals may perform all the all of these roles.For larger riskier projects it may be necessary to have more than one team and to useexternal advisors and consultants.

Project Manager

A project managers role is to manage the day to day activities of a project such thatthe outputs are delivered to time using the agreed level of resources (including thebudget).


25/41

______________________________________________________________________________________________________


The project manager should have the necessary project management skills to enablethem to discharge this function efficient and effectively.

The Project Manager is responsible for reporting the progress on the delivery of theproject to the ICG, via the Project Accountant in Finance Services.

User Representation / Client

In all projects the user needs to be involved in how the project is progressing and as apoint of contact in ensuring that complications arising during the implementation stageof the project can be discussed. The user representative will be the custodian of theproject outputs and key deliverables. The user may comprise one representative ormore.

In addition any project activities that may cause disruption to the users operationalactivities need to be discussed and communicated to them through the userrepresentative(s).

University Representation / Client

In larger, reputational, sensitive, or novel projects, a University representative will berequired. The University representative will be a member of the Vice ChancellorsExecutive Group or their nominated Senior Management Group member.

The University representative will be responsible for ensuring that the keydeliverables identified in the project appraisal are achieved.

In addition any project activities that may cause disruption to the Universitysoperational activities need to be discussed and communicated through the Universityrepresentative.

Technical Expertise

Depending upon the nature of a project certain areas of technical expertise may berequired. The appraisers of a project need to be satisfied that appropriate technicalexpertise exists within a project team to ensure that a project is capable of proficientdelivery.

It is possible that this will be acquired externally (for example quantity surveyors etc.),but where such expertise exists within the University consideration should be given toinviting these specialists on to the project team.

Where a project materially covers issues of University strategic significance, forexample the development of the Web or the development of learning spaces, then aspecialist from that area of the University should be invited to join the team. Similarly,where a project involves building works a member of the Estates DevelopmentService team would be expected to be a technical specialist.


26/41

______________________________________________________________________________________________________


D MONITORING

D1 Defini tion and purpose of project monitoring

Monitoring is the process of review carried out during the lifetime of a project. Keyelements of the project plan are compared to what is actually happening as theproject progresses. The elements to be monitored will include:

The financial plan. Timescales and progress against milestones.

Other key deliverables.

Risks.

The main purpose of monitoring is to ensure delivery of the project outputs within theagreed time and resource usage. Where variations to plans are identified through themonitoring process, then either remedial action must be initiated to bring the planback on track, or the variations must be reported and approved through theappropriate channel.

In addition to monitoring the individual project and its progress against plan, the

impact of the project in relation to relevant consolidated plans must also bemonitored. Consolidated plans will include the University capital programme, long-term maintenance plans and individual college or service plans.

The approved monitoring processes are designed to:

provide assurances to ISG and to Council that the Universitys resourcesallocated to specific projects are being managed effectively.

provide regular information on project progress to stakeholders.

assist in the preparation of robust f inancial forecasts at University level.

D2 Project Monitoring Groups

A Project Monitoring Group (PMG) should be formed for every project of value 2m orabove. ISG may request for a PMG to be formed for projects below this 2mthreshold. Normally, the group will be chaired by a member of VCEG and serviced byEDS. Membership will include the Project Sponsor (or nominated representative),representatives from EDS and Finance and other senior University representativesrepresenting appropriate stakeholders.

The terms of reference for the Project Monitoring Group include overseeing themanagement of the project to ensure that project outputs are delivered within

programme and budget; to report on any deviations to the authorised investmentappraisal and ensure compliance with Capital Procedures.

The full generic terms of reference can be viewed at Appendix E1.

The quorum for the group is the Chair (or nominated deputy), one representative fromEDS and one representative from the College/Service sponsoring the project.


27/41

______________________________________________________________________________________________________


D3 Roles and responsibi lities

Overall responsibility for project monitoring lies with the ISG. They will receive reportson individual projects and on progress against plans. The ICG will review reports andconsider RFAs and RRFAs. Where required, these will be passed to ISG and Councilfor approval or re-approval as set out in the Authority Table.

It is the responsibility of the Project Manager to ensure delivery of the project,

including financial management. They will report progress to the Project Sponsor andto the ICG. They will be supported in this process by the Professional Services, asfollows:

The Project Accountant, in Finance Services (Corporate Accounting), isresponsible for:

The allocation of project references to RFA forms.

Maintenance of the project status log.

Allocation of financial account codes.

Distribution of monthly transaction and project balance reports.

Preparation of project monitoring reports in liaison with the project manager

(although completion of these reports still remains the responsibility of theproject manager)

Co-ordination of individual project monitoring reports.

Preparation of consolidated project monitoring reports.

For IT projects, the PCG is responsible for undertaking the monitoring role of theICG and provide it with up to date reports on the performance of IT projects foreach ICG meeting.

Estates Development Service are responsible for supporting individual projectmanagers involved in estate-related projects, ensuring that they have

implemented appropriate procedures to manage financial aspects of the projectand progress these against other plans. For IT projects Academic Services willprovide equivalent support to individual project managers.

Finance Services will provide support to project managers on other projects, asnecessary.

D4 Link to appraisal and authorisation Request for Authori ty (RFA)

For non-IT projects the key elements of a project will be set out in the RFA form,completed prior to the authorisation process. Each RFA will be allocated a uniqueproject code by the Project Accountant, in Finance Services (Corporate Accounting),

and will be recorded on the project status log. This will usually correspond with theproject code allocated to the Project Proposal form.

With respect to IT projects the authorisation will be through the IT Authorisation Limitsand Process as detailed in the table in C1.

When a project has been approved, the project status will be amended on the projectlog. Finance Services will set up an appropriate account code on the main financialsystem (Aptos), and will load the approved budget, profiled by year as appropriate.Details of the Project Manager will be confirmed and that person will be informed ofthe project account code.


28/41

______________________________________________________________________________________________________


D5 Project status log

For non-IT projects the Project Accountant in Finance Services will maintain a projectstatus log. This will record details of each RFA including:

Project code;

Project status (approval pending, approved, approved with variations, completed);

Date and minute number of approval;

Aptos account code; Total approved expenditure budget;

Total external funding;

Total internal funding;

Frequency of monitoring required;

Date and amount of approved variations;

Date of last monitoring report received.

For IT projects a similar process will be undertaken by the Project Administrator.

D6 Financial management

The Project Manager must ensure that appropriate procedures are put in place tomanage financial aspects of the project. This will include preparing a detailedbreakdown of the project budget and the expected expenditure profileandensuring all financial commitments and contracts are recorded against the relevantbudget.

Actual project expenditure will be recorded in the Universitys main financial system,and may be processed via an acceptable job costing system. Detailed financialprogress against plan may be collated in spreadsheets using data from either system.However this data must be reconciled on a monthly basis to the balance on theproject code in Aptos.

To assist the reconciliation process, monthly transaction reports will be producedeach month by Finance Services and issued to individual project managers, togetherwith project balance reports, showing total expenditure to date against budget.

D7 Project Expenditure Profile

In order to assist in the preparation of cash flow forecasts, project managers will beasked to prepare a profiled budget. This will be a monthly prof ile for the first 12monthsof the project and quarterlythereafter. The expenditure profile should beupdated each month and forwarded to the Project Accountant in Finance Services.

D8 Individual project monitoring reports

Individual project monitoring reports must be prepared at appropriate intervals. Thefrequency will depend on the size and duration of the project, and will be agreed atthe start of the project following consultation between the Project Sponsor, the ProjectManager and the Project Accountant (Finance Services). The ICG may also specifythe required frequency when they approve the project.

Project monitoring reports must follow a standard format and consist of a summaryreport and accompanying commentary. The monitoring report consists of foursections (detailed below):


29/41

______________________________________________________________________________________________________


Section 1 - Project Details

These details will be obtained from the RFA completed when the project is putforward for approval, or will have been agreed when the project has been authorised:

Project reference.

Aptos code.

Project name. Project sponsor.

Sponsoring college or service.

Project start date.

Project completion date.

Project variation limit.

Indicator as to whether a Revised Request for Authority (RRFA) is required.

Section 2 - Approved budget

Approved budget, profiled by year of planned expenditure.

Forecast variance to budget.

Liability for additional project resource.

Section 3 - Revised Forecast

Previous forecast.

Revised forecast.

Variance to previous forecast.

Actual to date.

Section 4 Commentary

This should include, as a minimum, comments on the following:

General comments on progress against plan.

Reason for any project slippage.

Amendments to project outputs.

Key risks identified.

Guidance for completion of individual project monitoring reports

Section 1

Project Reference a unique reference is provided by Finance Services when theRFA is completed.

Aptos code Finance Services issue an Aptos account code when the project hasbeen approved.

Project name the project is identified by a name consistent with the activity andoutcomes of the project.

Project sponsor this is the person nominated by the college or service that willbenefit from the project.


30/41

______________________________________________________________________________________________________


Sponsoring college or service the name of the college or service that will benefitfrom the project.

Project start date the date the project was expected to commence or the actual startdate.

Project completion date the date approved for completion updated for subsequentforecast changes.

Project variation limit forecast project expenditure may vary by the lower of 250k or10% of the approved expenditure budget (or as otherwise agreed by ICG) before arevised request for authority is required.

Indicator as to whether a Revised Request for Authority is required this box will f lagYES if the forecast variance to budget exceeds the project variation limit.

Section 2

Approved budget the budget (expenditure, external and internal funding) approvedby the appropriate authorisation committee for the project, profiled by year of planned

expenditure, including any approved variations to budget.

Forecast variance to budget this will calculate automatically when details of thelatest forecast are completed in section 3 and will show the difference between theapproved budget and the latest forecast.

Liability for additional project resource when the project is approved, it will beagreed who will be responsible for funding any additional resources. This box willshow the amount of additional funding required if there are variations against budget.

Section 3

Previous forecast details of the forecast completed in the previous monitoringreport, including unallocated contingency.

Revised forecast details of the latest revised forecast, including unallocatedcontingency. This should be completed by the Project Manager after reviewing allrelevant information relating to the project and after discussion with the ProjectSponsor.

Variance to previous forecast this will calculate automatically and will show themovement in forecast income and expenditure between the previous and the latestforecast.

Actual to date actual expenditure and income to date, taken from the latest monthlytransaction and balance reports.

Section 4

The purpose of the commentary is to provide narrative explanation for any variancesin the financial plan, in the key deliverables, or in the timescale. Risks identified as theproject progresses should be highlighted, and the proposed action to mitigate theserisks detailed. It may be useful to build up the commentary over the lifetime of theproject, retaining the narrative from previous reports. This commentary will act as auseful reference during the post project appraisal.


31/41

______________________________________________________________________________________________________


D9 Review of project monitoring reports

The completion of the project monitoring reports is the responsibility of the ProjectManager although, in practice, these will be completed by the Project Accountant inliaison with the Project Manager. These monitoring reports should be forwarded toFinance Services (Corporate Accounting), to the Project Sponsor and to the relevantcollege or service accountant within Finance Services. Finance Services will review

the monitoring report and, if any variances are material, will present the report to thenext meeting of ICG in the first instance, followed by the appropriate authorisationroute.

If the project shows variance to plan outside the approved limits, a Revised Requestfor Authority must be completed. This will be submitted through the appropriatechannels for approval refer to Capital Processes - Appraisal and Authorisation.

Finance Services will update the project status log.

D10 Approval of variations

When a Revised Request for Authority has received approval the Project Managerand Project Sponsor will be notified by Finance Services a

capital project planning and appraisal.pdf

Documents