NEW APPROACH TO CAPITAL PLANNING

Investment in hospitals, schools, highways and other infrastructure is essential to the delivery of needed public services, and the province's economic growth. Investment in these assets has traditionally been at the expense of the province, and has contributed to overall provincial debt.

In order to help bridge the gap between the need for provincial infrastructure investment and the province's financial capacity, government is introducing some important changes that will affect how capital expenditures are planned, financed and implemented.

First, starting this year, agencies are required to accommodate debt service and amortization costs associated with capital expenditures within their operating spending targets. In the past, these costs were built into ministry budgets. In developing their capital plans, agencies must now consider not only what they need with respect to capital, but also what they can afford in terms of debt service and amortization, as well as funding to operate and maintain new facilities.

Second, recognizing the budget pressures faced by agencies and their on-going need for capital, agencies are being asked to explore new ways of funding and managing infrastructure projects in order to ensure the most effective and efficient delivery of public services. A broad range of alternative service delivery and public-private partnership opportunities will be considered.

Recognizing this practical and economic imperative, a Capital Asset Management Framework will be introduced in 2002 that has two key objectives:

• to establish best practices in capital asset management across the public sector; and
• to help ministries, health authorities, school districts and other public agencies find efficient and innovative ways to meet British Columbia's infrastructure needs.

The framework will require public sector agencies to challenge service delivery assumptions and explore a full range of options for effectively and efficiently meeting public needs. For example, as a first step in capital planning, agencies will ask:

• Is there another way to meet our service delivery needs that could avoid new capital spending? For example, is it more cost-effective to purchase services instead of building infrastructure?
• Is there a way to better manage or use existing assets that could reduce the need for additional capital expenditures?
• Is there a way to share the cost and risk of capital acquisition with, for example, a private sector partner?

The framework will also ensure the necessary checks and balances are in place to provide accountability, protect the public interest and effectively manage risk through all phases of capital projects. The following principles will be applied:

• Sound Financial and Risk Management: Capital spending will be managed within financial limits, and all capital projects will be supported by rigorous business case analysis.
• Strong Accountability: Agencies responsible for capital management will measure their performance and report results to the government and the public.
• Emphasis on Service Delivery: Agencies will challenge traditional service delivery assumptions and explore a full range of options for effectively and efficiently meeting public needs.
• Value for Taxpayers' Dollars: Capital decisions will be based on practical, project-specific assessments of a full range of options to achieve the best value for money while protecting the public interest.
• Protecting the Public Interest: Agencies will ensure their capital decisions safeguard the public interest by thoroughly considering factors such as public health, safety, environmental protection, accessibility, equity, privacy, security and reliability.
• Competition and Transparency: Services will be procured through competitive, open, and transparent processes.

Benefits of the New Approach

Government's new approach to capital planning and budgeting sets a new standard for the way the government acquires capital assets. It paves the way for a high-quality infrastructure system that meets people's needs and delivers on government's commitment to make the best use of every tax dollar.

The new framework will allow BC to develop a world-class capability that can be exported to other jurisdictions. This new approach will attract private sector investment in the province's infrastructure while creating a 'home grown' capability that will allow local business to export their expertise to other jurisdictions.

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