Capital Project Prioritization

1
Capital Project Prioritization

• How Does your Process Stack Up?
• Ray Walls
• Management Budget Advisor
• Orange County Office of Management Budget

2
Session Outline

• Overview
• Group Exercise
• Getting Quality Project Requests
• Framework for Prioritizing
• Constructing a Review Committee
• Prioritizing Projects
• Group Exercise
• Discussion

3
Session Outline

• Overview
• Group Exercise
• Getting Quality Project Requests
• Framework for Prioritizing
• Constructing a Review Committee
• Prioritizing Projects
• Group Exercise
• Discussion

4
Overview

• Capital Improvement Projects Defined
• The Construction, Installation, and/or Renovation
  of Facilities Purchase of Land, Buildings, or
  Equipment
• Minimum Service Life
• Minimum Cost

5
Overview

• Government Capital Improvement Project Types
• Roads
• Water Electric Utilities
• Parks
• Fire Police Stations
• Large-Scale Technology Projects
• Other
• Capital Projects Allow Governments to Provide
  Basic Services

6
Overview

• Not All Capital Projects Can be Completed Due to
  Growing Demands and Increasingly Tighter Budgets
• Limited Resources Dictate Making a Choice Between
  Projects
• Roads vs. Jails
• Parks vs. Fire Stations
• Community Centers vs. Police Stations
• Picking One Project Over Another Will Have a
  Lasting Impact on a Government the Community it
  Serves
• The Goal is to Implement a System that Does not
  Pit One Project Against Another

7
Overview

• It is Important that Capital Project Funding
  Decisions be Made with Clearly Defined Reasoning
• Projects Competing for the Same Funding Should be
  Judged by the Same Standards
• All Aspects of a Project Should be Weighed in
  the Decision Making Process
• Initial Cost
• Operating Costs
• Public Safety Impacts
• Outside Funding
• Increased Efficiencies
• Strategic Fit

8
Overview

• What Will We Cover This Morning
• The Information Needed to Make Informed Capital
  Project Prioritization Decisions
• Sample Parameters for Scoring Capital Project
  Requests
• Putting Together an Effective Review Committee to
  Score Project Requests
• Method for Scoring Ranking Project Requests

9
Session Outline

• Overview
• Group Exercise
• Getting Quality Project Requests
• Framework for Prioritizing
• Constructing a Review Committee
• Prioritizing Projects
• Group Exercise
• Discussion

10
Group Exercise

• Prioritize the Following Capital Project
  Requests
• Fire Station - 4 Million
• Serve Growing Residential Area. No Existing Fire
  Station within 10 Mile Radius. More than 10
  Minute Response Time.
• Senior Center - 500,000
• Serve Growing Population of Retirees. Current
  Facilities are Inadequate or Non-Existent.
• Electronic Jail Locks - 1 Million
• Current System is 15 Years Old. Support has been
  Discontinued, and the System Could Fail at Any
  Time.
• Upgrade Government Info Channel to Digital Signal
  - 250,000
• FCC Requirements Mandate All Television Signals
  to be Digital by 2009. Requirement for
  Broadcasting.

11
Session Outline

• Overview
• Group Exercise
• Getting Quality Project Requests
• Framework for Prioritizing
• Constructing a Review Committee
• Prioritizing Projects
• Group Exercise
• Discussion

12
Getting Quality Project Requests

• Having Sufficient Information is Important When
  Prioritizing Capital Projects
• Clearly Communicate Information Requirements to
  Those Making the Project Requests
• Encourage Open and Honest Assessments of Needs
  and Wants
• Leads to a Better Understanding of the
  Organizations Current and Future Needs
• Avoids an Im afraid Culture

13
Getting Quality Project Requests

• Soliciting Project Requests
• Utilize a Standardized Form for Capital Project
  Requests
• Require that Everyone Uses the Form
• Ask for All Requests at Once (Organization Wide)
• Set a Deadline
• Set No Funding Limitations on Requests
• Address Needs and Wants

14
Getting Quality Project Requests

• What Type of Information Should be on the Request
  Form?
• Descriptive Project Name
• Project Type
• Public Safety, Transportation, General
  Government, Human Services, Arts Cultural, etc.
  
• Name of Project Manager or Contact
• Political District or Geographic Area of
  Influence
• Problem(s) that will be Addressed by the
  Requested Project
• How the Project Remedies the Problem(s)
• Required Cash Flow (capital operating)

15
Getting Quality Project Requests

• Sample Project Submittal
• Project Name Electronic Jail Locks
• Project Type Public Safety
• Project Manager Andy Griffith
• District All Districts
• Problem Current system is 15 years old and
  subject to failure. The software is no longer
  supported by vendor. Failure may pose a safety
  risk to correction officers and surrounding
  community.
• Solution Purchase and install up-to-date
  electronic locking system. Purchase maintenance
  package to ensure 24/7 operation and support.
  Will ensure that locks work properly and
  alleviate the safety risk currently being faced.
• Cost 1 Million for Purchase Installation
  25,000 for annual support.

16
Getting Quality Project Requests

• Utilizing a Database to Collect CIP Requests is
  Ideal
• Allows for Information to be Stored and Accessed
  Centrally
• Information Can be Easily Updated if Necessary
• Maintains a Historical Record of Project Requests
  and Related Information
• Information for Approved Projects Can be
  Transferred to Other Databases

17
Session Outline

• Overview
• Group Exercise
• Getting Quality Project Requests
• Framework for Prioritizing
• Constructing a Review Committee
• Prioritizing Projects
• Group Exercise
• Discussion

18
Framework for Prioritizing

• An Effective Review Process Requires Defined
  Scoring Parameters
• Parameters Should be Measureable Against All
  Requested Projects
• Avoid Using Different Standards for Different
  Project Types
• Standards Used to Score Prioritize Projects
  Need to Match the Priorities of the Organization
• Scoring Criteria Should Remain Consistent Over
  Time

19
Framework for Prioritizing

• Ensure that Those Requesting Projects are Aware
  of the Scoring Parameters
• Publicize that Project Requests will be Competing
  with Each Other for Funding
• Will Result in the Submittal of More Pertinent
  Information and Higher Quality Project Requests

20
Framework for Prioritizing

• Sample Project Scoring Categories for Local
  Government
• Project Criticality up to 100 Points
• Life Safety Emergency up to 40 Points
• Project directly relates to saving or protecting
  lives, correcting hazardous conditions, or
  eliminating potentially life threatening
  situations.
• Legal Liability up to 40 Points
• If the project is not funded, legal action
  against the local government is imminent.
• Prior Binding Commitment up to 20 Points
• The project is required to be undertaken due to
  commitments created through actions of the local
  governing body.

21
Framework for Prioritizing

• Sample Project Scoring Categories for Local
  Government (cont)
• Operational Issues up to 30 Points
• If the project is not funded, the local
  governments day-to-day operations could be
  negatively impacted. The project will positively
  impact levels of service or satisfy currently
  unmet needs.
• Note Unlike the Criticality scoring category,
  this Operational Issues category is intended to
  award points for projects that increase
  operational efficiencies, but are not absolutely
  necessary.

22
Framework for Prioritizing

• Sample Project Scoring Categories for Local
  Government (cont)
• Operational Savings up to 20 Points
• Completing the project will result in decreased
  operating costs for the local government.

23
Framework for Prioritizing

• Sample Project Scoring Categories for Local
  Government (cont)
• Strategic Importance up to 20 Points
• The project is a crucial part of the local
  governments growth plan or impacts a population
  segment, geographical area, or political
  jurisdiction of special concern.

24
Framework for Prioritizing

• Sample Project Scoring Categories for Local
  Government (cont)
• Partnership Funding up to 20 Points
• The project will receive grants or sources of
  funding other than those from the local
  government. Points are awarded based on the
  level of outside funding received in relation to
  the total cost of the project.

25
Framework for Prioritizing

• Sample Project Scoring Categories for Local
  Government (cont)
• Other Considerations up to 10 Points
• Wildcard category for assigning points to
  projects that present unique opportunities or
  extenuating circumstances not covered by the
  other scoring categories.

26
Framework for Prioritizing

• Any Other Scoring Parameters Your Organization
  Uses or Would Recommend?
• Scoring Categories will Differ Depending on the
  Type of Agency
• Be Able to Explain Each Category and Its
  Importance to the Mission of the Organization
  When Questions Arise

27
Session Outline

• Overview
• Group Exercise
• Getting Quality Project Requests
• Framework for Prioritizing
• Constructing a Review Committee
• Prioritizing Projects
• Group Exercise
• Discussion

28
Constructing a Review Committee

• Once a Scoring System is In Place, a Group to
  Conduct the Scoring is Necessary
• The Group Need NOT be Impartial
• Each Member Should Possess a Stake in the Outcome

29
Constructing a Review Committee

• The Committee Should Consist of Five (5) to
  Twelve (12) Members
• Members Should Understand Organizational Goals
  Direction
• Members Do Not Need Specific Experience with the
  Project Areas Being Considered
• It is Helpful for Committee Members to be
  Consistent from Year-to-Year

30
Constructing a Review Committee

• Committee Should be Chaired by Single Individual
• Chair Has Equal Input in Process But Should Not
  Dictate Outcome
• It is Important that Someone be Designated to
  Document Committee Activities and Decisions
• Does Not Have to be a Committee Member

31
Session Outline

• Overview
• Group Exercise
• Getting Quality Project Requests
• Framework for Prioritizing
• Constructing a Review Committee
• Prioritizing Projects
• Group Exercise
• Discussion

32
Prioritizing Projects

• Youre Ready to Begin Prioritizing Project
  Request When
• Scoring Criteria has been Established
• Project Requests Have Been Received
• Project Review Committee has been Assembled

33
Prioritizing Projects

• Before the Committee Meeting
• Distribute Project Request Information and
  Scoring Criteria to Committee Members
• Definitions of Scoring Categories
• Project Information Sheets
• Individual Project Scoring Sheets
• Each Member Should Review and Preliminarily Score
  Each Project Prior to Meeting
• Members Can and Should Score their Own Project
  Requests

34
Prioritizing Projects

• During the Committee Meeting
• Individual Project Requests are Formally
  Presented to Committee
• Encourage the Use of PowerPoint, pictures,
  graphs, figures, etc.
• Allow a Reasonable Amount of Time for Each
  Presentation
• Committee Members Ask Questions of Project
  Requestors and Clarify Outstanding Issues

35
Prioritizing Projects

• During the Committee Meeting (cont)
• Presenters Should Leave Room After Each
  Presentation
• Committee Members Should Individually Review and,
  If Needed, Revise Preliminary Scores for the
  Project
• Open Discussion Regarding the Project Should be
  Conducted by the Chair

36
Prioritizing Projects

• During the Committee Meeting (cont)
• After Open Discussion, Committee Members Share
  their Scores in Each Category for the Project
  with the Committee
• Reasons for Awarding a Particular Score Should be
  Discussed
• Persuasion is Allowed and Changing Individual
  Scores is Acceptable
• The Chair Leads the Committee in Generating
  Consensus Scores for the Project Under Review
• Consensus Scoring is a Democratic Process Where
  the Most Popular Score Among Committee Members is
  Adopted as the Final Score for the Project

37
Prioritizing Projects

• During the Committee Meeting (cont)
• The Presentation, Discussion, and Scoring Process
  Should Repeat Itself for Each Project or Group of
  Projects
• Allows for Each Project Request to be Scored
  While Still Fresh in the Minds of Committee
  Members
• Discourages Project vs. Project Scores while
  Encouraging Project vs. Scoring Criteria Scores

38
Prioritizing Projects

• After the Committee Meeting
• A Master Score for Each Requested Project is
  Tallied
• Projects are Placed on a Ranking Sheet
• Sorted by Funding Source and then Total Score
• An Available Funding Line is Indicated on Ranking
  Sheet

39
Prioritizing Projects

• Ranking Sheet Example
• 3 Million Available in General Fund

40
Prioritizing Projects

• Ranking Sheet Example
• 3 Million Available in General Fund

41
Prioritizing Projects

• Ranking Sheet Should Act as a Guide
• Results are not Set in Stone and Can be Adjusted
  as Dictated by Needs
• Scores and Rankings Can Remain in Place From
  Year-to-Year While Projects are Added or Removed
  from the List
• It May be Beneficial to Review Project Scores
  from Year-to-Year to Evaluate Need and
  Environment Changes

42
Prioritizing Projects

• The Prioritization Process Should be Conducted in
  Conjunction with the Budget Process
• Enough Time Should be Allotted for
• Submission and Initial Review of Project Requests
• All Necessary Prioritization Committee Meetings
• Ranking of Requested Projects and Determination
  of Available Funding
• Determination of Approved Project Requests by Top
  Management
• Budgeting for Approved Projects and Related
  Operating Costs

43
Session Outline

• Overview
• Group Exercise
• Getting Quality Project Requests
• Framework for Prioritizing
• Constructing a Review Committee
• Prioritizing Projects
• Group Exercise
• Discussion

44
Group Exercise

• Prioritize the Following Capital Project Requests
  Using the Scoring Sheets Provided

45
Group Exercise

• Project Name Fire Station Lonesome Oak Street
• Project Type Public Safety
• Project Manager Joe T. Fire
• District 2
• Problem No fire station exists within 10-mile
  radius of this area. Response times are more
  than 10 minutes. Residents are complaining about
  home insurance rates. A total of 100 people
  would live within the 10 mile radius of the new
  station. 100 more people are expected to move in
  within 5 years.
• Solution Design and build new fire station on
  Lonesome Oak Street. Would provide fire service
  in an area that is currently lacking. Would
  lower insurance rates for residents and stop
  related complaints.
• Cost 4 Million for design, purchase of land,
  construction, and equipment. 1 Million per year
  in operations costs for 12 firefighters and
  equipment maintenance.

46
Group Exercise

• Project Name Senior Center District 3
• Project Type Social Services
• Project Manager Joe T. Social
• District 3
• Problem Currently, there are no organized
  recreational opportunities for seniors in the
  area and a number of complaints are being lodged
  each week. Liability insurers require that any
  organized activities, such as bingo, cards, or
  dominoes be held in a properly air-conditioned
  building. District 3 is home to the largest
  number of senior citizens in the area.
• Solution Design and build a recreational
  facility for seniors in the area of District 3.
  The center will provide organized social and
  recreational opportunities for our older citizens
  and provide healthier, more active lives for
  countless individuals.
• Cost Total cost of the project is 1.5M. Grant
  sources have agreed to pay 1M of the total cost.
  Therefore, the cost to the local government for
  the facility will only be 500,000. A local
  charity organization has agreed to fully cover
  the operating costs of the facility.

47
Group Exercise

• Project Name Electronic Jail Lock Replacement
• Project Type Public Safety
• Project Manager Joe T. Correction
• District All
• Problem The jails locking mechanisms are
  controlled by a computerized system that is now
  15 years old. Support for the system has been
  discontinued by the vendor and fixes are
  currently being done in-house. There is a
  possibility that the system could fail at any
  time and we do not have the resources to
  completely rebuild it. Malfunctioning locks pose
  a risk to employees at the jail and to those
  residents who live within a few miles of it.
• Solution Purchase and install new hardware and
  software for the jails electronic locking
  system. Will alleviate safety risk currently
  being faced.
• Cost 1M for purchase and installation of
  system. 25,000 annually for maintenance and
  support by vendor.

48
Group Exercise

• Project Name Digital Signal Conversion
  Government TV Channel
• Project Type General Government
• Project Manager Joe T. Television
• District All
• Problem The FCC has mandated all television
  signals to be digital by 2009. The current
  signal is analog. Without this conversion, we
  will be unable to broadcast government
  information under normal circumstances or to get
  emergency information to citizens via TV. Many
  citizens tune to the government channel in the
  aftermath of natural disasters.
• Solution Upgrade the stations recording and
  broadcasting equipment to digital standards.
  Doing so will ensure that the channel remains on
  air and uninterrupted once the requirement is
  enforced in 2009.
• Cost Upgrade will cost 250,000. Once complete,
  total cost of the project will be reimbursed
  through a partnership with the local cable
  company.

49
Session Outline

• Overview
• Group Exercise
• Getting Quality Project Requests
• Framework for Prioritizing
• Constructing a Review Committee
• Prioritizing Projects
• Group Exercise
• Discussion

50
Discussion

• Comments?
• Ideas?
• Questions?

51
Capital Project Prioritization

• How Does your Process Stack Up?
• Ray Walls
• Management Budget Advisor
• Orange County Office of Management Budget