Sustainable Campus Project

1. Sustainable Campus Project Business Case June 2011 V0.3

2. Summary – Sustainable Campus Project The Sustainable Campus Project (the project) outlined in this business case is a proposal for Glasgow Caledonian University to invest £4.9 million to install a gas fired Combined Heat and Power (CHP) and district heating network. This will provide a flexible and sustainable future energy supply. The project forms one of the three projects prioritised for the future develop-ment of the campus as identified within the University’s Campus Masterplan. The need has arisen from identified objectives within the corporate, academic and estates drivers of the University. The project will: • Support future long term growth of the campus, including the proposed CBS and INTO buildings; • Provide a flexible and sustainable future energy supply; • Reduce annual operating costs and carbon emissions; • Offer the potential to generate income from selling excess heat generated; and, thus, • Support the implementation of the University’s Carbon Management Plan and provide a visible commitment to sustainability and support to initiatives such as Sustainable Glasgow. The use of CHP will require additional gas consumption, but this can be offset by a reduction in the electricity purchased by the University resulting in approximate annual savings of £250,000 in operating costs in the first four years of operation (2013/14 – 2016/17). Over time this will off set the initial capital expenditure, such that the Net Present Cost (NPC) of the project is lower than ‘doing minimum’, while at the same time it future-proofs the energy supply infrastructure of the estate and meets all of the investment objectives. The solution retains the flexibility to be converted to alternative fuel sources depending on future cost and availability considerations. The project will be funded through retained funds of the University. This draws on capital grant funding received from the Scottish Funding Council, which has been ring fenced to fund the implementation of a sustainable energy infrastructure to support the long term operation of the estate. The project programme has been developed to ensure that conditions attached to the capital grant funding are achieved. Construction works are due to commence in April 2012 and be completed by July 2013. Operating cost savings will therefore be achieved each year from 2013/14 onwards. 2

3. Contents 3

4. 1. Strategic Case 4 Deloitte

5. 1.1 Strategic Context Overview Glasgow Caledonian University (the University) is one of the largest universities in Scotland, offering a wide range of learning, research and knowledge transfer opportunities on a national and international basis. Formed in 1993 the University has approximately 17,0000 students and 1,600 staff. The University operates out of a single site campus based in Glasgow City Centre. In September 2010, ‘GCU London’ a specialist postgraduate campus was opened in Spitalfields area of London. Recent restructuring has seen the University implement a three school structure - Business, Law & Social Science; Health & Life Sciences; and Engineering, Computing, Built & Natural Environment, together with a reorganisation of support services. The University is confident that this revised structure provides a sustainable base for its future operation. Priorities The University is committed to further investment and development of its estate. This has resulted in the prioritisation of three projects across the campus which are proposed to be implemented in the short to medium term (2011 – 2015). The strategic context driving the identification of the projects is illustrated below. Priority projects: • Sustainable campus • New build on BTP site • ‘Heart’ of campus The business case process Each priority is discussed in more detail within the Strategic Case and forms the basis for the identification of a range of investment objectives and options for the project. The options are then appraised within the Economic Case to identify a preferred option. The commercial strategy, affordability and funding strategy for the preferred option are then considered within the Commercial and Financial Cases respectively. The governance and project management arrangements that will be adopted are then detailed within the Management Case. 5

6. 1.2 University Strategy University Strategy The University’s Vision, Mission and Strategic Goals are detailed within the Glasgow Caledonian University Strategy 2015 as summarised below: Mechanisms for delivery: • Successful new academic Schools of Business, Law and Social Sciences; Health and Life Sciences; and Engineering, Computing and the Environment, led by Executive Deans. • An international strategy which focuses on partnership working in strategic locations around the world. • An increasing emphasis on the delivery of high value professional qualifications and postgraduate education. • Enhancement of the student experience. • A research and REF strategy which builds on the key areas of research strength: health, engineering and the environment. • A successful Enhancement Led Institutional Review which demonstrates our commitment to excellence in education. • Development of our campus to create a modern learning environment. Sustainability: Underpinning the strategy is a focus on ensuring long term sustainability, which will enable the University to remain competitive in order to succeed in a challenging external context. This consists of three strands namely: • Academic - shifting balance towards postgraduate education, together with undergraduate excellence, and enhancement of learning opportunities and methods of delivering and learning partnerships and focussed research excellence • Financial – reducing dependence on public funding and increasing our income from other sources through a strategic focus on reducing our costs while employing our new model of delivering for growth • Environmental- implement our campus master plan to provide an enabling educational environment for our students, staff and partners. 6

7. 1.3 Estate Strategy 2010 The Estate Strategy 2010 sets out the strategic vision and aims for the University estate. The Vision: ‘We believe that our buildings, open space and associated infrastructure should reflect our values and aspirations to be dynamic, inclusive and accessible to our students, businesses and the wider community. All parts of our Estate should support and reinforce these goals. The development and management of the University’s Estate plays a vital role in achieving our corporate aims.’ Estate context Previous versions of the Estate Strategy identified the core objective to centralise the University campus on a single site within Glasgow City Centre. This principle remains a core driver of the current strategy, but with an added driver to vacate existing leasehold accommodation around the campus, allowing for further cross-campus centralisation and consolidation. Since 1993, expenditure on the campus has been in excess of £100 million, which has included a number of new buildings such as Govan Mbeki, CPD Centre and the award-winning Saltire Centre, together with a programme of refurbishment of the existing building stock. This has given the University significant expertise in managing complex new build and refurbishment projects within a compact operational campus. While expenditure to date has delivered significant operational benefits and enhancement of the campus, the University is aware that there is an ongoing need for campus development to ensure that it is appropriately positioned to attract and serve its future customer base. Like all other institutions within the Higher Education sector, the University is faced with the challenge of responding to changing delivery methods for learning and teaching and the subsequent impact on learning environments. There is therefore a need for the estate to respond flexibly to ensure that the campus is able to support the University’s range of pedagogies. As the University Strategy outlines, there is an identified commitment to the ongoing investment and development of the campus. Such investment will require to be subject to detailed appraisal and prioritisation against competing needs given the current and future public funding constraints faced by the sector. Indeed, the University is aware of the need to look at alternative funding and delivery models to support prioritised investment across the campus. The aims of the Estate Strategy are, in summary: • Provide high quality flexible facilities to support the University’s learning, teaching and research, knowledge transfer and social/community-related activities. • Widen access to the University by providing welcoming and stimulating learning environments for community use. • Facilitate implementation of the University’s International Strategy through further development of enhanced on-campus services and facilities. • Provide social and recreation facilities for staff and students, with particular regard to international and residential students’ needs. • Ensure continuing provision of residential accommodation at a quantity, quality, price and location that will be attractive to prospective students and meet the needs of those in residence. • Support the University’s external-facing activities by providing facilities on campus capable of hosting major academic conferences, business events and social occasions. • Ensure buildings are fit for purpose and the campus is safe, secure, accessible and eco-friendly. • Provide value for money in estate development and management through reconfiguring our buildings to make better and more efficient use of the existing campus, maximising appropriate opportunities for partnerships, collaborations, outsourcing and shared services, terminating leased accommodation at the earliest practicable opportunity, and generating commercial income, thereby reducing dependency on public funding. In addition, we will seek to generate funds through strategic partnerships, philanthropic endeavours and use of available grants and funding. 7

8. 1.4 Campus Masterplan To provide a more comprehensive vision and framework for the future development of the estate, a Campus Masterplan was commissioned in 2009. A multi disciplinary team led by Page & Park led a detailed consultation exercise that identified the priorities, principles and projects that would drive the future development of the campus. The Campus Masterplan was formally approved by the University Court in 2010. Overall Vision The priorities • Improve the setting and external environment of the campus and ‘greening’ of the landscape; • Build on the sustainability strategies of the University by improving building stock and energy use; • Create a new central support services hub with new social learning spaces and exacting facilities to form a ‘heart’ of the campus; • Refurbish the Hamish Wood building; • Manage campus space reallocation to allow vacation of the leased accommodation at Buchanan House; • Explore options for new build on BTP site; and • Plan for future removal of the William Harley building to open up potential access into the campus and provide extended CPD accommodation. The principles • Create a Heart – at the lower levels of George Moore and Hamish Wood provide a new space for networking, socialising, informal learning and frontline service delivery; • Greening the Campus – two linked but separate components: enhancement of the landscape ‘greenery’ of the campus, and ‘greening’ the campus from an environmental perspective through new environmental sustainability measures; • Define the University entrance – create a formal ‘entrance reception’ for the University; • Consolidate and connect – consolidate main teaching and research facilities back into the central campus; and • Grow out from the heart – create a strong, coherent and clear structure for the built social and learning environments enabling controlled and connected growth to occur. The projects • Greening the Campus • Sustainability Infrastructure • Heart of the campus project • Hamish Wood Level 0 • Research Hub • New build on BTP site • Vacating Buchanan House Phase 1 Projects • Sustainable campus - reduces the University’s carbon footprint and energy costs, and creates a sustainable campus for the future. • New build on BTP site – new building to incorporate professional and business development activities. • Heart of the campus – form new spaces to contain the dining, informal leisure, networking, social and events facilities for the campus, replacing the outdated refectory and associated spaces. Prioritisation The Campus Masterplan provided an overall framework for future development and within this it has been necessary to prioritise the proposed range of projects. This has resulted in the identification of three specific projects which are intended to form ‘Phase 1’ – the short to medium term (2010-15) development priorities for the estate. The projects are focused on delivering many of the identified priorities, principles and projects identified within the overall Campus Masterplan. 8

9. 1.5 Project drivers There are a number of project drivers which have caused the Sustainable Campus project to be prioritised, which are discussed below. These include both internal drivers specific to the University and external drivers reflecting wider energy efficiency/ sustainability considerations. 9

10. 1.5 Project drivers (cont’d) Sustainability Infrastructure The Campus Masterplan recommended an early deliverable project to install a new Combined Heat and Power (CHP) plant to serve existing and planned buildings on the campus. The proposed brief for this project was: • To provide a CHP installation and distribution network to efficiently serve existing and planned buildings on the campus; • To ensure that the installation will be capable of being expanded as required to meet future possible development of the campus; • To ensure that the energy source for the CHP will be capable of adaptation to respond to changing natural resource availabilities; and • To provide infrastructure capable of connection to wider City district networks if implemented – e.g. Sustainable Glasgow. It was estimated that the project would offer annual savings on energy costs of approximately £260,000. It was also anticipated that there would be a reduction in maintenance costs, a saving on the need for individual building boiler upgrades and cheaper new build costs in the future as the CHP plant will provide the required renewables component for future building projects. 10

11. 1.6 Objectives The priorities at University Strategy, Estates Strategy and Campus Masterplan, together with the identified project drivers, form the basis for a series of investment objectives for the Sustainable Campus project. These have been classified in terms of their ability to support the sustainability drivers that underpin the University Strategy, which are as follows: • Academic – supports the enhancement and delivery of new teaching and learning methods; • Financial – supports cost reduction and reliance on traditional funding sources; and • Environmental – supports the implementation of the Campus Masterplan. It is necessary to ensure that each of the investment objectives are SMART (Specific, Measurable, Achievable, Realistic and Timely). These are detailed in the table below and ensure that they provide a robust point of reference for developing and evaluating options as part of the Economic Case. Third Floor Flight Second Floor Shipping 11

12. 2. Economic Case 12 Deloitte

13. 2.1 Option generation Introduction This section outlines the identification of the project scope, which has resulted in the identification of a series of options which have then been appraised as part of the Economic Case. The option appraisal has been undertaken in accordance with HM Treasury ‘ Green Book’. Three biomass boilers were appraised (600kWe, 1000kWe and 2000kWe) using the same methodology as above. The 2000kWe unit came out most favourably with a simple payback of 6.9 years. The calculations included the updated Renewable Heat Incentive (RHI) figures of March 2011. Both these options offer a campus wide solution and so were considered as distinct options from the other renewable options which are building specific. Building specific technologies appraised included solar thermal and PV. Solar thermal proved most economically viable on the Arc, William Harley and Hamish Wood buildings while PV was best suited to the Saltire and Arc buildings. Due to the revisions in the RHI and Feed in Tariff (FIT) rates published in March 2011, the solar thermal solution resulted in a 22.7 year payback and the PV solution in a 25.4 year payback. These options have therefore been discounted at this stage. A critical issue for the biomass boiler option was securing planning approval, with no precedent of planning being granted for this technology in Glasgow city centre. Initial discussions with Glasgow City Council suggested ‘stringent’ conditions would need to be met for flue and air quality emissions. This could have resulted in the requirement for a tall flue from the plant that would incur additional cost and further planning considerations. Other issues, included greater space requirement for on site storage of wood chips, disruption from twice weekly deliveries and the security of continuity of fuel supply. Given the range of potential constraints and risks associated with this option, it was believed appropriate for it to be discounted from any further analysis. Following consideration of the feasibility study, the University Executive Board confirmed that gas fired CHP connected to a district heating network was the preferred option, and that a full economic analysis should be undertaken. This solution would involve installing a gas fired CHP unit which would supply hot water via a district heating scheme to all buildings on the campus. The network would connect to each individual boiler house with existing boilers providing back up and peak demand. The network would be sized to connect to future buildings such as the New Build on the BTP site and INTO buildings and allow for any future integration with an external heat network such as that proposed by the Sustainable Glasgow Initiative. The CHP would also generate electricity which would primarily be used on campus to avoid grid purchased electricity. It is envisaged that excess electricity could be sold via the grid to a local supplier. Feasibility Study To further explore the options in terms of sustainability infrastructure, SKM Enviros were appointed in October 2010, following a competitive tender for consultancy services, to carry out a feasibility study for CHP and a district heating network. Through subsequent discussions with the University the scope was revised to allow for a full option appraisal of renewable energies. This included a review of the Carbon Management Plan and the likelihood of achieving future carbon savings. The feasibility study involved collation and analysis of the campus building energy demands and assessment of the financial and technical feasibility of various renewable technologies including photovoltaics (PV), solar thermal, biomass and CHP. Other options considered included wind turbines, ground/air source heat pumps and biofuel CHP; these were soon discounted due to locational constraints of the campus. Due to the compact nature of the campus, it was considered that a district heat network would be suitable and would make a large centralised CHP unit or biomass option feasible, so that the University would benefit from economies of scale. Reciprocating gas fired CHP was chosen for appraisal as this is a proven technology, there is a gas supply to the campus already, the site Heat to Power ratio is on a par with the campus, and the grade of heat (i.e. low temperature hot water) is well matched. A Biomass boiler was also chosen for appraisal as it offers a very low carbon solution, it is a proven technology and there are numerous biomass fuel suppliers in the area. Three CHP size options were appraised (500kWe, 770kWe and 1,000kWe) using existing utility prices and standard capital and operating figures. Costs were also included for the heat network, connections, installation and energy centre housing. The 770kWe came out most favourably with a simple payback of 14.7 years (the optimal size was increased to 888kWe when the New Build on the BTP site project and INTO buildings were factored into the calculations). 13

14. 2.2 Options Appraisal The Options In accordance with HM Treasury guidance, it is necessary to ensure that all options for service delivery are considered as part of an economic appraisal. It is therefore necessary to consider a range of options as part of this process. Given the work undertaken as part of the SKM Enviros feasibility study, it is believed that the following two options should be considered as part of this process: Appraisal Methodology The appraisal of the options has been undertaken through a two stage process. The first stage involves an assessment of the ability of an option to meet the identified investment objectives of the project, together with a range of other key questions that require to be considered such as the operational disruption and associated delivery risk. The options have then been subject to a detailed economic appraisal (see Section 2.4), assessing the capital, revenue and income cashflows associated with each option over a 25 year period. These have been discounted to derive a Net Present Cost (NPC), allowing comparison of each option in today’s terms. 14

15. 2.3 Initial appraisal The initial evaluation of the options is detailed in the table below. The business as usual scenario proposed under Option 1 fails to meet the majority of the identified investment objectives for the project. While the replacement of existing boilers proposed under this option is likely to result in some potential efficiencies in terms of reduced operating costs and carbon emissions these are likely to be very limited. Option 1 fails to support the implementation of key approved strategies of the University, such as the Campus Masterplan and Carbon Management Plan. While operational disruption and delivery risk are both categorised as low, this reflects the limitations of the solution proposed. Option 2 will provide a solution that is able to meet all of the identified investment objectives for the project. The CHP and district heating network will provide flexible, future-proof improvements to the University’s energy supply and ensure that there is appropriate infrastructure to support the future development of the campus. Anticipated carbon savings are forecast at 1,012 tonnes in the first full year of operation (2013/14) addressing the anticipated savings target within the Carbon Management Plan. Once the district heat network is installed, the source of heat can be changed depending on future cost and availability of differing fuel sources. It will also demonstrate the University’s sustainability credentials in a very visible way, and will contribute to the Sustainable Glasgow initiative by reducing overall carbon emissions in the city and providing a network which could be connected to a future wider city wide heat network. It will also offer the opportunity to reduce annual operating costs across the campus, through reducing the level of electricity purchased by the University and providing a mechanism for the University to sell excess heat to its commercial benefit. The associated lower carbon emissions , will also help to reduce the University’s exposure to the CRC levy. These aspects are considered in more detail within the economic appraisal of the options. While the operational disruption and delivery risks for Option 2 have been assessed as medium, this is primarily down to the existing status of the project. As more detailed site investigation and design works are undertaken it is believed that impacts will be understood in detail and can be appropriately minimised. 15

16. 2.4 Economic appraisal The results of the economic appraisal of the options are summarised in the table below in respect of the total capital and operating costs and the NPC. The key assumptions adopted are summarised opposite with the detailed cashflows and all supporting assumptions detailed in Appendix 1. Key assumptions: • 25 year appraisal period; • Discount rate of 3.5%; • Existing boiler replacement and maintenance costs based on University EMAP; • Capital cost assumptions for CHP and district heating network developed by SKM Enviros and include allowances for professional fees and VAT; • Contingency allowance of 10%for optimism bias applied to CHP and district heating network capital costs; • Operating costs assumptions developed by SKM Enviros and exclude inflation; and • Excludes cost of financing. Option 2 has the lowest NPC, reflecting the significant savings in operating costs that are generated, which offset the additional capital expenditure of approximately £3.78 million required for the CHP and district heating network. The CHP will require additional gas consumption, but this is offset by a reduction in electricity purchased by the University. Net financial savings on utilities are predicted at approximately £244,000 during the first full year of operation of the CHP. When additional annual maintenance costs and electrical pumping costs are taken into account, the overall operating cost savings still amount to approximately £104,000 in the first year of operation. While operational savings vary in subsequent years due to changes in the assumptions made for future utility prices, they still average approximately £250,000 per annum over the first four years of operation of the CHP and district heating network. This includes annual savings in respect of carbon emissions which reduce the annual costs under the CRC levy. Preferred Option The appraisal process has identified that Option 2 is the preferred option for the project. Option 2 meets all of the identified investment objectives for the project, and is also believed to have manageable operational disruption and delivery risk to the University. The economic appraisal highlights that Option 2 will deliver the lower NPC. It will deliver significant annual operating savings, and reduced carbon emissions, providing a more sustainable financial and environmental position for the operation of the estate. 16

17. 3. Commercial Case 17 Deloitte

18. 3.1 Procurement Strategy Project Scope Within the scope of the preferred option, there are four principal aspects, which are summarised in the table below: Procurement – CHP and district heating network Based on its experience of similar projects, SKM Enviros has identified that procurement options for CHP and district heating network fall into two main categories: 1. Capital purchase (on balance sheet) – shown on this page; and 2. Operating lease (off balance sheet) – shown on the next page. Within each of these categories there are a number of procurement options which are summarised. 1. Capital purchase options i) Internal Funding – the University will provide the full capital for the installation. There are a range of delivery options available under this option. Contract terms with consultants, equipment suppliers and subcontractors require be designed to minimise the risk to the University. In respect of the required programme of existing boiler replacement across the campus to complement the CHP and district heating network, it has been assumed that this will be procured through existing contracts and arrangements that the University has in place. ii) Debt Finance – the University will acquire new debt funding and typically provide some retained internal funds. The borrowing timescale can potentially be matched to the payback period, with annual savings/income generated offsetting the capital and interest payments associated with the debt finance. iii) Leasing – this is a financial arrangement that would allow the University to use the CHP asset over a fixed period, typically through a hire purchase or a finance lease. The University would make regular rental payments to a supplier over a defined period reflecting the capital and finance costs of the facility, typically taking ownership at the end of the rental period. The University would retain responsibility for ongoing maintenance of the CHP and district heating network under this option. 18

19. 3.1 Procurement Strategy 2. Operating lease options Preferred Procurement Option Having considered the various procurement options, the University is looking to ensure that the maximum benefits from the project are retained. This is likely to require the University to retain ownership and control of the project, which points towards a capital purchase option. While the University is likely to retain considerable elements of financial and technical risk under this option, it is believed that through appropriate contract terms with design / engineering consultants, equipment suppliers and subcontractors, these risks can be mitigated. The University have confirmed the availability of capital grant funding received from the Scottish Funding Council, which has been ring fenced to fund the implementation of sustainable energy infrastructure to support the future operation of the estate. The use of this identified Internal Funding is believed to offer a more efficient financial solution than a hire purchase or finance lease arrangement. There is, however, a condition attached to the capital grant funding, which requires the project to be ‘committed’ by 31 March 2012. This effectively requires for design feasibility and contractor procurement to be completed by this date. i) Energy Services Company – An ESCO is a company set up to provide a total energy supply service, taking responsibility for provision, financing, operation and maintenance of energy facilities. An ESCO arrangement can vary widely, but typically the ESCO contractor supplies heat and power at agreed rates. From a financing point of view, the basis of this type of agreement is that the CHP plant capital and operating costs would be transferred by the University to the ESCO, together with all the technical and operating risks of CHP. The University could form part of the ESCO, however, savings are usually lower under this option. ii) Equipment Supplier Financing – this is where an equipment supplier may, as an alternative to outright purchase, offer a leasing package for the CHP. Under this arrangement, it will normally design, install, maintain and sometimes operate the CHP system. A common commercial arrangement is for the energy to be supplied at prices that incorporate agreed discounts on the open market price. The University may be required to pay a substantial standing charge, a lease payment or a high ‘take or pay’ volume of the energy supplied. Next Steps SKM Enviros have identified the following next steps as part of the development of the preferred design solution: • Detailed cost, performance analysis and optimisation; • Heat network options - layout, temperature, pressure and costs; • Network building integration – detailed survey of Boiler Plant and wet system integration; • Plant location, layout and integration; • Confirmation of gas supply; and • Electrical connection - outline design and costs to distribution system, supplier permit. iii) Private Finance Initiative – Under this arrangement, the University would sign a contract with a private sector consortium who would be responsible for the design, build, financing, operation and maintenance of the CHP over a long term contract (typically 25- 30 years). The University would pay an annual charge linked to the performance of the facility. The scale of f the proposed CHP and district heating network is believed to be too small to consider this option. 19

20. 3.2 Risk Register An initial risk register has been developed for the project, which reflects the current status. The risks have been classified in respect of Reputational, Financial, Project and Programme risks. Further details regarding risk management arrangements that will be adopted are detailed within the Management Case. 20

21. 3.3 Programme To allow for the project to be ‘committed’ by 31 March 2012, the programme (opposite) has been developed. This has been based on discussions between the Estates and Procurement departments within the University. To ensure that the 31 March 2012 timescale can be met, framework contracts available to the University (e.g. GCU Building Consultancy and Professional Services and OGC Buying Solutions) will be used as appropriate. These allow for significant time savings in tendering and procurement of consultants, whilst still ensuring that they posses the correct range of technical expertise and experience. The diagram below illustrates the process and consultant appointments which will be undertaken for the project. 21

22. 4. Financial Case 22 Deloitte

23. 4.1 Project costs Capital costs The indicative capital costs of the preferred option are summarised in the table opposite. These have been developed by SKM Enviros for the CHP and district heating network. The cost of replacement of existing boilers over the period 2011 /12 – 2016/17 has been sourced from the University’ EMAP prepared by the Estates Department. The costs will be subject to further refinement as more detailed design information is developed for the project. Indicative capital cost Operating costs While the project will deliver operating cost savings over the appraisal period, there are a number of additional costs that will be incurred each year as part of the preferred option. These are summarised below: • CHP maintenance costs: c. £73,400; and • Heat network costs: c. £5,000. The University will also require to meet the annual costs under the CRC levy from 2012/13 onwards. These costs are dependant on the level of carbon emissions each year, with the carbon price based on the DECC publication Forecast Grid Emissions and Prices for retail: commercial (central scenario). This shows an increasing cost per tonne of carbon over the appraisal period. These costs are reduced under the preferred option, due to the associated carbon savings that will be generated by the CHP and district heating network. * Allowance of £250k included for professional fees 23

24. 4.2 Funding strategy and affordability Funding Strategy There are a number of funding options that are available to meet the capital costs of the preferred option. These include: • Internal funding; • Debt finance; and • Scottish Funding Council – Capital Grant. As outlined previously, capital grant funding received from the Scottish Funding Council, has been ring fenced by the University to fund the implementation of sustainable energy infrastructure to support the operation of the estate. This will fund the capital costs associated with the project over the period 2011/12 – 2016/17. The table (opposite) details the cashflow impact of the preferred option over the period 2011/12 – 2016/17. This is based on the economic appraisal detailed within the Economic Case. Preferred option funding cashflow: Affordability Given the availability of internal funding to meet the capital costs associated with the project, annual operating cost savings that are generated will be fully retained by the University. The table opposite details the annual operating costs under the ‘do minimum’ option and the savings that are generated by the CHP and district heating network (exclusive of inflation). This covers the period 2011/12 – 2016/17. This confirms the long term financial benefits of the project to the University. Total Operating Costs: 24

25. 5. Management Case 25 Deloitte

26. 5.1 Project Governance The governance and approvals process that will be adopted for the project are summarised below. This approach has successfully been adopted for a number of previous projects across the University. The University Court is the Investment Decision Maker and holds the ultimate responsibility for the project. Responsibilities will be discharged as appropriate to the • Finance and General Purposes Committee; • Executive Board; and • Project Board. The responsibilities are in general to: • Monitor and ensure that the project provides best value and delivers the investment objectives; • Ensure the project is delivered to University Policy and carry out review, monitoring and approvals at key milestones; The Project Sponsor/ Champion provides the link between project ownership and delivery and is responsible for the ongoing management of the project. The Project Team has responsibility for ongoing management and delivery of the project. The responsibilities are, in general, to: • Ensure the design is developed to reflect user needs and is within identified cost parameters for the project; and • Monitoring and reporting progress in terms of cost, programme and risk mitigation to the Project Sponsor and Project Board. The Project Co-ordinator is responsible for the day to day management of the project on behalf of the University. The Project Manager will provide additional project management support to the Project Co-ordinator. The M & E Consultant will be responsible for leading and co-ordinating the Design Team. The Design Team will be responsible for the development technical design and solution for the project. 26

27. 5.2 Management Arrangements To support the successful delivery of the project and ensure that it is able to meet the identified investment objectives a range of supporting management arrangements will be put in place. These are summarised below: Arrangements for change and contract management The management and control of change ensures that the impact of changes to requirements, priorities, programme, and budgets do not outweigh the advantages to be gained from the project. A robust change management process will be implemented following final agreement of the project requirements. The implementation of a rigorous change control process will allow for greater cost and programme certainty and therefore the smoother management of change. Arrangements for post occupancy evaluation In accordance with good practice, appropriate processes for post occupancy evaluation will be put in place. The arrangements will be in accordance with the Scottish Funding Council Capital projects: post occupancy evaluation guidance. This recommends three stages for the review of projects, which are: • Operational review and project delivery phase, which is undertaken 3-6 months after occupation; • Functional performance review, which is undertaken 12-18 months after occupation; and • Strategic review, which is undertaken 3-5 years after occupation. More detailed arrangements for post occupancy evaluation will be detailed as part of the design development process. Arrangements for benefits realisation As outlined within the Strategic Case, the investment objectives of project will derive a range of potential benefits. It is necessary to ensure that appropriate processes are put in place to ensure that these are appropriately defined, together with the basis of their measurement. A Benefits Realisation Plan (BRP) will therefore be developed for the project. The BRP will consist of the following: • Refined set of benefits for the project; • Proposed basis of measurement; • Key performance indicators (KPIs); and • Timescales for measurement. The ownership of the BRP will rest with the Project Board, however, it will be the responsibility of the Project Team to review and update the plan at periodic intervals to ensure that the proposed benefits have been captured. The Project Team will be responsible for reporting progress on benefit realisation to the Project Board. Arrangements for project assurance The Scottish Funding Council Capital projects: Decision Point Approval Process Guidance identifies the importance of reviewing a project at critical stages in the procurement and delivery phases to provide assurance that it is consistent with the agreed initial aims and it can progress successfully to the next stage. While not mandatory for projects that are non funded by the Scottish Funding Council, in accordance with good practice these principles will be adopted for this project. The guidance identifies six key stages within the decision making process. Given the history and development of the project to date, it is believed that review and approval of this business case will address the requirement of ‘Decision Point Review 0 – strategic assessment‘ and ‘Decision Point Review 1 – business justification’. In accordance with the guidance, it is proposed that project reviews will be undertaken by a team independent of the project, to allow for appropriate scrutiny and challenge. 27

28. 5.2 Management Arrangements Arrangements for risk management As detailed in the Commercial Case, an initial risk register has been developed for the project. The risk register will be a ‘live’ document that will revisited at regular intervals throughout the project through formal risk workshops. The purpose of the risk workshops will be to: • Update risk assessments; • Update progress on mitigation strategy; • Close out risks that have been mitigated; and • Identify and assess new risks Regular reports regarding risk management will be prepared by the Project Team for submission to the Project Board. Communication plan A detailed communication strategy will be in place for the project. This will use a variety of media to ensure that there is clear and regular communication to key internal and external stakeholders regarding the progress of the project. 28