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Alignment of Infrastructure Delivery Cycle with Budget Cycle and Strategic Planning Cycle

This presentation discusses the alignment and interdependence of the infrastructure delivery cycle, budget cycle, and strategic planning cycle. It highlights the problems associated with infrastructure delivery and emphasizes the importance of developing a procurement strategy and managing cashflows for infrastructure programs.

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Alignment of Infrastructure Delivery Cycle with Budget Cycle and Strategic Planning Cycle

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  1. Alignment of theInfrastructure Delivery Cyclewith the Budget Cycleand theStrategic Planning CycleVersion 7: November 2011(Aligned with the 2010 IDM Toolkit) An initiative emanating out of the Infrastructure Delivery Improvement Programme (IDIP) NOTE: In order to get a clear understanding of this presentation the presenters notes contained on each slide should be printed and read whilst viewing this presentation.

  2. After this presentation you will have a better understanding of: • some of the problems associated with infrastructure delivery; • the Strategic Planning Cycle; • the MTEF Budget Cycle; • the Infrastructure Delivery Cycle; • the alignment and interdependence of these cycles; • The importance of developing a Procurement Strategy for an Infrastructure Programme; • the importance of project and programme cashflows when budgeting for infrastructure programmes; • the management of annual cashflows; • the importance of programme management by the client department.

  3. Under expenditure of infrastructure budgets and inappropriate expenditure patterns characterized by the 4th quarter expenditure spike. Annual Budget Under expenditure and Poor expenditure patterns Time May Jun Aug Sep Oct Nov Dec Jan Feb Mar Apr Jul Problem Statement (1)

  4. In many cases the functions of Strategic Planning, Budget Planning and Infrastructure Planning are carried out by different sections of the departments involved in infrastructure delivery. These sections often work independently to one another resulting in little or no alignment between the Infrastructure Delivery Cycle and either the Budget Cycle or the Strategic Planning Cycle. Strategic Planning Budget Planning Infrastructure Planning Problem Statement (2)

  5. Problem Statement (3) • In many cases there are poor relationships between Client Departments & Implementing Departments resulting in each party blaming the other for poor delivery. • The different titles and hierarchical relationships attributed to the different departments by various pieces of legislation can lead to power struggles rather than a harmonious working relationship based on the common goal of service delivery. PFMA GIAMA Custodian Client Department User Department Implementing Agent

  6. In some cases the budget for large multi-year projects was committed to 1 financial year instead apportioning the budget across the duration of the project. This resulted in the budget being rolled over from one year to the other in order for the project to be completed. Rollover Rollover Rollover Year 1 Year 2 Year 3 Year 4 Budget Time Problem Statement (4) Multi-year Project Duration Whole project budget is committed to Yr 1

  7. Problem Statement (5) • A lack of understanding of the necessity of multi-project Programme Management by the Client Department and of the ability to proactively manage annual cashflows. Planned Multi-year Commitments New Project Construction Project planning & procurement

  8. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) Year 1 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 2 Budget Year 3 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 1 Budget Year 2 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 1 Budget Year 2 Budget Year 2 Budget Year 3 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 3 Budget APP For Year 1 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 1 APP For Year 2 APP For Year 2 APP For Year 3 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 1 APP For Year 2 APP For Year 2 APP For Year 3 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 1 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 2 APP For Year 3 APP For Year 3 Fiscal Years Election Election Election 5 Year Election Mandate 5 Year Election Mandate 5 Year Election Mandate Electoral Cycle Planning & Budgeting 5 year Strategic & Performance Plan detailing Targets & priorities 5 year Strategic & Performance Plan detailing Targets & priorities 5 year Strategic & Performance Plan detailing Targets & priorities • Five-year Strategic and Performance Plans • Annual Performance • Plans and Budgets • (with 3 Year MTEF) LEGEND: APP – Annual Performance Plan

  9. Budget Preparation Process Implement Budget Preparation of Annual Performance Plan (APP) Quarterly Reporting Budget Preparation Process Implement Budget Closure Processes Preparation of Annual Performance Plan (APP) Quarterly Reporting Budget Preparation Process Implement Budget Closure Processes Preparation of Annual Performance Plan (APP) Quarterly Reporting Budget Preparation Process Implement Budget Preparation of Annual Performance Plan (APP) Quarterly Reporting 3 Year MTEF Period MTEF Budget Cycle Year 1 Budget Year 2 Budget Year 3 Budget Closure Processes Budget Day In the past there has been a tendency for annual budgets to be prepared by updating the previous year’s budget with a factor for inflation. The annual budgets submitted to treasury did not appear to be informed by actual projects to be implemented in the following year. These are all the concurrent budget activities that need to be undertaken in any 1 year

  10. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) Year 1 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 2 Budget Year 3 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 2 Budget Year 3 Budget Year 3 Budget APP For Year 1 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 2 APP For Year 3 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 2 APP For Year 3 APP For Year 3 • Principles: • Linkage between strategic & infrastructure planning. • Long Term Infrastructure Plan. • Life Cycle Costing. Fiscal Years Election Election 5 Year Election Mandate 5 Year Election Mandate Electoral Cycle Planning & Budgeting 5 year Strategic & Performance Plan detailing Targets & priorities 5 year Strategic & Performance Plan detailing Targets & priorities • Five-year Strategic and Performance Plans • Annual Performance • Plans and Budgets • (with 3 Year MTEF) At this stage the alignment between infrastructure planning and budget planning has not yet been discussed. Long term (10 – 15 yr) Infrastructure Plan or User Asset Management Plan (U-AMP) with life cycle costing (to address the targets and priorities in the Strategic Plan) (See the IDM Toolkit for details) LEGEND: APP – Annual Performance Plan

  11. The Previous Infrastructure Delivery Cycle Rollover Budget Preparation Process Implement Budget Closure Processes Budget Cumulative Cashflow Time 3 Year MTEF Period Handover of project list from Client Department to Implementing Agent typically happened in September. Previous Infrastructure Delivery Cycle Infr. Plan update Project Design Project Tender Project Construction Rolled Over Unspent Budget 100% With the Previous Infrastructure Delivery Cycle, expenditure during the 1st half of the year is virtually impossible since most projects are still in the tender phase. The result is the 4th quarter expenditure spike and overall under-expenditure.

  12. Improvements to the Infrastructure Delivery Cycle 3 Year MTEF Period In the past each Infrastructure Delivery Cycle has been characterized by under-expenditure and rolled over unspent budgets. Previous Infrastructure Delivery Cycle Infr. Plan update Project Design Project Tender Project Construction Rolled Over Unspent Budget Infr. Plan update Project Design Project Tender Project Construction Rolled Over Unspent Budget The focus was on the urgent as opposed to the important. Infr. Plan update Project Design Project Tender Project Construction Rolled Over Unspent Budget If you consider the concurrent activities in any one year. Improved Infrastructure Delivery Cycle • Principles: • Introduction of Procurement Strategy • Introduction of Programme Management. U-AMP update C-AMP update Proc Strategy Programme Mngmnt Plans

  13. Infrastructure Programme Management & Implementation Plans (IPMP & IPIP) • Principles: • Clear delineation of roles & responsibilities. • Service delivery agreements translated into individual performance agreements. • Single-point accountability. • FUNCTIONS OF the • Client Dept (CD): • Planning • Procurement • Programme Management • Monitoring & Reporting Client Department (CD) U-AMP & C-AMP Update Procurement Strategy SDA with IA 2 SDA with IA 1 IPMP Update IPMP issued to IAs Implementing Agent IA 1 Implementing Agent IA 2 IPIP for IA 1 IPIP for IA 2 IPIPs respond to IPMP Planning Planning FUNCTIONS of Implementing Agents (IAs): • Programme Management • Project Initiation • Procurement 4. Project construction 5. Project Completion 6. Monitoring & Reporting

  14. Improvements to the Infrastructure Delivery Cycle 3 Year MTEF Period Previous Infrastructure Delivery Cycle Infr. Plan update Project Design Project Tender Project Construction Rolled Over Unspent Budget Infr. Plan update Project Design Project Tender Project Construction Rolled Over Unspent Budget Infr. Plan update Project Design Project Tender Project Construction Rolled Over Unspent Budget Improved Infrastructure Delivery Cycle (Design by Employer example) U-AMP update C-AMP update Proc Strategy IPMP PSP P/ment Project Design Project Works Planned Multi-year Project Works Project Close-Out IPIP Project Planning Contractor P/ment • Principle: • Building in appropriate timeframes for due process to be completed. Please note: The Improved Infrastructure Delivery Cycle shown above shows the process steps in the order that are applicable to the Design by Employer contracting strategy. The order of these process steps will be different if a different contracting strategy is selected. See the IDM Toolkit for contracting strategies. The timeframes shown are only indicative and will vary considerably for different programmes. LEGEND: IPMP – Infrastructure Programme Management Plan IPIP – Infrastructure Programme Implementation Plan

  15. Delivery Processes DP1: Portfolio Management Prov Infr Strat DP1-1 Infrastructure Planning DP1-2 Programme Management Develop/review U-AMP (including prioritised MTEF works list) Develop/review C-AMP (incl portfolio level Work Plans) Develop /review Constr Proc Strat Develop /review IPMP Authorise Implementation Monitor & Control Close Out G1(a) G1(b) G2 U-AMP C-AMP Manage Implementation PC1 PF1.3 PF1.4 PF2.1 PF2.2 PF2.3 PF3 PF4 PF5 PF1.1 PF1.2 DP2: Project Management DP2-1 Implementation Planning DP2-2 Design DP2-3 Works DP2-4 Close Out Prepare Packages Define Packages Develop/Review IPIPs (Prgr & Proj level) Detailed design Compile MFC Info Handover works Adminstv Close Out Design devlpmt Construct / Deliver works Contracts Close Out G4 G5 G6(a) G6(b) G7 G8 G3 PEP1 PEP2 IPIP PEP3 PEP4 PEP5 PEP6 PEP7 PC2 PC3 PC4a PC5 PC4b T1 T2 PF1.3 PF1.4 PF2.1 PF2.2 PF2.3 PF3 PF4 PF5 DP3: Operations & Maintenance DP3-2 Mobilisation for Facilities Mgt DP3-3 Operations DP3-1 Recognise & accept assets DP3-4 Maintenance DP3-5 Demobilisation of Facilities Mgt PF1.3 PF1.4 PF2.1 PF2.2 PF2.3 PF3 PF4 G8 PF5

  16. Delivery Processes IPIP Develop/review U-AMP (including prioritised MTEF works list) Close Out Review IPMP Design DP2-3 Works Develop/review C-AMP (incl portfolio level Work Plans) Develop /review Constr Proc Strat Develop /review IPMP Review U-AMP Review C-AMP Constr Proc Strat Impl Planning U-AMP C-AMP DP2-1 Implementation Planning DP2-2 Design DP2-3 Works DP2-4 Close Out Develop/Review IPIPs (Prgr & Proj level) IPIP

  17. Delivery Processes IPIP Close Out DP2-3 Works Review IPMP Design Review U-AMP Review C-AMP Constr Proc Strat Impl Planning U-AMP update C-AMP update Proc Strategy IPMP PSP P/ment Project Design Project Works Planned Multi-year Project Works Project Close-Out IPIP Contractor P/ment Project Planning Improved Infrastructure Delivery Cycle (Design by Employer example)

  18. Alignment of the Infrastructure Delivery Cycle & the Budget Cycle MTEF Budget Cycle Budget Preparation Process Implement Budget Closure Processes Previous Infrastructure Delivery Cycle Infrastructure Planning Project Design Project Tender Project construction Rolled Over Unspent Budget The improved Infrastructure Delivery Cycle now facilitates the alignment of the Infrastructure Delivery Cycle with the Budget Cycle. The budget preparation process can now be strengthened by actual projects identified during Infrastructure Planning. Previously Infrastructure Planning was undertaken too late to facilitate effective alignment of the Infrastructure Delivery Cycle with the Budget Cycle. Improved Infrastructure Delivery Cycle U-AMP update C-AMP update Proc Strategy IPMP PSP P/ment Project Design Project Works Planned Multi-year Project Works IPIP Contractor P/ment Project Planning

  19. Multi-year Project Budgeting Rollover Rollover Budget Time Budget Budget 3 Year MTEF Period Previous Project Budgeting Infr. Plan update Project Design Project Tender Project construction Implementation of Roll-Over Implementation of Roll-Over Retention Period Whole project budget is committed to Yr 1 100% Cumulative Cashflow • Principles: • Multi-year project budgeting. Best Practice Project Budgeting U-AMP update C-AMP update Proc Strategy IPMP Project Procurement Project Design Project Works Retention Period IPIP Project Planning Commit from Yr 2 Commit from Yr 3 Com-mit from Yr 4 Commit from Yr 1 Monthly Projected Cashflow 100% Cumulative Cashflow

  20. R 50,000 R 60,000 R 70,000 Project 1 R 30,000 Project 2 R 20,000 Project 3 R 25,000 R 7,000 R 8,000 R 10,000 Project 4 R 15,000 R 12,000 R 3,000 R 0 Project 5 R 10,000 R 5,000 R 5,000 R 0 Project 6 R 20,000 R 11,000 R 4,000 R 5,000 Example of a Programme Budget to commit & spend the entire Annual Budget R 10,000 R 11,000 R 9,000 R 5,000 R 10,000 R 5,000 R 120,000 R 50,000 R 40,000 R 30,000 R 15,000 R 20,000 R 40,000 • Principles: • Multi-year project budgeting.

  21. Infrastructure Delivery Cycle 3 Year MTEF Period Improved Infrastructure Delivery Cycle U-AMP update C-AMP update Proc Strategy IPMP Project Procurement Project Design Project Works Planned Multi-year Project Works Project Planning IPIP U-AMP update C-AMP update Proc Strategy IPMP Project Procurement Project Design Project Works Planned Multi-year Project Works Project Planning IPIP U-AMP update C-AMP update Proc Strategy IPMP Project Procurement Project Design Project Works Project Planning IPIP U-AMP update C-AMP update Proc Strategy IPMP Project Procurement Project Planning IPIP These are all the concurrent infrastructure delivery activities that need to be undertaken in any 1 year LEGEND: IPMP – Infrastructure Programme Management Plan IPIP – Infrastructure Programme Implementation Plan 21

  22. Budget Preparation Process Budget Preparation Process Implement Budget Implement Budget Closure Processes Closure Processes Preparation of Annual Performance Plan (APP) Preparation of Annual Performance Plan (APP) Quarterly Reporting Quarterly Reporting Budget Preparation Process Implement Budget Closure Processes Preparation of Annual Performance Plan (APP) Quarterly Reporting Budget Preparation Process Implement Budget Preparation of Annual Performance Plan (APP) Quarterly Reporting These are all the concurrent activities that need to be undertaken in any 1 year by a department. MTEF Budget Cycle U-AMP update C-AMP update Proc Strategy IPMP Project Procurement Project Design Project Works Planned Multi-year Project Works Project Planning IPIP U-AMP update C-AMP update Proc Strategy IPMP Project Procurement Project Design Project Works Planned Multi-year Project Works Project Planning IPIP U-AMP update C-AMP update Proc Strategy IPMP Project Procurement Project Design Project Works Project Planning IPIP Infrastructure Delivery Cycle U-AMP update C-AMP update Proc Strategy IPMP Project Procurement Project Planning IPIP LEGEND: IPMP – Infrastructure Programme Management Plan IPIP – Infrastructure Programme Implementation Plan 22

  23. Managing Cashflows Across Years Some projects or clusters of projects in the current year can be delayed causing potential under expenditure Implemen-tation Planned Multi-year Commitments Procurement Project Works Planned Multi-year Commitments Project Planning & Procurement Project Design & Project Works IPIP There are already some projects that have been planned and are ready for procurement Infr. Plan update IPMP IPIP NB: The total value of the work in this year equals the Annual Budget for this year

  24. Managing Cashflows Across Years NOTE: For this to occur it is critical that the Client Department has a proper Programme Management System in place as well as an Early Warning System to inform the Programme Manager. Implemen-tation Planned Multi-year Commitments Project Works Planned Multi-year Commitments Procurement Project Planning & Procurement Project Design & Project Works IPIP These projects need to be procured earlier so that Project Design and Project Works can start in Year 1. This will offset the potential under expenditure caused by the delayed projects Infr. Plan update IPMP IPIP

  25. Summary of Principles contained in the Alignment Model (1 of 2) • Linkage between strategic and infrastructure planning • Long term (10 year) Infrastructure Plan • Life cycle costing • Bridging silo-based planning and budgeting • Application of zero based budgeting • Budget planning informed by project plans • Multi-year project budgeting • Clear delineation of roles & responsibilities • Signed Service Delivery Agreements (SDA) or Implementation Protocol • Translated into individual’s performance agreements

  26. Summary of Principles contained in the Alignment Model (2 of 2) Introduction of programme management within client departments • Appropriation of budget to programmes and not to projects • Management of cashflows by reallocation of budget within programmes • Achievement of single point accountability • Programme Management & Programme Implementation Plans covering MTEF period • Planning for procurement • Building in appropriate timeframes for procurement procedures • Best practice guidelines for all of these principles are contained in the IDM Toolkit (www.cidb.org.za)

  27. Better linkage with Strategic Planning is achieved Better alignment of the budget with the targets set out in the Strategic Plan Project planning is properly done resulting in achievable & realistic cashflows Multi-Year commitments are planned and budgeted for thereby reducing rollovers Improved clarity of roles & responsibilities between client departments and implementing agents. Identified Benefits

  28. Programme Manager with required skills is required Planning for built environment Quality Control Contract Procurement Commitment by political heads to only implement what is on the Infrastructure Plan. Understanding that if a project is entered as a new priority onto an Infrastructure Plan it must follow due process before construction can begin. Possible Challenges U-AMP update C-AMP update Proc Strategy IPMP Project Procurement Project Design Project Works Planned Multi-year Project Works Project Close-Out Project Planning IPIP

  29. STATEMENT ON THE CABINET MEETING OF 21st February 2007. Cabinet approved a framework to align infrastructure delivery cycles with the MTEF budget cycle in order to improve planning, implementation and better cash-flow management that would deal with the fourth quarter expenditure spike. The infrastructure delivery cycle will be amended to include anInfrastructure Programme Management Plan (IPMP) and an Infrastructure Programme Implementation Plan (IPIP)which will be mandatory for all departments. This framework will require the appointment of appropriately skilled built-environment professionals across all relevant departments, provinces and local government.

  30. Positive Results The rollout of this model as well as the IDM Toolkit via the Infrastructure Delivery Improvement Programme (IDIP) has contributed to considerable improvementsin both the overall annual expenditureas well as in the overall annual cashflow patternin those provincial departments responsible for infrastructure delivery. The introduction of best practice programme management principles has led to an improved understanding by all stakeholders of their roles and responsibilitiesresulting in improved relationshipsand afocus on the common goal of service delivery.

  31. Thank You Guidelines and templates for all of the processes and plans referred to in this presentation can be found in the IDM Toolkit which can be downloaded from the CIDB website: www.cidb.org.za Peter Brook on behalf of the IDIP PMU 083 655 1197peter.brook@treasury.gov.za

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