Dimension 11.3. Investment project costing
DIMENSION MEASUREMENT GUIDANCE
11.3:1. This dimension evaluates whether the budget documentation includes medium-term projections of investment projects on a full-cost basis and whether the budget process for capital and recurrent spending is fully integrated. Sound budget management requires the preparation of comprehensive and forward-looking project budget plans for capital and recurrent costs over the life of the investment. Projections of recurrent cost implications from projects are needed to plan and incorporate these costs into budgets going forward. Solid budget and cash-flow management, as well as cost-benefit analysis, depend on comprehensive financial analysis of investment projects.
11.3:2. Life cycle or total or full costs of major investment projects should include design, development, implementation, operation, maintenance, and disposal costs over the full life cycle of the investment, broken down annually. The
dimension does not require the calculation of net present value. Life cycle costs refer to the sum of all the costs of a major investment project, including consumption of fixed capital, overheads, and the costs of activities related to the project but performed by entities other than the entity responsible for the project.
11.3:3. Capital costs refer to expenditure incurred for the acquisition of land and other physical assets, intangible assets, government stocks, and non-military, non-financial assets, of more than a minimum value, with an expected lifetime of more than one year. The costs of major investment projects should include (i) projects that are implemented and/ or budgeted over several phases, and (ii) projects that involve a single program over time but that have different groups of activities at different times.
Dimension 11.3. Scoring
|Score||Minimum requirements for scores|
|A||Projections of the total life-cycle cost of major investment projects, including both capital and recurrent costs together with a year-by-year breakdown of the costs for at least the next three years, are included in the budget documents|
|B||Projections of the total capital cost of major investment projects, together with a year-by-year breakdown of the capital costs and estimates of the recurrent costs for the next three years, are included in the budget documents.|
|C||Projections of the total capital cost of major investment projects, together with the capital costs for the forthcoming budget year, are included in the budget documents|
|D||Performance is less than required for a C score.|
PEFA Handbook Volume 1: The PEFA Assessment Process – Planning, Managing and Using PEFA