Using Business Cases and Triple-Bottom-Line Analysis to Mange and Prioritize Capital Improvement Program (Cip) Investment Decisions

The Los Angeles Department of Public Works, Bureau of Sanitation (LA SAN) decided to strengthen its existing organization, processes, and practices by implementing an enhanced capital planning, project prioritization process and tools to yield rapid and measurable cost savings and performance improvements. The tools and templates developed for business case evalaution as well as triple bottom line (social, financial, and environmental) prioritization and scoring criteria will be used across treatment, collection, pumping and other assets and align with LASAN’s existing asset management and capital planning programs.LA SAN has taken a business oriented and financially driven CIP (Capital Investment Plannin) process that is focused on effective project prioitization and analysis.apporach and found that a key critical success factor is invlving the whole oraganization from the start of the palnning process including leadership, management and representatives from engineering, operations and maintenance, and finance divisions.LA SAN has considered a “business case” approach to proposed projects, requiring project sponsors to produce a comprehensive summary for each major project. Business cases typically include information and analysis such as: porject description and purpose, assessment of service level impact, identification of major criticality and risk issues, life-cycle cost forecasts, as well as financial analysis including ROI (Return on Investnent) and rate impacts and an evaluation of other likely project alternatives and scenarios.After business cases are completed, LA SAN used a transparent framework for project ranking and scoring to ensure the CIP projects are properly validated and that the most important projects are funded first. LA SAN developed and utilized a detailed criteria across all elements of the triple bottom line to ensure a balanced capital program that delievers on each utility’s stratgeic plan objectives incoporating not only asset condition and risk, but other elements such as efficiency/energy, communiy/growth, and financial and system reliability/service levels. This is very critical for LA SAN as funds are limited and more has to be done. The objective ranking process esnures that the most critical projects are funded first, while balancing many competing objectives.An integrated, asset management focused capital planning process is effective for LA SAN CIP process because it builds discipline, encourages analysis of options and alternative solutions, documents expected customer and environemental impacts, and ensures alignment with strategic asset manageent goals. In addition, this process provides greater transparency and integration with financial and rate analysis by ensuring that funding requirements are identifed up front, customer impacts are understood, and stakeholder needs are considered.Key benefits of LA SAN’s formal and dynamic capital investment planning process include:Greater understanding of the long-term service level and cost implications of capital investment decisionsEvaluation of the financial, social, and environmental impacts of major capital projectsGreater understanding of the true life-cycle cost of capital projects by examining project-specific ROI, NPV, and other financial measures.Establishment of a standard framework to evaluate treatment plant (vertical) as well as collection system assetsStrengthened long-term financial decision making, enabling accurate financial projections, and helping to ensure adequate funding and rate structures.Ensured that planning, engineering, operations, maintenance, and financial perspectives are all considered.Fostering a culture of collaboration throughout the organization.Creation of improved trust, understanding, and transparency with the public, elected officials, and stakeholders - strengthening the case for required investments and resources.Develop cross functional teams and committees to ensure a balanced perspective on capital planning and asset management issues and drive organizational change.