Capital Asset Management Tools and Strategies for Decision Making: Conference Proceedings (2001) / Chapter Skim
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2 Trends and Best Practices in Capital Budgeting
2 Trends and Best Practices in Capital Budgeting
Pages 5-12
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From page 5... ...
The Executive Order directed the commission to prepare a report on various aspects of capital budgeting, including the budgeting of capital in other countries and in state and local governments; define capital and depreciation for capital budgeting purposes if possible; and determine the broader effects of a possible federal capital budget on budget discipline, public policy choices, and the state of the economy. In its February 1999 report the commissioners concluded that there are aspects of fecleral budgeting that contribute to a suboptimal allocation of capital spending among projects.
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From page 6... ...
staff, the CAFs are intended to help ensure that programs are assessed the cost of using capital assets and to smooth out the peaks and valleys in the appropriations process by spreading out the cost across an entire agency. If the experiment proves successful, the CAP approach should be adopted throughout the federal government.
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From page 7... ...
Such a breakdown would inform policy makers, Congress, and the public of the President's long-term vision for federal spending. The commission felt that it would be helpful to the public debate if, short of a separate capital budget, the President's executive budget were to lay out proposed investment spending for the coming 5 years that would link to the 5-year planning and budget that we proposed in Recommendation ~ and the benefit cost analysis in Recommendation 2.
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From page 8... ...
The General Accounting Office routinely finds that capital projects cost more than planned, fail to meet scheduled milestone dates, fad] to meet missions and goals and ultimately contribute to the perception that the federal government does not deliver on the services that people want at an acceptable cost.
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From page 9... ...
All the leading organizations had extensive inventories, not just lists but evaluations of the condition of those assets and the performance of those assets. Before new projects were authorized at one leading institution, managers were required to identify their existing asset base and say why current assets could not fill those needs either in their current state or in a modified state.
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From page 10... ...
Also in these leading organizations, most of which have both capital and operating budgets, capital projects are expected to contribute budgetary savings on the operating side of the budget. This often creates pressure by operating components to bring capital projects online so that expected budget savings can be redirected to operations.
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From page 11... ...
MR is asking agencies to link nrono~1 investments to -- ~7 ~= ~ r - - r - - -— strategic and program performance; analyze current asset performance; identify performance gaps; detail functional requirements; evaluate alternatives; select the best investment; analyze benefits, costs, and return on investment; conduct market research; assess risk; develop risk mitigation and management plans; and develop a sound acquisition strategy. Agency return on investment or benefit cost analyses are still lacking at this stage.
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From page 12... ...
Useful linkages should also be established between agencies' S-year strategic plans and annual performance plans required by the Government Performance and Results Act of ~ 993. ~ favor revising Part 34 of the Federal Acquisition Regulations dealing with major system acquisitions to address planning, budgeting, and acquisition of capital assets.
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