Approach Methodology
The methodology for capital expenditure reviews should address:
- Customer expectations (demand)
- Knowledge of assets and system performance (availability, reliability)
- Operations and maintenance
- Identification of failure modes
- Optimized renewal decision analysis
- Optimized capital works program
- Budget rationalization techniques
- Actual works program.
The key review areas include the degree of confidence we have in the processes,
costs and other data and time elements that have been used in the production
of capital expenditure programs.
The review should examine:
- The key organization objectives and how they link to the capital expenditure
program
- Current asset utilization
- Demand load forecasting (predictions)
- Asset condition failures
- Asset reliability failures
- Opportunities for cost reduction on high cost assets
- The processes used to identify appropriate strategies for individual assets,
facilities and systems
- The accuracy of the cost elements in asset creation
- The accuracy of the timing of the capital works taking into account:
- Effective lives
- Decay in condition and performance
- Criticality of assets
- ORDM processes.
- The effectiveness with which the work is carried out including:
- Value management
- Project management
- Cost control.
The following table gives questions and issues for a CIP review.
| No. |
AUDIT REVIEW/CRITERIA |
| 1 |
Appropriateness of standards/levels of service:
- Current levels of service
- Predicted levels of service
- Design standards
- Customer expectations
- Regulator requirements
|
| 2 |
Knowledge of demands for services:
- Current utilization
- Past trends
- Predicted Growth in users, Growth in unit demand
- Customer impacts
- Program impacts
- Regulator impacts
|
| 3 |
Knowledge of existing asset capabilities:
- Physical attributes
- Current utilization
- Identified failure mode
- Capacity (availability)
- Condition
- Performance (reliability)
- Costs
|
| 4 |
Linkages to organization objectives:
- Stakeholder expectations
- Regulators' expectations
- Customer group impacts
|
| 5 |
Appropriateness of processes followed:
- Life cycle functions
- Customer initiated works
- Growth/augmentation works
- System renewal activities
- System improvement
- Efficiency programs
- Maintenance regimes
|
| 6 |
Appropriateness of capital works identified:
- Unit/single item works
- Major facilities
- Special projects
- New works (extensions)
|
| 7 |
Accuracy of the timing of capital works:
- Customer initiated works
- Growth/augmentation works
- System renewal activities
- System improvement
- Efficiency programs
- Maintenance regimes
|
| 8 |
Effectiveness of cost elements used:
- Design process
- Value management
- Project management
- Cost control
- Purchasing Materials
- Services
- Products/assets
- Cost of labor
- Efficiency of construction
- Efficiency of supervision
- Competitive environment
|
| 9 |
Appropriateness of organization case evaluation rationalization:
- Benefit identification
- Benefit assessments/quantification
- Cost elements (see above)
- Economic hurdles used
- Ability to vary program easily
|
| 10 |
Appropriateness of strategies adopted:
- Customer initiated works
- Growth/augmentation works
- System renewal activities
- System improvement
- Efficiency programs
- Maintenance regimes
|
| 11 |
Relativity of benchmarking and quality assurance used in the capital
expenditure process:
- Benchmarking capital expenditure as % of asset value
- Quality of asset management
- CMOS performance
- Capital investment/customer
|
| 12 |
Quality of final linkages between organization mission, objectives, strategies
and capital expenditure program:
- Tasks/activities linked
- Benefits in terms of organization drivers
- Investment Risk Evaluation
- Appropriateness of filtering, quality levels
|
| OVERALL RATING OF CAPITAL EXPENDITURE PROGRAM: |
|
FIVE YEAR ORGANIZATION PLAN
FIVE TO TEN YEAR ORGANIZATION PLAN
TEN TO TWENTY YEAR ORGANIZATION PLAN
|