This post by Mark Neasbey, a director in the Australian Centre of Value Management is the first of four that looks into the role of the budget in infrastructure decision making.
We are about to undertake a capital project for which we need a planning budget. We have chosen a figure that we think is affordable and justifiable and off we go with planning. We employ architects, engineers, cost planners and other specialists to work up a proposal. They’re all qualified experts so we can rely upon their advice to give us a value for money solution. Right?
But now we strike a problem. To some the capital project’s budget figure becomes the target to realise and push beyond, because once the decision-makers see the brilliance and worth of the proposal they’ll get the extra money – that way we don’t have to compromise on anything! Right?
For others, it’s the opposite – a barrier that must not be exceeded – the limit that has to be imposed irrespective of what compromises must be made. We simply cannot afford to pay any more. This is because no capital project should be seen in isolation of the whole business. The organisation’s other priorities will also need to be appreciated so the best overall outcomes can be realised.
Both attitudes have some merit.
Our question today is: How can they be reconciled?