What is the goal? To spend capital or gain beneficial outcomes?

Ignoring a problem doesn’t solve it!

You might think the answer to be self evident: surely we would all wish to see the best outcomes!  However, when it comes to government spending on infrastructure and public assets, this may not be the case. For state government public authorities, capital expenditures are often seen as a means of increasing the state’s GDP (gross domestic product), or a means of keeping up ‘a pipeline of investment projects’.  When this is the case, departments that do not spend all their capital budgets are not regarded  as ‘economical’, instead they are considered grossly inefficient.

When I was a policy manager in one of the state public works departments, budget meetings were only concerned with how fast money was being spent, not how effectively.  Taking the time to find more efficient ways to produce any given outcome, and so to spend capital money more efficiently, was actively discouraged: it slowed things down and the department did not spend ʻenoughʼ.

Much of the problem is that there is no easy way for politicians to demonstrate performance – only dollars of spending.   I doubt that this happens for any organisation with a quantifiable ʻbottom lineʼ (utilities, mining, manufacturing, etc) –  but maybe they have other problems?

Even for local governments, which are generally very short of capital money overall, and where one would think the ideal solution would be to get the ʻmost bang for the buckʼ, taking the time to look for ways to achieve ‘more for less’, is rarely well regarded as the economies achieved are often difficult to demonstrate, while the extra time taken will often feature in negative media reporting.  In addition, local governments frequently depend on capital grants from state and federal resources with short decision and expenditure deadlines imposed in order to secure a fillip to the economy (i.e. to spend money fast).

This problem has bedevilled me for over 30 years.  Is there a solution?


One Thought on “What is the goal? To spend capital or gain beneficial outcomes?

  1. The solution needs to enable us to talk about managing value (ISO 55000), not cost: it’s easy to measure the cost of works undertaken but not value (community outcomes)… but unless we do we’ll remain stuck in the situation as described.

    I’d add that unless we can make the value realised by activities more tangible (for this to be the focus of our conversations, not the cost), our planning for renewal/upgraded/new infrastructure will be of little meaning.

    I’ll also reference one of my pet hates relevant to this topic: NSW government is all but forcing councils (under the ‘Fit for the Future’ program) to spend an amount equivalent to depreciation on renewal of their infrastructure… regardless of whether or not that infrastructure is new or old because of the misguided notion that renewal must match depreciation over the short term (3 years!) rather than the long term (30, 50 or 80+ years). This is a textbook example of managing cost not value.

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