ANAO - Planning and Approving Projects

3.3 Approving the project

Diagram showing project approval in the context of the project lifecycle.

Having developed and endorsed a business case, the project sponsor will submit it for consideration within the entity. For some projects, this may be followed by external consideration, for example as part of Budget processes.

Important factors in setting a good foundation for achieving project outcomes are:

informed consideration by decision-makers taking into account the merits, cost and risks of the individual project, and also the cumulative effect and interactions of projects under consideration; and
for approved projects, setting key project controls to support effective oversight by the entity and the project sponsor.

Previous heading | Top | Next heading

Informed decision-making

Better Practice results: The proposed project meets the test of value-for-money, and required legal and accountability requirements are fulfilled.

In deciding whether to approve a project business case, it is important that the decision-maker:

is confident the expenditure is an appropriate use of resources – which for FMA Act agencies means that the project represents an ‘efficient and effective’ use of the public money; and is in accordance with the policies of the Commonwealth;³¹
has reasonable assurance that the project complies with entity policies, in particular business strategies and ICT architecture, and is consistent with relevant whole-of-government priorities and directions;
is confident, in cases where the project is being chosen in comparison with other projects, that the project will make more effective use of resources than alternative projects; and
has reasonable assurance that the project can be completed as planned, in particular that the relevant capabilities are available, that risks have been properly identified and responded to, and that the governance and control arrangements are appropriate.

The earlier discussion on entity arrangements for screening and comparing projects (page 28) provides useful considerations for decision-makers.

31: While many elements of project expenditure, such as procurement, will involve specific approval by a delegate under the FMA Act, there is likely to be significant expenditure, such as staff effort, where the authority is approval of the project business case.

Case study: Managing residual risk of a project

“I was involved in a decision on a major investment proposal, covering computer systems and all the computer equipment needed to run them. The business case was well put together, and explained performance levels and risks. The interesting point was the residual risk. The project sponsor was aware of the level of funds likely to be available and had fit the degree of equipment redundancy into that budget. This left a chance – albeit small – of service failure, which was explained in the business case for the attention of the investment committee. We decided the risk was significant enough that it should be drawn to the attention of the Chief Executive, either for acceptance of the residual risk, or for a larger budget. Following an independent review to confirm the facts, the Chief Executive decided to seek an increase in the agency’s capital budget.”

… independent member, investment committee.

To help meet accountability requirements, better practice entities will ensure that:

there is clarity on who endorsed the business case being approved, as the business case will be a major factor in the decision;
there is clarity on who took the approval decision – this will often be an individual officer, acting on the advice of an investment or project approval committee or board;
responsibility is allocated for both delivery of the project products, and achieving planned business outcomes;
any limits or conditions on the approval are made clear and fully documented – for example, the approval may be limited to preparing detailed specifications and cost estimates for reconsideration by the decision-maker; or contingent on independent assurance of costing or on the agreement of a stakeholder to the specifications;
any important residual risks (that is, project risks for which mitigation has not been funded or may not be effective) are minuted, and are drawn to the attention of the relevant senior executive for acceptance or action as appropriate; and
the approval decision is documented and retained in the entity’s recordkeeping system.

“I enjoyed being on the investment committee. I learnt a lot about the department overall, and reading other people’s submissions gave me a crash course in improving my own project planning.”

… Program branch head.

Good practices for decision-makers and members of committees are outlined below.

Better practices for decision-makers and committee chairs

Decision-makers who approve projects have a significant responsibility for authorising, or recommending, significant public expenditure. relevant better practices are:

remaining focused on the central elements of project proposals relevant to approval (such as their outcomes, costs, feasibility and risks, and broader contribution to agency goals);
considering the overall effect of projects under consideration, by paying attention to opportunities or difficulties arising from the impact of one project on another, or their effect on business–as–usual activities;
keeping in mind the option of conditional or staged approvals to help the agency better manage projects risks;
arranging for reports on the progress of approved projects and using this to inform future decision making; and
considering the applicability to the agency of the better practices for governance of approval described in Chapter 2 of this Guide;

For executives who chair project approval committees, better practices include:

awareness of, and clarity about, the scope of their decision-making role – this should be in the committee terms of reference;
consideration of the representation, skills and knowledge on the committee and taking action on any improvements needed;
consideration of the resourcing and capabilities of the committee secretariat – this is often of great importance given the volume and complexity of documentation typically presented to project approval committees;
encouraging a strong continuity of attendance by members – which contributes to the quality of review and to clear accountability; and
encouraging an environment of open and honest discussion.

Better practices for the members of approval committees

Important better practices for members of project approval committees are:

awareness of the scope of their responsibilities as committee members;
developing a knowledge of agency goals, including program delivery and ICT strategies, and of project planning principles;
contributing the perspective of their own area of expertise – for example particular knowledge of a service sector, an area of technology, or of the organisation – in assessing and commenting on proposals; and
drawing attention to any aspects of committee processes (for example, the format or size of submissions, or the nature of summaries or advice from the secretariat) that could be improved.

Previous heading | Top | Next heading

Key project controls

The value of Plain English status reporting:

The Project Manager’s story: “Previously we reported up the line based on our systems development methodology, and our internal batching of work. So management reports would say, for example, that ‘Release 6 was 80% complete’. Another report explained what was planned for Release 6.

Our management said they wanted more informative status reports. Our next project was to allow people to make claims at shopping centres, using shopping chains as agents. So, for each national agent we simply reported to senior management whether the relevant contracts had been signed and the percentage of that agent’s outlets where claims could now be made. Interestingly, this report focused us on early testing at shopping centres, and we found a data transfer problem with one agent we were able to fix without affecting the overall timetable.”

The Senior Manager’s view: “By defining this way of reporting at the start, I felt I always knew where we up to, in the language I could talk to stakeholders. It was plain English, in a half-page table.”

Better Practice results: Senior managers are aware of project status in terms relevant to external relations and internal coordination; senior management is alerted early to issues needing their action.

At the time of approving a project, the decision-maker also establishes the key controls that will help them understand the rate of progress and identify triggers for possible intervention. This requires striking a sound balance in gaining the right information for effective management, while avoiding information overload.

Characteristics of effective key controls for a project, from a senior management perspective, include:

Focus on key issues: there are a small number of key controls for senior management, with increasingly detailed controls for the project sponsor and project manager.
Business focus: the controls include a focus on business issues – such as delivering the ability to assess a specific application for payment, rather than focusing on all the underlying details of project implementation – such as installing a database component.
Progressive testing and assurance: there are measures which provide early indications of business outcomes, rather than needing to wait until near completion for any business capability.
Review points and exit options: linked to progressive assurance is the identification of points for review of progress and decision on continued funding (sometimes called ‘stage gates’, or ‘go / no go’ points). This can include identifying possible exit or fallback options, or redefining subsequent phases based on what has been learnt so far in the project.
Coordination issues: there is information to assist senior management in their coordination of multiple projects – such as how projects impact upon one another.
Exception reporting: appropriate thresholds are specified for exception information – such as budget, timeframe and risk.

An example of a project approval statement with the above characteristics is provided in the appendices (page 107).

Previous: Issues for cross-boundary projects

Next: Key better practice summary