A city of nearly three million people had a sizeable annual budget for funding capital expenditure for new projects, as well as operations and maintenance of existing infrastructure. Still, the proposed projects far exceeded its ability to fund all of them, and there was therefore a considerable need for project prioritization and optimal resource allocation. Before sending its final budget requisitions to the Ministry of Finance, the city had to prioritize and select from over 300 possible projects, spanning far-ranging categories including traffic and transport, historical district preservation, open spaces, gardens, and parks, and safety and security categories. The city wanted to ensure that it was efficiently allocating its resources into projects that provided the highest “benefit-to-cost” ratio to residents and stakeholders, and that the projects were both properly funded and in line with the municipality’s overall strategic plan.
Prioritizing these projects involved several key challenges. First, the number and scope of both the proposed and required projects far exceeded the city’s available budget, management capacity, and manpower. Realistically, the city could only support around one third of the proposed projects. Additionally, there were multiple tiers of key decision makers and influencers for each of the projects— the city council represented the city’s residents, while various ministries and departments oversaw the approval of the various plans, and the mayor and his executive arm oversaw the execution of all these matters.
Discovery & Solutions:
Strategic Decisions Group was called upon to develop a process and system to enable prioritization across the proposed set of projects and optimize the allocation of the budget. This meant taking into consideration: 1) the value measures based on input from the City Council; 2) how each project would impact the value measures; 3) the multi-year budget implications of taking on any specific project (the full lifecycle costs and benefits); and 4) the importance of ensuring balance across categories of projects, as well as the geographic distribution of benefits obtained. Our mission was to create an analytic decision support system with which the city could qualify and quantify each of the project’s measurable benefits and ultimately maximize value for the city’s residents and its future.
The analytic decision support system took the form of a project prioritization and optimal capital allocation process. The roll-out of this process required our team to train all the various key decision makers around SDG’s dialogue decision process to help establish systematic collaboration between groups. For the design and development of the system, we conducted extensive assessments of the joint municipality project team, the project owners, and our own team members. This way, technical information relating to each project and proposal was reported quickly and transparently by its owner(s).
Overall, the project prioritization and capital allocation process involved eight main activities:
The core project team drew expertise and leveraged support for key project decisions from a wide range of resources. To provide a final framework for evaluating a project’s ultimate benefit, we worked with the city’s council members and department executives to establish five key value dimensions: economic prosperity, environmental sustainability, good governance, quality of life measures, and quality transportation measures. These criteria served as the pillars for a projected value index, which we used to optimize the allocation of resources.
Results and Impact:
The solution, which consisted of the process and system, delivered multiple benefits to the city:
- Enabled the city’s Executive Team to allocate the annual budget in a way that maximized the value obtained for residents and ensured balance across the various geographic districts in the city moving forward;
- Supported decision-focused discussions between the city’s Executive Team led by the Mayor and the city council, and enabled stakeholders to understand the implications of various alternatives; and
- Provided a clear linkage between the annual budget allocation and the city’s strategic direction.