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Future developments

This chapter has discussed the mechanisms to achieve effective capital investment and management. In recent years steps have been taken to improve capital allocation and investment decisions, but improvements could still be made. Accordingly, there may be a case for greater coordination in improving asset performance and decision making to better ensure government objectives are met as efficiently and effectively as possible.

Better information to support analysis and decision making

Better analysis and decision making requires better information. The Crown needs to develop a way to systematically capture better information about the state of its assets and their effectiveness at meeting government objectives. Longer term capital planning would also support decision making and accountability for achieving outcomes cost effectively. Systematic ex-post review of investment outcomes against expectations would help support continued improvement in the investment decision making framework.

Better analysis of options

There is a need for better analysis of investment alternatives and for interventions to meet government objectives as efficiently and effectively as possible. While cost benefit analysis is a useful tool, it is not always performed well and has limitations. Analysis needs to continue to improve.

Prioritising investments from a whole of government perspective

Notwithstanding the existing controls that help ensure that investment is well founded, capital resources may not be as well allocated as they could be relative to the priorities of the government as a whole. Coordination across government could be improved, but needs to be mindful of maintaining agency accountability. This could take the form of adjusting settings such as decision rights, clarifying guidance, issuing directions, or stronger monitoring to sharpen incentives and improve practice.

Sharper incentives

Asset management is the responsibility of agencies, as are many investment decisions. Capital ownership and decision making should be improved such as through agencies implementing more robust business case methodologies and through a higher rate of capital recycling on the Crown balance sheet. These issues could be addressed by sharpening the incentives on the various agents of the Crown.

Recent legislative changes and the Better Public Services policy initiatives are helping. However, they will still need to be supported with more effective administration and coordinated decision making to ensure that Crown capital is employed to the highest and best use over time in response to changing circumstances.

Areas of focus

  • Ensure settings bring about more rigorous capital investment decision making and support asset management practice to improve alignment between investment and governments’ long-term priorities.
  • Strengthen the means for recycling capital into priority areas to meet changing demands and priorities without incurring unnecessary costs.
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