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The Importance of Embedding Sustainability in Business Cases

The Importance of Embedding Sustainability in Business Cases

The Queensland Government is increasing emphasis on the long-term whole-of-life sustainability of its infrastructure with a requirement for sustainability assessments to be undertaken for all proposals with a capital value of more than $100 million. Regardless of the capital value, it is best practice to look for opportunities to achieve sustainability benefits throughout the proposal life cycle and the state’s infrastructure advisor Building Queensland is supporting this focus.

Did you miss the webinar? Watch the recording of Building Queensland, ISCA and GBCA Chief Executives answered questions, discussed their sustainable development goals and shared insights on the importance of including sustainability in the business case development framework.


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Panel Experts | Questions and Answers: 

How are your framework documents different to those of ATAP and IA (Strategic Assessment, Options Assessment, etc)?
 
Answer:
The frameworks are aligned, with the primary differentiator being that the Building Queensland Business Case Development Framework (BCDF) has application across the spectrum of infrastructure classes and Queensland Government service delivery including health, education and public safety. The BCDF guidance and templates provide Queensland agencies with practical, “how-to” advice to develop strategic assessments, options analysis and detailed business cases. This analysis supports the investment decisions of the Queensland Government.
 
The Australian Transport Assessment and Planning framework and the Infrastructure Australia Assessment Framework, provide a framework for planning and assessing infrastructure proposals—especially transport systems and related initiatives. These frameworks are used to facilitate prioritisation across infrastructure projects to support the investment decisions of the Australian Government. 
 
In summary, with its practitioner focus on “how to” develop robust and transparent investment evaluations, the BCDF provides tools and tempates to develop infrastructure proposals rather than assess completed proposals.
 
Does business case modelling for projects include a shadow pricing for carbon? if yes, how and at what cost for carbon?  if not, why?
 
Answer:
All our business cases incorporate a consideration of costs, benefits and risk over the evaluation period. Climate risk and impacts are therefore an important consideration, but the extent of the analysis undertaken is determined on a case by case basis—typically a function of risk, impact and uncertainty.
 
Carbon impacts are evaluated both qualitatively and quantitatively in the business case. Both evaluations are reflected in the economic evaluation usually as part of the identification of both positive and negative externalities. 
 
How does the assurance processes (eg Gateway Reviews) take account of this sustainability guidance associated with Release 3 DBCF: eg Reviewers typically focus on the BCR and often see Sustainability as ‘soft’ analysi or ‘gold plating”.
 
Answer:
Quadruple bottom line analysis is at the core of Building Queensland’s BCDF and business cases. We consider the strategic context and public interest, and undertake social impact evaluation and sustainability assessments as an adjunct to traditional cost benefit analysis and financial assessment. The analytical ratios such as BCR (Benefit Cost Ratio) and NPV (Net Present Value) are important elements of the qualitative and quantitative economic narrative in the Economic Analysis section of the BCDF, and for the quadruple bottom line viability assessment for the business case conclusions and recommendations. However, Building Queensland’s focus on the strategic merit, and documentation of the social impacts, and benefits (both positive and negative) which may not be able to be accurately quantified or monetised, is equally an important business case consideration. 
 
The approach taken to gateway reviews is set out in the Queensland Treasury guidelines and is applied rigourously in accordance with those guidelines. The current Gateway Review guidance and particularly gate 1, checks that:
  • stakeholders approve the intended benefits from the project
  • links between program and organisational objectives are clear
  • the optimum balance of cost, benefits and risk has been identified.
 
How are organisations like TMR planning to incorporate these updated business case development principles into design and construction tenders which will allow tendering organisations to propose options or alternative solutions aligned to these principles (and addressing a lowest CAPEX decision making culture which is not uncommon in govt proponent teams)?
 
Answer:
  • TMR follows the Queensland Procurement Policy which contains a framework to maximise the benefits that can be delivered through procurement. Value for money means more than just the lowest price. In measuring value for money it must also advance the government’s economic, environmental and social objectives for the long-term wellbeing of our community.
  • For construction contracts, there are a number of specialised infrastructure procurement processes including an early tenderer involvement process where the shortlisted tenderers participate in workshops and contribute to the design. In these processes, alternative tenderers are generally accepted subject to also providing a conforming tender and to the conditions in the tender.
  • Regarding the first part of the question regarding incorporating the Building Queensland Business Case Development Framework (BCDF Release 3) principles into D&C tenders. To recap, this framework consists of three stages: Stage 1: Strategic Assessment—conception, Stage 2: Options Analysis—generating and analysing options and Stage 3: Detailed Business Case—detailed analysis of the preferred options. The business case provides evidence of a viable project. Some of the principles in the BCDF continue to be applied after the business case to all infrastructure project delivery including design and construct tenders.
 
 How is Climate Change Risk assessed in the Options Analysis stage to ensure that the options selected for Phase 3 detailed business case is/are not subject to future climate risks?

Answer:
In assessing climate change risk, TMR follows a risk assessment process, based on AS5334 (Climate change adaptation for settlements and infrastructure - A risk based approach) that includes the assessment of likelihood and consequence of climate related risks and opportunities, within an assets anticipated life.
 
https://www.tmr.qld.gov.au/business-industry/Technical-standards-publications/Climate-change
 
Please note that these publications are recent, and we are continually trying to build on and improve the resources available.
 
To assist industry in meeting this consideration, TMR are in the process of releasing updated Options Analysis Functional Specifications for infrastructure sustainability. The specifications require that a preliminary climate change assessment is undertaken that:
·         Identifies future climate conditions over the whole of design life of the asset. This incorporates a short-term climate projection and long-term climate projection.
·         Identifies the projected climate change hazards applicable to the asset over its design life.
·         Assesses the impact of the projected climate change hazards on the:
-        service requirements of the asset, and
-        resilience of the transport network to achieve the relevant level of service.
From these determinations, climate change impacts will be able to be addressed or minimised during Business Case development
While it is unlikely that future climate risks can be fully eliminated (unless global GHG rate of increase is averted), TMR is committed to reducing these risks through infrastructure specific adaptation measures. This work is also complemented by our work in the mitigation space, particularly with research and investment into materials that contribute to a circular economy.
 
 
Has there been consideration of implementing a standard business case framework across each of the state infrastructure agencies so that we are nationally aligned?
 
Answer:
Currently no, but the broad approach to business case analysis is aligned across Australian jurisdictions, and we are increasingly collaborating both between jurisdictions and nationally to improve practice and provide more detailed guidance.  A current national collaboration across the Infrastructure Bodies is looking at how best to incorporate climate risk into our evaluations. As each State has varying policies, requirements and “business as usual” practices, it is difficult to have a single “one-size fits all” tool.
 
The building sector emissions reduction report Catie mentioned, will this apply to roads as well as buildings?
 
Answer:
No, the Buildings Sector Project only considers buildings and does not extend to the broader built environment. The scope of the report does not include anything outside the building shell, e.g. community spaces or connecting infrastructure.
 
Regarding publicly available infrastructure work, ISCA, ASBEC and Climateworks collaborated with the support of Queensland Government and CEFC on ‘Reshaping infrastructure for a net zero emissions future’. That work does look at transport infrastructure embodied and operational emissions but also ‘enabled emissions’ which is important in the transport planning space. https://www.isca.org.au/News-and-Media/Net-zero-future-ISCA,-Climate-Works-and-ASBEC?viewmode=0
 
How are strategic sustainability/climate resilience issues/opps considered/reported during Stage 1 (Strategic Assessment) of the Qld BQ framework, specifically with regards to targeted benefits, risk management, potential initiatives?
 
Answer:
The focus of our Stage 1 Strategic Assessment is on conceptualisation and demonstrating a service need. What we look to do is identify that there is problem worth solving or opportunity that is worth exploring, that there are benefits in solving that problem, and a solution is something Government should pursue. In this sense sustainability could be a service need in its own right.  
 
Agency capability and capacity to better incorporate sustainability and climate issues/opportunities is evolving. We anticipate that overtime strategic assessments will increasingly consider both sustainability and climate issues/opportunities when developing initatives for further consideration. For now, sustainability across the quadruple bottom line really comes to prominence in generating and analysing options in Stage 2 Options Analysis, and for more detailed consideration in Stage 3—Detailed Business Case. 
 
In Release 3 we have better integrated sustainability throughout general considerations for proposal development including a sustainability assessment requirement in Stage 2: Options Analysis. We also highlight opportunities to use available resources such as the ISCA planning tool in early stage proposal development—leveraging the sustainability scorecard and materiality assessment.
 
The Detailed Business case certainly improves the defined process to integrate sustainability into infrastructure development. Well done Building Queensland with the partnership with GBCA and ISCA.
 
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