As part of ongoing management reform, a wide ranging review has been undertaken of the Government's Approach to the Capital Program and Asset Management. Conducted over a twelve month period to July 94, the review involved a broad cross section of budget and non budget sector agencies.

The purpose of this Circular is to inform you of the key findings of the Review and the actions that can be expected to flow from it.

The Review identified a range of impediments to effective and efficient allocation of capital resources and the management of public sector assets by both line and central agencies. These related in varying degrees to inadequacies in planning systems and performance measurement systems, fragmented structures, inappropriate skills and distorting incentives.

To overcome these impediments, revised requirements for line agencies and refinement of the roles of central agencies were proposed. As well, the need to improve the integration and coordination of asset plans across agencies was recognised in order to achieve better overall resource allocation.

As a result of the Review, the following actions are planned:

(i) the current capital planning and asset management guidelines will be extended and updated to emphasise the importance of a "service outcome" approach, and to enhance the processes and procedures that underpin such an approach.

(ii) incentives will be strengthened to encourage agencies to develop their capabilities towards the "service outcome" approach.

(iii) pilot studies will be initiated to trial the approach with budget sector agencies; and

(iv) a Familiarisation Program will be offered to help agencies to become aware of the extended guidelines and their implications for capital programs and asset management processes.

The program will be implemented over the next 12 months and will be managed by the Capital Works Unit in conjunction with Treasury, the Cabinet Office and Public Works.

A Reference Group comprising representatives of budget and non budget sector agencies will be formed to provide guidance and to oversight the program. Consultation will also be maintained directly with agencies to ensure the outcomes address the challenges that are evident in the rapidly changing capital development and asset management arenas.

For further information concerning these matters contact Vivienne Swil, Director Capital Works Unit on 228 4860 or Jeff Powys on 228 5234.

C. Gellatly,
Director General.