Infrastructure Australia's methodology for assessing initiatives rest on three discrete pillars:
1. Profiling - the extent to which the proposal addresses national infrastructure priorities
2. Triple bottom line economic viability - the proposal's lifetime benefits must significantly outweigh its lifetime costs to society
3. Deliverability - the proposal must have a clear and robust delivery plan to ensure its successful realisation.
In addition, as a fundamental principle, Infrastructure Australia will only make advisory recommendations on the basis of robust, comprehensive and objective evidence and data.
The assessments are conducted in a consistent and structured manner, utilising a range of qualitative and quantitative processes:
1. The profiling assessment process captures the extent to which the proposal meets a range of strategic policy goals, assesses the balance between impacts, and picks up long term impacts that are not captured in traditional appraisal. It tests whether there is a comprehensive understanding of the nature of the problem it seeks to solve and whether the root causes of the problem are identified. It also captures the extent to which a proposal is embedded in long term planning (that is, is this a major problem and how does it fit into the infrastructure network?); the extent to which a range of solutions have been considered and that there is compelling evidence that the preferred solution is the best response to the problem.
In process terms, proposals are assessed in three ways:
• The extent to which they contribute to the achievement of Infrastructure Australia's seven strategic priorities3 and to which they are nationally significant4;
• The extent to which they address the seven themes for action; and
• The extent to which the Reform and Investment Framework has been followed to ensure the proposal is the best solution to a genuinely pressing problem.
2. The second stage - economic viability - seeks to establish whether a proposal's economic, social and environmental benefits outweigh its costs to society, in a triple bottom line assessment. The bedrock of this assessment is a traditional, and widely understood, monetised benefit-cost assessment, complemented by qualitative assessment of impacts where monetisation is not feasible.
In process terms, independent cost-benefit experts scrutinise submissions to ensure they are robust and comparable, using a standardised pro-forma of 'issues for investigation' prepared by Infrastructure Australia, as well as bringing their own expertise to identify issues in any aspect of the business case.
3. The deliverability assessment tests the extent to which the delivery of the initiative maintains the proposed strategic and economic benefits. It does this by examining how well developed the initiative is, particularly in its identification and assessment of risk. It then examines how the initiative proposes to manage the key risks, including through existing and proposed approaches to consultation with stakeholders, technical options analysis, planning and environmental approvals, procurement, design and construction, and operations and maintenance of the infrastructure.
The deliverability assessment also considers the appropriateness of proposed funding and financing arrangements for the initiative.
• Where the initiative will operate within a market environment, the deliverability assessment will test whether appropriate consideration has been taken of the ability of users to fund the initiative. For example, in the water and energy sectors, as a starting point, Infrastructure Australia would want to understand why regulated prices could not recover the full cost of the initiative. Where market failure is proposed as a reason for supplemental funding, Infrastructure Australia would expect to see the nature of the market failure explained and analysed. It would also expect a full exploration of reform options for resolving the cause of the market failure, prior to consideration of non-market interventions. The deliverability assessment will also test the appropriate form of any supplemental government funding (grant/debt/equity).
• The deliverability assessment tests whether the proponent has given adequate consideration to the potential for private financing to deliver value for money.
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3 Infrastructure Australia s seven strategic priorities are outlined table 2 below.
4 A project or program of work is considered Nationally Significant if the estimated capital expenditure is greater than $100M, it will make a measurable contribution to achieving the seven strategic priorities, and is assessed as having a BCR greater than 1.