(Investment decisions are made at Cabinet level following the government's budgetary process and are presented to Parliament as part of the annual government budget)
Governments need to make decisions that lead to the investment of finite public resources to those initiatives that provide the greatest impact for meeting community service needs in areas of the highest priority (where priorities are normally set out in the government's pre-election policy statements).
The nature of this decision making, with the concept of VfM applied in the broadest sense across the full ambit of the government's responsibilities, sees competing decisions on funding approvals being made across sectors (e.g. transportation vs public health vs law & order vs education vs water vs, etc) and within sectors (e.g. road A vs road B).
Government funding approval of any one investment proposal involves a judgement of the VfM case made by the agency in its Business Case. There are two important decision points at this stage:
1. whether on balance the service benefits to the community held up against the costs and risks set out in the Business Case provide an attractive investment proposition; and
2. whether this one Business Case proposal in comparison to other Business Case proposals (across other government sectors) demonstrates better VfM in a higher priority area (in effect, the opportunity cost of capital consideration).