Effective property decisions require entities to understand both the funding implications of proposals and their long-term financial impact. Entities are expected to use robust financial analysis to inform property decisions, demonstrate value for money and support compliance with the Commonwealth Procurement Rules (CPRs). A cost-benefit analysis (CBA) that considers whole-of-life cost (WoLC) helps entities compare options, understand long-term financial commitments and demonstrate transparent use of public resources.
Whole-of-life cost and cost-benefit analysis
When assessing value for money for a procurement the CPRs require officials to consider relevant financial and non-financial costs and benefits over the full life of an asset or property commitment. For property decisions, this requires a WoLC approach that captures the costs of acquiring, occupying, operating and exiting a property arrangement.
Applying a WoLC approach supports informed decision-making by providing a comprehensive view of the financial implications of property options and allows entities to assess value for money on a consistent basis.
All WoLC models should be reported as Net Present Value (NPV) and consider the changing costs of a property such as rental increases, operating expenses and end-of-life obligations.
Examples of property-specific costs that should be considered, where relevant, include:
- lease tail costs - the remaining financial and operational liabilities of an existing commercial property commitment, typically involving make-good obligations, residual rent liabilities, and holding costs during relocation or early exit where leased property is retained longer than operationally required
- surplus space costs - rent, outgoings and operational costs associated with underutilised or vacant space
- end-of-life obligations – such as make-good obligations, decommissioning costs and disposal of fit-out assets.
These costs can have a material impact on value for money outcomes and should be estimated and documented in the business case to support robust financial planning and accountability.
A CBA is required for all property decisions (own, lease, dispose, and transfer). The level of detail should correspond with the size, value, risk, and complexity of the transaction, consistent with the CPRs.
Entities are encouraged to seek assistance from their Property Service Provider (and their Agency Advice Unit) when preparing property costings, including fit-out, lease, and ongoing operating expenses, to confirm that all relevant WoLC elements are captured accurately and in line with Finance guidance.
For assistance with WoLC analysis, please contact propertyframework@property.finance.gov.au.
Further guidance is available through PSPs or via the GovTEAMS Commonwealth Property Community.
Budget process requirements
The Budget process is the decision-making process for allocating public resources to Government priorities.
Officials should talk to their Chief Financial Officer (CFO) or finance team to help them with understanding budget process requirements and to access relevant policy and guidance documents such as the Budget Process Operational Rules (BPORs) and Finance Estimates Memoranda.
When seeking funding for a procurement, officials must follow the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and the CPRs.
Information on financial management is available through the GovTEAMS Commonwealth Property Community.
Officials can request access by emailing pscp@property.finance.gov.au.
Public works and capital works approval
In addition to standard Budget process requirements, some property projects may be required to complete the Two-Stage Capital Works Approval Process (which is part of the Budget process) and/or obtain Parliamentary approval through referral to the Parliamentary Standing Committee on Public Works (the Committee).
To read more about these processes see Public works and capital works approvals.
