Investment analysis report - Deliverables - NPMS - Real Property (2024)

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• Definition
• Relevant phase
• Control point
• Guidelines and templates
• Base case (status quo) scenario

Definition

The investment analysis report (IAR) further studies the viable potential solutions approved by the reviewing manager (from the Feasibility phase), investigates the pros and cons of each viable potential solution, evaluates them against a predefined set of criteria, and makes a final recommendation of the single preferred solution. The process of writing the IAR includes (among other things) a series of financial and non-financial evaluations. These serve to justify the rationale behind the recommendation. The analysis of solutions must be objective, open and transparent.

Relevant phase

• Analysis Phase

Control point

• Project approval

Guidelines and templates

• Guide for the preparation of investment analysis reports
• Intermediate investment analysis report (for space projects)
• Intermediate investment analysis report (for asset projects at project approval and initial expenditure authority)
• Intermediate investment analysis report (for asset projects at expenditure authority for project implementation)
• Full investment analysis report for space projects
• Full investment analysis report (for asset projects at project approval and initial expenditure authority)
  
• Full investment analysis report (for asset projects at expenditure authority)
• Simplified investment analysis report. Document available on the Real Property National Project Management System related documents (page available on Government of Canada network only).

Base case (status quo) scenario

Base Case or Status Quo is sometimes defined as the continuation of the current strategy. In terms of Real Property Services, this would likely mean the continuation of an existing accommodation strategy to house our Tenants (that is remain in the existing premises, in either Crown owned or leased space).

Base Case is intended to provide a base line for analysis purposes, so that we can compare the cost of the various solution alternatives being considered, in relation to the Base Case. It is also an opportunity to compare the strengths and weaknesses of the various solution alternatives to the Base Case. In this way, it provides decision makers with the cost to implement the various solution alternatives and allows them to weigh the costs against the benefits and risks associated with the Base Case. This provides the decision makers with the context to arrive at a conclusion.

Base Case or Status Quo does not mean "do nothing" for the next 25 years, but it does mean ensuring that the Building Codes, Labour Codes and Occupational Health and Safety requirements are addressed and that the lowest initial investment is incurred to keep the space operational and meet the government's functional requirements. It would involve making the ongoing repairs and maintenance to a facility and deferring major expenditures until such time as components are nearing failure and need replacement, thereby recognizing the time value of money. It will not provide a state of the art facility, but rather it is making the best with what you have and meeting minimal accommodation standards as well as satisfying codes for existing buildings (that is not the Building Codes, Electrical Code, Fire Code, etc. of brand new construction). Where an existing lease is nearing expiry, the Base Case would be to remain at the existing premises (by exercising options or lease renewal), thereby minimizing fit-up costs, moving and tenant related costs associated with the relocation to a new premises.

Over the investment horizon, the Base Case may not always prove to be the least costly solution, as there could be duplication of work, loss of efficiencies and/or the asset may continue to deteriorate as a result of the deferral of capital improvements, which can lead to larger and more expensive problems. It can also result in unreliable service to our tenants, which may prove disruptive to their operations. This would not only add additional cost to Government as a whole, it may be very inconvenient to staff and the public that they serve. These financial and non-financial considerations need to be addressed as part of the investment analysis report (IAR).

In a situation where new staff/Full Time Equivalent (FTEs) are being added, the Base Case may involve adding extra workstations in the existing space. Where this is not practical, it may be necessary to supplement the current space by adding more space in another part of the building or in another premises in close proximity (possibly in existing inventory or in a new lease to be acquired).

The Base Case financial analysis may include costs as follows;

1. Ongoing repairs and maintenance expense (which are typically higher in an older building than in a new building for example)
2. Carrying out the work identified in the Building Management Plan (BMP) and the Asset Management Plan (AMP).
3. Cyclical recapitalization over the investment horizon (based on a percentage of replacement cost new, or dollars per rentable metre on an annual basis, etc.)
4. Reconfiguration of existing space or expansion space to meet tenant requirements (that is Tenant Service Work, new lease etc.)
5. Provision of swing space to carry out necessary repairs
6. Other necessary costs to meet code requirements and keep the space operational.

Each case under analysis is unique and therefore it is difficult to prescribe an exact methodology, but the Base Case principles remain the same, continuation of the existing accommodation solution with minimum investment to keep the premises functional and operational.

The following is a list with some examples which may be of some assistance.

Base case examples—Examples of project types

Space based

1. Crown owned building; Reconfiguration of space to better accommodate staff and/or implement new technology, etc.
   • Base case example:
     • Make only those changes to the building systems that are necessary to accommodate the new layout (that is modify the mechanical, electrical systems, to accept the new walls, fit-up, screens, voice-data cable, etc.). Replace floor coverings and repaint as necessary. Investment is kept to a minimum, and restricted to only those areas of the premises that are affected.
   • Other possible solutions:
     • Complete reconfiguration and fit-up of the space to meet the latest fit-up standards and population density targets. Renovate the entire building to meet the latest building code and performance specifications (that is Heating, Ventilating, and Air-conditioning (HVAC), electrical etc.) as well as meet Sustainable Development Strategies, such as LEED Gold, BOMA Go Green etc. Also consider Lease Tender, New Crown Construct, Lease Purchase etc. as possible solution alternatives.
2. Leased Accommodation; Lease nearing expiry
   • Base case example:
     • Remain at the existing premises (that is Exercise Options or Renew the Lease).
   • Other possible solutions:
     • Relocate to a new premises (that is Utilize existing vacant inventory (crown owned or leased), Lease Tender, New Crown Construct, Lease Purchase, etc.)
3. Addition of new staff/FTEs
   • Base case example:
     • Utilize the existing accommodation by reconfiguring the layout to add new workstations to accommodate new staff. Where this is not practical due to the number of staff being added, consider adding a second premises in close proximity to supplement the existing, such as utilizing vacant space already in the portfolio or by acquiring new leased space.
   • Other possible solutions:
     • Relocate other tenants in the existing building to make sufficient room for the new staff; collocate existing staff and new staff in a single location (that is existing vacant inventory, new Lease, New Crown Construct, Lease Build, Lease Purchase, etc.)

Asset based

1. Crown owned building (Base Building systems such as elevator, fire alarm, roof etc.)
   • Base case example:
     • Repair or replace individual components to make the existing system operational and meet existing code requirements (that is replace only failing electrical components, repair part of roof that is leaking and defer remainder, replace only leaking window units, not all, etc.)
   • Other possible solutions:
     • Replace and upgrade the Building Systems to meet the latest performance specifications (that is new HVAC system and controls, replace entire roof and upgrade insulation, replace exterior cladding system and new windows, new lighting system throughout, etc.).
2. Lease with the private sector (Base Building systems such as elevator, fire alarm, roof etc.)
   • Base case example:
     • Generally speaking, these items are the Landlord's responsibility as outlined in the terms and conditions of the standard Public Services and Procurement Canada (PSPC) Lease and are factored into the rental rate.
   • Other possible solutions:
     • Not applicable as this is typically the Landlord's responsibility and forms part of the ongoing rental payments (except in unusual and specific circ*mstances). Fit-up, screens, voice-data cable etc. are typically paid for by the Lessee (that is PSPC and/or the Tenant).
3. Federal Holdings (dry docks, locks and dams, highways, etc.)
   • Base case example:
     • Carry out necessary repairs on specific components while minimizing capital investment to keep the asset operational.
   • Other possible solutions:
     • Major capital investment to extend the life of the asset, or possibly the construction of a new asset, or provide a new alternate solution (that is build a new highway, tunnel, ferry service, etc.) and dispose/decommission the existing asset.

Date modified:

2023-10-17