Staff Paper Prepared for the President's Commission to Study Capital Budgeting

 
A Matrix of Capital Budgeting Problems and Options
 
--------------------------------------Categories of Investment-----------------------------------
Problem Federal Assets   
(defense & nondefense)
Infrastructure   
(transportation)
Other Investment (tangible and intangible)
1 There is little long-term planning for capital in life-cycle context outside of the Department of Defense. o Require 10-year capital plan linked to budget.  o Require 10-year planning by grant recipients.   o Favor grant recipients that do long-term pl anning.
o Set capital plan in context of agency GPRA plans. o Reward jurisdictions doing high quality planning.
o Enforce rules in Capital Programming Guide. 
o Plan for full asset life-cycle.
 
2 No one is fully responsible for capital planning. o Hold agency heads primarily responsible. o Improved accountability needed here too? o Improved accountability needed here too?
3 Information about physical, financial characteristics of assets is inadequate. o Require agency system for property, financial accountability. o Require inventory of use and condition.
4 Accounting standards do not include current cost or imputed interest. o Ask FASAB to consider current cost, imputed interest.
5 Pork barrel projects are often chosen over projects with higher returns. o Require benefit/cost studies to be submitted, published on internet.   o Require grantees to publish benefit-cost by project.   o Require grantees to publish benefit-cost by program.  
Summarize them in Analytical Perspectives.
o Ask CBO, GAO to provide timely studies to Congress. o Summarize them in Analytical Perspectives.
6 Dedicated revenues are not fully used to finance designated investment. o Consider a separate cap for infrastructure funded by earmarked revenues.
7 There are no goals or targets for any category of investment. o Consider alternative ways to set investment targets. o Consider alternative ways to set investment targets.
8 Funding is not always assured to complete projects efficiently. o Require regular or advance appropriations for full cost of usable segments. o Use long-range plans to manage funding. o Use long-range plans to manage funding.
9 Projects often take more than one year to complete. o Require multiyear appropriations for projects that will take years to complete.
10 Spikes in necessary funding sometimes deter justified investment. o Aggregate capital in CAFs; cover remaining spikes w/central funding if justified. o Use long-range plans to manage funding.
11 Programs are not charged uniformly and fully for their use of capital. o CAFs would charge all uniformly for capital use.
12 Programs are not charged uniformly for their use of labor, support services. o Charge for retiree benefits, and support services.
13 Inappropriate choices are made to lease vs. buy.  o Improve incentives to make economic choices.
14 Cost over-runs, delays, and poor quality plague many acquisitions. o Use performance-based management system to acquire assets. 
15 Government often buys hi-tech, custom projects that come a cropper. o Require off-the-shelf or prototype; Raines rules.
16 Capital is often poorly maintained. o Plan maintenance and monitor actual.  o Require grantees to meet maintenance criteria.
o Consider advance funding.
17 Capital is often poorly utilized. o Charge for cost of capital; share revenue from property disposition.



President's Commission to Study Capital Budgeting