Victorian Auditor-General’s report
9 February 2011

Construction of Police Stations and Courthouses
Audit summary
Over the past decade the Department of Justice (DOJ) and Victoria Police (VicPol) have invested $586 million in the construction and upgrade of courthouses and police stations.
Asset investment decisions are made within a strategic asset management framework. Sustaining Our Assets—issued in 2000—documents public sector asset management policy and outlines the main principles. The guiding principle is that agencies’ service delivery needs drive asset management decisions.
Because they are long-lived, purpose built assets, the decision to invest in new or replacement buildings requires rigorous planning. The significant capital cost of construction also demands effective project and contract management, so that the approved building is delivered on time, on budget and to the design and quality standards specified.
This audit examined the planning for, and acquisition of, courthouses and police stations. It assessed whether:
·	the strategic asset management framework applied to investment planning was robust
·	asset acquisition planning was based on sound rationale, criteria and guidelines
·	project construction and procurement was managed effectively.
Conclusion
Both DOJ and VicPol demonstrably manage the construction of their assets effectively. However, strategic and acquisition planning by both agencies still requires improvement.
Of most concern is that neither agency had fully implemented the strategic asset planning principles that have been available for the past 15 years. While both agencies have improved in some respects, each needs to significantly strengthen their analysis of the performance of their existing assets, and their analysis of the impact of their future service delivery strategies.
Until they do this neither agency can reliably demonstrate that their asset investment decisions represent the best value-for-money outcomes.
DOJ has recognised this and has commenced an asset management improvement program across its entire built-asset portfolio. Part of this program includes developing a legal services master plan during 2010–11. The actions taken and planned under these initiatives are expected to address the issues raised in this audit. It will be important therefore that the program and plan are implemented and applied specifically to the courthouse system. It would also be appropriate for VicPol to adopt the same strategic approach to improve its strategic asset planning.
Findings
Strategic asset planning
The approach to strategic asset planning in both agencies has improved significantly over the last decade and current asset strategies reflect this. Both have better aligned their asset plans with service delivery, but they recognise they can strengthen this by conducting more sophisticated analyses of the impact of changing service delivery on their built asset portfolios.
Both agencies have also begun to use more relevant and appropriate information on asset performance. However, this remains relatively under-developed and limits their ability to present stronger rationales for new assets. Significant work is required to develop their asset registers into true asset management systems.
While both agencies have clearly improved their planning for new assets over the decade, there is little evidence of progress towards a fully integrated asset strategy that covers asset acquisition, operation, maintenance and disposal plans.
DOJ is in the process of rectifying this situation, as it applies to courthouses and more broadly to its built-asset portfolio. It has commenced an asset management improvement program, focusing initially on data standardisation to capture more relevant and appropriate asset performance information. It is also developing a legal services master plan covering all legal services built assets, not only courthouses. The principles and approaches being developed and implemented are intended to strengthen strategic asset management across DOJ’s asset base.
Acquisition planning and project delivery
Once an asset investment project commences, both DOJ and VicPol manage their procurement and construction processes effectively. Cost variances are reasonably constrained within acceptable limits in relation to updated project budgets, and time lines projected at the commencement of construction are generally achieved.
However, original time lines and initial budget estimates are not always achieved. This is because of weaknesses in the acquisition planning process, rather than subsequent project management. In particular, asset investments and budgeted costs have been approved before a comprehensive business case has been prepared, with too much reliance placed on less rigorous feasibility studies. For example, cost increases for a number of courthouse projects occur because there has been insufficient attention to identifying and analysing suitable sites early enough in planning.
Both agencies should strengthen their post-construction evaluations to examine the benefits of completed projects and incorporate lessons learned into future projects.
Recommendations
Number	Recommendation	Page	
1.	The Department of Justice and Victoria Police should:	19	
	·	better quantify the impact of changing service delivery strategies on their built-asset portfolio and link this analysis more clearly to their asset acquisition plans
·	integrate their asset acquisition plans into an overarching asset strategy for courthouses and police stations.		
2.	The Department of Justice should:	19	
	·	implement an asset management system to produce relevant, reliable and timely data on the operating and financial performance of their built-asset portfolio
·	establish a priority rating system and apply it consistently to all proposed built-asset acquisitions for the justice portfolio, to better inform decisions about relative needs and priorities.		
3.	The Department of Justice and Victoria Police should:	28	
	·	identify and rigorously analyse suitable sites prior to submitting business cases
·	undertake robust post-implementation reviews in accordance with the Investment Lifecycle Guidelines to confirm that:
·	project objectives are met
·	project benefits are realised
·	issues are identified and lessons learned are incorporated into future projects
·	a continuous improvement model is adopted and outcomes are fed directly into strategic planning documents and operational guidelines.		

Submissions and comments received
In addition to progressive engagement during the course of the audit, in accordance with section 16(3) of the Audit Act 1994 a copy of this report was provided to the Department of Justice and Victoria Police with a request for submissions or comments.
Agency views have been considered in reaching our audit conclusions and are represented to the extent relevant and warranted in preparing this report. Their full section 16(3) submissions and comments, however, are included in Appendix B.