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Defence Estate Quality Management System (DEQMS) BSI Certification

Government and Departmental Project Approvals

Cost Agreement - Process

Guidance for obtaining Cost Agreement from the Department of Finance for Major Capital Facilities (MCF) projects that are subject to either Cabinet or 'Two Minister' consideration (comprising the Minister for Defence and the Minister for Finance).

Once the Business Case has been endorsed by the Defence Estate Committee, it can be submitted to Finance for Cost Agreement.  The Project Team, in consultation with Infrastructure Division (ID) Finance, should provide the following documents to Finance when seeking Cost Agreement:

First Pass

  • Overarching Statement - an explanation of the project and the cost planning methodology used (i.e. measuring from drawings, Rawlinsons, industry expertise etc);
  • Endorsed IBC;
  • Development Phase Funding - a high level break down of the development phase funding and a statement on how the budget was determined; and
  • Development Phase Funding Cash Flow - the cash flow of the development phase funding.

Second Pass

  • Overarching Statement – explaining the cost planning methodology (i.e. measuring from drawings, Rawlinsons, industry expertise etc); any movements since the endorsement of the DBC; the level of contingency and why this level has been selected; and the level of escalation and the basis for that rate being selected;
  • Endorsed DBC – including project delivery and procurement strategy, the project schedule, other legislative requirements such as environment and heritage obligations;
  • Latest Design Documentation –for example the Functional Design Brief, Concept Design Report, Schematic Design Report, Detailed Design Report;
  • Risk Register including a Risk Management Plan and project/whole of life risk analysis; and
  • Cost Plan – this must be provided in a manipulable format (for example Excel) (i.e. containing formulas and not PDF or hard-coded).   The cost plan for an IBC must have at least a P50 confidence level and the cost plan for a DBC must have at least a P80 confidence level.

For Second Pass Cost Agreement Only - Approximately one week after providing the initial documentation to Finance, a face to face meeting between Finance, the Project Team and ID Finance should be held. The exact timing will reflect the complexity of the project and the completeness of information provided to Finance. At this meeting, the Project Team should provide Finance with access to the PM/CA, cost planner and designer (this can be via teleconference) as needed. This meeting enables Finance to ask direct questions of the Project team and to clarify any remaining issues.

The resulting Cost Agreement may be different from the project cost in the DBC. Generally, it is expected that Finance and Defence will be in agreement on this revised total. However, Finance is able to issue Cost Agreements without Defence's agreement on the revised cost.

The above list of documents is not exhaustive.  Project teams should look to provide Finance with any information that would allow the confirmation of how Defence arrived at the costs. Spreadsheets should be in a format that allows Finance to see how Defence calculated the costs.  ID Finance should be consulted through this process to ensure all relevant information and appropriate explanations are included in the data provided.  ID Finance can assist with co-ordination of this information between Finance and ID.

Depending on the size of this information, it may need to be provided to Finance on a CD.

Finance will then consider the information that you have provided.  If Finance have any questions or require additional supporting information they will contact the Project Team directly.  To avoid unnecessary delays to obtaining Cost Agreement please endeavour to provide the information or answer any questions within 48 hours.

Further guidance on confidence levels can be found in Annex A of the RMG 502 Guidance for the Two Stage Capital Works Approval Process for Australian Government Construction Projects issued by Finance.

Government and Departmental Project Approvals