Budget and Affordability

The budgetary environment and constraints faced by road authorities and public road network operators today are well known. They are continuously expected to do more with less. Capital and maintenance expenditure is increasingly being rationed or trimmed, and many RNO project deployments are slowed or dropped. As ITS matures and becomes main-stream it may no longer attract any special budget treatment that might be available to a one-off novel ITS project.

WHY PLAN?

The challenging overall budgetary environment, in itself, calls for effective budget planning. ITS systems are typically medium term assets (5-15 years), involving significant operating costs and rapid technology evolution and - consequently - obsolescence. Effective budget planning to confirm project affordability is critical for ITS deployment. This not only promotes good financial stewardship and governance, but also helps to avoid a situation where financing and funding problems are the source of indefinite delays and/or undermine the sustainability of ITS services deployed. In a constrained budgetary environment the importance of getting firm spending commitments into budgets, where competing projects are involved, cannot be overstated.

WHAT TO PLAN?

Budget planning needs to be done at both the individual project and the cumulative programme levels.

The starting point for an ITS project relates to the expected capital costs for start-up and the on-going operation and maintenance expenditures. To this should be added the cost of financing the creation of the ITS asset and the working capital for on-going operations. The timing of these various expenditures should be part of the budget planning process.

Equally important, if not more so, is to plan the funding stream. What, when and from whom will the money to pay back the project investment and operating costs be obtained? This needs to be realistically mapped out. Unless financing for the project can be paid back there can be no project. A project's deployment is all subject to affordability.

Budget planning for a Road Network Operations ITS deployment programme is vital to ensure there is the capacity to deploy a stream of projects with value for money, maximising benefits from synergies among projects. In a fast developing technology business, ITS developers and suppliers are invariably from the private sector. They will focus on markets with continuous and/or growing demand rather than one exhibiting "stop-start" demand syndrome.

FURTHER INFORMATION

The OECD has made recommendations on Budgetary Governance including ten principles that provide an overview of good practices and gives practical guidance for designing, implementing and improving budget systems. (See OECD Principles of Budgetary Governance)