Two Stage Capital Works Approval Process
New Policy Proposals (NPPs) from non-corporate Commonwealth entities (NCEs) and corporate Commonwealth entities (CCEs) for capital works which are estimated to have a Whole‑of-Life Cost (WoLC) of $30 million or more (excluding fit‑out), are subject to the Two Stage Capital Works Approval Process.
Capital Works must not be separated into smaller projects to avoid the Two Stage Capital Works Approval Process.
Entities must follow the Two Stage Capital Works Approval Process when undertaking capital works, including capital works projects that involve acquiring property or property remediation, on behalf of the Commonwealth.
Finance provides entities with guidance on the Two Stage Capital Works Approval Process.
Department of Defence maintains its own Two Stage Capital Works Approval Process through the Major Capital Equipment Projects and the Defence Integrated Investment Program as part of the Portfolio Budget Submission process, and bi-annual updates to Government.
The Two Stage Capital Works Approval Process provides a methodical approach to developing the scope and cost estimate associated with a project, reducing risk and increasing cost certainty. This approach ensures that:
- the Government achieves maximum value for money in the investment being made, including that funds are utilised in the most effective, economical, ethical and efficient manner; and
- the scope and budget approved is adhered to by entities.
Although the Two Stage Capital Works Approval Process is separate from the PWC Approval Process, required under the Public Works Committee Act 1969 (PWC Act), a project may be subject to both processes. The difference between these processes is that the Two Stage Capital Works Approval Process provides Government approval of funding, whereas the PWC Approval Process provides public scrutiny of proposed public works.
In addition to the Two Stage Capital Works Approval Process, capital works projects that meet or exceed $30 million and/or risk thresholds may be subject to independent Assurance Reviews, including the Gateway Review Process and Implementation Readiness Assessments.
The First Stage Approval Process involves seeking the Government’s in-principle agreement for a capital works project and securing the necessary funding to develop a Detailed Business Case (DBC) for further consideration by Government.
The First Stage Approval Process involves a strategic assessment, the development of an Initial Business Case (IBC) and New Policy Proposal (NPP) (as part of the Budget process), and seeking first stage approval.
Entities must use WoLC estimates (GST inclusive) throughout the development of an IBC and NPP, calculated at the P50 confidence level. For assistance with defining P50, refer to the Defining P50 and P80 Manual. All options considered in the IBC must be comparable and assessed objectively and consistently.
The First Stage Approval Process does not guarantee or constitute approval to proceed with the capital works project.
The purpose of the Second Stage Approval Process is to secure Government approval and funding for implementation and delivery of a project in accordance with the Detailed Business Case.
The Second Stage Approval Process involves the development of the DBC and NPP, and seeking Second Stage Approval.
Entities must use WoLC estimates (GST inclusive), throughout the development of the DBC and NPP, calculated at the P80 confidence level. For Assistance with defining P80, refer to the Defining P50 and P80 Manual. All options considered in the DBC must be comparable and assessed objectively and consistently.
The timing of Second Stage Approval is dependent on the complexity of the project and time required to develop the DBC and supporting information.
For further information, please contact Property Framework.
Parliamentary Standing Committee on Public Works
The PWC is a joint committee, meaning that its membership comprises both Members of the House of Representatives and Senators. It is constituted by the PWC Act. Under the PWC Act, public works projects proposed to be undertaken by, or on behalf of, NCEs and CCEs are subject to referral to the PWC, unless specifically exempted under the PWC Act or enabling legislation.
The PWC is required to consider the purpose, need, scope, cost effectiveness, any expected revenue and public value of proposed works and report its findings to Parliament. PWC approval is required for the project to proceed.
Under the PWC Act, public works must be referred to the PWC which will conduct an inquiry into the proposal. Referral thresholds for non-defence and defence purposes are highlighted in the below table. For medium works, public works must be notified in writing to the PWC for consideration prior to commencing.
| Referral threshold | Medium Works Notification threshold | |
| Non-defence purposes | Public works exceeding $15 million (GST exclusive)
| Public works with an estimated cost between $5 million and $15 million (GST exclusive) |
| Defence purposes | Public works exceeding $75 million (GST exclusive) | Public works with an estimated cost between $5 million and $75 million (GST exclusive) |
Finance is responsible for preparing referral motions, expediency motions and exemptions, and briefs the Finance portfolio Minister on public works requiring referral to the PWC. The Finance portfolio Minister or a Ministerial representative moves referral motions in the Senate or House of Representatives and expediency motions in the House of Representatives.
