Tier assessment

Tier identification

The Tier assessment applies a tailored, risk-based approach to project analysis for proposed investments.

To identify a proposed investment’s appropriate Tier, the Project Team needs to have an indicative understanding of the project’s cost and risk profile, based on the outputs of the activities undertaken in Stage 1 – Develop of the Capital Framework (preliminary scope, risk and delivery analysis, the ILM process and the EPP).

The role of risk in identifying the Tier is to ensure that the level of assessment is appropriate for each project and to mitigate the potential for significant additional work or rework. For more information on the preliminary risk assessment, refer to the next section.

The Project Team should assign the project’s Tier in accordance with the matrix shown in the diagram below. The Tier assessment of some projects, Programs or Precincts may differ from the matrix shown below if agreed in the EPP (refer to the EPP Guidelines).

Tier classification matrix

The tier classification matrix separates projects based on their cost and risk profiles into three tiers. Projects less than $25 million that are low or medium risk are classified as Tier 3 projects. Projects between $25 million and $100 million that are low or medium risk, or projects less than $25 million that are high risk are classified as Tier 2 projects. Projects that are over $100 million or projects that are between $25 million and $100 million and are high risk are classified as Tier 1 projects.

For Programs and Precincts comprised of small value, low-risk projects (e.g. Tier 3 projects and some Tier 2 projects), the overall cost and risk assessment of the Program or Precinct undertaken by the Project Team may lead to a higher Tier than appropriate. During the EPP, the Project Team should discuss with MPC, FABG and ICA if it proposes to deviate from the matrix above, providing a clear rationale for a lower Tier assessment.

Preliminary risk assessment

The Project Team must undertake a preliminary risk assessment to inform the project’s Tier allocation.

The Project Team is not required to develop a full Risk Register at this stage of the Capital Framework. However, they should consider and identify the key risks that are expected across the Infrastructure Investment Lifecycle. In identifying key risks, the Project Team should consider the types of risk listed in the Risk Analysis Guidelines.

The Project Team should identify the risk level of the project based on the descriptions provided in the table below. Each risk level may include a combination of risk types. The Consequence, Likelihood and Impact of each risk type will designate the risk level of the project.

Identifying project risk levels

Risk level

Description

High Risk

Projects generally should be classified as high risk if the Territory has limited or no experience developing, delivering and operating a project with similar characteristics. Additionally, the project should be classified as high-risk when the project includes new, complex or unique characteristics. This may include projects that:

  • Use a new financing strategy (financial risk)
  • Are located on a site within a designated area (which has special characteristics of the National Capital) (planning risk)
  • Have significant stakeholder interest and requires extensive community engagement (stakeholder risk)
  • Use a new, or an Alliance, Managing Contractor or Public Private Partnership (PPP), delivery model
  • May result in, or be related to, political, reputational or strategic issues
  • Require integration with surrounding or interrelated projects (design and integration risks).

Medium Risk

Projects may be classified as medium risk when the Territory has some experience developing, delivering and operating projects with similar characteristics. The project may also involve medium-level risks related to:

  • Integration with surrounding or interrelated projects (design and integration risks)
  • Some stakeholder interest (stakeholder risk)
  • The location or site of the project (site or planning risks)
  • The approval process for the project.

Low Risk

Projects should be classified as low risk when the Territory has extensive experience developing, delivering and operating projects with similar or the same characteristics. This may include ‘business as usual’ projects.

Within the EPP in Stage 1 – Develop, the Project Team should discuss and obtain consensus on the allocated risk level with MPC, FABG and ICA.

For more guidance on identifying project risks and determining the magnitude of their impact, refer to the detailed Risk Analysis Guidelines.

Requirements for each Tier

Minimum mandatory requirements for projects to progress through the Capital Framework are based on their determined Tier. These requirements are tailored to each Tier to ensure the project development pathway is appropriate.

It is the Project Director’s responsibility to complete all mandatory analysis and reporting requirements. These minimum requirements are shown in the activities diagram below.

The extent of the analysis required for the activities shown in the diagram below will vary depending on the Tier. For example, although an Economic Appraisal is mandatory for all Tiers, Tier 3 requires only a statement of the benefits and costs to satisfy this requirement, with the level of required analysis increasing for Tier 2 and then Tier 1. The Guidelines specific to each of these activities provide more bespoke information on the type of analysis required under each Tier.

Activities required across the Capital Framework for each Tier

The activities required across each stage of the Capital Framework differ for each Tier. The level of analysis required varies across tiers, and activities may either be mandatory, recommended only or not required at all.

Although the minimum mandatory requirements are prescribed for each Tier, the Project Team may wish to include additional analyses above these requirements. They should determine what additional analysis is necessary on a case-by-case basis and agree it in Stage 1 – Develop. For example, for a Tier 3 project that has key risks associated with stakeholders, the Project Team may need to undertake a Stakeholder Engagement Plan. For more information on the determination of these additional requirements, refer to Next steps and approval.

Additionally, projects with a ‘Medium’ or ‘High’ risk should have a greater focus on the key risk areas in the Business Case developed in Stage 2 – Prove of the Capital Framework.

External advisors

The Project Team may engage external advisors to support the progress of a project through the Capital Framework. The Advisor Engagement Plan Guidelines provide more information on the types of advisors that may be necessary.

The Project Team is strongly encouraged to engage external advisors to assist in the completion of Tier 1 Business Cases. Additionally, the Project Team should engage external advisors for Tier 2 projects for which it expects to use an Integrated delivery model (see Delivery Model Analysis).

MPC maintains a panel of infrastructure commercial advisors. Members of this panel can aid the Project Team in developing analysis that meets the Capital Framework’s requirements.

In some instances, there may be opportunities to use internal government expertise and the Sponsoring Agency should consider the ACT Government's insourcing policies prior to procuring/purchasing resources for project.

Updates to the Tier assessment

ICA will periodically review and, if needed, update the Tier classification requirements outlined in these Guidelines.

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