Five CIP Development and Execution Tips

May 31, 2016 – Charlie Francis


Click here to see a list of all editions of the Finance Officer’s Desk column.

We are now into week #4 of our series on Capital Improvement Planning. This CIP series is highlighting some best and promising practices for each of the following phases of capital budgeting:

Introduction: Capital Projects 101

  • What is a Capital Improvement Plan (CIP)?
  • What are the benefits of developing a Capital Improvement Plan?
  • What are the features of a Capital Improvement Plan?
  • What is the process in developing a Capital Improvement Plan?

Phase I: Differentiating Between Capital Projects and Maintenance

  • Define what a capital project is in writing.
  • Develop definitions for maintenance expenditures and designate maintenance funding sources.
  • Identify the capital projects that not included in the CIP.
  • Develop a comprehensive inventory and infrastructure rating system.

Phase II: Aligning Capital Projects Across the Organization

  • Identify organizational responsibilities and interdependencies.
  • Maintain centralized oversight of capital projects.
  • Develop an internal plan to Inform and involve elected officials in the capital improvement planning process.
  • Inform and update the long-term financial plan with future operating budget impacts of capital improvement planning.

Today we turn to…

Phase III – Capital Improvement Plans Development and Execution

Tip 1: Develop a prioritization, decision-making matrix for ranking and selecting capital projects. Capital projects should be prioritized and ranked based on specific selection criteria and priorities. Clear definitions with examples of criteria, such as an emergency, severe problem or potential health and safety risk should be included in the documentation. The criteria should be transparent internally and externally. Involve the elected officials in developing the criteria.

Tip 2: Include criteria that ensure linkages with program objectives, master plans, and the entity’s strategic plan. Program outcomes and strategic missions should be defined and linked to capital investments. Capital requests should include the project’s purpose, the problem it addresses, how it relates to a strategic plan, and the project’s relevance for the agency’s overall mission and goals.

Tip 3: Document and standardize the cost estimation methodology. Because each department is preparing its individual capital projects, it’s not uncommon for cost estimations to vary from back of the envelope guesses to detailed off-the-shelf engineering design plans. Analysts, management, and elected officials should be able to understand the underlying assumptions and methods used in the cost estimates to thoroughly review project requests. The CIP instructions should detail cost estimation methodologies, and set organization-wide standards.


Seattle Public Utilities Cost Estimation Guide for Capital Projects.

Tip 4: Develop policy for project unspent funds. Incentivize departments to efficiently manage capital project resources minimize cost overruns from scope creep by adopting a policy for the retention of unspent project funds for their respective departments’ future capital needs.

Tip 5: Use project management methodologies for capital projects status and alerts. Use a contemporary capital project tracking system that monitors costs and construction schedules to targets and milestones. Consider using reporting and transparency tools to keep your internal stakeholders, elected officials, and citizens apprised of project status. See GFOA’s best practice advisory paper Capital Project Monitoring and Reporting

Next week we will cover best practices and tips for capital financing and debt management.


Charlie Francis is a municipal finance expert. He has more than forty years of local government financial management experience in both the public and private sector, including twenty years of experience as a Chief Financial Officer. Most recently, he served as the Director of Administrative Services and Treasurer for the City of Sausalito where he earned the unofficial title of “OpenGov super user”. He has also served as a finance manager for the Town of Colma, CA and as CFO and acting City Manager for the Cities of Indian Wells, CA and Tracy, CA.

Questions or comments? Email Charlie at cfrancis@opengov.com.