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21 March 2007 HEFCE logo
To  Heads of HEFCE-funded higher education institutions
Direct Line 0117 931 7300
Direct Fax 0117 931 7203

Circular letter number 11/2007

For further information contact Ian Lewis, tel 0117 931 7336, e-mail i.lewis@hefce.ac.uk
or Andrew Smith, tel 0117 931 7001, e-mail a.smith@hefce.ac.uk

Dear Vice-Chancellor or Principal

Implementing a capital investment framework for higher education institutions

1.   We received strong support for our proposals to adopt a new framework for capital investment for higher education institutions (HEIs). The consultation document (HEFCE 2006/04) and an analysis of responses is available. This letter explains how we are taking forward the proposals, and summarises key messages from recent reviews of capital investment and planning, which institutions may find helpful.

2.    The central purpose of the framework is to encourage a strategic approach to infrastructure planning and investment. We believe that the majority of institutions will be able to demonstrate that they are operating in this way, providing us with increased confidence in their governance and management. This in turn will allow us to reduce the level of information we require from these HEIs, and to fund them in a more flexible way.

3.   The framework reinforces our approach to sustainable development by significantly encouraging financial sustainability, and supporting environmental sustainability through emphasis on the efficient use of space, reducing environmental impact and promoting biodiversity. In addition, recognising business and the community activities in the formulae which determine the levels of capital funding will support social sustainability.

4.   Since the consultation we have been working with a steering group (see Annex A), including sector representatives and funders, to develop the framework. While funding from 2008 will depend on the outcome of the 2007 Comprehensive Spending Review, we wish to be prepared.

Purpose and form of the framework

5.   The capital investment framework will enable us to assess whether HEIs are investing in their physical infrastructure so that it is likely to be sustainable in the long-term. The assessment process will be undertaken by the HEFCE Assurance Service with input from the HEFCE regional teams.

6.   The assessment will include three strands:

  1. Asking institutions to respond to the six strategic questions at Annex B. The categories A-D reflect different levels of progress in the development of good practice in each area. We will ask HEIs to identify which categories best match their level of progress and to provide a supporting statement in respect of each.
    These questions have been developed in conjunction with the estates management self-assessment tool being created by the Association of University Directors of Estates (AUDE). We would expect all institutions to carry out a self-assessment, using this or other tools. We would wish to understand HEIs' processes for self-assessment, and may wish to see the resulting action plans that will have arisen to address the outcomes.
  2. Reviewing a range of key metrics, included at Annex C. These data are already available from a number of sources, so we will not ask HEIs to provide them again. We would, however, provide these data to HEIs for validation as part of the assessment.
  3. Drawing on other information and knowledge from our assurance service and regional teams.

7.   These three strands of information will enable us to form an overall assessment of whether an HEI is investing to sustain its physical infrastructure for the long-term.

8.   We expect to carry out the assessment in the autumn of 2007 - and will inform HEIs individually of their own outcomes. To improve transparency and sector commitment to the process, we will establish an advisory panel to review all assessments that do not demonstrate sustainability, and sample other assessments to validate the process.

9.   Over the coming months we will continue to work with the steering group, a sample of pilot HEIs, and the HEFCE assurance and regional teams to develop robust criteria against which we can assess both the qualitative and the quantitative data.

Assessment outcomes

10.   Where HEIs are able to demonstrate that they have a strategic and sustainable approach to capital investment, they will benefit from new arrangements for any capital funding from April 2008. Under these new arrangements, we will ask for minimal further information and allow greater flexibility in the deployment of funds. We anticipate that a majority of institutions will be able to demonstrate that they have such an approach. The outcome of the assessment will not be a factor in determining the amount of funding to institutions between 2008 and 2011.

11.   Where HEIs are not able to demonstrate that they have a strategic and sustainable approach to capital investment, or where plans are not considered to be satisfactory, we would continue with the present requirements for programme and project level information. We will set out the reasons why an HEI was unable to provide us with the level of assurance we were seeking. These might include:

  • not having a satisfactory infrastructure investment strategy
  • insufficient levels of investment
  • needing to re-assess the asset base necessary to support activity
  • needing to survey the condition or functional suitability of the estate
  • needing to improve aspects of management information
  • needing to improve the efficient use of infrastructure.

12.   HEIs would be reassessed once the specific areas had been addressed. Our expectation is that all HEIs should be able to demonstrate a strategic and sustainable approach to capital investment by March 2011.

13.   Approaches to capital planning and investment will vary between institutions depending on their mission and management practices. However, we expect that the following elements are likely to be evident in a well managed HEI:

  • infrastructure planning is integrated within strategic and operational planning processes
  • infrastructure is sufficient in terms of amount, fitness for purpose and condition to meet the needs of the institution
  • infrastructure is capable of generating an adequate income stream to cover operating, maintenance and capital costs
  • the level of infrastructure investment required and planned is affordable
  • the capital investment approach and plans are approved by the governing body.

14.   In addition to forming part of the initial assessment of HEIs, the metrics at Annex C will be reviewed annually. Where metrics - or other relevant knowledge about the HEI - indicate cause for concern, we will raise the issues with the institution. This may lead to a reassessment of the basis for capital funding.

15.   We would also expect HEIs to revisit their self-assessments at regular intervals, and to implement any actions that arise from that process.

Information from recent reports

16.   We thought it would be helpful, as we continue to develop the capital investment framework, to draw together the key messages from a number of recent reports. These have some consistent themes around capital planning and investment which are set out at Annex D.

17.   Much of this relates to existing good practice and I hope you find this feedback of value for your own purposes as well as in preparation for the capital investment framework.

Yours sincerely

Professor David Eastwood
Chief Executive

Download

Annex A

[ MS Word 73K | Zipped Word 13K | Adobe PDF 15K | Zipped PDF 7K ]

Annex B-C

[ MS Word 119K | Zipped Word 22K | Adobe PDF 55K | Zipped PDF 34K ]

Annex D

[ MS Word 80K | Zipped Word 17K | Adobe PDF 28K | Zipped PDF 19K ]