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

Circular letter number 21/2007

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

Arrangements for the capital investment framework

1.   We have now finalised arrangements for the capital investment framework which has been further developed since Circular Letter 11/2007. The framework is designed to encourage a strategic approach to infrastructure planning and investment whilst reducing the burden of regulation. This circular letter outlines the arrangements for higher education institutions (HEIs) to make submissions for assessment and reports on the outcomes of the pilot exercise. Completed submissions are required by Friday 19 October 2007 via the HEFCE extranet.

2.   We believe most institutions will be able to demonstrate that they meet the requirements of the framework, 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.   Completed submissions (see sample form at Annex A), approved by the head of the institution, confirming that due process has been followed, should be submitted using the HEFCE extranet by 19 October 2007. A separate letter is enclosed advising on arrangements for this. HEIs will be informed whether they have satisfied the requirements of the framework by the end of November.

4.   As soon as the 2007 Comprehensive Spending Review outcome for higher education is known our Board will consider the basis for distributing capital funding from April 2008. In the meantime all HEIs are encouraged to continue to plan their capital investment, and those that satisfy the requirements of the capital investment framework will benefit from more flexible capital funding arrangements from April 2008.

Approaches to capital planning and investment

5.   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.

6.   The framework also reinforces our approach to sustainable development by encouraging financial sustainability, and supporting environmental sustainability through emphasis on the efficient use of space, reducing environmental impact and promoting biodiversity.

The assessment process

7.   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 managed by the HEFCE Assurance Service with input from regional teams. A summary of the pilot exercise is at Annex C.

8.   The assessment includes four strands, three of which are covered in the submission form that is shown at Annex A for information:

  1. Institutions need to respond to the six strategic questions in section A of the submission form. The categories A-D reflect different levels of progress in the development of good practice in each area. HEIs are asked to identify which categories best match their level of progress and to provide a brief supporting statement for each. The form includes guidance on the supporting evidence that we expect to receive.
  2. We have devised a range of metrics which we will use as part of our assessment. These are shown at Annex B and are assembled on the extranet. Institutions can access these metrics via the HEFCE extranet. HEIs should use these metrics to provide context for their responses to the strategic questions and comment on or validate the metrics as appropriate in section B of the submission form.
  3. Institutions need to produce an action plan to address the key outcomes from a self-assessment of estates management capability. Institutions can undertake the self-assessment in the manner which they consider best meets their needs. One approach would be to use the tool developed by the Association of University Directors of Estates to self-assess estate management capability www.audesat.org.uk. This area is covered at section C of the submission form.
  4. We will also draw on other information that is provided to HEFCE as part of existing data collection or reporting processes.

9.   Taking these four strands together will enable us to form an overall assessment of whether an HEI is investing to sustain its physical infrastructure for the long term.

Review panel

10.   To improve transparency and validate the process, we are establishing a panel to review all assessments that do not yet satisfy the requirements of the framework, and a sample of other assessments. The review panel will be drawn from those involved at strategic levels across the higher education sector. The evaluation of the capital investment framework will include a sample audit of HEIs' submissions.

Timetable

11.   The submission form and metrics can be accessed using the HEFCE extranet, and are shown as Annex A and Annex B for information. Institutions should submit their responses to the questions, the metrics commentary and confirmation of the action plan following self-assessment via the HEFCE extranet by Friday 19 October 2007.

12.   A letter will be sent to the head of each institution by the end of November advising whether the requirements of the capital investment framework have been satisfied.

Assessment outcomes

13.   HEIs who are able to demonstrate that they have a strategic and sustainable approach to capital investment will benefit from more flexible capital funding arrangements from April 2008. This means:

  • we will not ask for programme and project-level information
  • we will profile the payment of grant from April 2008
  • the metrics will be used to ensure that capital investment continues to be at a level to secure long-term sustainability and is ahead of the level of grant funding.

14.   We anticipate that most HEIs 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.

15.   Where HEIs are not yet able to demonstrate that they meet the requirements of the framework, we will continue with the present requirements for programme and project-level information. For each HEI concerned we will set out the reasons why the requirements of the framework were not satisfied. These reasons might include:

  • not having a satisfactory capital investment strategy
  • 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 management information
  • needing to improve the efficient use of infrastructure
  • needing to improve environmental performance.

16.   HEIs will be able to apply for re-assessment when they are ready to do so, and we expect that all HEIs should be able to demonstrate a strategic and sustainable approach to capital investment by March 2011. At that time the Board will consider whether any subsequent capital funding should be provided to those HEIs that remain unable to satisfy the requirements of the framework.

17.   In addition to forming part of the initial assessment of HEIs, the metrics at Annex B will be reviewed annually. Where metrics - or other relevant knowledge about an HEI - indicate cause for concern, those issues will be raised with the HEI. The outcome of those discussions may resolve those concerns or may lead to a re-assessment of the basis for capital funding.

18.   We expect HEIs to revisit their estate management capability self-assessments at regular intervals, and to implement any actions that arise from that process.

19.   We believe that the capital investment framework will benefit the sector by promoting a strategic approach to infrastructure planning and investment whilst reducing the burden of regulation.

20.   I would like to take this opportunity to thank the steering group who have worked with us on the development of the framework.

Yours sincerely

Professor David Eastwood
Chief Executive

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Annexes

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