Chapter 4-1 - Management of Government Interests in Private Sector Initiatives
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Chapter 4-1 - Management of Government Interests in Private Sector Initiatives
(Publié aussi en français sous le titre Chapitre 4-1 - La gestion des intérêts gouvernementaux dans les initiatives du secteur privé)
Table of Contents
Preface	1
Policy objective	1
Policy statement	1
Application	2
Policy requirements	2
Responsibilities	4
Monitoring	5
References	5
Enquiries	6
Appendix A - Components of the Management Framework	1

Preface
To promote public policy objectives, the federal government sometimes becomes involved in initiatives where a private sector organization, another level of government or another jurisdiction has the immediate management responsibility.  This happens regularly under some ongoing government programs.  For example, the Canadian International Development Agency's involvement in individual initiatives is managed in the context of an ongoing program.  In these cases, the department or agency is accountable for results achieved under the overall program as well as those flowing from an individual initiative itself.
In certain instances, involvement is unique in nature, such as for energy megaprojects.  There is no ongoing program under which such initiatives can be managed.  Furthermore, the management considerations that arise when federal departments become involved in these initiatives tends to vary markedly from case to case.
It would be difficult to specify a detailed management framework for the federal government's involvement in such initiatives.  It is important however, that initiatives not being carried out under an ongoing program, be managed within the context of an approved framework. This framework includes the following two elements:
−	the government's involvement must be explicitly approved by the sponsoring minister and, when required, by the Treasury Board; and
−	an approved management framework must be in place before any binding commitments with financial implications are entered into on behalf of the federal government.
Policy objective
To ensure that, when federal departments become involved in private‑sector or other outside initiatives (on a unique basis), the interests of the federal government are managed within an explicit management framework approved by the sponsoring minister and, when required, by the Treasury Board.
Policy statement
It is government policy that departmental involvement in private‑sector and other external initiatives which are not a part of an ongoing program, take place only with explicit approval of the sponsoring minister and, when required, the Treasury Board.  These activities are to be managed:
−	in relation to clearly articulated objectives;
−	under a well‑defined management framework for achieving objectives;
−	in a manner sensitive to risk, complexity and economical use of resources;
−	under explicit performance monitoring, reporting and evaluation requirements.
Application
This policy applies to departments and agencies listed in Schedules I and II of the Financial Administration Act.
This policy applies to all departmental involvement in private‑sector or other outside initiatives that is unique or special in nature and is not undertaken within the context of an ongoing program.  Legal agreements on behalf of the Crown, that are already in place at the time this policy comes into effect, shall take precedence.
More specifically this policy applies to cases where the Federal Government:
−	is not directly involved in procuring goods or services or in operating any facility being supported.
−	acquires significant financial assets to further government objectives of a program nature (e.g. taking an equity position in an otherwise privately owned company to foster the development of infrastructure to exploit a natural resource);
−	enters into arrangements where it assumes significant contingent liabilities (e.g. providing loan guarantees to foster particular industrial developments); or
−	enters into certain business relationships without necessarily providing any direct financial support.  These relationships concern infrastructure development to be undertaken by other jurisdictions or a private‑sector organization, and involve significant degrees of financial or other types of risk (e.g. allowing private‑sector developments within or in conjunction with a federally owned facility).
When departments fund initiatives undertaken by private sector organizations or other jurisdictions through contributions or other transfer payments, the Treasury Board's Policy on Grants, Contributions and Other Transfer Payments applies.
Policy requirements
1.	Departments must identify all initiatives that fall within the applicability of this policy and manage them accordingly.
2.	Before a department enters into any commitments with outside parties, its involvement in the outside initiative must be explicitly approved along with a tailored, effective and clearly defined management framework.  Policy Appendix A sets out generic requirements for the management framework.
3.	Departments involved in these types of initiatives must also ensure that the other parties involved fulfil the terms and conditions under which federal support is provided and that public policy objectives are realized to the maximum extent possible.
4.	A department's involvement in any initiative as well as the related management framework must be approved by the sponsoring minister.  In addition, the department must obtain approval from Treasury Board when:
4.1	potential federal outlays and liabilities, whether budgetary or non‑budgetary in nature, exceed $50 million.  For example, if the federal government's involvement is through a joint venture, either explicitly or potentially, with a total estimated and contingent cost in excess of $50 million, then Treasury Board approval must be obtained.  Because of the joint venture status of the involvement, potential liabilities would not be limited to the federal government's direct support or equity participation;
4.2	the federal government is entering into a business‑type relationship with a private‑sector organization or other jurisdiction and there are significant financial or other types of risks (e.g. leases of federal land to permit private‑sector developments within or in conjunction with a federally owned facility);
4.3	a negotiated agreement is going to deviate substantially from what had previously been approved by Treasury Board in the management framework.  A new framework and objectives must be submitted to Treasury Board for approval before the agreements are finalized; and,
4.4	Treasury Board directs that a   management framework be established for involvement in a specific outside initiative.
5.	When a Treasury Board submission is required, it must contain the following elements:
5.1	a proposal seeking authority to enter into negotiations with outside parties concerning involvement in the outside initiative in accordance with the proposed management framework; and,
5.2	A clear and explicit management framework proposal.
6.	Departments must ensure that an adequate system is in place for internal approvals of involvement in all outside initiatives subject to this policy and that the approvals are subject to audit (i.e. some kind of formal system involving adequate audit trails must exist).  Approvals must be made at an appropriate time, usually when it is decided to proceed seriously with negotiations that will potentially involve entering into firm commitments.
7.	In reviewing a management framework, the Treasury Board may refer the proposed involvement in an outside initiative to Cabinet for further consideration.
8.	The department with lead responsibility for the federal government's involvement in an outside initiative must report annually to Parliament.  This report is made through Part III of the Estimates and provides details on the progress made towards achieving the approved objectives of the involvement.
Responsibilities
Sponsoring departments
Sponsoring departments must appoint through a designated official (where appropriate) a federal government leader.  The leader is responsible for:
−	managing the federal government's involvement in the outside initiative;
−	identifying and notifying other federal departments and agencies having general or specific interests in the government's interests in an outside initiative; and
−	inviting these departments and agencies to participate in an active or coordinative role as appropriate.
Participating departments
−	Participating departments are responsible for:
−	selecting a designated representative; and,
−	defining, to the sponsoring department, the nature and extent of their proposed participation, in the federal government's involvement in an outside initiative.
The leader and designated representatives are to be selected according to their experience and abilities as well as the significance, scope, complexity, risk, and visibility of the federal government's involvement in the outside initiative.
Treasury Board Secretariat
Treasury Board Secretariat is responsible for:
−	advising departments on the practical application of this policy;
−	advising departments on appropriate management frameworks, taking into account the risks involved, the scope of interests held by other departments and agencies, and the uniqueness of the government's involvement in the outside initiative;
−	advising the Treasury Board on the merits of submissions under this policy (including the Secretariat's view of the risks and proposed risk management strategies);
−	communicating the decisions of the Board to the submitting department;
−	recommending a reporting schedule, if required, to keep Treasury Board ministers informed of the status of federal involvement; and,
−	carrying out a liaison function to ensure that the sponsoring department provides appropriate management information required by the Board.
Monitoring
Treasury Board Secretariat will use the following criteria to assess departmental performance in meeting the objectives of this policy:
−	consistency between initiatives proposed for approval by the Treasury Board and all other government objectives;
−	timeliness of consultations with the Secretariat and other interested departments and, where required, submissions to the Treasury Board;
−	quality of the management framework proposed for those initiatives requiring Treasury Board approval.  Quality is considered to cover the degree to which the framework establishes clear objectives for the initiative and associated accountabilities; adequately recognizes and addresses any potential risks and provides strategies for dealing with those risks; and presents parameters that accurately monitor the initiative and support assessments as to whether it is on track or not.
References
This policy is issued under the authority of section 7 of the Financial Administration Act.
This policy should be read with the other policies in this volume as well as those policies involving grants, contributions, other forms of transfer payments, risk management and loan guarantees.
Enquiries
On Policy interpretation
Executive Director, Procurement and Project Management Policy Directorate, Comptrollership Branch, Treasury Board Secretariat.
On Treasury Board Submissions
Departments should contact their analyst within the Treasury Board Secretariat Program Sectors.
Appendix A - Components of the Management Framework
Private‑sector or other outside initiatives will normally involve three phases:  a negotiation phase culminating in formal agreements; an investment phase (not always involving federal expenditures) culminating in completed infrastructure; and an operational phase.  While different management issues will usually be associated with each phase, it is important that a management framework be approved and in place before any negotiations begins.  As involvement in an outside initiative moves into its later phases, this framework is often adjusted to meet changing expectations and circumstances.  With respect to negotiations with outside parties, the framework must clearly set out a negotiating strategy and mandate.  The framework must also address how decisions about whether to proceed will be handled during all stages of the negotiations, including the criteria that will be used.
Commensurate with the amount of funding being provided, the degree of financial and other risks, and the complexity of the federal involvement, the management framework should:
−	clearly and comprehensively state the objectives of the proposed involvement in an outside initiative;
−	justify the proposed involvement, including reviewing alternative means for pursuing the objectives associated with it;
−	identify and assess potential risks on a comprehensive basis and provide strategies for dealing with them;
−	provide a proposed mandate and strategy for translating the objectives of the involvement into concrete agreements with the other participants; and,
−	present a proposed framework for managing the federal government's interests during all phases of its involvement in an outside initiative.  The proposal should:
−	specify a leader to manage the federal government's involvement;
−	state the role for the leader (see the Major Crown Projects policy in this volume for guidance);
−	specify the membership of a Senior Advisory Committee in managing the federal involvement where Treasury Board approval is required and in other cases as appropriate.  The committee which should include members from all departments potentially affected by or having a program interest in the outside initiative.  A proposed statement of role for the Committee should also be provided.  Refer to the Major Crown Projects policy in this volume for guidance;
−	specify which departments or agencies are accountable for achieving the approved objectives of the involvement in the initiative; and,
−	present parameters, including financial, to serve as a monitoring baseline in assessing whether involvement in the initiative is on track.  The framework should include a monitoring and review process that triggers a requirement to seek approval for an amended management framework when parameters are exceeded.
The management framework should respect the following primary considerations:
−	all objectives associated with the federal government's involvement in an outside initiative should be clearly articulated and concretely reflected, to the extent possible, in the agreements reached with other participants.  The presumption is that the key objectives usually will not be strictly financial in nature, but rather, be related to program‑type objectives such as industrial and employment benefits and impacts on economic viability;
−	the federal government's involvement in such an initiative should be managed so that there is a single, clearly identified locus of management responsibility for the achievement of all objectives at any given time and, preferably, through all phases.  This consideration is essential for ensuring adequate accountability.  Exceptions should be considered only for compelling reasons; and,
−	since the key focus for furthering and protecting federal interests usually lies in the formal agreements entered into by the participants, the agreements should be as specific and concrete as possible about the responsibilities and accountabilities of the various participants. Informal understandings and best efforts undertakings should be avoided.