Introduction
Definitions of the terms used in this appendix are provided in
the Glossary of this volume.
When the present value of a project that is predominantly
lease-related exceeds the minister's authority level, the department must obtain
an LPA before soliciting bids. The LPA effectively combines the PPA and EPA
submissions into a single approval process.
The submission must be made early in the planning phase so that
realistic options are available to decision makers. It is therefore, similar to
a PPA submission. The LPA submission must also contain information based on
market prices and clear assumptions regarding likely costs to adapt the leased
asset to operational requirements. The formal Treasury Board approval process
may be tailored to individual projects and departments, depending on the nature
of the risks involved in those projects. Departments should plan and coordinate
submissions for approvals to minimize administrative overhead.
The LPA submission is to be prepared in accordance with the
Treasury Board Submissions Guide volume of the Treasury Board Manual and
must include information for each section as follows.
Proposal
1. The proposal must list all authorities being sought from the
Treasury Board to implement the Lease Project Approval.
2. The proposal must include a substantive cost estimate
objective (see Appendix G), for a lease project, of a specific total value.
2.1 The cost objective must include an estimate of the
anticipated cost of the lease arrangement. The estimate must include the
expected cost per metre squared of usable space and the net present value of the
net rental costs of the lease period. It must also include all anticipated costs
for construction (fit-up and building improvement), commissioning, design,
moving and any other one-time costs associated with bringing the property into
inventory. This includes fees, registration costs and any taxes.
2.2 The costs shown in an LPA should be based on market
comparable since the actual costs won't be known until a lease is solicited and
negotiated.
2.3 For the purposes of the LPA, lease option periods must
be excluded from both the cost estimates and authorities being sought. However,
full disclosure is to be made to the approving authority of the options that are
intended to be sought and that will be considered in the selection or evaluation
state. The exercising of options will be treated as a separate project for
approval purposes.
2.4 After the receipt of offers, when a lease contracting
authority is sought from Treasury Board for approval, the overall project costs
from the lease project approval (LPA) submission must be revised, as
appropriate, to reflect actual costs. A revised LPA is required if the cost
exceeds the original LPA cost or if project costs are no longer consistent with
the original purpose and quality level quoted in the LPA.
3. The operating and maintenance costs and property taxes
that will be associated with or included in the lease contract, while not part
of the project costs, must be provided for information purposes in order to
identify the full costs associated with the project.
Supporting Documentation
4. This information may be included in either the body of
the submission or in an accompanying investment analysis report.
4.1 The background section identifies the program
requirement for the leased space and provides justification that it can be
addressed by the proposed project.
4.2 The cost information section demonstrates how the costs
(market comparable) were established.
4.3 The timing section indicates the critical milestones
for the project, including the timing of lease solicitation, contract approval,
fit-up, base requirements and tenancy.
4.4 A summary of the various options must be outlined. This
includes both other lease options that could meet the program requirements and
other acquisition strategies such as construction by the Crown. The cost and
program implications of each option must be noted.
4.5 The assumptions, risks and uncertainties section
outlines the assumptions that have been made about the market and the risks and
uncertainties inherent in the proposed lease project approach. It should also
indicate the steps that have been taken to manage these factors.
4.6 The outstanding issues section provides an outline of
any other issues that require resolution before the bid can be solicited or
negotiated.
Approval
5. Treasury Board approval of the lease
project will be in the form of a decision letter. The letter may include changes
to the proposed objectives as well as other direction from the Treasury Board.
The department is accountable to the Treasury Board for meeting the project
objectives and any other directions set out in the decision letter.
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