2. Long-term strategic vision and planning
It is important that countries have long-term strategies and plans that guide public investment decisions at the highest level. This ensures that all public investment decisions are planned, designed and delivered in a way that address genuine public needs. Long-term planning gives citizens, governments and infrastructure developers certainty about future investments, which is important given infrastructure can require years of planning and can be in operation for many decades. This chapter expands on the importance of long-term strategic vision and planning for public investments, citing international best practice, and assesses the role of long-term planning in Bulgaria.
The OECD Recommendation of the Council on the Governance of Infrastructure describes high quality strategic direction for infrastructure as including:
“… shared ambitions for national and subnational development, enhancing the economic, natural, social and human capital which underpins well-being, sustainable and inclusive growth, competitiveness and public service delivery ….
… a rigorous assessment of current and future infrastructure needs ….
… [Being] fiscally sustainable and giving certainty by being linked with budget allocations and other sources of financing and aligned with the medium-term expenditure framework ….
… a transparent, coherent, predictable, legitimate and accountable institutional framework for infrastructure, in which relevant institutions and levels of government are entrusted with clear and consistent mandates, ample decision-making powers, right skills and competences, and sufficient financial resources ….
… a broad-base political consensus and stakeholder engagement process ….
… actively contributes to the achievement of sustainable and inclusive development in line with long-term policy objectives ….” (OECD, 2020[1])
Having a clear strategic intent is important for public investments, especially infrastructure, given the long-lead times required to deliver major physical assets and the many decades they can be in operation. Most major infrastructure investments around the world involve participation by the private sector across many stages of the lifecycle, including legal, planning, design, engineering, financing, construction and maintenance phases, amongst others. The private sector relies on having a steady, predictable and reliable pipeline of projects to give them the confidence to invest in the necessary people, plant and equipment. In turn, countries benefit from being able to access high quality skills and capabilities that they can draw upon at different stages of the investment lifecycle.
This certainty begins with having a clear strategic intent. Bulgaria’s strategic direction, which flows from the EU level and down through national and sub-national governments, is depicted in Figure 2.1.
For the strategic direction to carry meaning and purpose, it must be supported by a specific set of programmes, projects and policy initiatives with a broad indication of timeframes and a clear rationale and articulation for how those investments help implement the strategic direction. The high-level vision, priorities, targets and key performance indicators (KPIs) must cascade from the highest level of government policy making and clearly and consistently cascade through the planning hierarchy, being reflected in the subordinate planning instruments delivered by ministries, agencies and municipalities. Ministries, agencies and municipalities will need to build upon the high-level direction with more specific priorities, targets and KPIs, which should become more specific the further down the planning hierarchy. But it is essential that the highest-level priorities, targets and KPIs are clearly reflected in subordinate strategy and planning instruments so that government policy makers can easily measure whether their policy goals are being implemented. Also demonstrating a clear and consistent plan for implementing government policy gives citizens, businesses and the infrastructure market certainty and confidence about the timing and location of future public investments, which in turn gives them the confidence to plan and invest.
Being able to demonstrate that investments align with the long-term, strategic direction enables government to demonstrate to the public that it is allocating resources where there is a genuine need, which is important for upholding integrity and transparency. It also helps decision-makers think about the widest possible range of solutions to a policy problem, which could include either supply-side solutions (e.g. building a new transport corridor to meet demand) or demand-side solutions (e.g. introduce network pricing to reduce or change demand patterns). This opens decision-makers up to a new set of possible solutions that may be more affordable and deliver greater benefits more quickly than if they were to deliver conventional solutions. Demonstrating that investments address genuine needs also signals to the private sector that the government has a clear policy plan that they are committed to, which can help give the private sector the confidence to invest in a country’s infrastructure market.
It is important to note that the strategic planning phase is not the stage at which decision-makers choose infrastructure programmes or projects. The strategic planning phase should deliberately avoid settling on any solutions, instead focusing on setting a high-level vision, identifying genuine public policy needs and making the case for the government to act on a particular need. The subsequent phases of investment planning, including the economic, commercial and management stages, are where potential solutions are shortlisted and assessed.
Bulgaria has a clear strategic direction to inform how resources should be allocated to investment decisions. However, this is not always flowing through to the investment decisions made at the national or municipal levels. In fact, regular stopping and starting of projects, which were reported by some Bulgarian officials, also suggests decision-makers are not sticking to their long-term strategic objectives.
The various strategic documents that are intended to inform public investment decisions at the national and sub-national governments are summarised in Figure 2.1.
Within strategic planning, there are good examples of KPIs that are specific, measurable, achievable, realistic and time bound. For example, Bulgaria2030 contains objectives for infrastructure that are aligned to the United Nations Sustainable Development Goals and include quantifiable performance indicators over a ten-year period. It specifies three nationwide, strategic goals, which are: 1. accelerated economic development; 2. demographic upswing; and 3. reduction of inequalities. These are supported by five “development axes”, or themes: 1. Innovative and intelligent Bulgaria; 2. Green and sustainable Bulgaria; 3. Connected and integrated Bulgaria; 4. Responsive and just Bulgaria; and 5. Spirited and vital Bulgaria. These goals and axes are supported by 13 priorities, the most relevant to this report including: circular and low carbon economy (priority 4); transport connectivity (priority 7); digital connectivity (priority 8); and local development (priority 9). The priorities are supported by measurable and specific indicators, such as:
the share of renewable energy in gross final energy consumption will increase from 18.7% (2017) to 27% (2030);
road traffic fatalities per 100 000 inhabitants will decrease from 9.6 (2017) to 4.9 (2030);
ultrafast broadband take-up will increase from 9.7% (2017) to 40.0% (2030), and;
the share of population connected to at least secondary wastewater treatment will increase from 63.2% (2017) to 78% (2030). (Republic of Bulgaria Ministry of Finance, 2020[2])
Bulgaria2030 is supported by three-year action plans, the current plan being for the period 2022 – 24. These plans list the programmes and projects that give effect to the goals and priorities in Bulgaria2030. To ensure that Bulgaria2030 and the action plans are aligned and there is coordination across sectors, the action plans are approved by the Development Council of the Council of Ministers, which is comprised of all relevant ministers. These commitments then flow into the three-year Medium-Term Budget Forecast. The goals of Bulgaria2030 also guides EU funding under the National Recovery and Resilience Plan. Bulgaria2030 also uses the same KPIs used by the EU to track performance in particular areas over time, which is an effective way to ensure alignment between objectives set by the EU and Bulgaria.
Line ministries are required to demonstrate how their investment programmes align with Bulgaria2030. However, the strategic flow appears to sometimes break down when line ministries come to implement public investment objectives in their respective sectors. For example, Bulgaria2030’s priorities, targets and KPIs are not directly stated in the Ministry for the Environment and Water’s Priorities in the National Environment Policy (2022) or the Ministry of Transport and Communication’s National Programme “Digital Bulgaria 2025”: roadmap for the period till 2025 (2019). Instead, these documents set out different priorities, targets and KPIs. While it’s understandable that ministries, agencies and municipalities need to set more specific objectives and KPIs further down the planning hierarchy, it is crucial that the priorities, targets and KPIs from Bulgaria2030 are reflected in subordinate planning documents. A strategic planning hierarchy whereby priorities, targets and KPIs clearly and consistently cascade from the highest-level of government to implementation plans allows decision-makers to measure whether the government’s policy goals are being implemented and demonstrates to communities, businesses and investors how the government’s objectives are being implemented, providing certainty on the immediate to long-term policy environment.
In addition, there are indications that decision-makers may not always make investment decisions with their long-term goals in mind. Infrastructure projects funded from the state budget are often abandoned as priorities within government change or as projects approach cost overruns, often in favour of other projects that had previously been halted. Projects that can be delivered quicker often get prioritized over projects that will take longer to complete. Frequently halting projects to start new, or restart ceased, projects is financially costly and, as noted above, can undermine private sector confidence. As noted in Section 6: Capital Budgeting and Fiscal Sustainability, EU-funded projects are less prone to this uncertainty because their commitments are more strictly specified in operational plans. The Guidelines for the Presentation of Draft Budgets for 2022 and Budget projections for the Period 2023-24 introduced a requirement that priority be given to investment proposals valued above BGN 1 million that can be completed within their approved annual funding allocation. Each responsible line ministry develops their own criteria for prioritizing investment proposals. The Ministry of Finance states that priority should be given to projects that have already been “launched” or are at the design and construct phases. The Guidelines include other criteria that support strategic direction, such as the need to achieve existing KPIs and align with long-term objectives.
For EU-funded projects, there are measures in place to assess whether projects are meeting their strategic objectives. As part of regular audits, the Executive Agency for the Audit of European Union Funds assesses key performance indicators for programs and projects, cost benefit analysis and a program or project’s compliance with spatial plans where the rules for the implementation of construction activities are described. When assessing the allocation of the Recovery and Resilience Fund, the EC is results-orientated, focusing on how milestones and targets are being achieved. But the same process does not seem to be in place for nationally funded programs and projects. Bulgaria’s National Audit Office undertake financial audits of programs and organizations, but not individual projects or key performance indicators.
As an example, to help Bulgaria align its investment decisions with public needs, Box 2.1 provides a best practice approach for defining a problem that the public investment is intended to solve, identify the objectives of a policy intervention and develop KPIs for measuring whether the proposed investment will help achieve the intended objectives.
One best practice approach to aligning investments with strategic direction comes from the Five Case Model, which sets out five stages for developing a business case for public investments.
The first stage of the Five Case Model is the strategic dimension, which helps determine whether there is a genuine need to invest and confirms the outcomes sought from the investment. This information should be largely derived from strategic direction at the highest level.
Specifically, the strategic dimension should include:
Agreed objectives that are specific, measurable, achievable, realistic and time bound (SMART). The objectives must directly reflect the rationale for the proposal and be able to be monitored and evaluated
Identification of the changes that need to be made to help bridge the current situation and what is needed to achieve the SMART objectives
An explanation of the change process, including the chain of cause and effect as to how the change will achieve the SMART objectives.
This must be supported by data and other forms of verifiable evidence. Comment should also be provided on the quality and robustness of the evidence.
In subsequent phases of the Five Case Model, users step through stages that help select the most suitable solution and refine the proposal.
This model originates from the United Kingdom and has been adopted widely by ministries of finance as a best-practice methodology for analysing and determining high value public investments.
Source: (HM Treasury, 2022[3])
Regarding climate adaptation, Bulgaria’s National Climate Change Adaptation Strategy and Action Plan (NCCASAP) (Ministry of the Environment and Water, 2019[4]) sets out climate change risks, outlines Bulgaria’s strategic response and sets out high-level actions and KPIs across various sectors, including energy, transport, water and urban development. These actions include improving institutional capacity, regulatory settings and provide technical guidance among other actions. The NCCASAP is to be monitored and reported on every two years, starting in 2021. However, the first report on the implementation of the measures, the National Climate Change Adaptation and Strategies (Ministry of the Environment and Water, 2021[5]), does not report on whether the KPIs set out in the Action Plan are being met.
Regarding emissions reduction, the Integrated Energy and Climate Plan of the Republic of Bulgaria 2021 – 2030 (Ministry of Energy and Ministry of the Environment and Water, 2020[6]) sets annual greenhouse gas reduction targets by 2030 in electricity, gas and heating. For transport, the Integrated Transport Strategy for the period until 2030 (Ministry of Transport and Communications, 2017[7]) sets numerous high-level objectives for reducing emissions in transport, but without enough specificity that these objectives could be monitored and reported on over time. On energy, the Integrated Energy and Climate Plan describes several energy initiatives that are expected to reduce emissions, but also does not set specific or measurable targets. Bulgaria’s plans for responding to climate adaptation and emissions reduction include high-level actions, which must be accompanied with more detailed actions that are specific, measurable, achievable, realistic and timebound (SMART). This will ensure infrastructure practitioners know precisely what is required to deliver more climate-resilient infrastructure, and also ensures decision-makers can track whether Bulgaria’s climate commitments are being met.
There are also good examples of strategic direction at the municipal level. For example, Burgas Municipality’s Spatial Development Plan (Burgas Municipal Government, n.d.[8]) identifies the emerging opportunities and challenges that the municipality faces and the implications for infrastructure, such as: 1. population growth leading to an increase in the consumption of infrastructure services and 2. a need to address a lack of sanitation in some neighbourhoods. The Spatial Development Plan also includes a sector-by-sector assessment of the quality of infrastructure. Burgas also measures whether the city is meeting the goals set in the Burgas Municipal Development Plan, including KPIs that track achievement over time for measures such as air quality, quantities of recycled materials and numbers of public transport trips (Burgas Municipal Government, 2021[9]). Performance against KPIs is regularly reported on and overseen by a Monitoring Committee, made up of representatives from municipal government, the private sector, industry organisations, non-governmental organisations and the media (Burgas Municipal Government, 2014[10]).
We also observed good examples of long-term strategic direction being informed by a thorough stakeholder engagement process, consistent with the EU Principle of Partnership. For more details, see Section 8: Integrating Stakeholder Engagement into Planning and Decision-making Processes.
References
[9] Burgas Municipal Government (2021), Subsequent Evaluation of Municipal Development Plan of the Municipality of Burgas for the Period 2014-2020.
[10] Burgas Municipal Government (2014), ‘2.6 Monitoring, Evaluation and Updating System’, Municipal Development Plan of the Municipality of Burgas for the Period 2014 – 2020.
[8] Burgas Municipal Government (n.d.), Spatial Development Plan.
[3] HM Treasury (2022), ‘The Five Case Model’, The Green Book: central government guidance on appraisal and evaluation.
[6] Ministry of Energy and Ministry of the Environment and Water (2020), Integrated Energy and Climate Plan of the Republic of Bulgaria 2021 – 2030, https://energy.ec.europa.eu/system/files/2020-06/bg_final_necp_main_en_0.pdf.
[5] Ministry of the Environment and Water (2021), Firest Interim Report of the National Strategy for Adaptation to Climate Change and Action Plan, https://www.moew.government.bg/bg/purvi-mejdinen-otchet-na-nacionalna-strategiya-za-adaptaciya-kum-izmenenie-na-klimata-i-plan-za-dejstvie/.
[4] Ministry of the Environment and Water (2019), National Climate Change Adaptation Strategy and Action Plan, https://www.globalwps.org/data/BGR/files/National%20Climate%20Change%20Adaptation%20Strategy%20and%20Action%20Plan.pdf.
[7] Ministry of Transport and Communications (2017), Integrated Transport Strategy for the period until 2030, https://www.mtc.government.bg/en/category/42/integrated-transport-strategy-period-until-2030.
[1] OECD (2020), Recommendation of the Council on the Governance of Infrastructure, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0460.
[2] Republic of Bulgaria Ministry of Finance (2020), National Development Programme BULGARIA 2030.