Who accepts the operating cost before capital approval?

A capital approval is a decision about a sum of money. It authorises an entity to commit a known amount, over a known period, to build a known thing, and the gate that grants it has a named reviewer, a recorded decision and a file of evidence behind it.

The same file also describes what the finished asset will cost to run. That figure is estimated, reviewed and, in the better procedures, confirmed as affordable. It is not approved, because nothing is being authorised: the money that will pay it has not been appropriated, and will be appropriated a year at a time, starting when the asset is close to operating. And the unit that will run the asset, spend that money and answer for the service is, in the documents this piece reads, asked to take part in producing the estimate and not asked to accept it.

That is the gap: participation is assigned, acceptance is not. The rest of this piece shows where each half is written, why the method is not silent on operating cost and still leaves the gap open, and what a gate would have to hold to close it.

What the business case method already asks for

It would be easy to say that capital appraisal ignores operating cost. It does not, and the correction matters, because the fix for a requirement that is missing is different from the fix for one that is present and has no owner.

The last sentence is the reason for the whole requirement, stated by the body that wrote it. An operating cost moved off the sponsor's books and onto somebody else's is not a saving, and an appraisal that counts it as one has measured the wrong organisation.

HM Treasury's 2018 International Guide to Developing the Project Business Case turns that into a structure. Its financial case exists to demonstrate affordability and funding, and the task it sets is "to identify and resolve any potential funding gaps during the life span of the scheme". Capital and revenue requirements sit together at the top of the financial case's contents.

So the method asks the right question, across the right period. What it does not say, in either document, is who answers it.

Where the Saudi procedures put the operating cost

EXPRO, the Expenditure and Projects Efficiency Authority, publishes stage gate procedures for government projects. Its founding regulation, gazetted in Umm Al-Qura on 21 Rajab 1442 (5 March 2021), defines the government entities it deals with as ministries and other bodies funded from the state's general budget, and among its tasks lists verifying that projects meet stage gate requirements before they are included in the budget. Its powers are stated as being without prejudice to the competences of other bodies. That is the extent of the scope claimed here: what follows applies to budget-funded government projects within EXPRO's remit, and says nothing about projects outside it.

The business case procedures name their own parent. The Outline Business Case procedure, EPM-S00-PR-000007 Rev 003, describes itself as Stage 2 of the Five Case Method, and its first reference is HM Treasury's International Guide. Its treatment of the operating cost is explicit.

So the operating cost is estimated, it is appraised, and its funding gap is to be stated. The same procedure then assigns the work.

Its responsibilities section names two parties. The Sponsor, defined as the individual responsible for proposing the project during five-year portfolio planning, creates the business case and the evidence matrices. The Gateway Reviewer, who should be independent of the Sponsor, reviews them and records one of three decisions: accept, reject, or refer back. Inside the financial case the procedure adds two more roles. The entity's Director of Finance and the project's Senior Responsible Owner must play a lead role in vetting the financial model. And the confirmation of financial support is to be given by the appropriate individual within the organisation, "usually the chief executive officer".

"Entity" itself is defined in both business case procedures as the government organisation responsible for the delivery of government funded infrastructure construction projects. The body the procedure addresses is the one that builds.

One step, two strengths

The financial case states the ongoing cost twice, with different force.

The other manual assigns the knowledge

The procedure's Stage 2 list says where the operating estimate comes from: "refer to section 6.3.2 in Volume 16 Chapter 1". It does not say which manual. Read inside the Projects manual, Volume 16 Chapter 1 is the introduction to project turnover and closeout, seven pages with no section 6. The section exists in the other national manual, the National Manual for Assets and Facilities Management, whose Volume 16 Chapter 1 is the role of asset and facilities management during the phases of construction projects, EOM-ZP0-PR-000004-AR Rev 000. The knowledge centre lists that document in Arabic.

What the standard requires · EXPRO, National Manual for Assets and Facilities Management, Volume 16 Chapter 1, EOM-ZP0-PR-000004-AR Rev 000, sections 6.2.1, 6.3.1, 6.3.2 and 6.3.7, page 10 onward; the Arabic governs and the rendering here is ours

At the entity's strategic outline case, before project stages begin, the need for the asset is to be established together with initial capital and operating expenditure over the asset's life cycle, and the full involvement of asset and facilities management in that process is stated as essential to deal with operating expenditure correctly. At initial planning, asset and facilities management must set out the entity's budget constraints on capital and operating expenditure and share them with the project team. It must define the service quality of the completed asset in line with the entity's expectations and the operating budget, and it must define the asset's operating requirements so that the project team knows the project's end objectives.

That is a clear assignment, and it gives its own reason: the operating expenditure cannot be dealt with correctly without the people who will incur it. It sits in a manual the business case procedure reaches only through a cross-reference, and it assigns participation. It does not say that asset and facilities management signs the operating estimate, and the business case procedure, which governs the gate, does not list asset and facilities management among its parties at all.

Capital approval and operating affordability are two decisions

The reason this matters is that the two costs are funded by different decisions, taken at different times, and not necessarily by the same people.

A capital approval commits a sum over the construction period. The operating cost begins when construction ends and is funded year by year thereafter. The IMF's Public Investment Management Assessment, the framework it uses to assess how governments plan, allocate and implement public investment, treats the relationship between the two as something to be examined rather than assumed.

Read together, those three dimensions describe the mechanism exactly. The capital decision can be taken once, for the whole project. The operating decision cannot, because the money is appropriated one year at a time, and the first year it is needed arrives after the capital is spent. A confirmation that the ongoing cost can be contained within "the agreed and available budget" is, for any year beyond the current one, a statement about a budget that has not been agreed.

That is not a flaw in the confirmation. It is as much as a Stage 2 document can say about future years. It is the reason the confirmation cannot stand in for an acceptance: one says the organisation believes it can pay, and the other would say which part of the organisation has agreed that it will.

What the roles look like, without claiming any one organisation chart:

Prepares. Under the procedure, the Sponsor creates the business case, including the operating estimate. Under the other manual, asset and facilities management supplies the operating constraints and requirements the estimate should rest on.
Reviews. The Gateway Reviewer, independent of the Sponsor, and finance, which vets the model.
Funds. The capital is committed by the approval. The operating cost is funded later, through the entity's recurrent budget, by a decision the gate does not take.
Inherits. Whoever runs the asset, whether an internal operating unit, a separate entity or a contractor paid from the recurrent budget.

Only the first two are named at the gate. The fourth is the one whose budget the operating estimate describes.

The same boundary, seen from the asset management plan

What late involvement does to the estimate

An operating estimate is a price for an operating model: in-house staff or contracted services, the service levels, the hours, the maintenance regime, the spares held. Those are decisions, and the estimate is only as good as the answer to who made them.

Where the operating side is involved late, the estimate at Stage 2 prices a model the delivery team assumed. That is not a forecast of what the operator will spend; it is a statement of what the sponsor expected the operator to do. When the operator arrives, it may run the asset differently for sound reasons, and the difference between the two is nobody's variance, because nobody on the operating side ever adopted the first number.

The Assets and Facilities manual's own reasoning points the same way, and it does not depend on any ratio of operating to capital cost. It asks for asset and facilities management at the strategic outline case because the decisions that fix operating cost are being taken there.

Why early involvement does not need a lifecycle ratio to justify it

How the gap shows at handover and in operation

An unaccepted operating estimate does not fail at the gate. It surfaces later, in three places, and none of them looks like a business case problem when it arrives.

At handover, the receiving organisation needs trained staff, a maintenance strategy, spares, service contracts and a system holding the asset records. Each has to exist on the day the operator takes custody, so each is paid for before the asset has delivered anything, and none of them is on the construction contract.

What the receiving organisation has to produce, and why nobody tracks it

In the first operating budget, the asset asks for money that was described in a business case several years earlier by a different team. If the operating unit did not adopt that figure, its budget request starts from its own estimate, and the business case figure has no standing in the discussion.

In operation, the operating estimate can only be tested against what the asset actually costs if both were built on the same breakdown of the asset. An estimate made against the project's structure and an outturn recorded against the asset register are two sets of numbers with no key between them, and the comparison the business case invited cannot be made.

Whether the project's identifiers survive onto the asset record

Where this applies, and where it applies differently

The Saudi texts are the worked instance here, not the limit of the argument. The Green Book structure the EXPRO procedures rest on is the same structure any Five Case business case uses, and the question of who accepts the operating cost arises wherever capital approval and recurrent funding are separate decisions.

It arises differently in three arrangements, and none of them makes it disappear.

Where one body builds, owns, runs and funds from a single budget, the acceptance is internal, and the question reduces to whether the operating estimate had an author inside the operating function.

Where the operating cost is contracted at award, as in an availability payment, the payment commitment is the acceptance, and the question moves to whether the body that will make those payments agreed to them before the capital was committed.

Where the asset transfers to another entity on completion, the funding statement the procedure asks for, which should show which internal departments, partners and external entities will provide the resources required, is the natural place for that entity to appear. Whether it appears as a name or as a signature is the whole question.

Outside EXPRO's remit, including projects of bodies not funded from the general budget, the procedures read here do not apply, and this piece makes no claim about what those bodies require.

What to examine

Is the unit that will run the asset named in the business case? Not the department that will own it on paper; the unit that will staff it, maintain it and hold its recurrent budget. If it is not named, nobody can be asked to accept anything.

Who wrote the operating estimate, and who adopted it? An estimate produced by the delivery team with the operating side consulted is a delivery assumption. Ask whether anybody on the operating side has stated that the figure is theirs.

Which operating model does the estimate price? In-house or contracted, what service level, what hours. If the model is not written down, the estimate cannot be tested and cannot be adopted.

Is the estimate built on a breakdown of the asset the operator will use? Ask whether it could be compared, line by line, with the first year's outturn.

Which budget line will carry the cost from the first operating year, and who holds it? The funding statement should answer this by name. A confirmation that the organisation can afford it does not.

What happens at the gate if the operating side has not accepted? If the answer is nothing, the acceptance is not a control. It is a courtesy.

What the gate should hold

Our reading, not a standard · This publication's proposal, not a requirement of EXPRO, HM Treasury or the IMF

An operating cost acceptance, filed with the business case at the gate that precedes budget inclusion. One page, signed by the holder of the recurrent budget that will carry the asset, stating:

the operating unit that will run the asset;
the operating model the estimate assumes;
the annual operating and maintenance estimate, its basis, and who produced it;
the budget line that will carry it from the first operating year;
acceptance of the estimate as a claim on that budget, or the signatory's stated disagreement with it.

And one rule: the gate does not pass the business case without the page. It may pass it with a recorded disagreement, which is itself information a Gateway Reviewer can weigh. It may not pass it with the page missing.

Sources. HM Treasury, The Green Book, 2026 edition, paragraph 6.31 on capital, operating and maintenance costs, paragraph 6.87 on costs transferred between public bodies, and Table 4 for affordability as a critical success factor. HM Treasury, International Guide to Developing the Project Business Case, 2018, chapter 2 on the purpose and contents of the financial case. Organisation of the Expenditure and Projects Efficiency Authority, Umm Al-Qura, 21 Rajab 1442, Article 1(5) for the definition of government entities and Article 4(12) for stage gate verification before budget inclusion; the Arabic governs. EXPRO, National Manual for Projects Management: Project Initial Planning Introduction, EPM-S00-GL-000003 Rev 003; Project Outline Business Case Procedure, EPM-S00-PR-000007 Rev 003, sections 3.0, 4.0, 5.0, 6.1.2, 6.3 and 6.5; Project Full Business Case Procedure, EPM-S00-PR-000008 Rev 002, sections 3.0 and 6.3.2; Introduction to Project Turnover and Closeout, EPM-KTC-GL-000001 Rev 003. EXPRO, National Manual for Assets and Facilities Management, Volume 16 Chapter 1, EOM-ZP0-PR-000004-AR Rev 000, sections 6.2.1, 6.3.1, 6.3.2 and 6.3.7, published in Arabic on the authority's knowledge centre. English quotations are translated by Projects Advisors; the Arabic original governs. International Monetary Fund, The Updated PIMA Questionnaire, dimensions 7.c, 8.a and 9.a and their scoring rubric.

Operations is told to take part in the business case. Nobody asks it to sign.