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Delivering the Government's infrastructure commitments through major projects Contents

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3Delivering projects which grow the economy and ‘level up’

Background

67.The Government has made ambitious commitments on infrastructure but if it is to achieve these objectives, it needs to deliver individual projects well. Governments have faced challenges with implementation in the past that have led to projects often coming in over budget, late, and not delivering the stated benefit(s). Speaking to this end, Professor Bent Flyvbjerg of the Oxford University Saïd business school, told our predecessor Committee that his iron law of megaprojects is that they overrun on cost, time and underdeliver the anticipated benefits.65 The Government needs to overcome these challenges if it is to deliver on its infrastructure objectives.

A clear focus on strategy and outcomes

68.Successful project delivery starts at the outset. This means: clarity on intended outcomes, realistic costs and timescales, and clarity around how eventual success will be measured. This understanding must by shared by all involved. The Comptroller and Auditor General, noted that “the repeated messaging from the NAO has been that there is a lack of clarity in the scope and objectives at the outset of projects and, conversely, a focus on excessive accuracy of cost estimates.”66 This was echoed by Dominic Cook, of Deloitte, who said:

more time (and investment) should be made upfront on major projects with a particular focus on planning, resourcing, aligning interests, standardising (not inventing), setting crystal clear scope, understanding how benefits will be derived, being realistic on cost and time as well as ensuring fit for purpose reviews and project controls are implemented.67

69.Witnesses told the Committee that projects are more likely to deliver successfully if the approach and scope are focussed on the most important outcomes. The former Comptroller and Auditor General, Sir Amyas Morse, told the previous Committee’s inquiry: “I have identified quite a lot of projects where I think a more modest approach, much less risky, might have delivered a lot of the benefits … . I see a lot of projects that I think are trying to be world-beating, best in class, but just good enough to deliver the required benefits would be rather preferable in my view.”68

70.Sir John Armitt stated the importance of understanding what “you really value” so that when trade-offs are made the project doesn’t lose focus. He told the Committee that:

if I can take the example of the Olympics, which everybody says was a fantastic achievement, it was fairly straightforward. Time was the absolute fundamental driver, and everything else took second place to time because we could not be late on the opening ceremony and delivering the Olympics.69

71.In evidence to the predecessor Committee, Professor Michael Bourne of Cranfield University said of the Olympics, that “the costs went up just over threefold … just after we won it”.70 However, the London Olympics is considered a great success because it delivered the most essential output well. London First summed this up when it told the Committee that “successful examples of Government-led major projects (such as the 2012 London Olympics) have been notable for their clear scope, immovable deadline, and clear-headed leadership throughout Government and delivery bodies.”.71

Delivering the promised benefits

72.Fundamentally, projects can only be deemed successful if the end users derive benefit from the final product. The Committee heard that projects need to be clear on the benefit they wish to achieve at the outset and maintain focus on that throughout if they are to be successful. Gareth Davies told the Committee that there is “a robust system for deriving benefits” but that early benefits forecasts are a “dynamic figure” that must be adjusted and kept track of throughout the project. In his written evidence, he stated that “once an intervention has been approved, departments sometimes fail to revisit investment appraisals to monitor benefits realisation against forecasts.”72

73.The Committee heard that as projects progress through delivery stages, they can default to focussing on time and cost and lose track of why the project was conceived in the first place. Project X told us that while there was a focus on identifying benefits at the outset of a project, that focus deteriorated as projects progressed through various stages.73 Deloitte’s written evidence to the Committee stated that:

all too often significant effort is put into [benefits] plans at four distinct times: (i) during preparation of the full business case (ii) before an NAO audit/MPRG review (iii) ahead of a Parliamentary Committee enquiry/hearing and (iv) to justify the on-going operation of a broken project about to enter a “re-set”. The systemic tracking, updating and reporting of benefits could and should be given greater priority by project leads as planners tend to underestimate risks of complexity, supplier capability, market maturity, scope changes etc. during project development and decision making.74

74.The focus on cost and time over quality of outcome can mean that the benefit of the project can be lost. Deloitte’s evidence to the Committee quoted John Ruskin, stating:

it’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money—that’s all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.75

75.The National Audit Office investigation into Verify stated it was one example of a Government project where the forecast benefits reduced to the point where it was “hard to conclude that successive decisions to continue the project were sufficiently justified.”76

76.It is hard to judge whether Government projects are successful in delivering their benefits, because tracking often stops once the project is complete. In written evidence, the Comptroller and Auditor General stated that the NAO has “found in our value for money reports that once an intervention has been approved, departments sometimes fail to revisit investment appraisals to monitor benefits realisation against forecasts.”77 The NAO’s report on projects leaving the Government Major Project Portfolio stated that “the lack of systematic monitoring of whether projects had realised benefits made it difficult to conclude on trends in performance across the Portfolio”.78 The NAO tracked 48 projects and found that, for 22 of the 48, it was not possible to say whether the project had achieved the stated aims. This failure to follow up on benefits means the Government has a lack of data from which to learn, and it also reduces the incentive for those responsible for delivery to maintain a focus on the benefits throughout the project lifecycle.

77.The IPA has responded to the NAO report in its latest annual report, where it states:

leaving the GMPP rarely marks the end of a project’s delivery, and for some of the most complex projects the IPA maintains a continued involvement in the project, as required. In line with recent NAO recommendations, the IPA is committed to ensuring that all projects leaving the GMPP have had an exit (or equivalent) review which includes consideration of the ongoing tracking of project benefits.79

78.Nick Smallwood, Head of the IPA, told the Committee that there is “what is called a Gate 5, which is after the project is completed and is into operation, and it is good practice and discipline to then go to check that those benefits expected continue to be realised through the life of the project.” He went on to say he would like to see projects remain on the portfolio “for at least the first Gate 5 gateway review”. He noted that:

if [the Gate 5 review] is healthy I think it is an appropriate time to come off. We have a number of projects joining every year and a number leaving. I do not have the resources to have an endless stream of projects. I think there is an appropriate time when there is a diminishing return from having our review. Certainly, a rigour around Gate 5 reviews is something we should encourage.80

79.The IPA produces an annual report for projects on the major project portfolio which includes schedule, cost and latest delivery confidence assessment. This is covered in more detail later in this Report. The report includes some narrative on benefits, but financial and transformational benefits are not consistently reported, and (where they are reported) cannot be tracked back to earlier approvals.81

80.A project’s benefits are the very reason it is proposed and delivered, and the Committee does not believe that a project can be deemed successful if it does not demonstrate realisation of its stated benefits. The Government has sought to justify spending millions of pounds on infrastructure during economically-uncertain times by stating it will boost economic outcomes across the country. The Committee therefore expects the Government to be able to demonstrate growth as a result of this spend in future years.

81.Far too often, project managers and ministers prioritise time and cost at the expense of benefits. The Committee has heard of projects delivering benefits that are reduced to the point of no longer exceeding the costs, or more frequently, the benefits being unclear entirely upon delivery.

82.Benefits must be prioritised and reported. The IPA should report against benefits plans consistently in its annual reports from 2021–22. Consistent reporting of benefits should include a standardised financial measure, reported as trend data (showing the benefit agreed at the outset, alongside any agreed changes at specific dates, up to current forecasts) alongside a narrative of transformational benefits promised.

83.The Committee welcomes Nick Smallwood’s statement that major projects should remain in the GMPP until Gate 5. The Committee would like the IPA to consider periodic reporting on past projects, perhaps at five-year intervals, to assess whether they have achieved their benefits. The IPA should write to the Committee in the Autumn to explain how best to do this and when the first review will take place.

84.Where benefits will not be apparent immediately on delivery and may only materialise later, there should be a mechanism to hold previous ministers and SROs to account after the project has ended. The Chair of the Committee has written to the Chair of Public Accounts Committee (PAC) asking that when it receives NAO reports on projects, it calls the ministers and senior civil servants who were in place during set up, where that is appropriate, to give evidence.

Over-optimism in project planning

85.Over-optimism in project planning was a consistent theme in the evidence the Committee received during this inquiry, as it was in the predecessor Committee’s inquiry. Dominic Cook of Deloitte told the Committee that “all too often the heady combination of optimism bias combined with the occasional project strategic misrepresentation result in a headlong rush into the particular project without recognising that the initiation and management of major projects represents a significantly higher risk to an organisation than business as usual.”82

86.One of the key issues raised with the Committee was that projects lock in costs and timings before scope and benefits are defined. This is combined with a pressure to deliver as quickly and cheaply as possible, which leads to projects ignoring or playing down risks, and understating delivery challenges. The Association For Project Management (APM) told the Committee that early figures are often calculated without the “information required for detailed and accurate estimating”. The APM went on to give the example of the Scottish Parliament building which, it stated “had its estimated cost put into primary legislation” and that these later transpired to be “woefully underestimated” because detailed work on the architectural models had not been done.83 The Comptroller and Auditor General confirmed to the Committee that project managers commit to time and cost estimates too early on in the process, and then struggle to deliver to those specifications later.84 Tom Thackray agreed, saying that:

we get locked into viewing these major projects in very restricted terms because of the way they have been sold at the outset. We should be much clearer that these are major and complex projects and they will flex over time.85

87.The Royal Institution of Chartered Surveyors (RICS) told the Committee that optimism is sometimes “driven by political pressures–the need to ensure that projects which are considered as political priorities must proceed ‘at all costs’ and if this means artificially supressing the ‘true’ cost and artificially reducing the programme time allowed, then this is an acceptable route to take.”86

88.While political pressure to be optimistic is hard to overcome, there are some technical approaches which can reduce the risk of inaccurate estimates. Nick Smallwood told the Committee that improving early estimates “comes back to … a robust assurance process.”87

89.Witnesses to this inquiry and our predecessor Committee’s major projects inquiry suggested a number of approaches, which include:

a)Shadow Cost modelling, where a second team without a vested interest in the project undertakes a parallel costing exercise for comparative purposes. Professor Michal Bourne of Cranfield University told the previous Committee that this had been used in planning the Olympic Games, and it meant that the team knew early in the project that costs would be significantly higher than the original estimate88

b)Benchmarking against historic or international data. RICS told the Committee that it had collaborated on the production of International Construction Measurement Standards (ICMS), that could act as “internationally agreed high-level cost classification framework that can be used to classify, record, and present life cycle costs of an asset”.89 Nick Smallwood told the Committee that the IPA “has started work to implement a benchmarking hub, a cross-Government data repository where we will be able to capture actual costs as well as true benchmark costs for components of Government projects.”90

c)Costs approved in ranges. The Comptroller and Auditor General told the Committee that ranges (rather than point estimates) allow for the inclusion of quantified risks in early estimates, and could be narrowed as the project progresses.91

d)When a private sector delivery mechanism is used, witnesses have suggested going to the market early to understand potential costs.92

90.All of these approaches have potential drawbacks, of course. As Professor Bourne explained, exercises like shadow cost modelling are expensive,93 but the Committee heard time and time again from experts that up-front investment can save time and money later.94

91.Projects are hindered by over-optimistic estimates of cost and time schedules, and overstatement of early benefits. Ministers are too keen to commit to specific cost and timescales early in the process, and project managers become tied to these estimates. The early estimates can then shape the rest of the project delivery, sometimes leading to reductions in outputs or benefits as project-managers struggle to keep project timescales and costs in check.

92.Project data should be reported in ranges, which reflect quantified risks to costs and timescales. The IPA should start reporting ranges for any newly-approved projects immediately, and HM Treasury should state an expectation that projects going through Treasury Approval Processes (TAP) present ranges as a default.

93.Projects which are particularly risky or high profile should invest more time up front, and consider approaches such as shadow cost modelling. The IPA should report on the methods used on the GMPP which can be viewed as best practice for other Government projects.

Preventing derailment of projects by achieving local buy-in

94.Local resistance to a project can lead to delays, or even cancellations, and can risk value for money. Written evidence to the Committee gave examples of where public consultation either did not happen or was insufficient to overcome local opposition. The Royal Society for the Protection of Birds (RSPB) raised one such example:

The Oxford to Cambridge Expressway [is] on hold while the Department for Transport explores alternatives, to date there has been no public consultation on this project. The promised Government review must redress this democratic deficit and answer questions about the project’s compatibility with Government net zero carbon and 25 Year Environment Plan targets.95

95.Jonathan Loescher wrote to the Committee with specific reference to HS2 explaining that “people who are affected by infrastructure schemes, through no fault or wish of their own, stand to lose their homes, businesses, lifestyles or communities” and that “90% of respondents [to a recent survey] felt that HS2 Ltd’s engagement was poor or very poor.”96

96.As Nick Smallwood told the Committee:

[consultation] is one of the parts of good project management. You have to face all the challenges, both local constituents and non-Government organisations. It goes with the complexity of some of the infrastructure we have to put into the UK. We are a very dense island and lots of communities are impacted. If you want a successful project you have to have a plan to engage with all the key players.97

97.The Committee received a lot of evidence stressing the importance of consultation early in the decision making process. In 2018, Martin Blaiklock presented written evidence to the previous Committee inquiry suggesting consultation should take place before (not after) key decisions are made.98 Jonathan Loescher, in his written evidence on HS2, suggested an independent ombudsman should report directly to Parliament.99

98.Witnesses were firm that this consultation needs to happen before decisions are made. Sir John Armitt took the same view:

the public is the customer, the public is the consumer and, therefore, their views need to be taken into account. To get those views taken into account, we need to be prepared to spend a lot more time opening up the issues.100

He noted that in France “they spend longer on the public engagement at the front end of their projects before they publish lines on a map”.101

99.Lord Agnew agreed:

it is about winning the hearts and minds of that local community and getting them to understand the benefits of whatever the project might be for their community.… we need to do more about that to ensure that local communities are benefiting, but we also need to ensure that the people leading the opposition to a particular project are local people … We want to hear from the local people and if they have objections then we listen carefully, but they need to be given the priority.102

100.Jesse Norman raised the example of MHCLG consultations on housing projects, where “there has to be a board, it has to be diverse and inclusive, it is private sector-led and projects have to be agreed and heavily consulted on and bought into at project formulation stage and then before the bid is sent in, so that hopefully that alignment between local concerns and issues and the sucking-up of the best knowledge locally takes place.”103

101.Not enough is done to involve local people in decision making at an early stage. The Committee heard that decisions are made about a project before consultation happens, and that late consultation can be insufficient to overcome local opposition. This can result in delays to projects, but it can also lead to infrastructure which does not have full public support or serve local needs.

102.All projects should include proper public consultation as part of the early decision making phase. Projects should consider setting up an independent arm to lead on public engagement that is proportionate to the scale and profile of the project. Projects should be able to demonstrate their engagement as part of early IPA approval gates, and as part of the Treasury Approval Process. Projects that are unable to demonstrate that they have undertaken proportionate public consultation, and responded to the findings of that consultation, should not get Treasury or IPA approval.

The Government’s ability to deliver projects with its infrastructure strategy

Capability

103.Once projects have completed the start-up phase, they can go off course during delivery. One of the key issues raised with relation to Government project delivery, highlighted by our predecessor PACAC and PASC Committees, is project management capability within Whitehall. As our predecessor Committee reported,104 the Government has invested in upskilling civil servants, but evidence to this inquiry highlights a perception that the Civil Service remains insufficiently skilled to deliver major projects. The Comptroller and Auditor General attributed issues with a number of major defence projects to capability shortfalls:

Our recent report on delivering Defence Capabilities found that under-resourced project and delivery teams contribute to delays in delivery, with particular shortages of engineering and commercial staff. SROs for nine of the 32 Defence Major Projects Portfolio capabilities considered that a lack of team capacity and skills is affecting capability to deliver105

104.A number of submissions highlighted issues with the way project teams are formulated, with civil servants moving between roles, and there being insufficient skills in general. Deloitte suggested that not enough consideration is given to setting up teams with appropriately skilled people;106 RICS noted that civil servants often move between departments, leading to a lack of consistent staffing on projects;107 and Jag Patel stated that some departments suffer from “woefully inadequate project management skills”.108 RICS also questioned whether there was a particular lack of people with experience of built environment infrastructure which requires “theory-based project management techniques (such as team building, programming and resource planning and risk awareness) and also specific knowledge of the sector.”109

105.Our predecessor Committee commented on the training available for civil servants in project management professions, welcoming the investment in greater skills. Senior Civil Servants (SCS) wanting to be Senior Responsible Officers (SROs) on major projects must undertake training with the Major Project Leadership Academy (MPLA). The MPLA was established by the IPA in conjunction with Oxford University’s Said Business School. Civil servants below SCS can train through the Project Leadership Programme (PLP) which is delivered in conjunction with Cranfield University. Thus far, some 570 civil servants have graduated from the MPLA and a further 700 from the PLP.110

106.Nick Smallwood praised the MPLA as “world class” but acknowledged that the provision of project management training had not penetrated far enough into the Civil Service. He conceded that, below the PLP level, there “is very little”. He told this Committee that:

we need to build a cadre of skills throughout the profession from the Fast Streamers coming in. It is worth highlighting that we have a very healthy application of Fast Streamers coming into Government who want to play a part in the project delivery profession, and we need to skill them up from the get-go to become expert.111

In its written submission to this inquiry, the Government told us that the current in-house training in project management is undergoing a revision. This will see a more “rigorous approach to accreditation” linked to external professional standards.112

Senior Responsible Officers

107.The shortfall in SROs was highlighted by witnesses as a particular area of concern. The Comptroller and Auditor General noted in his written evidence that SROs were spread too thinly, with individual SROs spread across multiple projects. Lord Agnew conceded that the cadre of suitably qualified officials to act as SROs was too small:

every project should have an SRO and the brutal reality is that there are not enough of them and they are spread too thin … . Frighteningly, 88% of projects do not have an SRO who is spending 75% or more of his time on that project—these are major projects. Most of those projects should have a full-time person on them; that is the truth of it.113

108.Nick Smallwood told the Committee that, although not all projects needed a full time SRO for their entire duration, there were key stages when the role of the SRO was crucial and there should be a full-time, dedicated person. He agreed that the pool of SROs is too small.114

109.The shortage of SROs and of other suitably qualified project management experts contributes to the problem of churn, a longstanding complaint that our predecessor Committee considered in its project management report. With too few qualified SROs, the demand for their services between projects and departments is considerable and there has been a tendency for them to move too frequently.115 The Comptroller and Auditor General highlighted churn as one of the main issues with civil service project management:

this is something you wouldn’t see in the private sector to this extent. If you’ve got the right person leading a project you hang on to them and incentivise them to complete it to a high standard and within budget. It’s much harder for the Government to do that, particularly with the culture in the civil service of rapid turnover in key roles. There have been attempts to address that issue but these have only been partially successful.116

110.The Government is clearly aware of the issues relating to project capability and efforts are being made to address them. The IPA’s latest annual report outlines plans to address project capability, including continued recruitment through the project delivery fast stream, deploying the Project Delivery Capability Framework to assess existing capability, establish common, cross-departmental standards, and target improvements, and establishing a new academy.117 Unlike the existing Major Projects Leadership Academy, focussed on the Senior Civil Service (SCS), and the Projects Leadership Programme, focussed on those just below the SCS grades, this new academy will cover all grades, from entry level to the most senior.118

111.HM Treasury’s Green Book guidance on project delivery includes identifying that there are skilled people to undertake the project as a critical success factor as part of its five-case model for project business cases. Business case guidance states that “the level of available skills required for successful delivery” should match the option being appraised.119 It appears from evidence received, however, that a general shortage of skills might undermine this in reality.

112.Efforts to address capability are welcome but will take time to take effect. A scarcity of appropriately experienced people and salary constraints in the public sector contribute to the ongoing problem of shortages, particularly in the SRO role. The Government needs to recognise that capability is a potential constraint on its infrastructure plans.

113.The Government must give further consideration to civil service upskilling if it is to deliver its infrastructure commitments, which might include a commitment to making salaries more competitive, at least in the short term. The Cabinet Office should review whether a separate pay system or allowance for SROs and valuable project managers would help keep them in their roles for the duration of a project, and it should report back to the Committee in the Autumn.

114.SROs should lead a project from start to completion, and remain accountable for delivering benefits after completion. Heads of Departments should ensure that the right incentives are in place to retain SROs, including career or pay progression opportunities as appropriate. SROs should have enough time to lead properly the projects for which they are accountable—and in many cases, this will require the SRO to work full time on that project.

Ministerial decisions

115.Our predecessor Committee noted how ministerial decisions can contribute to poor project design and delivery.120 Ministers initiate projects often with little or no training on appointment, and few have relevant professional experience on which they can draw. Nick Smallwood told the Committee that “we believe there is a huge benefit in helping Ministers understand the impact they can have, both positive and negative, in the various decision making processes”.121

116.There are political incentives to proceed with projects too rapidly, against unrealistic budgets or schedules, but it is hoped that giving ministers insight into the project design and delivery process will mitigate that to some extent and counter the over-optimism that has been blamed for so many projects failing to meet expectations.122 Mr Smallwood was positive but realistic in his appraisal of the likely impact of project training for ministers:

I don’t think it is ever going to cure these embedded issues of the political system because that is the nature of the beast. What it might do is lead to a longer-term and a more calibrated and a more thoughtful process, and that can only be good.123

117.The Committee welcomes the introduction of training for ministers in project management. It is important that ministers take the opportunity provided to educate themselves better about how projects are delivered and how they can have an impact on that, both positively and negatively. The Committee expects that all Secretaries of State and any minister with significant projects in her or his portfolio will undertake this training immediately after appointment. In its response to this Report, the Government should include a list of all ministers who have already received the training and those who are booked to complete it by the end of the calendar year. The Committee will ask for regular updates from the IPA on training after ministerial reshuffles.

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