A recent report from The House of Commons Committee of Public Accounts has highlighted concerns as to the delivery of major infrastructure projects in this country, with the Infrastructure and Projects Authority (IPA) confirming that around three quarters of all major projects are either delivered late or with significant costs overspends.
The Committee delivered the report, entitled “Lessons from Major Projects and Programmes”, against the backdrop of the ambitious plans set out by the government in the March 2020 budget for £600 billion of gross public capital investment by 2025, as well as a commitment to be net zero carbon by 2050.
Given these ambitions, the public accounts committee raised concerns about “the value for money risks resulting from the significant increase in investment, speed of delivery and changes to how government makes investment decisions... This Committee questioned the ability of both government and the private sector to deliver large increases effectively and efficiently”.
The Committee referred to earlier reports on major projects and programmes and noted “We see many of the same difficulties time and time again – such as programmes not keeping to cost or schedule, a lack of transparency in their progress, and weakness in leadership and governance”.
The Committee was keen to stress that procurements should not be rushed in the effort to deliver major infrastructure.
The report presented a series of conclusions for the reform of large-scale infrastructure project delivery. The key recommendations (and our observations) are set out below.
For the procurement phase, the Committee recommended:
- Rigorous option appraisal, and meaningful engagement with the public and stakeholders, before committing to a project’s scope. We frequently see disputes arising where, for example, time pressures on funding have meant the procurement process has been rushed. Identifying the scope of a project early on reduces the risk of disputes around scope later.
- Front end development of programmes. Again, the more the programme is developed during the procurement phase, the more accurate picture the parties will have as to an achievable timescale. Delays can have a significant financial impact for both the procuring party and the winning bidder – establishing a realistic programme lessens the chance of difficult conversations around timescales further down the line.
- Standardisation of costs estimates, and the ability to review and benchmark costs. The Comptroller and Auditor General recommended the use of ranges of estimates, which can narrow through the procurement process so that, for example, as a programme goes to outline business stage the range is 25% to 30%, with a costs estimate with an accuracy of plus or minus 10% by the final business case stage.
The Committee identified the following issues:
- Skills, Leadership and capacity. The public sector face a perennial challenge around not only skills shortages, but also individuals charged with delivering projects also “not being afforded the time in role to do the necessary work”. Managing project delivery requires rigorous contract management from both parties.
- Data analysis. The ability to review and track data measuring performance is critical. Many project agreements will contain contractual requirements for the delivery of management information and performance reports from the contractor/ supplier. Transparency around data allows an early identification which can be critical in managing issues early on to avoid significant disputes further down the track.
- The Committee wanted greater transparency as to progress with the projects. Whilst its primary focus was on parliamentary accountability, it also discussed the importance of transparency when it comes to budgets, timescales and capability. The Committee appear to have issued a broad call for open and frank discussion relating to all areas of major projects from the beginning of their life-cycle in order to ensure value for money for the taxpayer.
The report highlights common themes and challenges around successful procurement and delivery of major projects.
Successful project delivery requires:
- A well-developed procurement process, with a clear understanding of the objectives for all stakeholders
- A thorough appraisal of procurement procedure options to deliver the project
- A pragmatic approach to available data on costs and assets, to encourage funders and lenders to invest
- A commercial and technical understanding of the potential risks, and contractual solutions for how to manage those risks
- Anticipating needs and contingencies that may arise over the life of the project so as to future proof the specification as far as possible
- A focus on communication and transparency throughout project delivery
- A clear understanding of relief measures available for non-delivery, and
- A strategy for what steps will be taken if things do go wrong.
The delivery of infrastructure, with the public and private sector working together, creates opportunities for economic and social growth, as well as community cohesion.
Our market leading infrastructure teams are experts in delivering successful projects across all sectors including health, education, transport, leisure, energy, waste, social infrastructure and IT. We work with our clients from inception and choice of procurement, through to the tender process, complex contractual negotiations, contract management, dispute avoidance and (if necessary) dispute resolution.