Major projects: Government warned of skills gaps and unreliable cost estimates

A report from MPs om parliament’s Public Accounts Committee has found that departments are often too dependent on private sector suppliers to support delivery of large tech and infrastructure programmes

A lack of skills in the civil service has left departments too dependent on suppliers and weakened their position as a buyer, MPs have warned.

Departments have been left “in a weak position” because they “cannot act as an intelligent client” without sufficient in-house project-management, technical and engineering skills, the Public Accounts Committee said in a report this week. And a lack of cost-estimation capability means government is reliant on suppliers defining how much a project will cost, the report added.

Government last year invested £150,000 in a mass of data to kickstart an initiative that aims to ensure that major projects are embarked upon with much more accurate estimates of how much they will ultimately cost to deliver. The Benchmarking Data Service will house information on 6,000 projects – encompassing 4,673 programmes related to UK roads, 1,298 railway projects, and 123 rollouts of new healthcare infrastructure.

A multibillion-pound project to bring together four of government’s largest departments on a shared services platform, meanwhile, recently brought in specialist consultants to help “reduce bias and support the development of a realistic business case”.

Despite such efforts, the report says: “Optimism bias in government is a significant factor in nearly every project we look at. Another, related, factor is a tendency in government to approve projects before they have been developed sufficiently for there to be confidence in the accuracy of the cost estimate. High Speed 2 has been a case in point.”

A February report by PAC noted that the 2020 £44.9bn cost estimate for the first phase of HS2 had risen to between £49bn and £57bn in 2019 prices – and could rise by a further £8-10bn due to inflation. Plans for HS2 had only reached a maturity level of 10% when the final business case was approved.

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“HM Treasury told us that the challenge of estimating cost accurately for developing business cases and for spending reviews is an area that government still has not cracked and that better transparency about cost estimates can be helpful,” the MPs said.

The report also warns that the IPA’s plans to improve the quality of government’s cost estimates of major projects have taken too long to implement.

The authority has developed “a community of cost estimators” across government and a cost-benchmarking hub to provide better data to improve cost estimation, the report says. However, the hub “does not yet have the data to make it useful and effective as a tool” and the IPA does not expect departments to populate it with their project cost data until later this year.

Work is underway to build up government’s project-management capability through the government’s major project leadership academy. But the report warns there is “still a long way to go and there is a particular need for skilled professionals in senior positions”.

Only 1,000 of the 16,000 professionals who need to gain accreditation have done so thus far, according to the Infrastructure and Projects Authority, which provided evidence to PAC’s inquiry. The IPA aims to have another 1,000 professionals accredited through the programme by the end of March 2025.

The report calls on the Treasury and the IPA to produce an analysis of risks to the government’s portfolio of infrastructure projects caused by this lack of skills.

It points to some of the issues stemming from the skills deficit, including that there have been “numerous projects over the years where cost estimates have increased significantly over the life of the project”.

As part of their response, PAC said the IPA and Treasury should set out how they plan to incentivise departments to populate the hub with “accurate and consistent information on the actual costs and benefits of their projects”.

As well as lacking clear cost estimates, the MPs warned that departments “spend too little time and effort establishing what value they expect a project to deliver and ensuring that major projects deliver the intended value”.

Plans for realising benefits of projects are “insufficiently professional” and there is no formalised process for looking at the value a project has delivered once it has been up and running for some time.

Meanwhile, departments “still have few incentives to commission and carry out high-quality evaluations of major projects”, the report said. It pointed to an earlier report that found in 2019, only 8% of £432bn of spend on major projects had robust impact evaluation plans in place, and 64% of spend had no evaluation arrangements at all.

‘Unique and novel challenges’
Commenting on the report, PAC chair Dame Meg Hillier said the failure to ensure projects have robust impact evaluation plans in place is “symptomatic of the short-term mentality dominating these processes”.

“The government must encourage cross-departmental learning if we are to avoid repeating past mistakes,” she said.

The report calls on the Treasury and the Evaluation Task Force – which is in the process of updating its 2019 analysis – to come up with a plan to address the root causes of why evaluations are not routinely carried out and how to incentivise departments to carry our more high-quality and independent evaluations.

Hillier added: “Over the coming years, government spending on major infrastructure projects is set to rise to unprecedented levels. Such projects present unique and novel challenges which government must navigate if it is to secure value for public money. Without a robust market for essential skills in place, these are challenges the UK will fail to meet, as shortages push costs up in a globally competitive environment.”

A government spokesperson said: “This government delivers some of the most challenging, ambitious and innovative projects the UK has ever seen. Speeding up delivery, while ensuring projects are effectively managed and deliver value for money, is a priority. Upskilling staff is a key part of this and we recently published a new framework to enable civil servants working on public projects to utilise AI to improve the effectiveness and efficiency of their delivery. We are on target to meet our long term ambition to accredit 16,000 civil servants as government project delivery professionals.”

Beckie Smith

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