The Treasury has endorsed the Office for Value for Money’s (OVfM’s) recommendation that mega infrastructure projects in the UK should have a lengthy feasibility stage before they are announced publicly.
As part of a Public Accounts Committee (PAC) inquiry into the governance of mega and major projects, the Treasury stated it proposes to fund a feasibility stage for mega-projects of the future which will be “more substantial” than it currently is to clarify objectives for mega-projects “before setting out publicly what the project intends to do.”
Within the report on the inquiry, Governance and decision-making on major projects, the PAC noted this could take months or even years but the Treasury stated it believe it necessary to have a “staged approvals process as recommended by the OVFM, where funding will only be provided from the Treasury to get to the next stage of approval once the mega-projects decision panel is satisfied that the project is able to proceed.”
The Treasury referred to this as a “go slow to go fast” approach aiming to encourage both the “faster and more reliable delivery of projects.”
Within the PAC report, it further notes how that politicians are a factor in government announcing mega projects too early.
The PAC said the OVfM told it that the proposed feasibility stage will try to address this by setting out “how governance is going to work, with publication of the strategy and delivery plan for a mega-project that defines the stages it will go through.” The OVFM and the Treasury also emphasised the importance of flexibility and that cost and schedule estimates should be very broad ranges in the early stages.
Under new mega-project governance proposals, when the mega-project is ready it will enter a construction phase, which would have its own budget with flexibility within it where things are not expected to change, as a result of the work done during the feasibility stage.
The OVfM, a Labour-initiated unit within the Treasury, made its recommendation for this lengthy feasibility stage within its report Value for money study: governance and budgeting arrangements for mega projects, released in July.
It detailed the flaws in how government management of mega projects works at present, warning that the projects are simply not set up for success from the outset, and how it intends to change that.
Discussing the feasibility stage recommendation in the recent PAC report, the Treasury stated it is proposing “a strategy and delivery plan for each mega-project to be published, “stating what the aim of the mega-project is and how this will be delivered” at the end of the feasibility study. These plans will be laid as “Command Papers” in Parliament at the start of the mega-project and also at key milestones through the project delivery, including when ministers make material changes to mega-projects, the Treasury is proposing.
The Treasury further outlined how it intends to have a new supervisory role for mega-projects, this will see it have a greater role in the governance of mega-projects by requesting a seat at the board and, “in its role as financial shareholder, will have far greater accountability for the mega-project’s success.”
These new proposals are being made as the Treasury, OVfM and National Infrastructure and Service Transformation Authority (Nista) said that there are currently issues around whether the objectives of a megaproject are clear, whether the design is immature as construction is started and whether budgets and schedules are announced too early.
The organisations further highlighted how there is often pressure on projects “to get started quickly and this pressure is often political, with projects progressing before decision-makers have the time to fully understanding a mega-project’s risks and uncertainties.”
Mega-projects are different from major projects. Mega-projects are those that exceed the £10bn threshold, which both the PAC and Treasury highlighted as a current issue, which needs some flexibility in the future.
On 31 March last year, the government Major Projects Portfolio (GMPP), which comprises the government’s largest, most innovative and most risky projects, included 227 projects at a combined whole-life cost of £834bn. Within the GMPP are a small number of ‘mega-projects’, such as big railway or energy projects, that are particularly costly, innovative, risky, complex and/or strategically important.
Institution of Civil Engineers (ICE) director of policy and external affairs Sam Gould said: “Today’s PAC report on governance and decision-making for major projects is a welcome addition to the conversation about how to improve project delivery.
“The ICE and the PAC agree that increased Treasury oversight for projects is a smart move. Streamlining decision-making has long been identified by the ICE and others as a key area for improvement.
“The ICE also agrees with the PAC that it’s concerning that such enhanced oversight will only apply to projects expensive enough to be labelled ‘mega’.
“Improving delivery should be a priority for projects of every shape, size, and cost.
“The report also echoes the ICE’s call for the Nista to retain an independent voice so it can proactively and effectively challenge government.
“Nista should also be given the ability to mandate the use of best-practice tools like the Construction Playbook to raise delivery standards across departments, whether or not projects meet the £10bn ‘mega’ threshold.”
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