Critical programmes slip through net of new governance plans for govt mega-projects, says new PAC report

- PAC welcomes Treasury taking greater responsibility for complex, risky programmes

- Warnings that projects including Euston Station and New Hospitals Programme will continue to come under past ineffective arrangements

Multiple critical government programmes could be left out of plans to strengthen governance of so-called ‘mega projects'. In a new report, the Public Accounts Committee (PAC) welcomes HM Treasury (HMT) plans to take more responsibility for planning and delivering such mega projects given frequent problems arising in the past, while warning of other complex schemes being left to slip through the net.

A mega-project can be defined as government's biggest and highest-profile projects, which are particularly costly (in excess of £10bn), risky and complex. These in past years have routinely seen issues including unclear objectives, construction starting when design is still immature, and budgets and schedules announced too early. The PAC welcomes HMT's commitment to implement stronger governance for these projects, per recommendations made by the Office for Value for Money (OVFM).

However, it is surprising that HMT and the OVFM only consider three projects in the government's vast portfolio to be ‘mega', and thus subject to this stronger governance – HS2, the Sizewell C nuclear power station, and the Dreadnought submarine programme. This leaves out projects including Euston station, the New Hospitals Programme, the Lower Thames Crossing, the Oxford-Cambridge Arc, and artificial intelligence. All projects in the government's portfolio of over 200, other than the three considered ‘mega', will still fall under the previous approach to governance and decision-making, which was not working effectively. The PAC is calling on HMT to lay out the rationale for the mega-project criteria.

The government has set out a number of missions as part of its plans for reform, has set up Mission Boards to oversee their delivery across government, and also plans to drive more “place-based” governance and co-ordination of projects. Each mission requires investment in major projects, and the PAC was left unconvinced by how these separate yet overlapping structures would work in practice. The report warns that work could be duplicated and confusion arise without the right skills involved in decision-making, and asks for an explanation with examples on how these arrangements will help deliver government's infrastructure strategy.

On the strategy, the report warns it is not clear how HMT and the National Infrastructure and Service Transformation Authority (NISTA) will be held to account on its progress. With the strategic advisory role of the National Infrastructure Commission (NIC) having been brought inside government, the report warns of the risk of an absence of independent scrutiny over the effectiveness of HMT and NISTA in delivering the strategy. The PAC is calling for more information on how government will make arrangements for independent assurance to be in place.

Sir Geoffrey Clifton-Brown MP, Chair of the Public Accounts Committee, said: “It is welcome to see recognition from the Treasury that, given past failures, a firmer grip must be taken by the centre of government on so-called ‘mega-projects'. The challenges implicit in successfully bringing into land the government's costliest and most complex programmes are self-evident, and this change has the potential to completely transform how such schemes are managed. However, it is surprising that under the current definition, the Treasury is only taking this greater accountability for three of over 200 of the nation's most challenging schemes. We look forward to hearing more from government on the rationale behind this classification, as many high-profile programmes will still suffer from the same unsatisfactory governance demonstrated to be so ineffective in the past.

“The role of the cross-cutting boards overseeing government's high-level missions in its Plan for Change were explained to our inquiry, and this inquiry found a risk of confusion and duplication in the overall structure of which they are a part. The goals behind each of the government's missions are of course desirable, but Whitehall must be directed to carry them out in a coherent way. If these arrangements are not aligned properly per the recommendations in our report, then failures of the kind seen in the delivery of HS2 will continue to echo into the future of the delivery of British infrastructure.”

PAC report conclusions and recommendations 

It is welcome that the Treasury is implementing stronger governance, and taking more responsibility and accountability for planning and delivering mega projects. We frequently see issues with governance and decision making on major projects. In particular, unclear objectives, construction starting when design is still immature, and budgets and schedules announced too early. The Treasury has committed to implementing in full the recommendations set out in the OVFM's report on governance and budgeting for mega projects. For example, departments will have to complete feasibility studies to scope projects. Mega-projects will receive funding from the Treasury for this feasibility stage and will not receive funding to deliver the project until the final investment decision is made by the Prime Minister, Chancellor and Secretary of State. A Strategy and Delivery Plan will be laid as a Command Paper in Parliament at the start of the project and at key milestones, including when ministers make material changes e.g. to scope or objectives. The OVFM and the Treasury expect these measures to mitigate the risk that mega-projects budgets and timetables are announced before they have reached the required stage of maturity. However, while the Treasury also plans to be more involved in the governance of mega-projects, with greater accountability for the project's success, how this will operate in practice needs to be clearer.

Recommendation 1. The Treasury should write to the committee in 12 months with an update on the effectiveness of the revised approach to governance of mega-projects.

There are many strategically important projects that will not fall within the OVFM and Treasury's definition of a mega project. The Treasury and the OVFM's criteria for what constitutes a mega-project are focused on strategic importance, complexity and cost, with the latter needing to exceed £10 billion to be considered 'mega'. This means a number of complex, strategically important projects, such as the Lower Thames Crossing and the Oxford-Cambridge arc, do not meet this definition. We were told that Euston station's bespoke governance arrangements and many stakeholders mean it is an example of a project which could become a mega project. The criteria exclude projects that are deemed to be repeatable and scalable, such as new hospitals, despite previous failures being experienced by these sorts of projects. Similarly, technically complex and innovative projects, such as digital transformation and artificial intelligence (AI), also do not fit the Treasury and OVFM definition of a mega project, despite government's clear focus on these to deliver its ambitions for public service reform.

Recommendation 2. Alongside its Treasury Minute response, the Treasury should write to us setting out the rationale for the £10 billion cost criterion for mega projects, and under what circumstances a project's complexity and importance could justify it being a mega-project even where the £10 billion cost threshold is not met.

We are not yet convinced there is a coherent approach to making decisions on major projects as part of wider plans for local areas and national missions. The ultimate responsibility for a large and complex project currently sits within one department despite the fact these projects can affect multiple sectors of society and the economy. We were told that the Government intends to use the boards overseeing delivery of the government's five missions to identify the links between projects where they collectively contribute to a mission. Government also intends to use the infrastructure strategy and pipeline to drive more "place-based" governance and co-ordination of projects which are dependent on each other to deliver outcomes in a specific area. These are in addition to the new arrangements being put in place for mega projects. However, we were unconvinced by witnesses' explanation of how these separate yet overlapping structures would work in practice, raising the prospect of duplication of work and confusion in delivery without the right skills involved in decision-making

Recommendation 3. Alongside its Treasury Minute response, the Treasury should write to the committee with explanations – with worked examples – for how it will ensure major and mega project governance will align with Mission and place-based governance in the delivery of the infrastructure strategy.

NISTA still has work to do to ensure that it gains assurance about progress with all major projects and that they are governed and assured effectively. The government has been focused on mega-projects and the infrastructure strategy and pipeline but there are over 200 projects on the Government Major Projects Portfolio (GMPP) which also need appropriate attention and scrutiny. NISTA currently divides projects on the GMPP into tiers and decides whether to allocate resources to overseeing a project depending on the tier. However, its focus is likely to be on some of the larger projects, including the mega-projects, and overseeing delivery of the infrastructure strategy. Departmental oversight boards also need to have the right skills and capability to properly exercise their oversight role and lead major projects successfully. To address poor governance and decision-making culture, NISTA has been working on improving and growing the project delivery function and ensuring standards and training are consistent. It is not yet clear to us how it will reform governance of all projects on the GMPP, and how it will gain assurance about progress with those projects.

Recommendation 4. In its Treasury Minute response, the Treasury should set out what it and NISTA will be doing to improve governance and assurance of all major projects in the future - particularly at a Departmental level - to ensure oversight boards have the relevant skills mix, including what system-wide interventions it is planning to make.

NISTA has a broad and stretching range of responsibilities, which will require it to juggle many competing demands on its resources. NISTA is responsible for infrastructure strategy, major project assurance, project delivery capability and has six objectives covering these broad areas. To fulfil these, NISTA has approximately 200 members of staff, though it stated it can also draw on around 18,000 project professionals across government, and the Treasury told us that it envisages some efficiency in it being brought into the Treasury. NISTA is also responsible for improving the collection and use of data to drive government project delivery, and acknowledges there is more work to do in standardising and using the data provided by projects. Bringing NISTA fully into the Treasury requires a fundamental change in culture, thinking, and the way Government delivers mega projects as they will now have a direct stake in the success or failure of these projects.

Recommendation 5.

1. a) NISTA should outline milestones for achieving its strategic objectives, including how it will allocate its resources to deliver its objectives, and ensure it retains a focus on priority areas such as digital and transformation projects.
2. b) NISTA should make better use of data on the performance of major projects to inform its assurance work.

It is not clear how NISTA and the Treasury will be held to account for delivery of their infrastructure strategy and pipeline. It is now critical that NISTA and the Treasury deliver on the commitments they have set out. NISTA believes that the role of setting infrastructure strategy is better situated inside government because the advice it received from the independent National Infrastructure Commission (NIC) was not always aligned with government policy. NISTA told us that it is retaining the NIC's advisory council to ensure there is a strong voice from industry experts to influence government strategy. However, there is a risk that bringing the NIC's strategic role into government could leave an absence of independent scrutiny over the effectiveness of the Treasury and NISTA's delivery of the infrastructure strategy.

Recommendation 6. In its Treasury Minute Response, the Treasury and NISTA should set out how they intend to report annually on progress against delivery of its strategy, as well as what arrangements it will make for this to be independently assured.