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How are government projects faring?

The Infrastructure and Projects Authority has published the fourth annual report on the status of major projects across government – all 143 of them, worth £405bn in total. Adam Boon looks at the portfolio and what impact Brexit might have.

The Government is inevitably focusing its attention on the political and economic fallout from the EU referendum and this is already having a knock-on effect on other policies and projects. Our recent analysis shows that everything, from the High Speed Two rail network to the Hinkley Point C nuclear power station, is experiencing uncertainty. But it is important that the most pressing domestic priorities do not get overlooked.

The annual update on major projects – which, since 1 January 2016, is the responsibility of the Infrastructure and Projects Authority (IPA) – gives us a snapshot of the Government’s performance to date on some of its largest and most complex projects. Examples of projects covered include capital projects such as Crossrail and Queen Elizabeth-class aircraft carriers, and transformation projects such as Universal Credit, on which the IfG will be publishing a major report in the autumn. Capital and transformation projects have different cost and benefit profiles (capital projects need a lot of up-front expenditure and tend to provide benefits at the end of the project; transformation projects can be structured to require less up-front investment and provide benefits incrementally).

There are now 143 projects in the Government Major Projects Portfolio (GMPP), down from 188 in 2015.

The number of projects in the GMPP is at its lowest level since 2013, due to a combination of fewer new entrants (24) and more projects leaving (76) the portfolio. A number of MoD projects classified as ‘new’ are actually elements of existing projects that now sit separately, which should be borne in mind when looking at the overall numbers.

Projects can exit the portfolio for various reasons, but not necessarily because they have been completed. A number of projects may now be considered ‘business as usual’ and therefore leave the portfolio. Of the 38 projects to have entered the portfolio a year ago, only 21 remain. It is questionable whether or not these projects were originally due to be completed within a year or have been re-designated as ‘business as usual’ to limit the portfolio’s overall size.

In Managing with Less, we recommended that in order to reduce the risks of project failures and make room for new priorities, the Government should reduce the size of the existing portfolio of major projects. The latest figures do show a welcome reduction in the portfolio’s size, allowing government to reallocate resources to the most risky projects. But it’s not clear whether this reduction is sufficient. Even more prioritisation will be necessary at a time when much of Government’s attention is focused on managing Brexit and on the new Prime Minister.

The percentage of all projects in the portfolio rated red or amber/red has increased since last year to 32%, and is at its highest level since 2013.

RAG ratings assess the level of confidence that a major project will be delivered on time and within budget. Each colour in the rating denotes the level of risk attached to a particular project, with green representing greater delivery confidence and red at the other end of the spectrum. The six red-rated projects in the portfolio are:

  • ISSC1 (CO): developing an independent shared services centre for the DfT based in Swansea
  • Shared Services Futures Project (DfT): centralise functions for finance, human resources, payroll and procurement into two independent shared service centres
  • NHS Procurement Efficiency Programme (DH): improve procurement practices and capability in the NHS
  • Adelphi Modernisation Project (HO): Home Office shared services project
  • Operational Information Services (MoD): delivering operational information services to Land, Air, Maritime and Joint users in the deployed environment
  • Electronic Monitoring (MoJ): procurement of an enhanced electronic tagging system.

The presence of a number of shared services projects mirrors recent criticism of the Government’s performance in this area from the National Audit Office (NAO). The number of red-rated projects would be half its current level without shared services projects. The decrease in the size of the overall portfolio means proportionally red and amber/red projects make up a greater proportion of the portfolio. However, the absolute number of projects in each RAG category has largely held steady since 2015 (the number of red, amber/red and amber projects have actually fallen).

The proportion of amber-rated projects that have been in the portfolio since 2013 has increased for the first time in three years.

Until this year, the proportion of amber-rated projects that have been in the GMPP since 2013 (and therefore featured in every annual IPA report) had fallen. The proportion of red and amber/red rated projects, however, has held steady. The portfolio is used to oversee the riskiest projects, so having new projects flashing red and amber/red does not necessarily indicate a problem. However, projects that have been in the portfolio for some time without showing improvement are more concerning.

Projects that started with a red or amber/red rating in 2013 and are still in the portfolio today have on the whole seen an improvement in their RAG rating.

Projects that entered the portfolio in 2013 with the lowest RAG ratings (red or amber/red) have broadly improved. Cabinet Office, DCMS and DWP all have projects that have moved from a red or amber/red rating in 2013 to amber/green for at least two years now.

DfT’s Shared Service Futures Project turned red this year, having entered the portfolio in 2013 with an amber/red rating. The MoJ (Shared Services) and DWP (Personal Independence Payments implementation) are managing projects which have been flashing red or amber/red since 2013. Although these ratings are concerning, they at least suggest the portfolio is not experiencing grade inflation to avoid difficult questions around slippage in RAG rating from one year to the next, which the Institute for Government has previously warned against.

Major projects are concentrated in MoD (34), DH (21) and MoJ (16).

The number of projects in the portfolio falls unevenly across Whitehall. The largest number of projects is in MoD, DH and MoJ, which is broadly similar to the pattern in 2015. Whilst these departments have red or amber/red projects, other departments with a relatively small number of projects have a high proportion of low rated projects. For HMRC, this includes projects in the portfolio since 2013 that remain red or amber/red.

MoD, DECC and DfT have the largest whole-life cost to manage, but the lack of a RAG rating for significant projects is a concern.

Whole-life cost of major projects is also distributed unevenly across departments, although this does not necessarily reflect the same pattern of distribution as the number of projects across departments. MoD has both the highest number of projects and whole-life cost. DECC has a smaller number of projects but they are high-cost. MoD and DECC both have significant projects which have not been given a RAG rating. These are projects where exemptions apply under the Freedom of Information Act 2000. For some projects (Nuclear Warhead Capability Sustainment Programme and Hinkley Point C), there are significant costs (approximately £57 billion) but no rating. For other projects like the Type 26 Global Combat Ship, neither a RAG rating, nor a whole-life cost figure is available (although a budget for the financial year is published). This makes it much harder to assess if departments are effectively managing these complex and resource-intensive projects.

Turnover of senior responsible owners (SRO) in charge of projects is down from 2013, but is increasing for project directors.

Continuity of management, especially with the distractions of Brexit, is important and turnover of SROs and project directors needs to be monitored carefully. The size and cost of the portfolio overall has to be managed and where projects have consistently been rated red and amber/red since 2013, departments have a responsibility to give them renewed attention. Effective management of these major projects in the portfolio will continue to matter, despite attention currently being focused on managing Brexit.

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