The National Audit Office (NAO) today published its initial evaluation of the Department for Transport and Highways England’s investment in England’s strategic road network. Tess Kidney Bishop says the promising strategy is underachieving due to process failures and insufficient commercial capability, and highlights three key lessons for other infrastructure programmes.
1. A clearly defined strategy will lead to better project delivery
In 2013, the Government announced a series of road reform measures. This included plans to structure decision making around five-year Road Investment Strategies (RIS). The first of these was announced in 2014 and set out a five-year programme with £11.4 billion of capital funding.
The IfG has previously highlighted the importance of setting out a clearly defined long-term mission in government strategies. The first RIS represents a significant step in establishing this much-needed clarity within the roads network. It ensures objectives are consistent across the road network and that projects are in line with national objectives, including supporting economic growth and environmental improvements.
Guaranteed funding allows the Department for Transport (DfT) to implement long-term plans and commit to long-term contracts with suppliers, which are likely to be lower-cost as a result. The NAO report recommends this be built upon in the next road strategy, due in 2019.
But government could go further by developing a national strategy that not only covers roads but also rail, energy, utilities and digital communication. That way ministers could sensibly prioritise different types of infrastructure in pursuit of government objectives.
2. Failure to properly consider a wide range of options can increase costs
Despite the benefits of having a strategy, as of February 2017, Highways England has already identified 16 projects as at risk of not delivering value for money out of a total of 112 schemes. The NAO report points to several major obstacles still facing the roads network in achieving value for money which must be addressed.
The first of these is spending sufficient time considering which projects to invest in. The NAO says that, despite introducing a longer-term strategy, DfT rushed project selection, taking only two months to consider which projects would best meet the strategy’s objectives and should be invested in. As such, the 112 projects included are not necessarily the ones which would produce the highest benefits relative to costs. Furthermore, DfT and Highways England did not assess how the selected projects would work together. An already potentially flawed shortlist was then not subject to sufficiently rigorous appraisal.
More than half of the 112 enhancement projects announced were only in the early planning stages, so were still subject to a high level of uncertainty regarding their affordability, deliverability and potential benefits relative to costs. As such, the cost estimates were still vague and likely to change while funding was being decided upon.
According to the NAO, this uncertainty was not well communicated by DfT. However, ministers may be reluctant to cancel or change projects after publicly announced them, even if later appraisals find that they are not as worthwhile as first thought. A more effective appraisal of the options early on would minimise potential political and economic costs.
Highways England is working to address this issue ahead of the second strategy announcement but may struggle due to its limited capacity.
3. Understaffing is a false economy
The NAO says Highways England is 19% below its target headcount for procurement and commercial specialists. Previous IfG work highlights just how damaging a lack of commercial specialists can be. Perhaps most concerningly, not having enough staff with commercial expertise limits the ability of Highways England to negotiate effectively with contractors and necessitates the use of consultants and interim staff at up to three times the internal staff rate, raising costs.
Government understaffing thus threatens quality of work and can increase costs. The West Coast Mainline franchise fiasco shows how stretched departments can make poor infrastructure decisions. Government must improve its financial planning to ensure that short-term cuts don’t result in long-term costs.
Over the coming months, the Institute for Government will publish of a series of reports on improving infrastructure policymaking.
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- Policy making