Brexit will require the successful delivery of major projects in areas such as customs and immigration. These are yet to begin in earnest, but the Government approaches this challenge with a project portfolio already containing many high-cost and high-risk projects. Successful delivery now appears ‘probable’ for only a fifth of all government major projects, and costs have increased across the portfolio. But there is also good news – delivery confidence is up for small, and information and communications technology (ICT) projects, and the disruptive turnover of project leaders has slowed.
Alongside their day-to-day operations, government departments manage a range of projects and programmes. Among these are building High Speed Rail at DfT, upgrading IT systems at the Home Office, and improving military capability at MoD. The ‘most complex and strategically significant’ are included in the government major projects portfolio – an evolving portfolio overseen by the Infrastructure and Projects Authority (IPA), a joint unit of the Treasury and the Cabinet Office. Each year, the IPA awards projects a red-amber-green (RAG) rating based on how confident it is that they will be delivered on budget and on time.
The Government is managing as many major projects as last year…
The IPA oversaw 143 government major projects in 2017, the same as in 2016, but down from a peak of 199 in 2014. However, the number still seems too high; the chief executive of the civil service, John Manzoni, said in 2016 that the civil service is ‘doing 30% too much to do it well’. Many major projects aimed at implementing Brexit (for example, those relating to new customs and immigration systems) have not yet been added to the portfolio. According to the National Audit Office, there are 14 potential new Brexit-related major projects that ‘would be critical for immediate implementation after EU exit’, with another 10 projects affected by Brexit already in the portfolio. To meet the additional demands, the IPA has urged departments to prioritise their major projects ‘to create space in an already full portfolio’.
Of the 36 projects that left the portfolio in 2017, 21 were delivered successfully, while five were brought to an early close without having met their objectives. The remaining projects were either replaced by new ones, or no longer met the criteria to be included in the government major projects portfolio.
…and the total value of the projects portfolio has grown
The total whole-life cost of projects included in the portfolio was £455bn in 2017. This was up from £436bn in 2016, but down from a peak of £489bn in 2015 (when the number of projects in the portfolio was higher). The average cost of a project has increased every year since 2013, and is now £3.4bn.
New projects with a combined whole-life cost of £62bn were added to the portfolio in 2017, more than in any previous year. Among these were DfE’s £11.3bn apprenticeship reform programme, and MoD’s £11.1bn project to improve communications systems used in land environments. These projects, however, were completely offset by those that left the portfolio in 2017, which were also valued at a combined £62bn. The largest was DH’s £18.6bn programme to implement the reforms set out in the Care Act 2014 (where successful delivery was considered ‘probable’ in 2016).
The growth in the value of the Government’s projects portfolio between 2016 and 2017 can therefore be attributed to increased cost estimates for existing projects. Estimated whole-life costs for those included in the portfolio in both years rose by a total of £26bn, with an increase of £13.1bn for the High Speed Rail programme, and £12.9bn for the construction of the Hinkley Point C nuclear plant. Cost increases for existing projects were lower in 2017 than in previous years (estimated costs grew by £77bn in 2014, £94bn in 2015, and £54bn in 2016).
Costs are particularly high for infrastructure and military projects
The IPA breaks down projects into four categories in its annual report:
- Military projects help maintain national security.
- Infrastructure projects add to the UK’s stock of fixed building assets, and can help promote growth in the economy.
- Transformation projects make the delivery of public services more efficient and improve the experience of users.
- Information and communications technology (ICT) projects enable cost savings by improving or replacing government IT systems.
Whole-life costs tend to be higher – and delivery timelines longer – for infrastructure and military projects, reflecting their complexity and scale.
Together, the MoD (with 33 projects), DH (with 18) and DfT (with 17) account for more than half of the projects in the government major projects portfolio. The MoD is responsible for all 29 military projects, while most infrastructure projects are run by DfT (e.g. HS2, Crossrail, Thameslink) or the Department for Business, Energy and Industrial Strategy (BEIS, e.g. Hinkley Point C, Sellafield). IT and transformation projects are more evenly spread across departments, with a particularly large number of projects at DH, MoJ and the Home Office, which have large service delivery functions. The IPA did not oversee any major projects in 2017 managed by the Treasury, Communities and Local Government (DCLG), International Trade (DIT) or the Department for Exiting the European Union (DExEU).
The Government is confident of successfully delivering only one in five projects
The IPA defines the RAG ratings given to projects as:
- green if successful delivery appears highly likely
- amber/green if successful delivery appears probable
- amber if successful delivery appears feasible but significant issues already exist
- amber/red if successful delivery is in doubt
- red if successful delivery appears to be unachievable.
The percentage of projects rated green or amber/green has fallen every year since 2013 and is now only 20%. Meanwhile, the percentage of projects rated red or amber/ red increased every year from 2013 to 2016, though fell from 32% to 28% in 2017.
Four projects were given a red rating in 2017 (nuclear core production at MoD, the A303 tunnel and M20 lorry park at DfT, selling government-owned shares at BEIS), and one project – relating to IT improvements at the Home Office – was reset with a new business case after being rated red in 2016. One of the projects given a red rating – the M20 lorry park (which aims to minimise disruption in Kent when the Channel Tunnel is forced to close) – is among 10 projects identified as being affected by Brexit, according to the National Audit Office.
Confidence in delivery has declined partly because projects that are going well are more likely to leave the portfolio (after they are successfully completed), while those that are added tend to be more challenging and risky. Of the 36 projects that left the portfolio in 2017, 20 were rated green or amber/green in 2016, while none of the new projects were given a similar rating. The RAG ratings for projects that stayed in the portfolio between 2016 and 2017 were slightly more likely to improve than worsen, but delivery confidence for ongoing projects does not seem to be improving at the rate required to keep the overall balance in the portfolio stable. The changing balance of RAG ratings could also indicate a shift in the way that the IPA assesses project confidence.
Delivery confidence is low for transformation, military and high-cost projects
While delivery confidence is not high for any category, the percentage rated green or amber/green is particularly low for transformation and military projects, at 12.5% and 11.5% respectively. Roughly similar proportions of projects in each category were given the riskier ratings of red or amber/red in 2017 (ranging from 25% for ICT projects to 30% for transformation projects), which suggests that there isn’t a single category that inherently carries more risk.
Projects with high estimated whole-life costs, however, are significantly more likely to be considered at risk than those with low costs. A third with costs over £1bn, and 29% of those between £100m and £1bn, were rated red or amber/red in 2017, compared with only 14% of projects with costs below £100m. Larger projects can face difficulties because they are often unique, meaning that it is harder to rely on comparisons with other projects to estimate costs and timelines (although there is no obvious link between project duration and RAG rating in the portfolio).
Delivery confidence has improved most for IT projects, small projects, and projects with short timetables
Delivery confidence improved for 57% of ICT projects that remained in the portfolio between 2016 and 2017. In 2016, nearly half of ICT projects were rated among the riskiest, at red or amber/red. Delivery confidence also improved for 36% of transformation projects, but worsened for 32% in the military category.
Projects with lower whole-life costs were also more likely to show improvements in delivery confidence; 56% of those with costs under £100m had a better RAG rating in 2017 than in 2016. In contrast, RAG ratings improved for only 15% of projects worth over £1bn, with delivery confidence falling for 18%. Similarly, 45% of the projects expected to last less than five years improved in 2017, while only 8% expected to last over 10 years did. A possible explanation is that, over the life of a project, the RAG rating will typically go from more to less risky, and that projects with shorter timelines go through this process more quickly.
‘At risk’ projects at MoD and DfT are worth a combined £128bn
Together, MoD, BEIS and DfT account for 78% of the project costs in the government major projects portfolio. The value of the portfolio at DH, MoJ and HO is much smaller, even though they are responsible for more individual projects than BEIS (mostly because they tend to focus on IT and transformation, while BEIS’s projects are mainly infrastructure).
Within the £455bn portfolio, projects worth a total of £159bn are rated amber/red or red – meaning their successful delivery appears ‘in doubt’ or ‘unachievable’. This risk is concentrated at DfT, which is responsible for at-risk projects worth a combined £69bn, and MoD, which is responsible for at-risk projects worth £58bn. More than half of the portfolio value at DfE and MoJ is also rated amber/red or red. In contrast, almost all BEIS’s sizable project portfolio is rated green, amber/green or amber.
The project with the highest estimated whole-life cost, DfT’s High Speed Rail programme, is one of those projects rated amber/red. According to the project’s senior responsible owner, this rating ‘reflects [its] overall complexity’ and ‘should be seen in the light of the very significant progress’, such as the passage of the High Speed Rail Act 2017. The two largest new projects in 2017, DfE’s apprenticeships reform and MoD’s land environment tactical communication and information systems, were also rated amber/red.
BEIS’s project ‘to agree a contract to enable the construction and operation of a new nuclear power plant’ at Hinkley Point C was given a green RAG rating in 2017, after the Government came to a revised agreement with the energy company EDF in autumn 2016. Before this, the project’s RAG rating had not been reported; however, the estimated whole-life cost (which is determined by the gap between the Hinkley Point C strike price and the long-term forecasts for wholesale electricity prices) has increased from £21m in 2013 to £49.9bn in 2017.
Turnover of project leaders has fallen, and morale of civil service project delivery professionals has risen
There are two key leadership positions for projects in the portfolio:
- Senior responsible owners (SROs) oversee delivery, establish effective governance around projects and secure the resources necessary to ensure success. They are accountable to parliamentary select committees for explaining the decisions and actions they take.
- Programme or project directors manage the day-to-day running, and are accountable to the project SRO.
Turnover for project directors and SROs is at 8% per quarter, down from a peak of around 25% in Q2 2013. This means that project leaders will typically spend three and a half years in post. While it is unclear why turnover spiked in 2013, the foreword in the following year’s Major Projects Authority annual report by Francis Maude – then the Minister for the Cabinet Office – recognised the high turnover of project leaders as a problem. Ensuring that experienced people remain in post is crucial for delivering projects successfully, so the subsequent fall in turnover is an encouraging development.
Engagement scores have improved for project delivery professionals in the civil service. Scores for every theme in the Civil Survey People Survey have risen, apart from ‘my work’, where respondents remain as satisfied as they were in 2014. The most noticeable improvement has been for ‘leadership and managing change’, where scores have increased from 41% to 46%. The project delivery profession outperforms the civil service benchmark significantly for ‘learning and development’ satisfaction, scoring 59% compared with a benchmark of 50%. This may reflect the success of the Major Projects Leadership Academy, which since 2014 has been a necessary step in accrediting senior responsible owners for major projects. Nonetheless, the 2016 survey also showed 21% of those working in project delivery wanting to leave their organisation within a year.