Report on DCAL: Management of Major Capital Projects

Report-on-DCAL-Management-of-Major-Capital-Projects.PDF (7.76 mb)

The Executive Summary and Summary of Recommendations are available below or you can download the full report here.

Executive Summary

Introduction

1. If delivered well, arts and leisure infrastructure can enhance the lives of, and services provided to, the public and improve the productivity of the region. If delivered poorly, potential benefits are not fully realised and significant additional cost can accrue to the taxpayer. In the period 2008-11 the Department of Culture, Arts and Leisure (the Department) had an unprecedented target to deliver £229 million capital investment in the Northern Ireland culture, arts and leisure infrastructure and this resulted in the delivery of a number of capital projects including:

• the Grand Opera House;
• the Ulster Museum;
• the Crescent Arts Centre;
• the Public Record Office of Northern Ireland;
• Tollymore National Outdoor Centre;
• the Lyric Theatre; and
• the Metropolitan Arts Centre.

2. The projects have undoubtedly enhanced culture and arts provision in Belfast however this has come at a significant cost to the public purse. The projects cumulatively ended up costing £103.4 million, 32 per cent more than the original estimated cost of £78.5 million. The projects also encountered significant delays, the most substantial of which was a delay of 31 months in the delivery of the Crescent Arts Centre.

3. The Committee is concerned that despite the availability of extensive guidance, public bodies continue to make the same mistakes around planning, governance, project management and procurement that this Committee has observed and reported on over many years.

4. Approval for the projects was based upon business cases which were not robust and which were overly optimistic about what could be delivered. The Department acknowledged that projects were based on completely unrealistic cost estimates. This resulted in projects being re-scoped which contributed to the significant cost increases and time delays. Public bodies must ensure that robust project management arrangements are put in place so that projects can be delivered on time and within cost.

5. In total, £87.4 million (84 per cent) of the £103.4 million investment was provided by the public purse. Despite a lack of experience and expertise in delivering capital projects of this scale, the Department and the Arts Council NI failed to seek technical advice at the appropriate time and provided grant recipients with too much autonomy in making key decisions. This is clearly unacceptable: public bodies must ensure that they seek technical advice and that they use this to inform key decisions. All key decisions on projects of this scale should be authorised by the public body in consultation with technical advisors.

6. A number of completely unacceptable departures from long-established principles of good practice were made in awarding the Lyric Theatre rebuild contract.

A number of unexplained adjustments were made to the tender submissions, and the Department of Finance and Personnel's Central Procurement Directorate (CPD) confirmed that this is not normal practice;

Despite £413,000 being stripped out from one of the tenders, this cost was later paid in full;

The private sector consultants who produced the tender evaluation report destroyed the tendering documentation very promptly after the tender evaluation meeting;

Proper arrangements were not put in place for either the sponsoring bodies (the Department and the Arts Council) or their technical advisors (CPD) to attend the tender evaluation meeting;

The Department, the Arts Council and CPD all received a copy of the tender evaluation report but failed to raise any concerns; and

The preferred bidder provided a donation of £150,000 to the Lyric Theatre.

Taking all of the points in the round the Committee is left with a very strong impression that the outcome of the tender process was both rigged and manipulated.

Summary of Recommendations

Recommendation 1

The Department and the Arts Council NI need to be much more robust in their dealings with grant recipients on capital projects. The Committee recommends that procurement is controlled by an established Centre of Procurement Expertise (CoPE) such as CPD and not devolved to grant recipients and their choice of private sector consultants. All key decisions should be authorised by the public body in consultation with technical advisors such as CPD, and a clear audit trail in support of the decisions should be maintained in line with public sector practice.

Recommendation 2

Inaccurate cost estimates undermine effective appraisal and the achievement of value for money and public bodies must, therefore, do more to ensure that cost estimates are realistic. The Committee recommends that the Department undertakes a robust assessment of all business cases in order to satisfy itself that projects have been scoped correctly and that cost and time estimates are realistic. The Committee expects the Department to ensure that construction contracts of this nature are awarded on a fixed price basis and that contractors are held firmly to the fixed price.

Recommendation 3

CPD told the Committee that it advocates that cost estimates are prepared by the design team that will go on to design the building. This means that the design team must then live with whatever costs that it puts forward. The Committee recommends that the Department complies with this advice.

Recommendation 4

The Committee recommends that the Department considers adopting a formal reporting process to ensure that the Accounting Officer receives timely information about all major capital projects. Those experiencing difficulty need particularly to be flagged up. This would enable Senior Management to take corrective action as necessary.

Recommendation 5

The Committee recommends that the Department puts in place measures to ensure that it receives timely information about cost increases on capital projects and that the Department seeks appropriate approval — before spending — for all costs associated with its capital projects.

Recommendation 6

The Department has a wealth of technical advice available to it through CPD and the Strategic Investment Board (SIB). The Committee recommends that the Department takes advantage of this technical expertise by establishing formal and effective working relationships with technical advisors such as CPD and SIB. This, combined with better project management and oversight of capital projects, will improve the Department's ability to act as an informed partner in capital projects.

Recommendation 7

The Committee should not have to remind public bodies of the importance of retaining public records. It strongly recommends that DFP issues guidance to Departments that all public bodies include, as part of the terms and conditions of a contract, a requirement to provide the sponsor with ownership of all tendering documentation. The documentation should then be retained by the public body in line with public sector requirements. DFP should monitor compliance with this recommendation to ensure that it is applied rigorously.

Recommendation 8

It is unacceptable for public bodies to provide grant recipients and their choice of private sector consultants with the authority to award high value contracts without any consultation. The Committee recommends that public bodies should only agree to proceed to contract award once they have received appropriate technical advice and satisfied themselves that procurement guidelines have been met and that the contract represents value for money.

Download the complete report here.