Report on Major Capital Projects
Session: Session currently unavailable
Date: 22 October 2020
Reference: NIA 46/17-22
1. The 2011-21 Investment Strategy Northern Ireland (ISNI) outlined plans to invest a total of £13.3 billion over the period from 2011-12 to 2020-21. Over the eight year period to 31 March 2019, almost £10.6 billion was spent on Northern Ireland public infrastructure. Current estimates indicate that by 31 March 2021, there was a total of over £14.8 billion in capital expenditure in Northern Ireland (over a ten year period).
2. In 2015, the Northern Ireland Executive (the Executive) identified seven infrastructure flagship projects as its highest priority projects. Funding for these projects was allocated over a five year period, rather than the usual annual year allocation.
3. The Committee notes the results of the NIAO review of each of the flagship projects and four additional high profile projects which revealed that each suffered time delays and/or cost overruns (of over £700 million in total) when compared against original timescales and budgets. The Committee is deeply concerned about existing accountability mechanisms and this level of overspend, given that the additional funds incurred could have been invested in infrastructure, hospitals, roads, transportation or schools.
4. Accountability for delivery needs to be sharpened at the top of the civil service. In Northern Ireland, unlike in Wales or Scotland, the Head of the Civil Service does not hold the designation principal accounting officer; he or she therefore sits outside the chain of public accountability. This must change going forward. The NI Civil Service Board should also be strengthened by the inclusion of top quality independent non executives.
5. Unlike other jurisdictions, in Northern Ireland there is no single oversight body. In the Committee's view, there is need for central monitoring of major capital projects to bring more transparency and accountability to critical areas of the Executive's spend. The Committee also made it clear that the progress of individual major projects must routinely be on the radar of Accounting Officers if projects are to be delivered on time and within budget.
6. The Committee considers that the system for commissioning and delivering major capital projects is over complicated. In its view, the failure to centralise procurement (as recommended by the Strategic Investment Board in 2013) represents a missed opportunity to streamline the public sector procurement process, reduce waste and generate cost efficiencies for the public sector and industry. The Committee considers that there remains a need to assess the extent to which alternative structures could improve project delivery. In the Committee's view, this, together with greater use of standardised procurement approaches and standard contracts with few bespoke clauses, would reduce public sector and bidder costs.
7. The Committee considers it vitally important that staff in senior roles on projects, particularly Senior Responsible Officers (SROs), have relevant experience and are retained throughout life of projects to ensure transparency and accountability. The Committee welcomes the issue of new guidance from DoF on the appointment of Senior Responsible Officers and endorses plans to ensure that all SROs and project managers, leading on projects with an estimated cost of over £20 million, have a fully accredited qualification. The Committee agrees that improving the professionalism of procurement and construction staff will ultimately improve project delivery.
8. The Committee expects that, with qualified project managers in place throughout the life of large departmental projects, operating under the terms of a formal letter of appointment, transparency and accountability will improve and departmental staff appraisals will more accurately reflect an individual's performance in delivering projects on time and within budget.
9. In relation to the Construction Procurement Delivery (CPD), DoF accepted that target setting and reporting on CPD performance had been limited in recent years. The Committee considers that this is a step backwards from the situation several years ago when CPD was an Agency and reported annually on its progress.
10. The Committee heard from the Construction Employers Federation that it would be very keen to take a place on the Procurement Board to ensure that the private sector could contribute to the public sector process. The Committee welcomes assurances from DoF that discussions have started about the make-up of the Procurement Board and how often it meets.
11. It is clear that there were serious weaknesses in the business case process. The Committee welcomes the revision of the process but will reserve judgement on the success of the new approach until it can be demonstrated that business cases are more soundly based.
12. The Committee concluded that many of the issues resulting in cost overruns and time delays experienced could have been reduced if, at the outset of projects, departments had fully considered, and planned for, project risks and engaged adequately with planners, local communities and special interest groups. This was particularly evident in the Casement Park project.
13. The Committee considers that that there is much room for improvement in the current planning system. The Committee saw evidence that in some cases, delays occur because statutory consultees do not respond promptly. It is within the gift of the Northern Ireland Civil Service (NICS) to address this issue. The Committee expects the NICS to do much more to avoid delays by forcing improvement in response times from statutory consultees.
14. The Committee is aware that capital funding continues to be surrendered by departments because they were not in a position to progress delivery of projects. The Committee is deeply concerned about the implications of this on job creation and economic and community development.
15. In the absence of multi-year spending plans, the Committee acknowledges that it is difficult for the Executive to produce a Programme for Government and investment plan which relate to several years. The Committee noted that funding issues were a factor in a number of the projects examined and stressed the importance of ensuring that, when major capital projects are approved, there is certainty that a funding stream is available going forward. The Committee is aware that the "New Decade, New Approach " document provides a commitment that, from 2021-22, the Executive will put in place multi-year budgets (minimum three years) where the UK Government has provided multi-year funding. This is absolutely necessary to put Northern Ireland's finances on a sustainable footing.
16. In relation to the Casement Park project, the Committee was appalled to learn that advice from experienced consultants external to the department was only sought after the initial planning permission was quashed and that the need for an appropriately qualified, full-time senior responsible officer had not been identified at the outset of the project.
17. The Committee considers that the current culture in drawing up public sector contracts focuses on penalty clauses to deal with instances of poor contractor performance. In the Committee's view, contractor performance may improve where they are incentivised to deliver on time and within budget. DoF explained that it is aware that the Crown Commercial Service within the Cabinet Office regularly uses incentives in contracts and told the Committee that it is looking at those arrangements to see whether they have applicability here.
Summary of Recommendations
18. The Committee believes that, in line with arrangements in Scotland and Wales, the HOCS in Northern Ireland should have personal responsibility for the propriety and regularity of all government finance and the economic, efficient and effective use of related resources. It is not acceptable that in Northern Ireland, the HOCS sits outside the formal chain of public accountability.
The Committee strongly recommends that the role of the Northern Ireland HOCS is revised to mirror the role in Scotland and Wales.
19. The current arrangements, where projects are the sole responsibility of individual Accounting Officers, and leads to silo working with no joined-up thinking. In the interest of the public purse this practice must end to ensure better value for money.
The Committee recommends that action is taken to strengthen accountability for delivering major capital projects across the public sector. The Committee expects the Head of Civil Service to show leadership by taking a much more proactive role in monitoring delivery of public sector projects, challenging departments were performance is not in line with approved plans. The Committee believes that this, together with more regular scrutiny from individual Accounting Officers, will help improve major capital project delivery.
20. Construction and Procurement Delivery (CPD) is an important player in securing effective delivery of major capital projects. Given this, the Committee was shocked to discover that the DoF Accounting Officer of DoF did not have a suite of performance indicators in place to measure performance.
The Committee recommends that swift action is taken to reintroduce SMART targets for CPD with immediate effect. Performance against these targets should be publicly reported annually.
21. The Committee considers that overall responsibility for monitoring delivery of major capital projects should sit with the Northern Ireland Civil Service Board. This is in line with other United Kingdom jurisdictions.
The Committee recommends that membership of the Northern Ireland Civil Service Board is revised so that top quality non-executives (with a commercial background) sit alongside NICS Permanent Secretaries. Further it recommends that progress on major capital projects features more prominently on the agenda of the NICS Board.
22. The Committee considers that the existing arrangements for commissioning and delivering major capital projects are over complicated.
The Committee recommends that the public sector, as a matter of urgency, undertakes a further review of procurement arrangements to assess the extent to which alternative structures could improve project delivery. The Committee also recommends that departments are encouraged to make increased use of standardised procurement approaches and standard contracts with few bespoke clauses as a means of reducing public sector and bidder costs.
23. Unlike other jurisdictions, in Northern Ireland there is no single oversight body responsible for monitoring delivery of major capital projects, not even the Executive's highest priority flagship projects.
The Committee recommends that serious consideration is given to appointing a single oversight body or creating an independent advisory body with responsibility for central monitoring of major capital projects.
24. The Committee agrees that departments need to have the right people with the right skills in place and welcomes the issue of new guidance from DoF on the appointment of Senior Responsible Officers and plans to upskill staff to become professional project managers who can move from one department to another to manage projects as they arise. The Committee expects that, with qualified and experienced project managers in place throughout the life of large departmental projects, operating under the terms of a formal letter of appointment, departmental staff appraisals will more accurately reflect an individual's performance in delivering projects on time and within budget.
The Committee recommends that the NICS looks to other jurisdictions, e.g Whitehall, for the latest thinking in incentivising staff to see long term projects through. The Committee recommends that the SIB ensures that it attracts the most capable experts and that secondment of these staff is always considered to strengthen project teams.
25. The Committee is aware that the Independent Inquiry into the non-domestic Renewable Heat Incentive (RHI) Scheme concluded that aspects of the departmental business case were "incomplete, incorrect or misleading". The Committee has concerns over the "accuracy, preciseness and efficiency of outline business cases" and was shocked at the number of major projects examined which were subject to scope and design changes and/or experienced cost overruns. DoF explained that the old, overcomplicated, 10-step business case model has been reviewed and a new, streamlined five-step business case approach, used internationally and adopted across England, Scotland and Wales, became effective from 1 April 2020.
The revision to the existing process is welcomed but the Committee will reserve judgement on the success of the new approach until it can be demonstrated that business cases are more soundly based. The Committee recommends that DoF review the impact of the new process within the next 18 months and expects to hear the results of that review.
26. The Department for Infrastructure (DfI) accepts that there is much room for improvement in the current planning system, which is just over four years old, and told the Committee that is encouraging learning and the sharing of experiences across local councils. In addition, DfI has recently set up a cross-government planning forum which will meet regularly to ensure better co-ordination and management of the way in which statutory consultees play their part in the planning system.
Given the scale of delays and costs which can arise during the process of securing planning permission, the Committee recommends that DfI takes immediate steps to simplify and improve the process.
27. In relation to the Casement Park project, the Department for Communities (DfC) explained that the initial planning permission was quashed (in December 2014) when a judicial review concluded that the process was flawed, rendering the planning decision unlawful. Concerns included the department's assessment of the impact on traffic of a capacity crowd at the stadium. The Committee finds it incredible that the issue regarding traffic at Casement Park was not foreseen and addressed at the outset of the project, prior to the submitting the original planning application.
The Committee recommends that expert advice is sought, and acted upon, by departments at the outset of projects.
The Committee recommends that, for future projects, much more time is spent at the outset of projects, identifying potential barriers to securing planning permission. The Committee expects that this process will involve early departmental engagement with planners.
28. The Committee considers that DfC's experience with the Casement Park project clearly illustrates the consequences of failing to undertake effective engagement with local communities at the outset of projects. Without community confidence and buy-in to the project, much upset was caused, significant project delays were encountered and development costs more than doubled. That is not acceptable and, in the Committee's view, could have been avoided.
The Committee recommends that revised procedures are introduced across departments to ensure that effective community engagement, mitigating concerns where possible, is completed prior to progressing projects.
29. The Committee acknowledges that "the public and organisations with an interest must be allowed the opportunity" to contest projects on environmental or other issues. However, it is concerned about the extent to which judicial reviews delays add costs to, public sector projects.
The Committee recommends that the Northern Ireland Civil Service works with the Judiciary to consider if the balance needs to be reviewed between having a higher bar for taking Judicial Reviews while at the same time not discouraging genuine concerns from being raised. This should include an examination of the cost of lodging a judicial review in Northern Ireland. The Committee consider this could help to reduce the risk that 'vexatious' challenges are made.
30. In the absence of multi-year spending plans, the Committee acknowledges that it is difficult for the Executive to produce a Programme for Government and investment plan which relate to several years. DoF told the Committee that it has raised the issue of multi-year budgets with HM Treasury twice and received "very warm responses".
The Committee reinforced the importance of these multi-year funding representations to HM Treasury and recommends that DoF continues to push for their introduction as a matter of urgency.
31. The Committee considers that the current practice of drawing up public sector contracts focuses on penalty clauses to deal with instances of poor contractor performance. In the Committee's view, contractor performance may improve where they are incentivised to deliver on time and within budget. The Committee welcomes DoF's assurance that it is looking at practice elsewhere with a view to learning lessons and improving performance.
The Committee recommends that further work is completed to evaluate whether incentivising contractors might improve their performance and result in the delivery of project on time and within budget.