Delivery bodies will get automatic freedom to determine pay for specialist roles for so-called “mega projects” under new government reforms.
A study led by the Office for Value for Money found that mega projects – defined as complex, long-running schemes with budgets in excess of £10bn – consistently fail to be delivered on time or on budget, both in the UK and internationally.
Now the government has announced five changes to improve the governance and budgeting arrangements for such schemes.
This includes the pay reform, which the OVfM said “will enable projects to recruit and retain the expertise necessary to lead and deliver mega projects”.
To provide an extra boost to capability, the OVfM said the National Infrastructure and Service Transformation Authority will develop a “pipeline of project leadership talent” across government.
The reforms were announced yesterday alongside the publication of the new 10-year infrastructure strategy, which sets out a new “long-term” approach to infrastructure backed by “at least” £725bn of economic and social infrastructure over the next decade.
Current mega projects include the the Sizewell C nuclear power station, Dreadnought nuclear-powered submarines and the HS2 railway line, according to the OVfM study, with the latter's failures now inspiring a series of infrastructure delivery reforms across government.
Past mega projects include the Channel Tunnel, Crossrail and the 2012 Olympics and Paralympics – which the OVfM study highlights as a rare mega project success story.
Alongside the pay reform, mega projects SROs will be asked to develop “streamlined and bespoke” decision-making processes and integrated assurance plans – which will be approved by HM Treasury, NISTA and the Cabinet Office – to “avoid unnecessary delays through multiple layers of non-value adding review and scrutiny”.
Mega projects will also now require a strategy and delivery plan to be laid as a command paper in parliament at the start of a project and at key milestones, including when ministers make material changes e.g. to scope or objectives. The OVfM said this will ensure the project is “set up for success and stakeholders are aligned on what it is trying to achieve and how it will achieve it”.
Another of the changes will see feasibility studies become a requirement “at the outset to scope a project”, with mega projects given incremental funding through development. Ranges of costs and schedule will reflect uncertainty at early stages and be narrowed as risk reduces.
Finally, in construction, mega projects will be given a fixed capital envelope and delivery bodies will be able to move money forwards and back between years to accelerate work and “buy-out” risk to achieve better overall value for money. A fundamental reset can be triggered if the project is estimated to exceed the fixed capital envelope.
The OVfM said the changes aim to replicate – in part – the benefits of private investment identified in Sizewell C in other mega government projects.
It said the changes “will not be a silver bullet” as mega projects are inherently complex and risky, but they will “remove specific obstacles the government has historically put in the way of these projects that make them even harder to deliver effectively”.
The OVfM said it will also look at whether and how these changes could be extended to major projects as part of its wider work on reforms to improve value for money in public spending.
What are mega projects?
Mega projects are a small subset of the most costly, risky and complex projects in the Government Major Projects Portfolio.
The OVfM defined them in its study as:
- Strategically important, with transformational impacts on the economy, society or national security
- Having cross-cutting impacts, spanning multiple government departments
- Taking longer to deliver than other major projects – typically once in a generation projects that take longer than 10 years and span multiple parliaments
- Very expensive, with estimated whole life costs of more than £10bn, meaning proportionately small cost overruns can have a big financial impact
- Not scalable and unable to be broken into smaller projects
- Projects that do not take longer than 50 years to deliver – otherwise they would constitute business as usual.
The time-limited Treasury unit also said mega projects are typically in the defence, transport or energy sectors, with the latter becoming increasingly the case.
The changes will put in place many of the recommendations made by the National Audit Office earlier this year.