May 23, 2014 6:52 pm

UK Whitehall projects worth £500bn at risk of failure

Successful delivery of about one in five government projects, including new aircraft carriers and the HS2 high-speed rail line, is in doubt and requires urgent action, according to ratings released on Friday by the Major Projects Authority.

A total of 41 out of 199 projects, with a collective value of close to £500bn, have been given a “red” or “amber-red” rating, compared with 31 projects a year ago.

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Of the eight projects rated “red” in September 2012, only one still held that status a year later, the Queen Elizabeth Class Aircraft Carrier project.

The project has been dogged by cost overruns and late last year Philip Hammond, defence secretary, disclosed that the price of building two of the carriers would rise by another £800m to £6.2bn, due in part to the need to build a sophisticated aircraft landing system on the ships.

The MPA said that a new contract had now been agreed with the Aircraft Carrier Alliance, a partnership between government and industry, which would “provide stronger incentives for the shipbuilding industry to construct the ships to the agreed budget”.

The contract was based on “a realistic cost structure” for the first time and included “better cost sharing arrangements to help keep the programme on budget and on track”, the Ministry of Defence said.

Universal Credit, the government’s flagship welfare reform, which last year fell into the “amber-red” category, has not even been assigned a rating, on the grounds that it was “reset” last year – an omission that is likely to fuel doubts over the progress of the troubled project.

The Department for Work and Pensions insisted: “Universal Credit is on track. The reset is not new but refers to the shift in the delivery plan and change in management back in early 2013.”

Margaret Hodge, who chairs the Commons public accounts committee, welcomed the transparency inherent in publication of project ratings but said the failure to rate Universal Credit suggested a “veiled compromise” within government, designed to avoid revealing the “chaos” surrounding the project.

Nigel Keohane, deputy director of the Social Market Foundation, seized on the decision to exempt the Ministry of Justice’s payment by results system for prisoner rehabilitation from a public rating, on the grounds that it could be “prejudicial to commercial interests”. He said: “It is ironic that two of the big programmes where there is considerable concern – benefit changes and the Ministry of Justice’s reforms to probation services – are two schemes where the Major Projects Authority isn’t ready to comment.”

Meanwhile, the amber-red rating for HS2, unchanged since last year, showed that “the focused attention that is being applied to addressing the remaining issues must continue”, said the MPA, while stressing that many projects in their early stages still had problems to overcome.

The decision to publish assessments of progress by the MPA, established three years ago to oversee big ticket spending, is part of a Cabinet Office attempt to drive up performance through greater transparency and improving civil servants’ skills.

Francis Maude, Cabinet Office minister, said that before the last general election there had been “no central assurance of projects, a lack of the right skills and problems were not systematically highlighted before they spiralled out of control”.

Improving project management had helped to save £1.2bn in 2012-2013 alone, Mr Maude said.

Of the 31 projects rated either red or amber-red last year, more than half did better this year and only one had got worse, said the MPA. However, of the 122 projects that were assessed both this year and last, 32 had got worse while only 27 had improved.

The MPA said the “main reason” for the decline in performance was that 47 new projects had been added to its portfolio this year and “we are naturally at this stage less confident in their delivery than in those projects that left the portfolio during the year”.

However, one project descended from the “amber-red” into the “red” category: a plan to upgrade the IT used by the Serious and Organised Crime Agency. The MPA said the performance slippage “was due to a part of the upgrade being delayed, and a correction plan is being developed with the supplier”.

Now falling under the National Crime Agency, the project was still on track to achieve savings of £213m over 10 years, said the MPA.

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