Finance Minister Bill English said yesterday the release of 2 Treasury reports on its investment practices & the performance of its major investment projects provided an overview to the public for the first time.
But the immediate reaction of one of the Government’s own ministers, Gerry Brownlee, at a Christchurch media conference on the Earthquake Recovery Authority’s future, suggested consternation might have been a more appropriate word when it seemed the reports had marked his major task as unachievable.
Mr Brownlee, the Earthquake Recovery Minister, was quoted in the Press dismissing the report and calling it “utter tripe”, and saying the findings showed the “arrogant bureaucratic attitude” Wellington-based departments had toward Christchurch, the report had been produced by book-keepers and “They should spend more time book-keeping rather than trying to second-guess the Government’s strategy”. He found the report, which at that point he hadn’t read, “entirely disrespectful” and said funding for the projects was already in place.
The first annual Managing government investment projects 2014-15 report provides a snapshot of the Government’s overall investment programme and the recently implemented changes to the way it’s managed. It covers $6.4 billion of Government spending on 409 projects such as ICT, new schools, Defence projects and construction, with a net worth of $74 billion.
Also released was the Major projects performance report March-June, which provides a comprehensive update on 38 of the most complex of those 409 investment projects, and advises on the extent to which they are delivering on expectations.
Investments’ performance status was marked as: Green – on track, no forecast breach of project tolerances; amber – forecast breach of project tolerances (any); red – breach of project tolerances; or at midpoints between colours.
Red light for CERA
71% by value reported a green status and only 0.1% by value reported a red status. In the list of 19 projects rated for their delivery confidence, the Canterbury Earthquake Recovery Authority’s Christchurch central delivery programme was the only one marked fully red.
The report on it said: “Successful delivery of the project appears to be unachievable. There are major issues with project definition, schedule, budget, quality &/or benefits delivery, which at this stage do not appear to be manageable or resolvable. The project may need rescoping &/or its overall viability reassessed.”
An explanatory paragraph in the report made the fate of a red-rated project less final: “A red rating does not imply that a project or investment will fail – what it does show is that significant effort is required in order to ensure successful project delivery. This could include replanning, rescoping or additional funding.”
Most projects’ ratings were in the intermediate stages, combining amber with red or green, including 4 other quake-related projects.
English’s aim
Mr English said in his outline of what Treasury was trying to do: “These public reports offer greater transparency & increased accountability on how well taxpayer-funded projects are progressing. We want to reduce the risk of failure and increase the likelihood of success.
“These reports make clear the Government’s approach to project monitoring, which helps to detect early warning signs on projects to help make changes to either get the project back on track, revise intentions or discontinue further investment.”
Far from recommending abandoning work, “32 projects are rated amber or amber/green, which is to be expected – the report covers the most complex & expensive investments across Government and an amber rating indicates that successful delivery of the project is feasible, but issues exist that require management attention.
“Given the nature of the projects, a green rating is only given when delivery is nearing completion. Moving in and out of amber/red & red is typical in the lifecycle of major projects, and these are usually managed to successful delivery.
“With this information the Government can be responsive. The Christchurch central delivery programme, for example, has been assessed as red but a new monitoring regime & new legislation will ensure momentum is maintained to deliver the best possible outcomes.”
Mr English said he expected to see further results in 2016 from the changes made to the investment system, including more evidence about benefits achieved, higher quality information to support decision-making, longer planning horizons & greater efficiency across the system.
English quotes Lord Browne for inspiration
For his foundation, he quoted English businessman Lord Browne, in his capacity in 2011 as the UK Government’s lead non-executive, who wrote that 2 basic insights drove his recommendations: “The first is that the lowest standards that are set at the start of a project are the highest standards that can be expected for the rest of the project. The second is that nobody ever stops or intervenes in a poor project soon enough.”
In his first report as lead non-executive, Lord Browne wrote: “Appointing leaders from the private, public & voluntary sectors as non-executives and having secretaries of state chair enhanced departmental boards has been a hugely important step in helping departments deliver the Government’s reform programme and introducing greater efficiency to Whitehall.”
In the introduction to his 9-page paper in 2013, Getting a grip: How to improve major project execution & control in government, Lord Browne wrote: “The Government owns & runs 185 major projects which in total cost £414 billion. These major projects include the building of roads, railways, defence equipment & information technology systems, and they cost between £20 million & £20 billion each. Despite the level of investment, the management of these projects has been worryingly poor.
“When the Public Accounts Committee reported on major projects in September 2012, it found that only one-third were delivered on time & budget; that is in contrast to the highest performing private sector organisations.
“There have been improvements in government since 2010, including the creation of the Major Projects Authority (within the Cabinet Office) and an enhanced remit for Infrastructure UK (within Treasury). However, there is still insufficient attention given prior to the initiation of projects to identifying options & risks; consistent failure to put in place project leaders with the right skills, experience & incentives; and inadequate scrutiny of the most complex & expensive projects at the centre of government.
“This paper describes the problems; identifies best practice in the private sector for dealing with them; and makes recommendations for strengthening the remit of the Major Projects Authority, working alongside Infrastructure UK & Treasury, to implement the lessons.”
NZ Treasury response
The NZ Treasury has responded to that view by getting investment-intensive agencies to write a long-term investment plan, starting on 1 July this year. Each will go through an 11-principle Government investment strategy assessment.
The Government investment portfolio of 409 investment projects has an estimated whole-of-life cost of $74 billion, to run, grow or transform government services.
58%, estimated at $43 billion, is addressing local needs, nearly 40% of all regional investment is focused on Auckland, and $11 billion of that is for Government investments in transport initiatives.
In Christchurch, the investment portfolio contains 26 recovery & regeneration projects with an estimated whole-of-life cost of $11 billion. These investments include the reconstruction of horizontal infrastructure, the acquisition & development of land in the red zone and the redevelopment of central Christchurch. Many of these projects are managed & funded jointly or wholly by local government.
“Significant progress has been made in the past 4 years, with 85% of horizontal infrastructure completed and facilities such as the Christchurch bus interchange open. Yet the scale & complexity of the recovery has presented a range of challenges. Settlement of remaining dwelling claims, the future use of land in the red zone and supporting the wellbeing of communities represent just a few of the challenges that continue to receive focus.”
In the quarterly report, Treasury gave its assessment of the CERA project:
“The delivery confidence assessment for this programme has not improved since the last report, and remains red. The main issues across the programme relate to unanticipated costs, typically driven by land remediation, delays & scope changes. Issues with timeframes are also common. A number of project milestones have been missed or are under review, with other projects identifying risks around timeframes. These issues suggest the programme continues to be overly optimistic about what is achievable within its (& its partners’) capacity & capability. It is highly likely that additional funding will be needed to finish the programme. [Redacted]. This means increasing funding would require significant compromise of other investment initiatives. Treasury recommends advice is developed on how to manage financial pressures while delivering intended benefits.”
On the central Christchurch budget & expenditure, the Treasury report forecast pressures for the convention centre & stadium: “These pressures mean Treasury considers the programme, as visualised in the blueprint, cannot be delivered within the funding envelope established by the cost-sharing agreement in June 2013. The options to address this are to provide additional funding, revise the scope of the programme, or a combination of the 2.”
Links:
Managing Government investment projects 2014-15
Major projects performance report March-June
Treasury, Better business case
Getting a grip: How to improve major project execution & control in government
Reports by the former UK Government lead non-executive, Lord Browne of Madingley
Attribution: Ministerial release, Treasury reports, Madingley papers.
Comments are closed.