Government ‘too reliant’ on suppliers for project cost estimates, MPs warn

MPs have warned that the government lacks the skills to estimate project costs, leaving it “too reliant” on supply chain partners to price its biggest infrastructure schemes.

Government departments are agreeing funding packages before proposals are sufficiently developed, a cross-party inquiry into the government’s major infrastructure projects concluded. It cited HS2 as a “prime example of a budget being set before plans were sufficiently mature”.

The House of Commons’ Public Accounts Committee (PAC) said the government suffered chronic “optimism bias” over cost, with early estimates rarely resembling final project price.

Lack of technical, engineering and project management skills in the civil service have harmed government departments’ capacity to act as an “intelligent client”, it added.

The committee’s report also warned that the UK would struggle to deliver major projects amid competition for skilled workers from countries such as Saudi Arabia.

The Infrastructure Projects Authority (IPA) told the PAC during an evidence session it was lacking steel fixers for its major civil engineering projects, and had recently lost a design company with several hundred designers to Saudi projects.

The PAC added that improving project management skills within the government could mitigate risks from supply chain

Committee chair Meg Hillier said the UK would fail to meet the challenges of an “unprecedented” government infrastructure spend without a robust market for essential skills in place.

She said: “All too often we see projects and programmes that are poorly managed and delivered late and over budget. The failure to ensure projects have robust impact evaluation plans in place is symptomatic of the short-term mentality dominating these processes.”

The government’s Major Projects Portfolio, which represents its largest and riskiest infrastructure projects, included 244 projects with a collective cost of £805bn as of March 2023.

Saudi Arabia is proposing trillions of dollars of infrastructure investment through its Neom gigaproject. UK firms including groundworks specialist Keller have already signed up to work on the scheme.

The PAC recommended the IPA and Treasury provide the PAC with an analysis of the risks of the skills shortage to the government’s infrastructure projects.

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