Making sure hand-outs are no lottery

5 June 2002
More news

06 June 2002

The news that the OGC is to be consulted on high-risk awards of lottery cash is not before time. However, it remains to be seen how it deals with the private sector, says David Arminas

Tessa Jowell, secretary of state for culture, media and sport, has taken the first tentative steps towards ensuring a framework is used for spending lottery money.

She has told those who hand out the cash to take advice from the premier government procurement agency, the Office of Government Commerce (OGC), when considering high-risk, high-profile projects.

Jowell's move comes after her bruising time in front of a parliamentary select committee over the procurement processes for the now much-disgraced Wembley National Stadium project.

Most major procurement processes take place on projects not so much in the public eye. But a new sports stadium can bolster national pride. Seeing it get bogged down in a morass of bad procurement heightens a public belief - rightly or wrongly - that Britain fumbles the proverbial ball while other countries get things done properly.

It's been more than five years since the government decided to have a national stadium on the Wembley site and the Football Association's subsidiary, Wembley National Stadium Limited (WNSL), took on the task of making it come true.

Since then, the procurement process has been subject to accusations of major mismanagement. Some of the hardest knocks came in November when a parliamentary report heavily criticised WNSL for not adhering to best-practice procurement in its dealings with builder Multiplex.

By then, the costs had risen from £326 million to over £700 million, making it the world's most expensive sports stadium.

Our story shows that successful procurement of major IT and construction projects remains a concern for the government, as it should, given the history of such deals.

Nearly two years ago, the Treasury declared that government IT projects had "systemic" problems. Since then, procurement professionals have been patching up major IT disasters in, among others, the Immigration Service, the Lord Chancellor's Department and the Inland Revenue.

Jowell's move shows that the government will apply a more business-like process to investing lottery money. Politics about who gets the hand-outs should not play as large a role. No matter who wants the money, unless there is sound risk management, the money will or should be held back.

There is also another good reason for having a sound business case for handing out lottery money. Those who don't agree with gambling believe it is the people who can least afford the tickets who buy them, hoping for manna from heaven. This places a great moral responsibility to invest the money where it can do the greatest good for society.

Jowell's insistence that the OGC's six-stage Gateway template is used is the first indication that the government will follow the taxpayers' money away from departmental expenditure and, in the stadium's case, well into the sports world's financial dealings.

Anyone looking for a large lottery handout in future will have the watchful eye of the OGC as a rejoinder for the deal.

This is good in theory, but will the OGC's bark be worse than its bite when dealing with the private sector?

In the public sector, the Gateway process is meant to ensure that a project will move from one stage to the next only if financial risks are under control and financial targets have been met. Projects can be stopped by government, as it has ultimate control.

But the government may not have ultimate control in the private sector, where lottery money is only a proportion of a project's cost.

It remains to be seen if and when the OGC deems a project too risky, the government will withhold promised lottery money.

The OGC has until the autumn to assess projects and the risk to lottery money before the government publishes its report into financial management of lottery allocations.

It might be that the OGC is not involved after this, and a new formula is devised.

Meanwhile, the knowledge that the OGC will be involved should make some take risk management more seriously.

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