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14 July 2014 | Gurjit Degun
Around 20 per cent of projects and programmes at the Department for International Development (DFID) are underperforming because of a tendency among project appraisers to be overly optimistic.
That was the message from Mark Lowcock, DFID’s permanent secretary, who was speaking at the department’s second annual supplier conference in London last week.
Lowcock said that as of March, there are 1,100 projects and programmes, worth £37 billion, in DFID's ‘portfolio scoring system’. This reviews whether a project is on track in delivering its expected outcomes by giving it a score of A, B or C, with A being best.
“If every project in the portfolio scored an A then the total portfolio would have a score of 100,” explained Lowcock. “As it happens the total portfolio score is 98.1, and some people might assume that 2 per cent of the portfolio is underperforming.
“That’s not what’s going on. Twenty per cent of the projects in the portfolio are scoring either B or C which means they’re either a little or seriously underperforming. They are though compensated by the fact that a bit less than 20 per cent are scoring A+ or A++ so they are over performing.
“The 98.1 score is not quite where I wanted to be because that 20 per cent of underperforming projects is a little bit higher than I’m personally comfortable with.
“There’s two reasons why we’ve got those Bs and Cs. One is the immaturity of the portfolio. The other thing is that we’ve got too much optimism bias in the design stage, we have been unrealistic about how fast it will be possible to do stuff. We need to deal with that optimism bias issue. And it’s not just us, all our partners have an interest in doing that as well.”
Lowcock said he would like a portfolio score between 100 and 105. “I don’t want it to be 120 which would be maxing out everything,” he explained. “So this is going to be a growing part of the discussion for those of you who are managing projects for us over the next year or so.”
He also said the department’s relationship with it key suppliers is improving. “We think it’s been helpful that we’ve been much clearer than we were previously on what kind of expectations we have of you in the way we work with you and the kind of priorities we have,” Lowcock said.
“One other benefit of this new system [the key supplier management programme] is that we have much better overarching assessment for each of the key suppliers, what the total portfolio they’re managing for us is and how well each of the projects in the portfolio are performing and how well they are performing in aggregate.”
However Lowcock added that on average 20 per cent of its contracts “have got some or serious performance issues”. He said that the department and the top suppliers know what needs to be addressed to improve this.
“From my point of view it is a strength in the system that we have much better management information, and a much better collective sense on how the overall portfolio is working than we used to, I think it’s a healthy thing,” Lowcock added.