The National Audit Office (NAO) has released a survival guide to help civil servants navigate their way through costing major projects.
The guide said that with increasingly complex projects, it is more difficult to produce cost estimates, especially when under pressure to make firm commitments early on in the process.
Warning against over-optimism, the guide outlines non-cost concerns to consider when making decisions about the project as well as warning signs about cost estimates that can set up a project for failure from the start.
“The infrastructure projects that government is now delivering, such as High Speed 2 and Hinkley Point C, are bigger, more complex and ambitious and will be delivered over a longer timescale than those delivered in the UK for many decades,” said the guide.
“This creates particular challenges around the management of cost.”
The NAO says its survival guide is based on observations from its work on what can lead to a growth in costs.
Warning civil servants to be wary as ministers are becoming increasingly close to the executive role which can lead to accountability being confused and decisions not being sufficiently tested, it also says readers should beware of “entryism”.
For example, once a project is in the pipeline it may be hard to cancel even if it has not been realistically costed in the first place, the guide points out.
And public scrutiny of projects is more intense than ever in both the immediate and long-term, which can put officers’ personal reputations at risk, especially as accounting officers’ personal judgements may be seen in public documents.
Readers are warned to have a “healthy scepticism about early cost estimates and an appreciation of possible down-side scenarios”.
Among the warning signs that the guide lists are when a minister or sponsor suggests a groundbreaking project.
These are inherently more risky and more difficult to cost than low-risk projects with proven methodologies and existing supply chains, it says.
Equally it warns against projects which offer soft benefits that take decades to deliver, or projects where sponsors have vested interests to deliberately underestimate costs.
Another warning sign is when alternatives are excluded too early, on policy grounds, without a thorough evaluation of costs.
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