Infrastructure authority needs power to refer failing projects to NAO, says Lords committee

The Infrastructure and Projects Authority (IPA) should be given the power to refer projects with persistently poor ratings to the National Audit Office for review, the House of Lords built environment committee has advised government. 

In a letter outlining conclusions from its brief inquiry into infrastructure policy making and implementation in government, committee chair Lord Moylan described how the UK had “historically been poor” in delivering infrastructure projects on time and on budget. 

He cited optimism bias, inappropriate allowances for risk and incentives to over-promise in procurement as contributing factors in delaying and inflating the cost of projects and highlighted the role of the IPA, the client-side project management office for the government’s major projects portfolio (GMPP), in addressing these issues. 

The IPA’s chief executive, Nick Smallwood, gave evidence to the committee last month, where he advocated cancelling failing projects earlier. 

“If we really can’t get our costs, estimates and schedules correct and plans right at Outline Business Case, that’s the time… to pause and stop projects, rather than investing ever increasing amounts of capital,” he said. 

The IPA currently undertakes independent assurance reviews for each of the 266 projects in the GMPP, categorising them based on a traffic-light system. 

Smallwood recently introduced a ‘response to red’ process at the IPA, a policy which triggers a series of interventions when projects are rated red. 

The committee has now recommended that the IPA should be able to refer “persistently red rated projects” to the NAO for review. 

Lord Moylan also urged the government to “clarify the relationship between accounting officers and ministers when deciding to continue projects which fail to improve following the ‘response to red’ process” and to make clear the circumstances in which overspending projects would be cancelled by government. 

While Smallwood had told the committee that the accounting officer for a project would make the call on whether a persistently failing project would continue, James Cartlidge MP, exchequer secretary to the Treasury, told the committee in a subsequent hearing that any decision to halt a project because of a red rating would be for the relevant minister to make. 

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Lord Moylan also noted a “lack of ministerial accountability” for major projects delivery and suggested that the government “ensure greater political grip on priorities and improved inter-departmental coordination”. 

In the first hearing of the inquiry, the Lords heard from KPMG infrastructure chief Richard Threlfall, who explained how bodies such as the IPA and the National Infrastructure Commission typically relied on bilateral relationships with departments. 

Threlfall said his preference was not for a new dedicated infrastructure minister but for a more organised system of “collective responsibility”.  

He added: “If there was to be a ministerial committee that brought together all the ministers that had big infrastructure responsibilities, then you could start to look at infrastructure as a whole.” 

Other recommendations by the committee included attaining planning permissions for major projects before beginning construction and publishing comprehensive data on the regional breakdown of infrastructure spending. 

In his letter, which was addressed to Cartlidge, along with Baroness Neville-Rolfe, minister of state for the Cabinet Office, Lord Moylan requested a response to the committee’s recommendations within six weeks.