Why public sector projects fail

Public sector projects are most likely to fail because of poor project management skills and practices by the client. These are the findings of original research into the risks experienced on major projects including Guy’s Hospital phase III and the Home Office accommodation project.

Traditional risk management models emphasise outside risks such as the physical or economic environment. But this research revealed that more than 80% of risks in large public sector projects are down to the way they are managed. This should be an important lesson for current public sector programmes such as Building Schools for the Future or the prison building programme.

The UK government annually invests billions of pounds in projects to support and improve public sector service provision. Yet, over the past 15 years numerous reports have shown that these projects are failing to deliver the performance expected. Or if they do perform adequately it is only with significant increases in costs or project timescales.

The government has identified that successful risk management is a key element to successful project delivery and has devoted significant resources to improving performance in this area. Until now the priority has been on the development of risk management systems and procedures, but relatively little focus has been put on its implementation.

To identify and categorise the risks involved in large public sector projects, the researchers examined 25 National Audit Office (NAO) reports. This was the first time such an operation had been done, since NAO reports are handled by different departments within the organisation depending on the sector.

The analysis revealed 234 different risk sources which were divided into sub-categories. The list of the top 10 risks (see table) shows how many could be avoided by good project management. PFI projects were not found to be more risky than traditional ones. Both procurement routes had a similar number of risks, mostly within the client organisation, although the type varied.

The researchers found case studies revealing project management teams with no or insufficient knowledge of construction, government guidelines being ignored and projects where no risk management had taken place. Examples of poor practice uncovered included the team at Guy’s Hospital Phase III failing to carry out an Approval in Principle before tendering stage 1 of the project, despite £10m cost increases, and the Southampton Oceanography Centre being managed by a succession of inexperienced staff.

In contrast, successful projects illustrated the importance of good project management. For example, the Home Office accommodation project benefited from the secondment of a project manager from the Office of Government Commerce who had a construction background and experience of large projects.

Public sector projects do have some unique problems to overcome, such as the number of agencies and outside bodies that are involved and the changing political environment which can make it difficult to predict future requirements for an asset.

Reviews of construction sector projects have shown that progress is being made, and that improvement in delivery within timescale and budget is evident. An NAO report shows that between 2003 and 2004 a total of 55% of projects were delivered within budget compared to 25% in 1999, and 63% of projects were delivered within schedule compared to 34% in 1999.

However, the key finding remains that the number of risk sources on public sector projects could be significantly reduced if project managers conducted the required procedures and conducted them properly.

There are issues other than the lack of project management skills within public sector clients. The biggest is the sheer number of revised project management procedures which managers may have difficulty keeping up to date with.

And despite guidance provided by the OGC, lack of skills means that some public sector organisations do not translate and implement the guidance on their individual projects. Another problem is that although some procedures, such as appraisals, are followed, they are not seen as a valuable exercise, so the outcomes are often ignored.

Rather than produce more and more procedures and guidance, advisory agencies such as the OGC and HM Treasury should focus more on dissemination. There is a need for high-level co-ordination of construction project management procedures and streamlining of guidance, a process which the OGC has begun.

The findings of this research were used to create an online resource, or Risk Breakdown Structure, which categorises all the risks identified and provides examples from the NAO report. 

The research was funded by the Engineering and Physical Sciences Research Council. The authors are grateful for the assistance of the National Audit Office in pursuing this research.