Future megaprojects to have separate construction and design phase budgets

Megaprojects of the future will not have their construction budget or completion dates announced before a long feasibility phase, government officials have stressed.

Treasury officials told MPs on Parliament’s Public Accounts Committee on Thursday (26 June) that previous projects had their budgets and timescales set too early.

James Bowler, permanent secretary at the Treasury, said: “I think in the past, too often the button has been pressed too soon, with a government announcement that they are not only going ahead with Project X, but this is what it will cost, and this is how long it will take to deliver.

“The learning from that is […] people have been keen to show that the commitment is real by setting out that we’ve funded it and all the rest of it. The danger is going ahead with a too-immature design.”

Future megaprojects would feature a long feasibility section where objectives are clarified fully.

“You are not saying ‘this will cost £10bn and take 10 years and a ribbon will be cut in 2035’. When you have gone through that feasibility study and you’ve gone through the various business case processes, and you are ready to do that, you would then enter a construction phase.

“The construction phase would have a budget in and of itself. It would have flexibility in that budget, which is something the Treasury has not always been the champion of.”

Bowler also said that what constitutes a ‘megaproject’ would be defined. Currently the government considers HS2, Sizewell C and nuclear submarine programme Dreadnought to fall into the category.

Jon Loveday, director of infrastructure, enterprise and growth at the new National Infrastructure and Service Transformation Authority, told the committee that the £6bn HS2 Euston Station project may be considered a megaproject in its own right.

“That decision is not to be taken today but over the next few months as options are further progressed,” he said.

The comments came just over a week after transport secretary Heidi Alexander criticised the “mismanagement” of HS2 to date and announced its completion date had been delayed at least two years beyond 2033.

They also came a week after the government’s 10-year infrastructure strategy was released, outlining new strategies for delivery.

Pipeline to boost confidence

The session also heard that officials believe the imminent publication of a 10-year infrastructure pipeline, due before 22 July, will boost the supply chain and investor confidence.

Loveday said it would also help save public money.

“The pipeline that will be published before recess this year will give greater and further certainty to the supply chain and to investors about what is going to be done, exactly when and where.

“What we’ll then be able to do as we as we start to integrate and roll out the 10-year infrastructure strategy properly, is look on the commercial basis of which contracts are let and what is the most efficient way of doing that.”

He added: “Where we have already adopted that type of process in the prison building programme, we’ve already seen some significant improvements in terms of time and environmental benefits and other benefits, through the repeatability of designs and certainty that programme has been able to give.”