More than £2bn of taxpayer’s money is wasted each year because of poor management of public sector construction projects, according to a National Audit Office report
The report, published on Tuesday, claims that although some government bodies have improved, others have ignored best practice guidance provided by the Office of Government Commerce. The audit office puts the cost of wastage each year at £2.6bn. It calls on departments to act now to improve performance, and says they must:
- Use payment methods that avoid prolonged retentions, such as project accounts;
- Provide greater certainty over work flow and funding;
- Use group project insurance where appropriate;
- Employ integrated teams;
- Develop greater expertise for managing projects;
- Base design and decisions on projects’ whole-life costs;
- Follow action plans on sustainability;
- Use the most appropriate procurement strategies;
- Evaluate performance of all members of supply chain, learning from mistakes and achievements.
The report also calls for the OGC to establish a panel of departments to enable co-ordination of programmes.
Sir John Bourne, head of the NAO, said: “Departments and agencies have had a reputation for delivering construction projects that were late or over budget and designing buildings that were not cost effective to operate. There has been a considerable improvement in performance since my last report on the subject in 2001. Departments cannot, however, be complacent. There remains scope for further improvement.”
Bourne said a small improvement could have a big impact: “Even if only 20% of [the report’s] improvements are practicable, this would still release some £500m to be reinvested in frontline public services or higher quality built assets to deliver improved public services.”
Even if only 20% of the improvements are practicable, this would still release £500m to be reinvested
Sir John Bourne, head of the NAO
The report states that 55% of public sector construction projects were completed to budget in the period 1 April 2003-31 December 2004, compared with 25% in 1999. It also notes that 63% were delivered on time compared with the 1999 figure of 34%. The Achieving Excellence in Construction targets set by the government in 2003 required 70% of projects to be delivered to budget and on time by this month.
Rudi Klein, a barrister and chief executive of Specialist Engineering Contractors’ Group, said the report could lead to a revolution in public sector procurement in the next five years: “The NAO has identified the obstructions to real progress. The message throughout is that improvement can only be delivered through integration.”
The report claims that the OGC guidance, Achieving Excellence in Construction, has improved performance among clients but says the department needs to address the leadership and co-ordination of public projects.
Report highlights: Examples of best practice
- Procure 21: NHS trusts are able to access previously competitively tendered supply chains, speeding up procurement process and reducing costs. Design and risk workshops allow better management of risks.
- Kingsmead Primary School: Built last year by Willmott Dixon for Cheshire council, it achieved 50% lower running costs than a typical school.
- Defence Logistics Organisation offices: Defence Estates used a project bank account, ensuring all parties were paid on time and protecting the project when main contractor CITEX went into administration.