Why is Government Failing to Deliver Projects Successfully? by p4md

WHY IS GOVERNMENT FAILING TO DELIVER PROJECTS SUCCESSFULLY? Discussion paper This discussion paper looks at the practical implementation of policy, and lays out an assessment of why government is failing to manage and deliver projects successfully. This document is intended to facilitate discussion on this topic and we welcome feedback. It will be followed by a policy paper that addresses the issues we diagnose here.

February 2021

THE COMMISSION FOR SMART GOVERNMENT The Commission for Smart Government is an independent initiative to consider how to make public administration more effective. The Commission is a project of GovernUp, which is an independent, non-party research initiative that offers evidenced-based solutions for all political parties to adopt. The 12 workstreams are: Assessment

What have been the standout successes and failures of recent public administrations, and what can we learn from them?

Best Practice

What are the examples of best practice in the UK and around the world from which we can learn?

Talent & Competence

How do we equip civil servants with better skills, recruit and remunerate to attract the best and incentivise success, and share knowledge?

Project Management

How do we ensure government has the right skills and systems in place to commission and manage big projects successfully?

Finance

How do we ensure stronger financial management, strip out cost and drive efficiency?

Structures

How should we improve the current Whitehall structure, with its small yet overlapping centre and siloed departments, to make decision-making more effective and less bureaucratic? To what extent should we devolve more power and decision-making to local bodies, and how can this be achieved while maintaining a proper role for the UK Government? How can we make the system, including ministers and civil servants, as well as agencies, regulators and arms-length bodies, more accountable?

Devolution Accountability Technology

How can we deploy technology more effectively and rapidly to improve public services?

Data

How can we ensure that decisions are evidence-based and informed by data?

Ministers

How can we make ministers and advisers more effective in their jobs?

Appointments

How can we ensure that the appointments system attracts the best and aligns with the Government’s priorities?

The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

COMMISSIONERS Michael Bichard

Deborah Cadman Camilla Cavendish Suma Chakrabarti

Ian Cheshire Phaedra Chrousos Chris Deverell Simone Finn Jayne-Anne Gadhia Martin Gilbert Verity Harding Nick Herbert Margaret Hodge Husayn Kassai Daniel Korski Paul Marshall John Nash Mark Rowley Gisela Stuart Jacky Wright

Lord Bichard KCB is a crossbench peer in the House of Lords and chair of the National Audit Office. He was formerly Permanent Secretary at the Department for Education and the first Director of the Institute for Government. Deborah Cadman OBE is Chief Executive of the West Midlands Combined Authority. Baroness Cavendish of Little Venice is a former Head of the Number 10 Policy Unit. Sir Suma Chakrabarti KCB was until recently the President of the European Bank for Reconstruction and Development. He was formerly Permanent Secretary at the Ministry of Justice and the Department for International Development. Sir Ian Cheshire was the Chairman of Barclays UK plc until 2021. He was formerly the Government Lead Non-Executive Director 2019-2020. Phaedra Chrousos is the Chief Strategy Officer for Libra Group and a former commissioner for the US Technology and Transformation Service. General Sir Chris Deverell KCB MBE is the former Commander of UK Joint Forces Command. Baroness Finn is a Non-Executive Director at the Cabinet Office and a former government adviser on civil service reform. Dame Jayne-Anne Gadhia DBE FRSE is a businesswoman and the founder and Executive Chair of the start-up Snoop. Martin Gilbert is the Chairman of Revolut and the co-founder and former CEO of Aberdeen Asset Management. Verity Harding is a Visiting Fellow at the Bennett Institute for Public Policy, Cambridge University, where she is on secondment from her role as Global Head of Policy and Partnerships at DeepMind. Lord Herbert of South Downs CBE PC (Chair) is a former Conservative minister. Rt Hon Dame Margaret Hodge DBE MP is a Labour Member of Parliament, a former minister, and the former Chair of the House of Commons Public Accounts Committee. Husayn Kassai is the co-founder and CEO of Onfido. Daniel Korski CBE is the co-founder and CEO of PUBLIC and a former Deputy Head of the Number 10 Policy Unit. Sir Paul Marshall is Chair and Chief Investment Officer of Marshall Wace LLP and a former Lead Non-Executive Director at the Department for Education. Lord Nash is a businessman and Government Lead Non-Executive Director. He is a former minister. Sir Mark Rowley QPM is a former Assistant Commissioner of the Metropolitan Police. Baroness Stuart of Edgbaston PC is Lead Non-Executive Director at the Cabinet Office and a former Labour MP and minister. Jacky Wright is the Chief Digital Officer for Microsoft US.

Contents Executive Summary...........................................................................................................5 Why does effective project management matter?.........................................................7 What would effective project management look like? ..................................................8 What is the reality of project delivery in government? .................................................9 Current efforts to improve project management in government ............................ 10 Persistent problems for projects................................................................................... 12 Weaknesses in portfolio management ......................................................................... 13 What are the impacts of the weakness in portfolio management? ........................... 15 Lack of prioritisation and effective sequencing of projects ................................................. 15 The focus is on starting and completing individual projects, rather than an investment portfolio .................................................................................................................................... 15 Lack of a strategic approach to risk management ............................................................... 16 Existing gaps in skills are harder to manage because of the lack of portfolio view........... 17 Integration and implementation are neglected.................................................................... 17

Why is portfolio management in government weak? ................................................. 18 Causes at the departmental level .......................................................................................... 19 Causes at the whole-of-government level ............................................................................. 20

Call for responses............................................................................................................ 22 Author .............................................................................................................................. 23

Executive Summary Projects are how government actually delivers many of its policies. Expenditure on projects is a major component of public spending. In 2020, there were 125 projects in the Government’s Major Projects Portfolio (GMPP) with a whole life cost of almost £450 billioni. Effective project management is therefore vital for any government to be able to affect change and achieve the benefits and impacts for society which it hopes to bring about, and a critical component of managing public money well. This paper offers an assessment of the factors underlying the current issues with project delivery in government. In order to maximise successful project delivery, projects should be approved and designed based on clear objectives and realistic goals. The role of projects within wider programmes, and in turn within an organisation’s portfolio, should also be well-defined. There should be a strategic vision for the impact of the portfolio as a whole, with deep understanding of the connections between projects and programmes within this. At portfolio level, effective project management should see investments helping to deliver intended outputs and outcomes, and progress on key priorities. Since at least 2010, the UK Government has made concerted efforts to develop project management expertise in government. But despite the significant steps forward in project management capabilities and assurance, there is not yet evidence of a corresponding increase in project success. Overall confidence in the delivery of major projects, according to the Infrastructure and Projects Authority (IPA), has fallen every year since 2013ii. Fewer than 20 per cent of projects in the GMPP were considered on track in 2020, meaning more than 80 per cent of projects were rated as not likely to be delivered on time or on budgetiii. High profile failures, such as the NHS IT programme, or huge cost overruns, such as the £30 billion increase on High Speed Two, are matched by problems on many smaller programmes which combined, limit the Government's ability to deliver on its agenda. The overall picture is, as the National Audit Office has put it, that the ‘public sector has not had a good track record in project delivery.’iv Projects of very different shapes and sizes come up against a range of persistent problems. There are known gaps in digital, commercial and project management skills. Optimism bias is a wellrecognised problem. Alongside this, there are weaknesses in risk management and a tendency to treat spending as a proxy for performance, with greater focus on keeping costs under control than on the outputs and outcomes achieved with spending.

While most of the effort to improve project management within government has been focused on improving skills and processes at project level, our assessment is that the problems with project delivery cannot be resolved without better portfolio management. Weakness in portfolio management, at both the department and whole-of-government level, has become the most fundamental obstacle to successful projects, with impacts at every stage of project selection, planning, delivery and implementation. The Government Major Projects Portfolio brings together the biggest, most complex projects across government, but there is no active management of the portfolio. In departments, projects tend to be managed in isolation from each other, with too much focus on keeping budgets under control rather than contributing to the department's objectives. A portfolio management approach would bring much more focus to these objectives, with a portfolio of projects and programmes representing the sum of a department's investment into its priorities. Ideally, government would have a clear set of political and strategic priorities, and a coherent overarching programme of work reflecting these. Allocation of resources and sequencing of activities would be based on this, and decisions on projects made in line with this programme. Instead, the emphasis tends to be on getting individual projects approved and started. This leads to departments, and to government as a whole, taking too much on, beginning new projects when funds or capacity are already under strain, and failing to manage the interdependencies between the projects. As former Chief Executive of the Civil Service, John Manzoni, put it, the result is a government doing ‘too much to be doing it well.’v Many common problems with project management are symptoms of the weakness in portfolio management, or are exacerbated by it. The focus on ‘breaking ground’ can mean that elements of good planning are sacrificed. Value for money is typically assessed at a project rather than portfolio level, meaning opportunities for achieving benefits across multiple projects are sometimes lost. Without a portfolio view, it is harder to build a complete picture of the interdependencies between projects, and so to understand the full extent of risks to a project’s delivery. It is also more difficult to allocate capacity effectively across government, or within departments, so skills gaps are magnified. Departments can struggle to coordinate between different programmes and between their business-as-usual operations and change portfolio, threatening the success of integration and implementation. This has been a particular problem for transformation programmes. What are the causes of weak portfolio management in government? We propose a number of contributing factors, including a lack of strategic prioritisation, weaknesses in the collection and use of project data, and the departmental structure. We will explore these issues in more detail in a future paper and bring forward proposals to address them. The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

Why does effective project management matter? Effective project management is necessary for any government to achieve its goals, and to deliver to voters what politicians have promised. Governments deliver many of their key policies and priorities through projects and programmes. Portfolios of these projects represent how a government is investing in its priorities. Delivering this Government’s biggest priorities, from achieving net zero emissions by 2050, to tackling the Covid-19 pandemic and ‘levelling up’, will require effective management not only of a large number of individual projects but also of broad cross-government portfolios of projects. On net zero for instance, the Department for Business, Energy & Industrial Strategy (BEIS) has primary responsibility but it will need to work closely with the Department for Environment, Food & Rural Affairs, the Department for Transport and the Ministry of Housing, Communities & Local Government, each of which have responsibility for high-emissions sectors, as well as the Cabinet Office and Treasury, to achieve its goals. Effective project management is also necessary to keep already existing services running effectively and efficiently, by modernising public services, defence capacity, infrastructure, and the ways in which government works. There are an increasing number of transformation programmes in the public sector that seek to do this. These complex programmes have the greatest risk of failure, relative to other project types, and often have wide-ranging impacts for the entire department or body they seek to transform. vi They therefore pose an even stronger need for effective project, programme and portfolio management. The biggest, most complex, innovative and costly projects in government are collated in the Government Major Projects Portfolio (GMPP). This includes projects to deliver new warships for the Navy, digitise the tax system, build new phone masts, transform the NHS website, and dispose of radioactive waste. In 2020, there were 125 projects in the GMPP with a whole life cost of almost £450 billion.vii,viii This is only a subset of the projects currently being managed in government. There are many smaller projects and programmes in every department and public body, that together will also add up to a significant chunk of public spending. There is not data on the total amount of spending on project delivery outside the GMPP, but the National Audit Office (NAO) estimates that up to twice as much is spent on capital projects outside, as inside the GMPP.ix,x The size of the GMPP gives a sense of the huge amount of money at stake. The Government, including individual ministers and accounting officers, has a responsibility to ensure public money is spent well. This means not only controlling spending, as the Treasury already does relatively successfully,xi but ensuring projects and portfolios as a whole deliver their intended outcomes for the public. The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

Box 1: Projects, programmes and portfolios According to the Infrastructure and Projects Authority (IPA), the centre of expertise on major projects in government:xii ● A project is created to deliver one or more specific products or outcomes. ● A programme is usually composed of multiple projects and is created to coordinate and oversee their implementation ‘to deliver outcomes and benefits related to a set of strategic objectives.’ ● A portfolio ‘comprises part or all of an organisation’s investment required to achieve its objectives.’ Projects, programmes, sub-portfolios and other components are part of a portfolio. The formal definitions matter for designing governance and management frameworks, but use of these terms varies across government, and is not always reflective of these definitions. For instance, many of the ‘projects’ in the Government Major Projects Portfolio are programmes. We will use projects and programmes interchangeably in this paper.

What would effective project management look like? Genuinely effective project management should result in individual projects being delivered, in most circumstances, on time, on budget and achieving the benefits promised. The leading academic on megaproject management, Bent Flyvbjerg highlights five dimensions of effective project delivery: initial deliberation, optimism bias and overconfidence, strong project management capability, effective oversight and risk management, and the ability to adapt where necessary.xiii Projects should be approved and designed based on clear objectives and realistic goals. The role of these projects within wider programmes, and in turn within an organisation’s portfolio, should also be well-defined. There should be a strategic vision for the impact of the portfolio as a whole, with deep understanding of the connections between projects and programmes within this. On both individual projects and programmes, and at the portfolio level, data should be collected and used to inform decisions at every stage, including for design, delivery, implementation and The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

evaluation. Project leaders must have a thorough understanding of, and a plan to effectively manage uncertainties and risk, and clearly communicate this to senior leaders in the department. Responsibilities and accountabilities should be delineated for projects, programmes and portfolios, through the supply chain, delivery organisations, departments and even in the centre of government. At the portfolio level, effective project management should see investments actually helping to bring about the intended outputs and outcomes, and progress on key priorities.

What is the reality of project delivery in government? Some projects and programmes do arrive on time, to budget and deliver their intended benefits. These successes deserve recognition. Prominent examples include the Olympics,xiv automatic pension enrolments,xv and the DLR.xvi Neither Sellafield nor Universal Credit could yet be classed as ‘successes’, but after significant problems in their early stages, they did both see major improvements thanks to changes in project management. xvii Many lower profile and smaller scale projects are implemented without issue, including several smaller reforms to the welfare system led by DWP,xviii and various infrastructure projects managed by Highways England.xix Unfortunately, these examples do not represent the norm. As the NAO succinctly puts it: ‘The public sector has not had a good track record in project delivery.’xx Fewer than 20 per cent of projects in the GMPP were considered on track in 2020, meaning more than 80 per cent of projects were rated as not likely to be delivered on time or on budget. xxi These assessments were made before the full impact of Covid-19 had been felt, which is sure to cause further challenges to delivery. Although one would expect increased certainty as a project progresses, not all project ratings improve over the project's lifetime.xxii Again and again, we see projects going over-time and over-budget. Departments are repeatedly chastised for taking ad hoc approaches to risk management, data collection and evaluation. Projects frequently fail to deliver the benefits or savings that were originally promised. For example, High Speed Two is now estimated to cost up to £88 billion, against an original budget of £55.7 billion, and Phase One has already been delayed by three years. xxiii The Home Office’s Digital Services at the Border programme had to be reset in 2019, five years after it was launched, extending the delivery schedule by three years at an additional cost of £173 million. xxiv The Ministry of Justice’s £130 million program to develop a new electronic monitoring tag was described as a ‘a catastrophic waste of public money’ by the Committee of Public Accounts. xxv The new tags were rolled out in early 2019, more than five years later than the originally

scheduled date, and the program failed to deliver its intended savings or benefits, with the Ministry remaining reliant on legacy services and a far lower take-up of offender tagging than was expected. These are not just problems in the UK Government, or only in the public sector. Defence programmes in Australia and the US suffer similar delays to those in the UK.xxvi Almost 9 in 10 large transport infrastructure projects, anywhere, overrun on costs.xxvii 70 per cent of private sector transformations fail.xxviii Looking at the largest available dataset, Bent Flyvbjerg found that ‘overruns have stayed high and constant for the 70-year period for which comparable data exist. Geography doesn’t seem to matter either; all countries and continents for which data are available suffer from overruns.’xxix These shared challenges do not mean project delivery cannot be improved, but point to the fact that projects are stymied by deeply rooted problems. Compared to the private sector, the complexity of government projects and their impact on people’s lives, and government’s accountability to the tax paying and voting public, all make it even more important that government gets projects right.

Current efforts to improve project management in government There have been significant efforts to improve project management, and notable examples of successful projects. This Government has also laid out its particular ambition to improve project management.xxx The UK Government is broadly recognised as a leader in project management, and the IPA as a genuine centre of expertise. For instance, the introduction of The Green Book, the Treasury’s guidance on how to appraise programmes and projects, was a significant innovation when first introduced in 2003. The UK Government was also one of the first to require projects to demonstrate in proposals how they will curb optimism bias, a recurrent source of cost and time overruns, to gain approval.xxxi Since at least 2010, the Government has made significant efforts to improve project delivery skills across government.xxxii These efforts are led by the Infrastructure and Projects Authority (IPA), which was established in 2016 to bring together expertise on infrastructure and major projects and support project delivery across government. The Project Delivery function is the second largest cross-department professional specialism, with more than 14,000 civil servants in 2019, having grown year-on-year since its establishment and seeing a 170 per cent increase in size between 2013 and 2018.xxxiii Other specialisms critical to effective project management and The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

delivery such as commercial and digital, data and technology, are also growing. More than 900 senior leaders have been put through a specialised training programme (the Project Leadership Programme) since it was launched in 2015.xxxiv The Project Delivery function is unique in actually collecting data on the benefits of its training courses, and so is able to continually assess and improve their effectiveness. It was also the first to develop a ‘Capability Framework’, allowing individuals to assess their own skills, and overall allowing the function to build a clearer understanding of the project delivery skills across government. xxxv There have been a range of attempts in recent years to institute more of a focus on deliverability. According to Treasury guidance, feasibility is one of the four main criteria on which Accounting Officers should assess policies and projects.xxxvi A feasibility assessment should include assessments of deliverability. Departments are now encouraged to work with functions specifically on deliverability during spending reviews. The Project Delivery function produced guidance on deliverability for the Treasury and helped to build assessments of the deliverability of departmental bids into the 2020 Spending Review.xxxvii These assessments formed part of wider considerations on whether to approve proposals, as the Treasury sought to move away from a simple ranking based on benefit cost ratios.xxxviii There has also been growing recognition across government on the importance of assurance, including internal and external reviews, to project success.xxxix As well as its formal assurance process for projects in the GMPP, the IPA now advises more projects in their early stages, before they have entered the GMPP, and has started to keep track of more projects after they have left, hopefully allowing it to evaluate the delivery of benefits more consistently in future.

Box 2: Leadership and accountability for projects There are three key leadership roles in the management of projects, each with a different set of accountabilities for project success: ● Project or programme directors are responsible for day-to-day management and accountable to the senior responsible owner. ● Senior responsible owners (SROs) are ultimately accountable for project success – the project meeting its objectives and realising benefits. They are responsible for everything from design and delivery, to governance and assurance. SROs of projects in the GMPP are directly accountable to the accounting officer and to Parliament. ● Accounting officers (AOs) are accountable to Parliament for the proper management of public funds. The Permanent Secretary is typically the accounting officer for their department.

Persistent problems for projects Despite the significant steps forward in project management capabilities and assurance, there is not yet evidence of a corresponding increase in project success. Overall confidence in the delivery of major projects, according to the IPA itself, has fallen every year since 2013.xl There is also not yet a concrete link between assurance and performance. For instance, the Crossrail, Northern and Thameslink projects also encountered significant problems despite extensive assurance arrangements.xli The NAO also reports that responses to IPA recommendations vary across projects, being positive on Thameslink and Crossrail for example, while those managing HS2 and Universal Credit were less responsive.xlii Projects of very different shapes and sizes seem to come up against a range of persistent problems, threatening their success. Optimism bias is one such well-recognised problem. There are a range of problems associated with procurement and managing the many commercial arrangements involved in project delivery, beyond the scope of this paper. Others include gaps in certain skills, turnover in project leaders, weaknesses in risk management, and the issues caused by much more attention being paid to costs, than benefits. With regards to the skills required for effective project management, there are known gaps. The Cabinet Office acknowledges digital, commercial and project management as three of the areas with ‘most noticeable skills shortages’, with direct impact on delivery of major projects. xliii Partly because of skills shortages, there is a particularly high level of turnover in the project delivery profession, compared to other parts of the civil service and to the private sector. xliv Senior responsible owners sometimes have responsibility for multiple projects and are rarely responsible for a project from beginning to end. Universal Credit had five different SROs between 2012 and 2013 and five programme directors between 2010 and 2013. xlv Looking at a sample of 73 projects in the GMPP, the NAO found that only 5 per cent had a single SRO over a four-year period, and 56 per cent had two or more.xlvi When delivery bodies realise they need extra hands and additional skill sets too late in the piece, they can end up having to hire expensive consultants. The Cabinet Office estimates that £980 million was spent on external contractors in 2018/19. HS2, Crossrail and EU Exit programmes have all had particularly high consultancy spends.xlvii In the case of the biggest, most novel projects, there have sometimes been skill shortages even in the private sector. There was a lack of engineering skills in nuclear decommissioning, tunnelling and railway signalling for example. xlviii Risks are too often dealt with at the individual project level, and even at the level of individual risks, instead of ‘stepping back to understand and assess the totality of risks facing the programme.'xlix Rather than putting in place proper contingency arrangements, risks are too often The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

responded to in an ad hoc manner, as and when they arise. The NAO notes this as a recurring problem for projects: ‘departments did not have integrated strategies to give them a clearer view of the interdependencies between projects and how to prioritise them.’l For too long, government has treated spending as a proxy for performance, focusing on keeping costs under control more than on the outputs and outcomes achieved with spending.li This is in contrast to the private sector, where performance is typically closely monitored.lii Project managers often pay much more attention to managing costs than to delivering benefits, and certainly more so than establishing the connections between the two. The lack of focus on benefits means that value for money can end up being lost, even if costs are kept down, and there is little assessment of the extent to which projects contributed to government objectives, once delivered. Looking at projects leaving the GMPP for example, the NAO reported that ‘although there is evidence that most projects… have implemented their planned scope, it is less clear whether they achieve the intended outcomes.’liii While there is data on the value of intended benefits of projects, there is rarely public data on the benefits actually realised.

Weaknesses in portfolio management While most of the effort to improve project management within government has been focused on improving skills and processes at project level, our assessment is that the problems with project delivery cannot be resolved without better portfolio management. Weakness in portfolio management, at both the department and whole-of-government level, has become the most fundamental obstacle to successful projects with impacts at every stage of project selection, planning, delivery and implementation. It means that there is not a clear enough understanding of the full breadth of different projects underway in a department or across government, and how they relate to each other, and the overall level of investment in different priorities. The progress being made in project management skills and assurance is not sufficient to counter the problems caused by this higher level-issue. The NAO summarised the problem: ‘There is increased assurance through the Portfolio and other central departments have an increased role in assuring, approving and improving quality of delivery. But an effective mechanism still needs to be developed for prioritising projects across government or judging whether individual departments have the capacity and capability to deliver them.’ liv There have been some attempts to introduce portfolio management skills and approaches too. Portfolio management is a part of the IPA’s training programmes and included in the project delivery profession’s functional standard, which defines a portfolio management framework.lv However, much less time is spent on this compared to programme and project management. The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

The GMPP was meant to help gain a better view of the requirements of projects across government. But it is more of an exercise in data collection than portfolio management. The IPA does not have the authority to prioritise between projects in the portfolio, and especially not to deprioritise major projects. It also lacks sufficient data about where projects within the GMPP fit into the rest of each department’s portfolio, and about departmental workforces, to fully gain the potential benefits of a portfolio view for risk assessment or resource requirements. The National Infrastructure Commission was established to advise the government on long-term infrastructure priorities, which would hopefully encourage some genuine prioritisation between infrastructure projects. The National Infrastructure Strategy, published in November alongside the 2020 Spending Review, provided a vision for the government’s investment, but plans on delivery are still to come. This is a positive step, but any cross-government infrastructure portfolio would also need to be balanced with that of other types of projects, given their overlapping skills requirements. This is especially the case as infrastructure projects become increasingly technical and complex, and will need to learn from the expertise of those involved in ICT and defence projects.lvi There are some examples at the departmental level too. DWP and HMRC have started to take a portfolio management approach to their transformation projects.lvii Before it merged into the FCDO, the Department for International Development had its own assurance processes for its portfolio of around 1600 programmes.lviii DExEU in essence took on a portfolio management role for the various programmes across government related to EU Exit preparation, mapping systems impacts, redistributing resource, and identifying areas of interdependence where coordination was needed.lix MoD has its own major projects portfolio, the Defence Major Programmes Portfolio (DMPP). But it faces the same problems as the IPA does with the GMPP in gathering information on projects outside its DMPP, which accounts for more than half of the 2019-2029 Equipment Plan.lx Overall though, portfolio management has simply not been the focus of reforms to improve project management in government, despite its significant consequences for project delivery and, hence, for government’s ability to bring about change. The weak approach to portfolio management still causes major problems for the performance of projects in government, that simply cannot be fixed at the project level. Certainly not all problems with project management, or things that go wrong on individual projects, are caused by a lack of portfolio management. However, many familiar problems are symptoms of this weakness, or exacerbated by it.

What are the impacts of the weakness in portfolio management? Lack of prioritisation and effective sequencing of projects The lack of a clear portfolio view makes it difficult, if not impossible, to prioritise between or sequence projects in a systematic or strategic way. This leads to departments, and the government as a whole, taking too much on, beginning new projects when funds or capacity are already under strain. As former Chief Executive of the Civil Service, John Manzoni, put it, the result is a government doing ‘too much to be doing it well.’lxi These were problems for the Department for Work and Pensions (DWP), for example, when it began work on Universal Credit, the biggest overhaul of the welfare system in a generation. At the time, DWP was also working on 11 other major projects, reorganising the Department and attempting to reduce its operating costs. The NAO reports that it pushed ahead with this level of change ‘without fully assessing the organisation’s capacity to manage these programmes.’lxii The Institute for Government points out that ‘senior personnel were stretched very thinly’ and hence could not always give the level of oversight needed.lxiii

The focus is on starting and completing individual projects, rather than an investment portfolio Ideally, government would have a clear set of political and strategic priorities, and a coherent, overarching programme of work reflecting these. Allocation of resources and sequencing of activities would be based upon this, and decisions on projects made in line with this programme. Instead, the emphasis tends to be on getting individual projects approved and started, almost in isolation. It is extraordinarily rare to hear praise for sacrificing the timely delivery of one project for the good of a portfolio, even though a whole portfolio is more representative of a department’s priorities than any individual project. ‘Breaking ground’ understandably generates more attention than a study confirming the intended benefits of a project have been delivered decades later. But this can mean that elements of good planning are sacrificed, in the name of moving individual projects ahead, even though the project, and even more so the portfolio, will suffer the consequences down the line. Alternative options The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

are ruled out too early, ‘without a thorough evaluation of costs or limited evaluation of the costs of rejected alternatives.’lxiv Leading indicators on major risks are often developed too late, rather than being part of programme design. Further weaknesses are created by the fact that value for money is typically assessed at a project, rather than portfolio level. This means that departments do not necessarily get a full picture of the impacts of delays, cost increases, or the under delivery of benefits, that will likely have knockon impacts on other projects within their portfolio. When projects are considered in isolation, it can also mean that opportunities to generate wider benefits, through collaboration between multiple projects, can be missed, as it would seem too costly at an individual project or even department level. HS2 for example, will have significant impacts on the wider railway and transport network and on housing. A cross-government infrastructure portfolio could ensure these benefits are actually realised.lxv

Lack of a strategic approach to risk management

The lack of a portfolio approach to project management also makes it harder to build a complete picture of the interdependencies between projects and so to understand the full extent of risks to a project’s delivery. A department ‘cannot reliably assess its overall tolerance for risk without clear measures of programme needs and available capacity.’lxvi Getting risk management right is of particular importance for the largest projects in government. By virtue of their size, number of people involved, the role of wider benefits, the likelihood of reliance on external contractors and so on, these projects typically have a broad array of interdependencies with projects in their own department and other work across government. At the same time, they are typically of such strategic or political importance to the government that they will not be allowed to fail, and in the event of risks materialising that genuinely threaten delivery, the government will end up stepping in regardless of its contractual position. This was the case with the eventual use of armed forces to provide security at the Olympics. lxvii An unusually large formal contingency budget meant that, despite this, the Olympics still came in within budget.lxviii A portfolio view would give a better picture of the full cost of poor risk management by making clearer the knock-on impacts of the risks on one project being managed poorly on other projects, whether due to the need for more staff, delays, or increased costs. This would help to drive home the true value of investing in good risk management and contingency arrangements.

Existing gaps in skills are harder to manage because of the lack of portfolio view

Skills gaps are magnified by this weak portfolio management, as it is much harder to allocate capacity effectively across government, or even within departments, without a clear view of projects on the horizon. At the whole of government level, it means that functions do not have oversight of the full range of projects that need their expertise. They cannot, therefore, assign their specialists in the most effective or efficient way. Inconsistent workforce data between departments and the lack of consolidated information on projects outside the GMPP make it more difficult to allocate project delivery professionals across government departments based on need. The project delivery function has itself called for more consolidated data on civil service staffing, which would help it target its efforts more effectively.lxix A portfolio view would also help functions, and departments, build a longer-term picture of what skills will be needed to deliver government projects. At the department level, if capacity and capability requirements are dealt with on an individual project level, the department can easily end up taking too much on and failing to sequence projects in a way that takes account of their capacity to manage them. Senior leaders are left overworked, managing too many projects at once and spending less time on each project than would be ideal. As noted earlier, DWP’s senior leaders were managing a huge raft of reforms from 2010 onward, so did not always have enough time to devote to Universal Credit.lxx

Integration and implementation are neglected Without strong portfolio management, departments can struggle to coordinate between different programmes and between their business-as-usual operations and change portfolio. Several rail projects, including Thameslink and Great Northern rail, have run into trouble when their integration into existing services, and transition into day-to-day operations, was not adequately planned.lxxi Delays toward the end of a project, caused by problems integrating it into operations, are particularly costly: ‘on average, a one-year delay or other extension of the implementation phase correlates with an increase in percentage cost overrun of 4.64 percentage points.’lxxii This has been a particular problem for transformation programmes.lxxiii The number of transformation programmes is growing and they tend to have particularly significant knock-on impacts for other projects and departments.lxxiv The Ministry of Defence, for example, has The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

struggled to coordinate between different transformation initiatives, leading the NAO to raise concerns about implementation.lxxv Without a portfolio management approach, project teams are incentivised to think about their project as a discrete unit. They are often quickly moved onto new projects, leaving confusion about who is responsible for implementation and the delivery of benefits. The clear accountability for SROs and accounting officers during the project phase is muddied once they transition into business as usual. The ownership of benefits, and so accountability for achieving outcomes, can be lost. Portfolio management would help to incentivise the shifting of one project to protect existing operations or other projects, and bring more attention to outcomes at the portfolio level, rather than just project deliverables. The IPA does recognise some of this, writing recently that ‘Poorly planned and controlled delivery into service of new capabilities can impact the existing services and users the major project is designed to benefit…. Major projects may need to be asked to compromise their own schedule to protect existing operations and other major projects.’lxxvi

Why is portfolio management in government weak? Why has improving portfolio management not been a priority? What have been the obstacles to introducing a more comprehensive portfolio approach? The Commission will explore these questions in more detail in a future paper. For now, we propose a number of contributing factors, at the departmental and whole-of-government level. These causes are closely related and interdependent. Strong departmental portfolio management would in fact be necessary for effective management of a portfolio of cross-government priorities. Efforts to improve departmental portfolio management should be aided by initiatives from the centre of government, that would also help a cross-government portfolio. Any weaknesses in portfolio management at a whole of government level should not, therefore, be taken as an excuse for avoiding tackling these obstacles at the departmental level. In the same way that the UK became a leader in expertise on projects, there is now an opportunity to become an international leader in portfolio management, if the government can commit to developing thinking around how to tackle these problems.

Causes at the departmental level ● Priorities: a lack of strategic prioritisation at the departmental level (a problem also at the whole-of-government level) could threaten effective portfolio management. Historically, single departmental plans, the documents setting out each department’s objectives and how it intends to achieve them, have been far too broad, often encompassing dozens of priorities, and too vague to act on, or to guide a portfolio.lxxvii However, following the 2020 Spending Review, plans will be built around three to four priority outcomes, which should help with departmental portfolio management. ● Culture around data: effective portfolio management requires timely, accurate and comprehensive data on projects, programmes and existing operations in a department. It would also require clear definitions of what is business as usual, what is changed, and how projects are grouped. Adequate data does not exist in many departments and overhauling long established data collection systems is an extremely difficult task. There may also be concerns around who would ‘own’ the data on projects in a portfolio system. Those managing projects are not always fully transparent about project performance or willing to share data with other parts of a department. Organisational cultures sometimes stop accurate information about projects from emerging, or from being fed to senior levels of the department.lxxviii ● Technology: a large departmental portfolio is very complex to manage. Some departments have said that they do not have sufficient tools to undertake effective portfolio management.lxxix ● Incentive system: incentives for project leaders are currently structured around the delivery of individual projects. It would be a major change to recognise that a successful project leader might actually delay or reduce the scope of their project for the good of another in the wider portfolio. There are portfolio directors and managers in many departments, but they are not incentivised to actively manage the portfolios for which they are nominally responsible. ● Turnover: turnover in both ministers and civil servants is a well-established problem with wide-ranging impacts.lxxx It will be much harder for officials with a short tenure to get to grips with the scope of a portfolio, and be in a position to effectively manage it. Sir Oliver Letwin MP, rare in having served six years in one position as Minister for Government Policy, said that toward the end of his term he often knew more about projects than the officials advising him, as a result of a high level of turnover.lxxxi

● Divisions between teams and professions: the separation of delivery vehicles from departments, and divisions between policy, operational and technical professions, encourages specialisation that has benefits for project delivery. It also encourages projects to be managed largely independently from the rest of the department. How would these parts of the department each be involved in portfolio management? Management by senior policy professionals, typically closer to ministers, might invite scepticism from the operational and technical sides of the department, whose expertise would be as crucial for effective portfolio management as they are on projects. ● Role of boards and senior leadership: partly as a result of these divisions, senior leaders have become accustomed to mostly leaving programme management up to SROs. A portfolio management approach would require more active involvement from boards and other senior leaders.

Causes at the whole-of-government level

● Priorities: a cross-government portfolio would be composed of those projects which contribute to key government priorities and, because of their cross-cutting nature, cannot be managed by only one department. In order to build and prioritise among a portfolio of these cross-government projects, there must first be a clear and coherent strategic agenda at the political level. This would require Number 10, supported by the Cabinet Office, to have a consistent and narrowly defined set of priorities, which has not always been the case in recent years.lxxxii

● Authority and accountability: who would manage a portfolio for cross-government priorities? Whichever part of government is charged with bringing together a whole of government portfolio, would require sufficient authority to ensure departments would be transparent about project delivery, would overhaul their data collection systems to meet portfolio needs, and would be willing to sometimes sacrifice parts of their own projects for priorities in other departments. Existing tensions between the responsibilities of the Cabinet Office and the Treasury, and between departments and the centre of government, and confused accountability, would likely cause stumbling blocks. ● Departmental silos: British government is not built for cross-government working. Accountability for public spending lies primarily with departmental accounting officers. The Treasury, for the most part, monitors spending by department rather than against crossThe Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

government objectives. A siloed approach has two distinct adverse consequences for portfolio management. First, the opportunity to look at the combined impact of projects across government for government priorities, such as net zero, is missed. Second, the combined geographical impact of projects across government, both financially and in terms of benefits, for different parts of the country and particular places is missed. This could threaten the government’s ‘levelling up’ agenda, as it makes it much more difficult to plan and assess the impact of projects on places, to make the most of opportunities for synergy, and to avoid duplication and conflict. A number of different structures have been used to manage crosscutting priorities, including Cabinet Committees, taskforces, working groups and implementation or delivery units. But genuine cross-government working is still difficult, and would likely pose additional challenges for proper portfolio management. There may be lessons here from the cross-government challenges of EU Exit and the Covid-19 pandemic, which each used portfolio approaches to some extent. ● Skills: the role of portfolio management is recognised by the IPA, and some relevant skills are taught in formal courses. But to correct for the current weaknesses, capability and capacity in portfolio management would need to be dramatically increased. ● Political pressure: Parliament, the public and the media typically want to see big projects delivered successfully, and latch onto any delays or cancellations. Much of this stems from justified concern about the use of public money. Committing to portfolio management, will require open communication around the reasons why cancellation and delays are sometimes necessary, and even of benefit to the whole portfolio, to allay the pressure to push ahead on failing projects.

Call for responses We welcome your feedback on the analysis laid out in this paper, ideas on further reasons for weaknesses in portfolio management, and how this could be addressed. In particular, we are interested to gather views on the following questions: ● Why is the government weak at portfolio management, and why has improving it not been a priority? ● Which parts of government have the most effective approach to portfolio management? ● Which countries take an effective approach to portfolio management in public administration? ● How could an effective portfolio management approach be instituted across government? Please send your feedback to commission@governsmarter.org

Author The author of this Discussion Paper is Tess Kidney Bishop. Tess is a freelance researcher, working on effective policymaking and implementation, domestic and global governance, and human rights. She was previously a Researcher at the Institute for Government, where she coauthored reports on financial and performance management, infrastructure policymaking, digital transformation, and the role of ministers. She has a Master's in Global Thought from Columbia University and a BA in Philosophy, Politics and Economics from the University of Oxford.

Infrastructure and Projects Authority, July 2020, Annual Report on Major Projects 2019 to 20, p. 5 Institute for Government, July 2020, Major projects in government, explainer iii Infrastructure and Projects Authority, July 2020, Annual Report on Major Projects 2019 to 20, p. 13 iv National Audit Office, Jan 2016, Delivering major projects in government: a briefing for the Committee of Public Accounts, p. 12 v Smith, Beckie, Jan 2020, Being John Manzoni: the outgoing civil service chief exec in quotes, Civil Service World vi National Audit Office, May 2015, Lessons for major service transformation, p. 3 vii Infrastructure and Projects Authority, July 2020, Annual Report on Major Projects 2019 to 20, p. 5 viii Not all projects in the GMPP are publicly funded. Energy and utilities-related projects are usually funded through user charges, but financed upfront by the government, private sector or a combination of both. For example, Hinkley Point C is being financed by foreign investors, but will ultimately be funded through charges to consumers on their energy bills. ix National Audit Office, Jan 2016, Delivering major projects in government: a briefing for the Committee of Public Accounts, p. 5 x Not all project spending in government is capital spending. Some project spending, particularly on transformation and public service reform, may come out of resource budgets. xi Wheatley, Martin, et al, Sep 2018, The 2019 Spending Review: How to run it well, Institute for Government, p. 13 xii Infrastructure and Projects Authority and Cabinet Office, Oct 2018, Project Delivery Functional Standard, pp. 67 xiii Flyvbjerg, Bent, et al, 2003, Megaprojects and Risk: An Anatomy of Ambition, Cambridge University Press xiv National Audit Office, Dec 2012, The London 2012 Olympic Games and Paralympic Games: post-Games review xv National Audit Office, Nov 2015, Automatic enrolment to workplace pensions xvi Flyvbjerg, Bent, April 2014, 'What you Should Know about Megaprojects and Why: An Overview', Project Management Journal, 45 (2) i

National Audit Office, Jun 2018, The Nuclear Decommissioning Authority: progress with reducing risk at Sellafield; Timmins, Nicholas, Sep 2016, Universal Credit: From disaster to recovery?, Institute for Government xviii National Audit Office, May 2015, Welfare reform – lessons learned, p. 6 xix National Audit Office, Mar 2017, Progress with the Road Investment Strategy xx National Audit Office, Jan 2016, Delivering major projects in government: a briefing for the Committee of Public Accounts, p. 12 xxi Infrastructure and Projects Authority, July 2020, Annual Report on Major Projects 2019 to 20, p. 13 xxii Institute for Government, July 2020, Major projects in government, explainer xxiii House of Commons, Committee of Public Accounts, May 2020, High Speed 2: Spring 2020 update, Third Report of Session 2019–21, HC 84, p. 3 xxiv National Audit Office, Dec 2020, Digital Services at the Border xxv House of Commons, Committee of Public Accounts, Jan 2018, Offender-monitoring tags, Fifteenth Report of Session 2017–19, HC 458, p. 3 xxvi National Audit Office, March 2020, Defence capabilities – delivering what was promised, p. 15 xxvii Flyvbjerg, Bent et al, Dec 2018, ‘Five things you should know about cost overrun’, Transportation Research Part A: Policy and Practice, p. 11 xxviii National Audit Office, June 2018, Successful transformation: voices of experience, blog xxix Flyvbjerg, Bent, April 2014, 'What you Should Know about Megaprojects and Why: An Overview', Project Management Journal, 45 (2) xxx Infrastructure and Projects Authority, Cabinet Office, HM Treasury, Jan 2021, Infrastructure and Projects Authority Mandate xxxi Flyvbjerg, Bent, April 2014, 'What you Should Know about Megaprojects and Why: An Overview', Project Management Journal, 45 (2) xxxii The predecessor bodies to the IPA, Infrastructure UK and the Major Projects Authority, were established in 2010 and 2011 respectively. Reforms to develop cross-departmental specialisms in the civil service began in 2013. xxxiii National Audit Office, July 2020, Specialist skills in the civil service, p. 18 xxxiv Infrastructure and Projects Authority, Dec 2020, Moving to the next level of project leadership across government, press release xxxv House of Commons, Public Accounts Committee, Dec 2020, Specialist Skills in the civil service, Thirty-Second Report of Session 2019–21, HC 686, p. 11 xxxvi The others being regularity, proprietary and value for money. See HM Treasury, Sep 2017, Accounting Officer assessments: guidance, pp. 4, 8 xxxvii National Audit Office, July 2020, Specialist skills in the civil service, p. 29 xxxviii HM Treasury, Nov 2020, Green Book Review 2020: Findings and response, p. 9 xxxix National Audit Office, Jan 2016, Delivering major projects in government: a briefing for the Committee of Public Accounts, p. 7 xl Institute for Government, July 2020, Major projects in government, explainer xli Infrastructure and Projects Authority and Department for Transport, April 2019, Lessons from transport for the sponsorship of major projects, p. 6 xlii National Audit Office, Jan 2016, Delivering major projects in government: a briefing for the Committee of Public Accounts, p. 33 xliii House of Commons, Public Accounts Committee, Dec 2020, Specialist Skills in the civil service, Thirty-Second Report of Session 2019–21, HC 686, p. 8 xliv Sasse, Tom and Norris, Emma, Jan 2019, Moving On: The costs of high staff turnover in the civil service, Institute for Government, pp. 13, 15-16 xlv National Audit Office, Sep 2013, Universal Credit: early progress, pp. 9, 37 xlvi National Audit Office, Jan 2016, Delivering major projects in government: a briefing for the Committee of Public Accounts, p. 35 xlvii House of Commons, Public Accounts Committee, Dec 2020, Specialist Skills in the civil service, Thirty-Second Report of Session 2019–21, HC 686, p. 5 xvii

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Infrastructure and Projects Authority, Mar 2016, Major capital programmes: a discussion document based on insights from recent experience, p. 14 xlix National Audit Office, Nov 2020, Lessons learned from Major Programmes, p. 15 l National Audit Office, Jan 2016, Delivering major projects in government: a briefing for the Committee of Public Accounts, p. 14 li See for example Wheatley, Martin, et al, Sep 2018, The 2019 Spending Review: How to run it well, Institute for Government, pp. 21-25 lii Bouvard, François et al, Better for less: Improving public sector performance on a tight budget, McKinsey & Company, Discussion paper, p. 6 liii National Audit Office, Oct 2018, Projects leaving the Government Major Projects Portfolio, p. 10 liv National Audit Office, Jan 2016, Delivering major projects in government: a briefing for the Committee of Public Accounts, p. 9 lv Infrastructure and Projects Authority and Cabinet Office, Oct 2018, Project Delivery Functional Standard, pp. 12-13 lvi Infrastructure and Projects Authority and Department for Transport, April 2019, Lessons from transport for the sponsorship of major projects, p. 12 lvii Howes, Sally and Kidney Bishop, Tess, Oct 2018, The hidden obstacles to government digital transformation, Institute for Government, p. 9 lviii National Audit Office, Jan 2016, Delivering major projects in government: a briefing for the Committee of Public Accounts, p. 12 lix National Audit Office, Sep 2020, Learning for government from EU Exit preparations, pp. 11-12 lx National Audit Office, March 2020, Defence capabilities – delivering what was promised, p. 10 lxi Smith, Beckie, Jan 2020, Being John Manzoni: the outgoing civil service chief exec in quotes, Civil Service World lxii National Audit Office, May 2015, Welfare reform – lessons learned, p. 7 lxiii Norris, Emma and Rutter, Jill, Sep 2016, Learning the lessons from Universal Credit, Institute for Government, p. 6 lxiv National Audit Office, Jun 2018, Survival guide to challenging costs in major projects, p. 5 lxv Davies, Nick et al, Feb 2018, How to transform infrastructure decision making in the UK, Institute for Government, p. 4 lxvi National Audit Office, May 2015, Welfare reform – lessons learned, p. 8 lxvii Infrastructure and Projects Authority, Mar 2016, Major capital programmes: a discussion document based on insights from recent experience, p. 6 lxviii Norris, Emma et al, Jan 2013, Making the Games, Institute for Government, p. 25 lxix National Audit Office, July 2020, Specialist skills in the civil service, p. 17 lxx Norris, Emma and Rutter, Jill, Sep 2016, Learning the lessons from Universal Credit, Institute for Government, p. 3 lxxi National Audit Office, Nov 2020, Lessons learned from Major Programmes, p. 19 lxxii Flyvbjerg, Bent, April 2014, 'What you Should Know about Megaprojects and Why: An Overview', Project Management Journal, 45 (2) lxxiii Howes, Sally and Kidney Bishop, Tess, Oct 2018, The hidden obstacles to government digital transformation, Institute for Government, p. 9 lxxiv National Audit Office, Jan 2016, Delivering major projects in government: a briefing for the Committee of Public Accounts, p. 7 lxxv National Audit Office, March 2020, Defence capabilities – delivering what was promised, p. 10 lxxvi Infrastructure and Projects Authority and Department for Transport, April 2019, Lessons from transport for the sponsorship of major projects, p. 12 lxxvii Freeguard, Gavin, Jan 2018, ‘Single Departmental Plans have improved but they need to go further’, Institute for Government lxxviii National Audit Office, Nov 2020, Lessons learned from Major Programmes, p. 23 lxxix Howes, Sally and Kidney Bishop, Tess, Oct 2018, The hidden obstacles to government digital transformation, Institute for Government, p. 9 lxxx See for instance Freeguard, Gavin et al, Jan 2020, ‘Ministers’ and ‘Managing people’, Whitehall Monitor, Institute for Government The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

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House of Commons, Public Administration and Constitutional Affairs Committee, June 2018, The Minister and the Official: The Fulcrum of Whitehall Effectiveness, Fifth Report of Session 2017–19, HC 497, p. 21 lxxxii Thomas, Alex, Jan 2021, The heart of the problem, Institute for Government, p. 11