UK lacks skills and capacity to deliver major infrastructure, PAC warns

The UK Government and wider economy lack the necessary skills and capacity to deliver ambitious plans for major infrastructure over the next five years. In a report released today, the Public Accounts Committee (PAC) calls for the Government to set out how it will address these issues and ensure future projects offer value for taxpayers' money in the long term.

Skills shortages in technical and engineering disciplines are set to worsen as gaps in the UK's workforce are compounded by competition from major global development projects. Project management and design are also areas of concern, and skilled professionals in senior positions in particular.  Of 16,000 project professionals that need to gain accreditation from the Government's major project leadership academy, only 1,000 had done so at the time of the PAC's report, which warns that failure to build market capacity could result in higher prices for scarce skills.

In March 2023, the Government Major Projects Portfolio included 244 projects with an estimated total whole-life cost of £805 billion. The PAC's inquiry heard that this scale of investment is unprecedented and projected spend over the next five years is very high as the Government looks to develop sectors including road, rail and energy.

Despite this level of investment, the PAC believes government departments are failing to devote the time and effort needed to ensure they maximise the value that comes from projects. Only 8% of the £432 billion spend on major projects in 2019 had robust impact evaluation plans in place and around two-thirds had no plans at all. This is despite high quality evaluation being important to provide evidence for what works, demonstrate value and to make the case for or against further investment. Decisions are being made in the absence of evidence, putting value for money at unnecessary risk.

The report highlights good examples of effective cross-government working, which will be fundamental to delivering complex major projects. However, the PAC believes more must be done to incentivise departments to work together if we are to see this practice become systemic across all departments.

Dame Meg Hillier MP, Chair of the Committee, said “Over the coming years, Government spending on major infrastructure projects is set to rise to unprecedented levels. Such projects present unique and novel challenges which Government must navigate if it is to secure value for public money. Without a robust market for essential skills in place, these are challenges the UK will fail to meet, as shortages push costs up in a globally competitive environment.

“All too often we see projects and programmes that are poorly managed and delivered late and over budget. The failure to ensure projects have robust impact evaluation plans in place is symptomatic of the short-term mentality dominating these processes. The Government must encourage cross-departmental learning if we are to avoid repeating past mistakes.”

Conclusions and recommendations

1. Government departments spend too little time and effort establishing what value they expect a project to deliver and ensuring that major projects deliver the intended value. In 2020, HM Treasury revised the Green Book (its guidance on appraising options and producing business cases) to make it clearer that before appraising options for what to deliver, government departments should clarify the strategic objectives that they want to achieve and the value that they are aiming to deliver. The Infrastructure and Projects Authority (IPA) has also produced tools and guidance to challenge departments to be clearer about their objectives. But departments still find it challenging to consider fully the potential value from a project and incorporate that into business cases. Once a project is operational, a Gate 5 review – a review of how the project is operating – typically closes out the project. But that is only the beginning of the process of realising value. Government departments are too focused on the short term, and do not look at the long-term economic benefits enough. Plans for realising benefits are insufficiently professional and robust and there is currently no formal, centrally mandated process – such as a Gate 6 review - for looking at what value has been delivered once the project has been operational for some time.

Recommendation 1: The IPA and HMT should review the case for a centrally mandated review stage to look at what value a major project has achieved once it has been operational for some time, such as a new Gate 6 review.

2. Government departments still have few incentives to commission and carry out high-quality evaluations of major projects. High quality evaluation is an important means of providing evidence about what works, transparency about what value a project has produced, and making the case (or not) for further investment. As we pointed out in our May 2022 report on the use of evaluation and modelling in government, in 2019, only 8% of £432 billion of spend on major projects had robust impact evaluation plans in place, and 64% of spend had no evaluation arrangements at all. The Evaluation Task Force is currently updating the 2019 analysis of how much evaluation of major projects now takes place and there is still room for improvement. In our May 2022 report we also pointed out that the same barriers such as a lack of political engagement and a lack of incentives for departments to produce evaluations had persisted since 2013. HM Treasury says it still has more to do to address these barriers, but that the time that it can take for value and benefits to be realised and the time it takes to carry out an evaluation can be barriers. HM Treasury does not, however, consider the cost of evaluation to be a barrier.

Recommendation 2: HM Treasury and the evaluation task force should develop a plan that addresses the root causes of why evaluations are not routinely carried out and how to incentivise departments to carry our more high-quality and independent evaluations. 

3. There are signs of improved cross-government working but government still struggles to establish effective governance and accountability arrangements on the most complex projects where multiple departments are involved. In our February 2024 report on cross-government working in general we concluded that “effective cross-government working is fundamental to delivering government's priorities but there is a lot of work to do”. This is particularly so for complex major projects, which often contribute to the objectives of multiple government departments and involve a number of organisation in delivery. There are examples of good practice, such as the East-West Rail project's growth board that brings together local and central government, and the No 10 Delivery Unit can also be effective in bringing departments together to deliver cross-cutting priorities. For some projects it may be more effective to have an organisation outside of the project delivery team accountable for delivering value. Development corporations such as those established to deliver regeneration benefits at Ebbsfleet for High Speed 1 and the Queen Elizabeth Olympic Park for the London 2012 Games have been effective. But bringing together the right stakeholders to deliver value does not come naturally to government departments and this remains a challenge. Ensuring that appropriate individuals sit on project boards is also important to provide challenge to project teams, support delivery and ensure that value is delivered.

Recommendation 3: HM Treasury and the Infrastructure Projects Authority should:

1. a) analyse what governance structures and incentives work well to encourage cross-government working; and 
2. b) issue guidance on how government departments can apply the right approaches that reflect the objectives and complexity of their projects including for delivering value once a project is complete.

4. Government departments and the broader economy lack the necessary skills and capacity to deliver the government's ambitious portfolio of major infrastructure projects. The UK's projected spend on infrastructure projects over the next five years is very high – unprecedented, according to the IPA – with the UK building more than it has ever built and in a range of sectors including roads, rail and energy. With global competition from other countries with massive investment projects such as Saudi Arabia, there is a risk of skills shortage to deliver such an ambitious portfolio of investment. Skills shortages in specific trades such as welding are already being seen but design and project management skills are also in short supply. Failure to build market capacity could result in higher prices for scarce skills. Too little of the right skills in government has led to an overreliance on the supply chain, particularly in technical and engineering disciplines. The IPA says that nearly 1,000 accredited project professionals have now passed through the government's major project leadership academy and that it has an ambition to get another 1,000 accredited professionals through the programme by the end of March 2025. However, that is only a small proportion of the 16,000 government project professionals that need to gain accreditation.

Recommendation 4: Alongside their response to this report HM Treasury and the Infrastructure Projects Authority should write to the Committee with an analysis of risks to the government's portfolio of infrastructure projects caused by the lack of skills.

5. The IPA's plans to improve the quality of government's cost estimates of major projects have taken too long to implement. We have examined many projects where early cost estimates have proved to bear little resemblance to what a project will ultimately cost, and there is optimism bias in nearly every project we look at. Funding packages are often agreed, and projects approved before projects have reached sufficient maturity.  High Speed 2 is a prime example of a budget being set well before plans were sufficiently mature. The IPA says that departments should be using ranges of potential costs until a project is sufficiently mature to finalise a funding package. Lack of cost-estimation capability in government means that departments end up too reliant on suppliers to determine what a project will cost. The IPA has produced cost-estimation guidance and developed a cost-benchmarking hub to provide better data to improve cost estimation. However, the IPA does not expect departments to populate it with their project cost data until later this year and currently does not intend that the benchmarking hub also includes information on the value and benefits that projects produce.  

Recommendation 5: Alongside their response to this report, the Infrastructure Projects Authority and HM Treasury should write to the Committee setting out how they plan to incentivise departments to populate the IPA's benchmarking hub with accurate and consistent information on the actual costs and benefits of their projects.

6. Government departments do not routinely learn lessons from their own projects or those of other departments, so are missing opportunities to improve effectiveness and efficiency of future projects. Applying learning about what has been successful in major project delivery can bring great efficiency and reduced costs, particularly where standardisation of design is possible. Schools, hospitals and prison building programmes are starting to apply digital methods of design and off-site fabrication and to apply the approach of ‘design one, build many'. Of course, the success of this approach would require the supply chain to have enough of the required skills and capacity. There are government forums for the sharing of lessons about what works well in project delivery, such as the IPA-chaired Government Construction Board.  However, learning across government departments still does not occur systematically, and departments must think more broadly about lessons in maximising long-term value, rather than just about lessons in delivering similar projects. The IPA acknowledged it could do more to challenge departments to learn from one project to another. Our February 2024 report on cross-government working also highlighted a lack of routine data sharing between departments and poor arrangements for sharing best practice and learning.

Recommendation 6: Alongside their response to this report, the Infrastructure Projects Authority and HM Treasury should write to the Committee outlining their plans for embedding cross-government learning for future major projects.