NAO recommends giving Treasury seat on board of megaprojects

The National Audit Office (NAO) has suggested HM Treasury or the National Infrastructure and Service Transformation Authority (NISTA) have greater involvement in megaprojects such as HS2 to ensure accountability and value for money.

The recommendation was included in a new NAO report looking at the governance of mega-projects ahead of the government’s plan to publish a 10-year infrastructure strategy later in the year.

NAO identifies megaprojects as a small number of schemes within the Government Major Projects Portfolio that are particularly costly, innovative, risky, complex or strategically important.

Examples of megaprojects include HS2, Crossrail and Hinkley Point C.

The public spending watchdog is recommending strengthening the governance of megaprojects, including more robust assurance about their affordability, value for money and feasibility before they are approved.

NAO suggested that the Treasury and NISTA have greater involvement in these schemes during their development and critical early stages through steps such as a formal position on a project board.

The report said: “For megaprojects, HM Treasury and NISTA should strengthen the project gateway and business case approval processes to ensure that government has assurance about the affordability, value for money and feasibility of the project before it is given final approval to proceed.

"This might include only providing funding to take the project to the next stage of development and maturity.

"NISTA and those charged with governance should advise government to stop a project if early work indicates that the project is too risky and/or costly, or that successful delivery of the benefits is too uncertain to proceed."

In October 2023, the Conservative government cancelled Phase 2 of HS2 because of cost overruns and delays.

‘Extremely encouraging’

Commenting on the report, Sir Geoffrey Clifton-Brown, chair of the Committee of Public Accounts, said: “The Public Accounts Committee has seen time and time again how difficult government finds it to deliver megaprojects. HS2 is a case in point for the billions of pounds worth of taxpayers’ money put at risk due to failures in governance and oversight.”

“Government clearly has a long way to go to learn from and address the common issues that plague these megaprojects. Today’s NAO report should serve as an important guide for how government can strengthen governance and improve decision-making in the riskiest and most complex projects it oversees.”

Sam Gould, director of policy and external affairs at the Institution of Civil Engineers (ICE), said: “It’s extremely encouraging to see that the lessons in the NAO’s report align so closely with recommendations put forward by the ICE.

“The ICE advocates for an approach to project planning and delivery that prioritises shared vision, and clear governance and decision-making processes. These themes run through the entirety of the NAO’s report.

“The report also echoes the ICE’s recommendation that complex, or ‘mega’ projects should spend more time in development before they get underway. Moving ahead with immature designs greatly increase the risks costs will rise over the course of a project, as they did with HS2.

“With a clear approach to infrastructure projects defined, now the government must focus on successful delivery. The launch of NISTA is a chance to implement these recommendations and deliver the infrastructure the country needs.”

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