NAO says DfT rail investment schemes have done well but could do better
The National Audit Office has given the Department for Transport the stamp of approval for managing five major rail infrastructure projects, but also notes that there is considerable scope for improvement.
The five major infrastructure programmes are: HS1, HS2, Crossrail, Thameslink and the WCML (West Coast Main Line) upgrade. The study is not a comparative survey as the schemes are all very different, and at different stages of development: HS1 and the WCML upgrade have been completed; Crossrail and Thameslink are ongoing developments; while HS2 is still at the gestation phase, for example.
HS1, HS2 and Crossrail also involve new construction; whereas Thameslink and the WCML upgrades are improvements to existing lines.
The report concludes: “The Department has made progress in its management of rail infrastructure programmes. In particular, it has established governance structures which separate its role as sponsor during delivery and allow construction to progress. It has responded well on programmes such as Thameslink and Crossrail to manage risks and control costs. Our reports also indicate that there are areas where the Department has not made as much progress as in others where it will need to focus as current and future programmes develop, notably:
- Developing clear strategic business cases and scrutinising economic analysis on the estimated benefits of new railways;
- Building its capacity and capability as a sponsor;
- Developing plans that are mature and realistic before construction begins;
- Understanding the impact of transport investment so that it can seek a greater contribution from those who will directly benefit from a programme; and
- Monitoring and evaluating benefits against the programme’s original objectives and using evaluation to inform future programmes.”
The report covered four key aspects: the business case; the programme delivery arrangements; the planning & monitoring process; and benefits realisation.
The BCR (benefit cost ratios) used in the business cases were “necessarily uncertain” because of the long time intervals used and were not constant: “The original BCR for the first phase of HS2 programme was 2.4:1 (later restated to 2.6:1 in our 2013 report) and was considerably higher than ratios for other programmes, but the DfT did not query why this was the case. Later on, it identified errors in modelling had the effect of some variables being double counted. After this was corrected and changes made to some other assumptions the ratio is now 1.4:1.”
The NAO said it would be better if BCR ratios were presented as ranges, not points.
NAO stressed the importance of separating sponsorship from delivery: in the case of the WCML, (the now defunct) Railtrack undertook both roles. However, since 2005 (and abolition of the Strategic Rail Authority), the DfT has played a more active part, as previously, programmes were largely delivered and overseen by the private sector. NAO argues that the DfT should oversea infrastructure programmes but leave actual delivery of such projects to a separate body (as has now become the case).
With planning and monitoring, the DfT was under pressure to deliver projects as soon as possible; this sometimes led to bad judgements. Both Thameslink and and Crossrail delayed work by three years and one (respectively) to keep costs within budget. The Thameslink (phase 2) plans were over-optimistic and incomplete but the DfT approved the budget before Network Rail had finalised the plans.
Funding was another problem area: “Past finance choices have been made on what the government can afford or on policy rather than value for money. With section 1 of HS1, the DfT used private finance which we calculated in 2001 cost £80m more than HM Treasury funding even though it guaranteed the loans.”