The TaxPayers' Alliance today reveals for the first time the scale of cost overruns in public sector capital procurement projects. We have investigated the official record of over 300 schemes, including roads, hospitals, science facilities, IT systems, art galleries and defence systems, which have been completed since the start of 2005 or are ongoing. We then compared the initial cost estimates with the final outturns or latest estimates for each one.
There have been a number of high-profile public sector building and defence projects that have finished years late and many times over-budget. The Euro-fighter, the Dome, and the Scottish Parliament, to name but a few, have repeatedly hit the headlines.
The research presented today represents the first systematic attempt to evaluate the official record of public sector capital projects, both large and small, over the last two years. The figures are quite startling:
- The total net overrun for the 305 projects was over £23 billion above initial estimates. This is the equivalent of over £900 for every household in Britain.
- The average overrun was 33.7 per cent.
- 14 projects overran by more than the Millennium Dome.
- 57 per cent of projects overran, compared with only 14 per cent that came in under-budget.
- The worst two departments for overruns were the Department of Health and the Department for Culture, Media and Sport:
- Projects under the responsibility of the Department for Culture, Media and Sport were 286 per cent over-budget on average.
- Projects run by the Department of Health were £13.9 billion over-budget.
- By contrast, the best department was the Department for Work and Pensions. Projects under its responsibility were 28 per cent under-budget on average.
- The worst regions for overruns were London and national (i.e. projects not allocated to any region):
- Projects in London were 132 per cent over-budget on average, primarily due to the Olympic Games, which are currently almost £7 billion over-budget.
- National projects were £11.5 billion over-budget, largely due to the NHS NPfIT, currently £10.1 billion over-budget, but given that the total size of national projects was larger, the average percentage overrun was lower.
- The worst region outside London was the West Midlands, where projects were 45 per cent over-budget on average.
- The best region was the South West, where projects were 10 per cent over-budget on average.
Based on this extensive analysis, the TaxPayers' Alliance now has a new “Law of Capital Procurement”, which states that public sector capital projects can be expected to overrun by at least a third. We will be applying this “law” to all new capital projects announced by national and local government, to give taxpayers a realistic estimate of how much the proposal will really cost.
Matthew Sinclair, Policy Analyst at the TaxPayers’ Alliance, said:
“These figures expose a consistent pattern of poor project management in the public sector. Taxpayers are footing the bill for the failure of politicians and civil servants to manage large projects effectively. This inadequate record stems from a failure to properly specify what is desired from a project before the project begins, underestimating costs to get the project approved and paying over the odds in an attempt to solve the problem.”
Andrew Allum, Chairman of the TaxPayers' Alliance, said:
“It’s astounding that the Government is currently overseeing more than a dozen Domes. Having had first-hand experience of public sector capital projects, it’s clear that the politicians and civil servants in charge lack the management experience and subject knowledge to run them effectively. The Government needs to reduce the enormous scale of overruns to give taxpayers better value for money.”
For the accompanying regional notes:
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