Publicly Funded Infrastructure Projects

Lord Tunnicliffe Excerpts

Tuesday 2nd July 2019 Grand Committee

[Lord Tunnicliffe (Lab)]

My Lords, I too thank my noble friend Lord Berkeley for creating this debate. This is a subject on which I have some form. Between 1988 and 2000—some 12 years—I was managing director and chairman of London Underground, and over that time I sponsored many projects, which probably all added up to about £6 billion-worth of expenditure. In London Underground, all decisions were subject to cost-benefit analysis. This took account of time for the customers, the environmental impact, the ambience of the railway, the money—both revenue and cost—and safety. The whole process worked well for us, and we refined it over time. In projects up to, say, £200 million, we tended to be able to deliver on time and within, say, 10% of the cost. It works well with incremental improvements—improving a station, buying a new fleet, and so on. However, big projects are different, and my big project was the Jubilee line extension. The noble Lord, Lord Freeman, approved it at £2.1 billion but it turned out to be £3.5 billion: some 70% over budget and 21 months late—thank God the benefits were massively greater in reality than in the original projection.

Why are big projects a problem? First, they have not been done before; when we built the Jubilee line extension it was 20 years since we had last done an underground railway line. The projects are so big that you have to have multiple contractors. That in itself is a tremendous overhead, because whatever you say in your contract, you have to integrate them and make sure that they work together. Big projects happen over a long time, and things change over time. One of the things that changes is that you discover problems in the environment you are working in, or perhaps the techniques are not there. The other thing about big projects is that their real value tends to be beyond the normal parameters, particularly as regards regeneration. Therefore anybody who tells you that they delivered a major project on time and on budget has cheated.

How can we do better and should Parliament have a role? Two things have happened since I was in that role. First, the Infrastructure and Projects Authority has been formed and produces its annual report; I believe the latest one was on 4 July last year. The second is that the DfT has produced an excellent report, developed with the Infrastructure and Projects Authority, called Lessons from Transport for the Sponsorship of Major Projects. This was developed by Bernadette Kelly, Permanent Secretary at the DfT, and Matthew Vickerstaff at the IPA.

Here I will pause to ask: what you are looking to do with the project? You are trying to get value for money, which means that you are trying to create a total contribution to the general good across the board that is better when compared with total cost. I propose a solution, which seems to have emerged in a couple of speeches, which is that departments, in this case particularly the DfT, should produce an annual response to the annual report of the Infrastructure and Projects Authority. This should cover: the total projected costs that have changed since its last report; the expected date of delivery; a review of the benefits, which will change over time as the world changes; and any changes in scope and any new initiatives—and this should be laid before Parliament.

Having worked in this environment, that will change how people manage and will create a situation where there could be an opportunity for structured scrutiny by, say, an appropriate Select Committee or debates in the House. It would create an internal discipline which would force rigour and better communications within the project. I put my solution to the Minister. I hope she will take it back to the department and perhaps tell us whether there is any warmth for it.