“Over run” on cost

[guy]

Inspired by the HS2 thread, who can find the highest over run on cost for a public contract.

HS2 - X2

Birmingham IT upgrade - x5

Can we get in to double figure multiplier for original estimate ?

EDIT: What would be your suggested treatment/action against the originator/s of the original costing :eek:

[struth]

they like to hide all those so good luck:eek:

[Puffin]

Yes, you couldn't make it up could you!

[Sherwood]

As I've already posted on the HS2 thread, there are clear guidelines on the appraisal methodology to be used for public sector investments. The current version was published in 2018. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/749086/Project_Business_Case_2018.pdf

The problem is that the methodology permits a lot of discretion in the assumptions made and gives insufficient attention to risk and uncertainty. Sometimes, the findings of the appraisal are overridden by political factors. The Jubilee Line extension went ahead even though the appraisal concluded that the costs outweighed the returns on the investment.

The original appraisal for HS2 concluded that the benefits would exceed costs by more than 2:1, although subsequent analyses have progressively downrated the ratio so that it is now less than 1 (unity). The levelling up benefits have all but disappeared, and the effects on job creation and unemployment will be well below the hugely optimistic figures initially projected. Costs were hugely underestimated with the figures used being well below the indicative unit construction cost estimates of the time.

Infrastructure investment is often a good way of boosting economic growth. The building of the US Freeway system after the depression was the greatest demonstration of this. The UK needs to be investing heavily in its decaying infrastructure, even if that means heavy borrowing. My preference on the transport side would be for cross country rail improvements. Housing is an obvious need, though I would favour new large scale eco-towns in the north and midlands rather than the weary battle ground of new builds and nimbyism. The need for more/better/safe schools and hospitals barely needs mentioning.

[Sherwood]

As to cost overruns on public sector projects, this FT story from last year is well worth reading.

https://www.ft.com/content/6cabfac4-1faa-4730-90d0-e14b3f0ff817

[guy]

As to cost overruns on public sector projects, this FT story from last year is well worth reading.

https://www.ft.com/content/6cabfac4-1faa-4730-90d0-e14b3f0ff817

Have to subscribe to read it and that would take me over budget :lol:

[Sherwood]

Have to subscribe to read it and that would take me over budget :lol:

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https://www.ft.com/content/6cabfac4-1faa-4730-90d0-e14b3f0ff817

An excerpt:

"The estimated cost for the Transpennine project has ballooned from under £300mn in 2011, to 10 times that number in 2019, before more than tripling again to around £10bn in 2021. This is not a classic cost overrun; if it was, at least northern cities would have the satisfaction of knowing the project was in progress. Instead, it’s a constant change of scope."

[Kember]

This gives some insight:

https://transportfutures.institute/optimism-bias/

[Jimbo]

I believe the Computerisation of the NHS didn't go too well, If my memory serves me well.

https://www.theguardian.com/society/2013/sep/18/nhs-records-system-10bn

:eek:

[Sherwood]

This gives some insight:

https://transportfutures.institute/optimism-bias/

Flyvbjerg has just published a book addressing the challenges of big projects.

https://www.amazon.co.uk/How-Big-Things-Get-Done/dp/0593239512

[Stryder5]

I believe the Computerisation of the NHS didn't go too well, If my memory serves me well.

https://www.theguardian.com/society/2013/sep/18/nhs-records-system-10bn

:eek:

I was involved in this project at a very early stage on behalf of the company I worked for at that time. My function was to analyse the NHS capability of defining their requirements, timescales, practicality etc.

A tender document was sent from NHS/Government to a number of IT companies. Various meetings were held, mainly in London, with heads of NHS management and ministers. I attended these meetings.

It was obvious almost from day one that there were problems with Commitment, Scope, Governance and Responsibly.

My observations and discussions lead me to suggest to my Company that we should decline to tender. Thankfully they did just that.

It turned out to be a total disaster, neatly avoided.

Gary

[Sherwood]

I was involved in this project at a very early stage on behalf of the company I worked for at that time. My function was to analyse the NHS capability of defining their requirements, timescales, practicality etc.

A tender document was sent from NHS/Government to a number of IT companies. Various meetings were held, mainly in London, with heads of NHS management and ministers. I attended these meetings.

It was obvious almost from day one that there were problems with Commitment, Scope, Governance and Responsibly.

My observations and discussions lead me to suggest to my Company that we should decline to tender. Thankfully they did just that.

It turned out to be a total disaster, neatly avoided.

Gary

A good point. It is often the contractor that is blamed for cost overruns. As often as not it is the client that is largely to blame. Lack of clarity in tender production often stems from a lack of understanding of the business and how it works. Subsequent changes to the scope of work, or a complete rethinking of the project will inevitably increase costs and extend timescales.