Management and programming good; business cases and funding streams could be better, NAO says, highlighting £160M Crossrail shortfall from benefiting businesses.

 A National Audit Office review  of five major rail projects* sponsored by the Department for Transport since 1998 has highlighted  lessons it should apply to its current and future rail programmes.

The review, which draws on published NAO value for money studies, points out the many challenges the department has encountered in these projects which are large in scale and complex, with construction either expected to or having taken nine to 10 years, at a cost of up to £21.4 billion.

It concludes that the department has made progress in its management of rail infrastructure programmes and responded well on programmes such as Thameslink and Crossrail to manage risks and control costs.

Overall, the NAO studies indicate an improvement in the department’s sponsorship of major rail infrastructure programmes and that the department has taken action in relation to many issues raised in the NAO studies, the NAO said.

“However, as current and future rail programmes develop, there remain areas which the department needs to address or where it needs to provide more focus.”

Rail lesson, according to NAO

•  Developing clear strategic business cases and scrutinising economic analysis of the estimated benefits of new railways. 

“The strategic case is vital where the department is looking to do more than increase capacity or meet other transport needs. Failing to explain the rationale for its investment can undermine the support the department needs for a programme to go ahead. Programmes that aim to bring wider national and economic benefits, such as HS1 and HS2, face the problem of a lack of evidence to demonstrate such impacts. Economic analysis must be checked to ensure it is realistic. The department is improving quality assurance of its analysis. Such scrutiny might have identified errors in early analysis of phase 1 of HS2 which led to an initial benefit-cost ratio of 2.4:1 [restated in the 2013 NAO report to 2.6:1]since revised to 1.4:1 which is more in line with equivalent programmes.”

•  Economic assumptions also need to reflect changes in real-life behaviour.

“The department is well regarded in government and internationally for its economic analysis. However, it was slow to take account of potentially significant changes to passenger behaviour in its initial economic analysis for HS2. It has subsequently revised its business case to include new evidence on the value of business travellers’ time and has a programme of further research to understand how passenger behaviour has changed now that new technology is available such as laptops, tablets and internet connections on trains.”

•  The department needs more programme management capacity and skills.

“The department has sought to manage its limited pool of experienced programme managers by rotating senior staff between programmes, putting the most experienced people on the highest risk programmes and appointing experts to do detailed reviews. These actions demonstrate that it has a shortage of skilled staff and this is an issue which the NAO and the Committee of Public Accounts have repeatedly commented upon. The department also needs to use its experienced staff to build skills and capability in their teams so that it has sufficient capacity for the number and scale of programmes for which it is responsible. Securing such skills may become more difficult in the future given the number of large infrastructure projects currently in progress and planned.”

•  Beneficiaries of new transport could contribute more funding and finance.

“On Crossrail, sponsors have used a mixed model of public and private funding. Beneficiaries of the line are providing funding through a business rate supplement and negotiated contributions from private sources although the department did not secure all the contributions that it initially expected and may have to contribute an extra £160 million. On HS2 there remains uncertainty as to how much private sector contribution the Treasury is seeking and for which elements it would wish others to pay. The department needs a better understanding of the wider benefits transport investment brings, through evaluation, to negotiate larger contributions for future programmes.”