Source · Select Committees · Public Accounts Committee
Recommendation 10
10
The Department acknowledged the risk of costs escalating on its biggest programmes— nuclear submarines and...
Conclusion
The Department acknowledged the risk of costs escalating on its biggest programmes— nuclear submarines and IT and communications systems—which are large, complex programmes involving the development of new technologies.19 It told us it assesses the risk of cost increases on projects and has embedded £13.5 billion in costings to enable senior responsible owners to manage risks that arise from delivering their projects. But the Department admitted that its independent cost assessors had estimated that there was £3.9 billion of risk over and above what is included in project budgets and the Department is also tracking £20 billion of cost increases that it judges, on balance, probably will not occur although at least some of these may materialise.20 The National Audit Office’s report also concluded that the Department’s approach to analysing cost risk and uncertainty means it is likely to have understated the level of risk in the Plan’s central forecast.21 While the Department has taken a more prudent approach on some high-risk projects, including the Dreadnought submarine programme, it has not explored whether its approach to assessing risk remains appropriate for new, complex projects.22
Government Response
Acknowledged
HM Government
Acknowledged
5.1 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2021 5.2 The next Equipment Plan report will explain the improvements made to assess risk in long-term projects and detail on the department’s planned efficiency savings. 5.3 As part of the work to strengthen the approach to assessing risk across the portfolio, the department has established a programme board to review how the department records risk in its financial forecasts to inform and support financial decision-making and control. The programme board has made several improvements, most notably the creation of centralised guidance on the methodologies for calculating risk costings and appropriate use. Supporting tools have also been made available to the project delivery community, which have purposefully been developed to accompany the new guidance. 5.4 The programme board will lead an implementation phase starting in financial year 2021-22, with the aim of fully embedding the guidance and improving the reporting, visibility and monitoring of risk across the portfolio. For the department’s major programmes, this will partly be achieved by improving risk management information presented at the Quarterly Portfolio Review.