Source · Select Committees · Public Accounts Committee
Recommendation 11
11
The Department acknowledged that its equipment projects are subject to uncertainties that affect their delivery...
Conclusion
The Department acknowledged that its equipment projects are subject to uncertainties that affect their delivery and cost. It is responsible for managing the risk of cost increases within its annual budget. For example, as approximately 15% of the Plan’s forecast expenditure is in euros or dollars, the Department models the impact of foreign exchange movements on future equipment expenditure and reflects a possible 10% reduction in the value of sterling in its worst case scenario of the Plan’s funding shortfall.23 The Department told us that it is paying very close attention to the impact of the global economic position on foreign exchange rates and is discussing with HM Treasury the effect of the fluctuations on sterling over the last year.24Furthermore, it monitors the impact on individual programmes as exchange rate fluctuations can create budgetary pressure; for example, it estimated that the costs of the Lightning II programme could increase by £0.8 billion if 2020 exchange rates persisted.25
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.