Recommendation 18

Lack of cost-estimation capability in government means that government is reliant on suppliers to government defining what a project will cost. The IPA told us that cost estimation is an important skill and one that government departments need to be much better at. HM Treasury told us that the challenge of estimating cost accurately for developing business cases and for spending reviews is an area that government still has not cracked and that better transparency about cost estimates can be helpful. The IPA has produced guidance on cost estimating and told us that it will be important for departments to move away from reference-class forecasting—applying costs from previous projects that are similar to those in your project—because that can miss important unique aspects of your project. The IPA also told us that it has developed a community of cost estimators across all 19 government departments and a cost-benchmarking hub to provide better data to improve cost estimation. More extensive use of standardisation and use of data and digitalisation of project designs could help produce more accurate estimates. However, the cost benchmarking hub does not yet have the data to make it useful and effective as a tool. The IPA does not expect departments to populate it with their project cost data until later this year. The IPA told us that including information on estimates of benefits could also be useful in the future but it does not currently intend to use the benchmarking hub for this purpose.19 Learning from previous projects