## 1gbrea2022012 ## Source details **Canonical URL:** [1gbrea2022012](https://www.imf.org/-/media/files/publications/cr/2022/english/1gbrea2022012.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2022/english/1gbrea2022012.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2022/english/1gbrea2022012.pdf.json) --- ### PREFACE, MISSION AND TEAM - Mission: Public Investment Management Assessment undertaken April 4 to 19, 2022 at the request of the Chancellor of the Exchequer; builds on September 2021 Climate PIMA. - Mission leadership: Ms. Carolina Renteria (lead); team members: Ms. Michelle Stone, Mr. Tjeerd Tim, Mr. Carlos Mulas Granados, Mr. Ed Hearne. - Key HM Treasury counterparts and other government, devolved, local, industry and audit stakeholders participated (listed in source). ### EXECUTIVE SUMMARY — OVERVIEW AND INSTITUTIONAL ASSESSMENT - Policy context and plans: - Government allocations exceed £600 billion in gross public sector investment over the five-year period to 2026/27. - Planned ramp-up expected to bring UK annual infrastructure investment to OECD average levels of 3 percent by 2024/25. - PIMA results (high-level): - Nine out of fifteen institutions rank “high” on institutional design; six rank “medium”. - Overall effectiveness scores similar in aggregate but weaker in allocation, notably maintenance and project selection. - IMF methodology estimates an efficiency gap of 23 percent relative to the frontier; alternative study estimates efficiency gap between 10 and 13 percent relative to best performers. - Execution risk: - OBR (2020) historical estimate: only 80 percent of additional public investment budgets are fully executed. ### PLANNING — STRENGTHS, GAPS, AND RECOMMENDATIONS - Strengths and architecture: - Green Book and Five Case Model are established appraisal standards. - National Infrastructure Commission (NIC) (created 2015) reinforces strategic planning; NIC fiscal remit: gross public investment in economic infrastructure between 1.1% and 1.3% of GDP each year between 2025 and 2055. - Major projects systematically subject to technical, economic and financial analysis; GMPP and IPA provide oversight and assurance. - Gaps and recommended reforms: - Broaden NIS scope to incorporate social infrastructure to improve comprehensiveness, sequencing and spatial hardwiring (Recommendation timing: Q4 2022; Responsibility: HMT). - Improve coordination across UK Government, devolved administrations and local authorities; provide more medium-term funding certainty and flexibility for integrated multi-annual local capital plans (Recommendations: Q4 2022 and Q4 2023; Responsibility: HMT with DLUHC). - Manage construction sector capacity: review coordination and develop strategy to boost capacity and skills (Q3 2022; Responsibility: BEIS with others). - Strengthen independent scrutiny and transparency of appraisal: increase independent project challenge, validate cost and schedule forecasts, commence publication of business case summaries immediately and retrospectively (immediately and Q3 2022; Responsibility: HMT/IPA; HMT and departments). ### ALLOCATION — MULTI-YEAR BUDGETS, SPENDING REVIEW PRACTICE, MAINTENANCE - Current practice: - Capital allocations framed within Spending Reviews (SR), typically 3−5 year multi-year SRs; SR21 set budgets to 2024/25. - Capital and recurrent spending are prepared and presented together; outlays appropriated annually; departmental reallocations from capital to current require HMT and Parliament approval. - Key figures (Spending Review 2021 / Box 3.8 & Table 3.4): - Total Managed Expenditure: 1045.4 (2022/23), 1081.4 (2023/24), 1107.6 (2024/25) - Total Departmental Capital Budgets (CDEL): 106.8 (2022/23), 115.5 (2023/24), 111.9 (2024/25) - Selected departmental CDEL (£ billion): Business, Energy, and Industrial Strategy: 17 (2022/23), 20.8 (2023/24), 21.2 (2024/25); Transport: 19.5 (2022/23), 19.9 (2023/24), 20.5 (2024/25); Defense: 15.6 (2022/23), 15.8 (2023/24), 16.2 (2024/25); Health and Social Care: 10.6 (2022/23), 10.4 (2023/24), 11.2 (2024/25); DLUHC: 8.9 (2022/23), 6.9 (2023/24), 6.8 (2024/25); Education: 6.3 (2022/23), 7 (2023/24), 6.1 (2024/25). - CDEL, £billion: 100.4 (2021/22), 107.3 (2022/23), 109.1 (2023/24), 112.8 (2024/25) - Multi-year settlements, £billion: 41.8 (2021/22), 47.1 (2022/23), 49.2 (2023/24), 37 (2024/25) - Multi-year settlements, % CDEL: 42% (2021/22), 44% (2022/23), 45% (2023/24), 33% (2024/25) - Identified allocation issues and recommendations: - Provide departments with five-year capital budgets updated annually on a rolling basis (next SR) — Responsibility: HMT. - Publish multi-annual departmental capital spending plans and require recording of multi-annual commitments (HMT and departments; Q4 2023 and Q2 2023 respectively). - Include maintenance in budget reports and integrate maintenance-performance indicators into Outcome Delivery Plans (HMT and departments; Q3 2023). - Set minimum project maturity for SR allocation and consider increasing reserve for unallocated capital (HMT by Q2 2023 and next SR recommendations). ### IMPLEMENTATION — PROCUREMENT, DELIVERY, MONITORING, ASSET MANAGEMENT - Procurement and delivery strengths: - Open, competitive procurement is the default; e-procurement systems: Contracts Finder (>£10,000), Find a Tender (>£118,000). - GMPP provides quarterly reporting; IPA provides assurance, advice and rapid response for off-track projects; NAO provides external scrutiny with high take-up of recommendations. - Government Project Delivery Functional Standard and Project Delivery profession (over 14,000 professionals) support capability. - Key implementation metrics and program pipeline: - GMPP 2020−21 annual report: 184 projects; total Whole Life Cost £542 billion; HMT advised GMPP expanded to around 250 projects and programmes. - GMPP construction & infrastructure subset: 66 projects with whole life costs of £236 billion; average project cost £3.8 billion and schedule of 11 years. - Construction Projects Pipeline (Modern Methods of Construction) — totals (£m): Transport Total 47,685; Utilities Total 20,758; Social infrastructure Total 8,434; Digital Infrastructure Total 1,478; Flood and coastal erosion Total 4.6; Science and research Total 393; Grand Total 78,751 across 2021/22–2024/25 columns. - Implementation gaps and recommendations: - Expand publication of procurement monitoring reports and ensure publication of contracts for major public investment projects with minimal redaction (Cabinet Office, Q2–Q3 2022). - Improve compliance with ex-post evaluation requirements; undertake and publish ex-post evaluations and document lessons learned (All departments, Q2 2022). - Strengthen central guidance on asset management and require maintenance of asset registers with minimum standards (HMT, Q3 2023). - Ensure sufficient flexibility to reallocate funds within and across departmental budgets to expedite delivery of ready projects (HMT by Q3 2022). - Introduce periodic reporting on procurement system operation (number of bids, winning contractors, aggregate trends) and implement planned central digital procurement platform. ### TRENDS IN PUBLIC INVESTMENT, REGIONAL DISTRIBUTION AND PRIORITIES - Spending Review 2021 envisages public sector investment growth of 42 percent between 2019/20 and 2024/25. - Capital stock and investment levels: - UK's capital stock estimated at 44.7 percent of GDP in 2019 (25 percent below average of advanced economies). - If 2021 SR plans are fully executed, public investment-to-GDP ratios should reach 3 percent of GDP by 2024/25. - Regional distribution and local government projections (OBR March 2022 estimates): - Total UK public investment (PSGI), bn £: 2022/23 = 124.3; 2023/24 = 133.5; 2024/25 = 133.3; 2025/26 = 138.7; 2026/27 = 143.9; Growth 2022-26 = 16% - Total public investment by LGs, bn £: 2022/23 = 26.3; 2023/24 = 29; 2024/25 = 28.7; 2025/26 = 29.8; 2026/27 = 30.7; Growth 2022-26 = 17% - LG public investment in ENG, % of total investment by LGs: 80% (2022/23), 80% (2023/24), 80% (2024/25), 81% (2025/26), 81% (2026/27); Growth 2022-26 = 18% - LG public investment in SCT, % of total investment by LGs: 14% (2022/23), 14% (2023/24), 14% (2024/25), 14% (2025/26), 13% (2026/27); Growth 2022-26 = 8% - LG public investment in WAL, % of total investment by LGs: 6% (2022/23), 6% (2023/24), 6% (2024/25), 6% (2025/26), 6% (2026/27); Growth 2022-26 = 13% - Regional per capita capital investment (2014–2019 averages): - London: £1,461 a year - Rest of the UK: £851 a year - East Midlands: £658 a year - Levelling Up commitments cited: - Levelling Up Fund: £4.8 billion for local infrastructure projects. - Towns Fund: £3.6 billion. ### WHOLE OF GOVERNMENT ACCOUNTS, ASSET VALUATION AND DEBT RULES - Whole of Government Accounts (WGA): - WGA consolidates audited accounts of over 9,000+ public sector organizations. - Property, plant and equipment comprises 60 percent of assets in the WGA; infrastructure assets are the largest component. - NAO estimated asset undervaluation of at least £58.8 billion in 2018−19 (up from £47.8 billion in 2017−18). - Fiscal rules and MTFF: - Charter for Budget Responsibility (2022) objective: “ensure sustainable public finances, economic growth (...) and intergenerational fairness.” - Fiscal mandate: public sector net debt (excluding the Bank of England) as a percentage of GDP falling by the third year of the rolling forecast period. - Operational rules include: current budget balanced by end of rolling period; welfare cap; target that public sector net investment does not exceed 3 percent of GDP on average over the rolling forecast period. - Concern: 3 percent investment cap may coincide with policy objective to reach OECD average of 3 percent, potentially making cap binding; IMF recommends OBR provide structured commentary each time fiscal rules are altered. ### PIMA DETAILED SCORES (SELECTED) - Aggregate: Nine out of fifteen institutions rank HIGH on institutional design; six rank MEDIUM. - Selected institutional scores (Design / Effectiveness), preserving numeric coding: - 1.a. 3 3 - 2.a. 3 3 - 4.a. 2 3 - 6.a. 2 3 - 7.a. 3 3 - 8.a. 1 2 - 11.a. 3 3 - 12.a. 3 3 - 14.a. 3 3 - 15.c. 3 3 - Full Annex 2 contains the complete scored questionnaire and thresholds. ### SUMMARY OF SELECTED ACTIONABLE RECOMMENDATIONS (timing and responsibility preserved) - PLANNING - Broaden the scope of the next NIS to incorporate social infrastructure (Q4 2022) — Responsibility: HMT; Institutions: 2, 7 - Review coordination on construction capacity and develop a strategy to boost capacity and skills (Q3 2022) — Responsibility: BEIS with others; Institutions: 2, 13, 14 - Increase local planning certainty through longer term funding guidance and streamlining funding instruments (Q4 2022 and Q4 2023) — Responsibility: HMT with DLUHC; Institutions: 3, 6 - Increase independent scrutiny and validate cost and schedule forecasts for major projects — Responsibility: HMT/IPA; Institutions: 4, 13, 14 - Publish business case summaries immediately and retrospectively (immediately and Q3 2022) — Responsibility: HMT and departments; Institution: 4 - Establish risk appetite and governance protocols for contingencies in major projects (Q4 2022) — Responsibility: HMT; Institutions: 4, 7, 13, 14 - ALLOCATION - Provide five-year departmental capital budgets, updated annually on a rolling basis (next SR) — Responsibility: HMT; Institution: 6 - Publish multi-annual overviews of major capital programs including cost distribution and explain significant changes (HMT and departments, Q4 2023) - Publish maintenance spending in budget reports and include maintenance performance indicators in Outcome Delivery Plans (HMT and departments, Q3 2023) - Set minimum project maturity for SR allocation and consider increasing reserve for unallocated capital (HMT by Q2 2023) - IMPLEMENTATION - Regularly publish monitoring reports on procurement execution (Q3 2022) — Responsibility: Cabinet Office; Institution: 11 - Ensure publication of contracts for major public investment projects, with minimal redaction and report on publication rates (Q2 2022) — Responsibility: Cabinet Office; Institution: 11 - Enable sufficient flexibility to reallocate funds within and across departmental budgets to expedite ready projects (HMT by Q3 2022) — Institution: 13 - Undertake and publish ex-post project evaluations and document lessons learned (All departments, Q2 2022) — Institution: 14 - Strengthen guidance on asset management and require asset registers with minimum standards (HMT, Q3 2023) — Institution: 15 - CROSS-CUTTING - Continue to build capacity across government sectors and regions to develop project proposals and build a diverse pipeline of quality projects (Q3/Q4 2022) — Responsibility: HMT, DLUHC, UKIB, IPA; Institutions: 3, 4, Capacity - Explore improved data sharing between information systems for PIM (Q4 2023) — Responsibility: HMT, IPA, implementing agencies; Area: IT *Source: IMF staff (excerpts from the cited chapter).* ### PREFACE ___________________________________________________________________________________________________ 6 ### PREFACE ### Mission mandate and timing - At the request of the Chancellor of the Exchequer, a team from the IMF’s Fiscal Affairs Department (FAD) undertook a Public Investment Management Assessment during April 4 to 19, 2022. - The report builds upon the analysis in the September 2021 Climate Public Investment Management Assessment and draws on information gathered in that exercise. ### Mission leadership and team composition - The mission team was led by Ms. Carolina Renteria and included: - Ms. Michelle Stone (FAD) - Mr. Tjeerd Tim (FAD) - Mr. Carlos Mulas Granados (European Department) - Mr. Ed Hearne (FAD short term expert) ### UK government counterparts and HM Treasury participants - The team met representatives from HM Treasury including: - Ms. Cat Little (Director General Public Spending) - Mr. Phillip Duffy (Director General Growth and Productivity) - Mr. Conrad Smewing (Director Public Spending) - Mr. Marcus Mason (Deputy Director General Expenditure Policy (Capital)) - Ms. Johanna Harston (Deputy Director General Expenditure Policy) - Mr. Tom Josephs (Director Fiscal) - Ms. Ruth Curtice (Deputy Director Fiscal Statistics and Policy) - Ms. Joanna Key (Director Infrastructure and Growth) - Mr. Jonny Medland (Deputy Director Infrastructure, Digital and Culture) - Mr. Joe Taylor (Deputy Director Climate Policy) - The team also met with staff from the following HM Treasury teams: - Balance Sheet Analysis - Climate Change Policy - Devolution - Efficiency and Cabinet Office - Exchequer Funds and Accounts - Environment, Energy and Agriculture - Fiscal Statistics and Policy - Fiscal Strategy - General Expenditure Policy - Government Financial Reporting - Growth and Productivity - Health and Social Care - Infrastructure, Digital and Culture - Housing, Planning and Cities - Local Government and Reform - Public Value Unit - Home and Legal - Project Speed - Transport teams ### Other departmental and agency meetings - Infrastructure and Projects Authority: - Ms. Helen Campbell (Director Strategy Performance and Assurance) - Ms. Fiona Spencer (Director Capacity and Capability) - Mr. David Clinton (Deputy Director Strategy) - Department for Levelling Up, Housing and Communities: - Mr. Chris Gray (Deputy Director Levelling Up Taskforce) - Zainab Agha (Deputy Director Devolution Strategy) and staff - Government Commercial Function: - Mr. Matthew Browne (Deputy Director Construction Major Projects) and staff - Department for Transport staff - Ministry of Justice: - Mr. Robin Seaton (Deputy Director and SRO Prisons Programme) - Mr. Matt Shelley (Deputy Director Finance Strategy and Planning) and staff - UK Government Investments: - Ms. Lucie Lambert - Mr. Jamie Carter - Office for Government Property: - Ms. Angela Harrowing and team ### Devolved and local government and external stakeholder meetings - Welsh Government: - Mr. Andrew Jeffreys (Director) - Mr. Steve Davies (Deputy Director Infrastructure Strategy & Assurance) and staff - South Yorkshire Mayoral Combined Authority: - Mr. David Smith (Chief Executive) and Directors - Infrastructure sector representatives from: - Confederation of British Industry - Global Infrastructure Investor Association - Mace - The Infrastructure Group - Other external experts and audit/forecast bodies: - Institute for Fiscal Studies: Mr. Carl Emmerson and Mr. Ben Zaranko - National Audit Office: Mr. James Osborne, Mr. Matthew Rees and Ms. Emma Wilson - UK Office for Budget Responsibility: Mr. Richard Hughes and staff ### Acknowledgements - The team thanks the UK government for their cooperation and participation in constructive discussions. - The mission especially thanks Ms. Handan Wieshmann, Ms. Halema Begum and Mr. Rory Allan for their excellent support in organizing the mission. *IMF Fiscal Affairs Department mission Preface (April 4 to 19, 2022).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Overview - The United Kingdom (UK) plans to increase infrastructure investment to boost economic growth, reduce regional disparities, and help achieve the climate transition through the National Infrastructure Strategy, Plan for Growth, Net Zero Strategy and Levelling Up White Paper. - Government allocations exceed £600 billion in gross public sector investment over the five-year period to 2026/27. - The planned ramp-up in public investment is expected to bring the UK’s annual infrastructure investment to OECD average levels of 3 percent by 2024/25, reversing a long-term decline in public capital stock dating to the 1970s and 1980s. ### Institutional assessment (PIMA results) - The UK’s public investment management system performs strongly under the Public Investment Management Assessment (PIMA). - Nine out of fifteen institutions rank “high” in terms of institutional design; the remaining six rank “medium”. - Overall scores for effectiveness are similar to design scores but distributed differently across institutions. - The report identifies scope for improvement to increase efficiency and unlock value from the planned ramp-up of public investment. ### Planning - Strengths: - The Green Book and Five Case Model are recognized worldwide as standard setters for appraisal. - The National Infrastructure Commission (created 2015) reinforced strategic planning for economic infrastructure. - Major projects are subject to rigorous technical, economic and financial analysis after appraisal. - Regulation supports competition in economic infrastructure; there is a framework to manage private sector involvement. - Areas for further reform: - Ensure consistency between economic infrastructure and social infrastructure; broaden scope of planning to incorporate social infrastructure. - Enhance coordination between UK Government, devolved administrations, and local authorities and provide more medium-term funding certainty and flexibility to enable integrated multi-annual local capital plans. - Use tools to support industry capacity to deliver the National Construction Pipeline, including expanding and enhancing the skilled workforce and accelerating adoption of modern methods of construction and other productivity-enhancing techniques. - Strengthen transparency, independence and implementation of project appraisal and assurance through greater independent scrutiny of business cases and publication of business case summaries. ### Allocation (Budget and Spending Review processes) - Current practice: - Capital allocations are framed within the Spending Review (SR) process; multi-year SRs set budgets for three to five years. - Budget process is comprehensive, covering both capital and recurrent spending; outlays are appropriated annually and departmental reallocations from capital to current spending require HMT and Parliament approval. - Recommendations: - Provide departments with five-year capital budgets updated annually on a rolling basis to offer longer-term funding guidance. - Publish more granular departmental multi-annual capital spending plans and improve incentives to adequately maintain public assets, including disclosing maintenance spending in budget reports. - Establish a minimum level of project maturity to receive a SR allocation to avoid premature project lock-in, while providing other opportunities for proposals to be approved within a SR period. ### Implementation (Procurement, delivery, monitoring) - Strengths: - Open, competitive procurement is the default. - Government Major Projects Portfolio (GMPP) provides oversight of the largest projects. - Infrastructure and Projects Authority (IPA) provides direct support and independent assurance reviews and leads the project delivery profession. - The National Audit Office (NAO) frequently reviews major projects and there is a high rate of implementation of recent NAO recommendations. - Areas for improvement: - Expand coverage of monitoring reports on procurement and implement planned procurement reforms to increase transparency. - Improve compliance with long-established ex-post evaluation requirements and systematically distil and apply lessons learned. - Strengthen central guidance on asset management where practices are weaker across some sectors. ### Trends in public investment - The Spending Review 2021 envisages public sector investment will grow by 42 percent between 2019/20 and 2024/25, underpinned by the Plan for Growth, the Net Zero Strategy, and the Levelling Up agenda. - The UK’s capital stock is estimated low relative to peers: an estimated value of 44.7 percent of GDP in 2019, which was 25 percent below the average of advanced economies. - Since 2013 public investment-to-GDP ratios have grown steadily; if 2021 Spending Review plans are fully executed, they should reach the OECD average of 3 percent of GDP by 2024/25. - Historical context: - Privatizations and a greater role for Public Private Partnerships (PPPs) shifted part of public investment provision to the private sector. - The proportion of public investment and capital deployed through PPPs is about four times higher in the UK than in other advanced economies. - Execution risk: - The OBR (2020) estimates that historically only 80 percent of additional public investment budgets are fully executed. ### Table 1: Key institutional strengths and effectiveness (high/medium) - A. Planning - 1 Fiscal targets and rules: Institutional Strength HIGH; Effectiveness HIGH - 2 National and sectoral planning: Institutional Strength HIGH; Effectiveness HIGH - 3 Coordination between entities: Institutional Strength MEDIUM; Effectiveness MEDIUM - 4 Project appraisal: Institutional Strength HIGH; Effectiveness HIGH - 5 Alternative infrastructure financing: Institutional Strength HIGH; Effectiveness HIGH - B. Allocation - 6 Multi-year budgeting: Institutional Strength MEDIUM; Effectiveness HIGH - 7 Budget comprehensiveness and unity: Institutional Strength HIGH; Effectiveness HIGH - 8 Budgeting for investment: Institutional Strength MEDIUM; Effectiveness HIGH - 9 Maintenance funding: Institutional Strength MEDIUM; Effectiveness MEDIUM - 10 Project selection: Institutional Strength MEDIUM; Effectiveness MEDIUM - C. Implementation - 11 Procurement: Institutional Strength MEDIUM; Effectiveness MEDIUM - 12 Availability of funding: Institutional Strength HIGH; Effectiveness HIGH - 13 Portfolio management and oversight: Institutional Strength HIGH; Effectiveness MEDIUM - 14 Project implementation: Institutional Strength HIGH; Effectiveness HIGH - 15 Monitoring of public assets: Institutional Strength HIGH; Effectiveness MEDIUM ### Table 2: Selected summary recommendations (responsibility and timing preserved) - PLANNING - Broaden the scope of the next NIS to incorporate social infrastructure (Q4 2022) — Responsibility: HMT; Institutions: 2, 7 - Review coordination on future construction capacity and develop a strategy to boost capacity and skills in the sector (Q3 2022) — Responsibility: BEIS with others; Institutions: 2, 13, 14 - Increase certainty for investment planning at the local level through longer term funding guidance and streamlining funding instruments (Q4 2022 and Q4 2023) — Responsibility: HMT with DLUHC; Institutions: 3, 6 - Increase independent scrutiny and project challenge, and validate cost and schedule forecasts, for major capital investment projects — Responsibility: HMT/IPA; Institutions: 4, 13, 14 - Commence publication of business case summaries in line with Government’s existing commitment and publish business case summaries retrospectively for already approved major projects (immediately and Q3 2022) — Responsibility: HMT and departments; Institution: 4 - Streamline project approvals and assurance, making it easier and faster for agencies to navigate HMT, IPA and Cabinet Office approvals (Immediately) — Responsibility: HMT; Institutions: 4, 10, 14 - Establish protocols for risk appetite and governance of contingencies in major projects (Q4 2022) — Responsibility: HMT; Institutions: 4, 7, 13, 14 - ALLOCATION - Provide more certainty for capital planning to departments by providing five-year departmental capital budgets, that are updated annually on a rolling basis (next SR) — Responsibility: HMT; Institution: 6 - Develop comprehensive departmental multi-annual capital spending plans and provide guidance on recording multi-annual commitments (upcoming SR and Q2 2022) — Responsibility: HMT and departments; Institution: 6 - Include maintenance in budget reports and include performance indicators in future Outcome Delivery Plans (Q3 2023) — Responsibility: HMT and departments; Institution: 9 - Set a minimum stage of project maturity to receive a Spending Review allocation, consider need to increase the reserve for unallocated capital, and provide another opportunity for proposals to be approved within a SR period (next SR) — Responsibility: HMT; Institutions: 4, 6, 10 - IMPLEMENTATION - Regularly publish monitoring reports on execution of project procurement processes (Q3 2022) — Responsibility: Cabinet Office; Institution: 11 - In line with procurement regulations, ensure the publication of contracts for major public investment projects, with minimal redaction and report on the rate of publication (Q2 2022) — Responsibility: Cabinet Office; Institution: 11 - Ensure there is sufficient flexibility to reallocate funds within and across departmental budgets to expedite delivery of projects that are ready to proceed (Q3 2022) — Responsibility: HMT; Institution: 13 - Undertake and publish ex-post project evaluations; document lessons learned and update project guidance on a periodic basis (Q2 2022) — Responsibility: All depts; Institution: 14 - Strengthen guidance on management of assets by departments (Q3 2023) — Responsibility: HMT; Institution: 15 - CROSS CUTTING ISSUES - Continue to build capacity across government sectors and regions to develop project proposals and build a diverse pipeline of quality projects (Q3 2022) — Responsibility: HMT, DLUHC, UKIB, IPA; Institutions: 3, 4, Capacity - Explore opportunities for improved data sharing between information systems for public investment management — Responsibility: HMT, IPA, implementing agencies; Area: IT *Source: IMF staff* ### 4. Most public investment is provided by the UK Government who intend to boost ### 1gbrea2022012 - 4. Most public investment is provided by the UK Government who intend to boost local infrastructure initiatives to help reduce regional disparities. ### Regional distribution of public investment - About two-thirds of public investment spending occurs at the central government level (Eurostat, 2021). - Capital investment per person: - £1,461 a year in the London area (average between 2014 and 2019). - £851 a year in the rest of the UK (average between 2014 and 2019). - £658 a year in the East Midlands (average between 2014 and 2019). - UK Government Levelling Up Agenda (2021) funding commitments: - £4.8 billion for local infrastructure projects through the Levelling Up Fund. - £3.6 billion Towns Fund. ### Composition and priorities of public investment - Over 30 percent of public investment is on economic infrastructure. - Recovery of UK's public investment over the past decade driven by economic infrastructure, with defense, health, and housing following closely. - Forthcoming investment focus (Spending Review 2021) to close gaps in roads and transportation networks, boost education, skills, and R&D, and help accelerate the climate transition. - Nearly 80 percent of the new investment plans until 2024/25 will target these areas (Spending Review 2021). - Definition: Economic infrastructure includes energy, transport, water, wastewater, waste, flood risk management and digital communications. ### Infrastructure quality, access, and digital performance - UK performance vs peers: - Weak on global measures of physical infrastructure compared to advanced economies, the G7 and the European Union; large gaps in electricity generation and roads per capita; significant gaps in public education and health infrastructure. - Perception of infrastructure quality: - UK ranked 11th out of 141 countries in overall perceived quality of its infrastructure in 2020 (World Economic Forum). - Perception declined during the last decade; underinvestment in maintenance of aging infrastructure is a possible factor. - Digital and connectivity indicators: - UK performs comparatively better in connectivity and digital economy indicators. - UK ranks 8 out of 28 European countries in digital economy indicators. - Room to improve in very high-capacity networks. ### Efficiency of public investment and gaps - IMF methodology estimates the UK’s efficiency gap relative to the frontier: 23 percent. - The distance between the UK's efficiency gap and the average gaps of other advanced economies or the EU is roughly 10 percent. - An alternative study using 12 indicators estimates the UK's efficiency gap between 10 and 13 percent relative to best performers. - Efficiency definition: relationship between the value of the public capital stock and a “hybrid index” of measures of the coverage and quality and quantity of infrastructure assets. ### PIMA framework and overall institutional assessment - PIMA evaluates 15 institutions across the public investment cycle: planning, allocation, and delivery. - For each institution, three indicators are scored for institutional design and effectiveness; scores can be high, medium, or low. - Climate-PIMA (September 2021) finding: relatively well-designed system to manage climate relevant public investment, with room to strengthen institutional design and important gaps in effectiveness. - Overall UK PIMA scores: - Nine out of fifteen institutions rank high in institutional design; six rank medium. - Effectiveness scores are similar in aggregate but weaker in the allocation stage, notably maintenance and project selection. - Areas where design exceeds effectiveness: maintenance, procurement, portfolio oversight. - Areas where effectiveness exceeds design: multi-year budgeting and project implementation. - Scope for improvement exists even in areas with high scores to increase efficiency and unlock greater value from planned investment ramp-up. ### Investment planning, fiscal framework, and fiscal rules - Fiscal principles or rules (Strength— High; Effectiveness— High). - Charter for Budget Responsibility (2022) objective: “ensure sustainable public finances, economic growth (...) and intergenerational fairness.” - Fiscal mandate: public sector net debt (excluding the Bank of England) as a percentage of GDP falling by the third year of the rolling forecast period. - Office for Budget Responsibility (OBR) functions: - Produces detailed five-year forecasts twice a year. - Assesses debt sustainability and provides fiscal risks and sustainability reports. - OBR concluded that public sector net debt and the debt-interest ratio are expected to decline by the end 2024/25 and that the fiscal mandate will be met (March 2022). - Operational fiscal rules: - Current budget should be balanced by the end of the same rolling period. - Target to contain welfare expenditure within a predetermined cap and margin set by the Treasury. - Target: public sector net investment does not exceed 3 percent of GDP on average over the rolling forecast period. - Rolling targets aim to achieve outcomes in the third year of the forecast. - There is an escape clause but no definition of a significant economic shock. - Concerns and recommendations: - Investment cap set at 3 percent of GDP may coincide with the declared policy objective of reaching the OECD average of 3 percent of GDP, potentially making the cap binding and limiting capacity to invest in Net Zero Strategy and Levelling Up Agenda. - Advisable to develop guidelines on phasing or reprioritization of investment spending if the cap is likely to become binding. - Fiscal rules in the UK are not legally binding and can change via a simple majority vote in the House of Commons; frequent changes have occurred over the past twenty-five years. - IMF recommendation: each time fiscal rules are altered, the OBR should provide Parliament with a structured commentary on whether the new calibration aligns with higher-order fiscal objectives of debt sustainability before a parliamentary vote. - Medium-term fiscal framework (MTFF) process: - OBR issues economic forecasts used by the Treasury for multiyear budgeting. - Treasury differentiates between multiyear current and capital spending; HMT provides the OBR with costings for all DEL expenditure, including capital. - Table of major changes to UK’s fiscal rules (1998−2021) highlights evolving rules and recurring themes; most recent 2021 rules include: - Public sector net debt (excluding the Bank of England) as a percentage of GDP should be falling by the third year of the rolling forecast period. - The current budget should be balanced by the third year of the rolling forecast period. - Public sector net investment should not exceed 3 percent of GDP on average over the rolling forecast period. - Welfare cap: expenditure on welfare contained within a predetermined cap and margin set by HMT. *Source: IMF staff.* ### 2. National and Sectoral Planning (Strength— High; Effectiveness—High) ### 2. National and Sectoral Planning (Strength— High; Effectiveness—High) ### National Infrastructure Strategy (NIS): scope, objectives, and delivery - The NIS is the overarching plan for economic infrastructure and encompasses investment across transport, energy, water and wastewater, waste, flood risk management, and digital communications. - The Strategy has three broad objectives: - to boost growth and productivity across the whole of the UK, levelling-up and strengthening the Union; - to put the UK on the path to meeting its net zero emissions target by 2050; and - to support private investment in infrastructure. - The NIS sets an ambitious plan to return UK public sector net investment to the highest sustained levels since the 1970s. - Investment plans for social infrastructure (for example schools and healthcare) are set out in discrete sectoral strategies. - Total Spending Review 2021 investment (including economic and social infrastructure) is consistent with the NIS. - The NIS is the product of a strong policy architecture for economic infrastructure planning; the National Infrastructure Commission (NIC) is currently working on an updated National Infrastructure Assessment (expected in 2023) which will inform the next NIS. ### Sectoral investment strategies and coherence - Sectoral investment strategies complement the NIS and cover areas such as: - digital infrastructure, - rail transport, - flood defense, - social infrastructure such as healthcare and housing. - Mission analysis findings: - There is scope to streamline sectoral investment strategies and embed stronger links between sectoral plans and the overall national strategy. - A large number of sectoral investment targets risks fragmentation of policy coherence. - Sectoral strategies do not uniformly include measurable output and outcome targets for investment plans. - Reporting channels aimed to track investment outcomes include the Public Value Framework, which requires departments to produce Outcome Delivery Plans to demonstrate spending impact; these indicators can be used to monitor progress against NIS-related targets such as Net Zero and Levelling Up. ### National Infrastructure Commission (NIC): role and fiscal remit (Box 3.1) - NIC established in 2015 as an Executive Agency of HMT, operating at arm’s length from Government to provide independent, expert advice and recommendations on economic infrastructure. - NIC core channels: - Publishes a National Infrastructure Assessment (NIA) once in every Parliament. - Undertakes specific studies on pressing infrastructure issues set by the government. - Publishes an annual monitoring report assessing Government’s progress on NIC recommendations. - NIC objectives (from Government mandate): - support sustainable economic growth across all regions of the UK; - improve competitiveness; - improve quality of life; - since 2021, support climate resilience and the transition to net zero carbon emissions by 2050. - NIC operates within a fiscal remit: recommendations must be implementable within a constraint of gross public investment in economic infrastructure of between 1.1% and 1.3% of GDP in each year between 2025 and 2055. - Government commits to responding to NIC recommendations within six months (where practicable and never more than one year), stating whether it accepts or rejects the recommendations. - The 2020 NIS was informed by NIC recommendations and represents the Government’s response to the 2018 NIA. ### Levelling Up and integration with NIS (Box 3.2) - Levelling Up is the UK Government’s strategy to address regional imbalances in economic and social prosperity across the country, consisting of 12 “missions.” - The Levelling Up White Paper undertakes to “hardwire” spatial considerations in government decision-making. - Public investment will play an important role in achieving these objectives, aligned to the NIS. - Relevant projects cited include Investment in Innovation Accelerators, the Integrated Rail Plan, City Region Sustainable Transport Settlements, Project Gigabit and school improvement through Education Investment Areas. ### International practice on scope of infrastructure plans (Box 3.3) - Several jurisdictions integrate social infrastructure with economic infrastructure planning: - Australia (Infrastructure Victoria) includes social and affordable housing, health infrastructure and justice in objectives. - New South Wales Infrastructure Strategy covers health, education, justice, culture, tourism and sport. - Canada’s Invest in Canada includes adequate and affordable housing and childcare as investment streams. - Ireland’s National Development Plan 2021-2030 incorporates capital investment in healthcare, housing, schools, third level education, culture, community regeneration and justice. - New Zealand’s Te Waihanga assessed baseline condition of infrastructure in healthcare and education alongside economic infrastructure. - Scotland’s Infrastructure Investment Plan 2021/22–2024/25 includes built environment of housing, education, health, justice and cultural facilities. ### Recommendation: broaden scope to include social infrastructure - Broadening the scope of the NIS to incorporate social investment spending will: - increase comprehensiveness of overall policy plans; - enable better planning and sequencing of public investment across sectors and levels of government; - support the commitment to "hardwire" spatial considerations in investment planning as set out in the Levelling Up White Paper. - National Investment Strategies for Wales and Scotland are cited as examples that incorporate social infrastructure plans alongside economic infrastructure. ### Project costing, appraisal, and approvals - Projects are costed in advance of inclusion in investment strategies: - The Spending Review provides the funding framework for the NIS and social infrastructure. - Departmental level settlements in the Spending Review are based on bottom-up costing of all capital spending projects. - HMT and the IPA review business cases for investment proposals prior to inclusion in the budgetary plans, including an assessment of delivery capability. - SR21 provides budgets for a three-year period; the investment strategy takes account of early-stage total project costs and is consistent with longer-term assumptions on available fiscal space. - HMT provides longer term indicative budgets beyond the Spending Review period for some projects. - Departmental settlements provide approval for medium-term project budgets (examples include major transport and energy projects and Project Gigabit). - Project appraisal framework: - The Treasury Approvals Process (TAP) and the Consolidated Budget Guidance (CBG) set out the need for project appraisal. - The Better Business Case Guidelines outline requirements to undertake project appraisal through a series of business cases developed as projects progress in maturity. - All projects joining the Government Major Project Portfolio (GMPP) require an Integrated Assurance and Approval Plan validated by HMT that sets out assurance requirements, including sequencing of reviews and approvals from HMT, Cabinet Office and Infrastructure and Projects Authority (IPA). - HMT guidance requires departments and Arm's Length Bodies (ALBs) to scrutinize business cases before they go to HMT for approval. - Assessment: Major projects are systematically subject to rigorous technical, economic and financial analysis, but greater independent review and transparency could improve effectiveness further. ### Coordination between entities, decentralization, and local government investment - Fiscal decentralization is limited: responsibility for UK fiscal policy, macroeconomic policy and funding allocation across the UK remains with HMT (Statement of Funding Policy 2021). - The UK has four nations (England, Northern Ireland, Scotland, and Wales) and three devolved national administrations (Northern Ireland, Scotland, and Wales). - Devolved administrations do not fully control their budgets; they are significantly sustained by grants from the UK Government (block grant), updated using the rules-based "Barnett formula." - Devolved administrations have some revenue-raising powers (notably elements of income tax in Scotland and Wales) and fund activities from their own Consolidated Funds. - Local authorities receive funding through various channels: capital grants, formula funding, competitive bidding, and taxes. - Office of Budget Responsibility (OBR) estimates (from Economic and Fiscal Outlook, March 2022) for public investment and local government investment: - Total UK public investment (PSGI), bn £: 2022/23 = 124.3; 2023/24 = 133.5; 2024/25 = 133.3; 2025/26 = 138.7; 2026/27 = 143.9; Growth 2022-26 = 16% - Total public investment by LGs, bn £: 2022/23 = 26.3; 2023/24 = 29; 2024/25 = 28.7; 2025/26 = 29.8; 2026/27 = 30.7; Growth 2022-26 = 17% - LG public investment in ENG, % of total investment by LGs: 80% (2022/23), 80% (2023/24), 80% (2024/25), 81% (2025/26), 81% (2026/27); Growth 2022-26 = 18% - LG public investment in SCT, % of total investment by LGs: 14% (2022/23), 14% (2023/24), 14% (2024/25), 14% (2025/26), 13% (2026/27); Growth 2022-26 = 8% - LG public investment in WAL, % of total investment by LGs: 6% (2022/23), 6% (2023/24), 6% (2024/25), 6% (2025/26), 6% (2026/27); Growth 2022-26 = 13% - Note: This analysis does not include Northern Ireland as services there are provided by their devolved government, the Northern Ireland Executive, and not by local governments. - OBR headline comparisons: - Public investments expected to grow by around 16 percent between 2022-23 and 2026-27, from £124.3 billion to £143.9 billion. - Public investment by local governments expected to grow by around 17 percent between 2022−23 and 2026−27, from £26.3 billion to £30.7 billion. - Local governments in England show the strongest growth in investments (18 percent), as compared to Scotland (8 percent) and Wales (13 percent). - Coordination mechanisms and issues: - There is no single overarching framework through which the central government and local governments share information about their multi-annual capital spending plans and shape investment priorities collaboratively. - Coordination of capital spending plans mainly takes place in the context of department investment priorities and sectoral networks (example: Local Adaptation Advisory Panel for climate change). - BEIS provided £587 million in 2021 to local authority investments in heat decarbonization and energy efficiency as part of the UK Public Sector Decarbonisation Scheme. - UK Government capital grants to local governments are spread over different funding instruments with different criteria, procedures, and funding horizons; selection and administration are delegated to responsible departments with HMT scrutiny via the Treasury Approvals Process. - The variety and complexity of bidding procedures, selection criteria, and funding flexibility could constrain local governments’ capability to develop integrated multiannual capital spending plans; this complexity is acknowledged in the Levelling Up White Paper. - The Spending Review 2021 announced the establishment of a multi-department Levelling Up Fund aimed at removing funding siloes; in the first funding round it supported £1.7 billion of projects in over 100 local areas, delivering £170 million to Scotland, £120 million in Wales, £49 million in Northern Ireland. - The funding horizon of these arrangements is generally constrained by the Spending Review horizon, limiting local governments’ ability to develop multi-annual capital spending plans; central government may set longer horizons for certain funds on a case-by-case basis based on deliverability considerations. ### Contingent liabilities and Whole of Government Accounts (WGA) - Contingent liabilities from all public sector entities are disclosed in financial reports and published in the Whole of Government Accounts (WGA) in accordance with International Financial Reporting Standards. - The WGA consolidates audited accounts of over 9,000+ public sector organizations to provide a comprehensive financial accounts-based picture of the UK public sector. - Contingent liabilities related to capital projects are explicitly mentioned in the WGA only if they are material to the overall account; example given: contingent liability of £3.5 billion reported in 2018-19 related to the Department for Transport. *Source: 1gbrea2022012 - 2. National and Sectoral Planning (Strength— High; Effectiveness—High).* ### Box 3.4. The Government Major Projects Portfolio ### Box 3.4. The Government Major Projects Portfolio ### Overview - The GMPP comprises the largest, most novel and highest risk projects and programmes. - GMPP projects typically require approval from HMT because the budget exceeds a department’s delegated authority limit and/or because the project is novel, complex, contentious, or requires primary legislation. - The GMPP covers many of the government’s most high-profile projects. - Projects on the GMPP are required to report quarterly on delivery progress and costs; this data is used to monitor progress across the portfolio and identify risks and delivery insights. - The latest 2020−21 GMPP annual report comprised 184 projects with a total Whole Life Cost of £542 billion delivered by 18 departments and their arm’s length bodies. - HMT advised that the GMPP had expanded to include around 250 projects and programmes. ### Governance, scrutiny and assurance - The IPA provides scrutiny and assurance of priority projects on the GMPP as part of business case development. - Expert teams in the IPA give specialist project delivery, commercial and financial advice, provide practical tools and make specific recommendations to help improve the chance of successful delivery. - The IPA is not an independent body, reporting formally into both HMT and Cabinet Office, but it provides expert and independent assurance of GMPP projects. - The Major Projects Review Group panel reviews business cases of projects that are above £1 billion, or that are highly novel and/or contentious, and includes two independent individuals selected from a pool of senior public and private sector experts. ### Transparency and publication of appraisals - Public information on appraisals is currently limited. - In its response to the Green Book Review in November 2020, the Government committed that from April 2021 it would commence publishing summary business cases for infrastructure projects on the GMPP within four months of projects having reached final approval. - The IPA confirmed that no business cases have been published yet due to timing, and security and commercial sensitivities. - To date, publication of business cases has occurred only in limited circumstances, often in response to requests from Parliament. - Stronger transparency would promote: the sharing of best practices; sharing of information relevant to other projects and the community; transparency and greater accountability for (and quality of) appraisals. ### Appraisal methodology and guidance - A clear, robust methodology for project appraisal is in place and supported actively by HMT to drive continuous improvement in culture and practice. - The Green Book and related Supplementary Guidance establishes the detailed standard methodology to be followed in undertaking economic appraisal throughout the development of project business cases. - Business cases are prepared following the five-case model (strategic, economic, commercial, financial and management). - Whole of government methodologies, templates, tools and examples are publicly available, including March 2022 guidance on Value for Money assessment. - Targeted guidance is provided for some sectors, including Health, with the Department for Transport having the most comprehensive guidance in the form of the Transport Analysis Guidance. - The conduct of assurance by HMT tests that these methodologies are applied in practice. - The UK Government has been perceived as a standard setter for project appraisal methodology; earliest versions of the Green Book date back to the 1970s and the Green Book has informed similar frameworks in other countries. - HMT has undertaken a public Green Book Review (2020) and a 2021 survey of government agencies' experience applying the Green Book; these informed the HMT Green Book and the strategy of the Major Projects Unit to improve culture and practice of project appraisal. - The strategy comprises 35 actions including arranging joint meetings to speed approvals, improved signposting of guidance and support, procedures for IPA rapid response to off-track projects and improving ALB oversight. - Regular training to those involved in business case preparation is provided by private providers based on a HMT syllabus; HMT provides training for assurance functions in HMT and Cabinet Office. A network of business case practitioners has been established and receives updates from the Unit. ### Risk assessment and cost estimation - Risk assessment and mitigation is a core part of project development and appraisals; efforts are underway to improve the rigor of cost estimation. - The Orange Book, part of the Green Book Supplementary Guidance, deals specifically with risk in project appraisal and development. - Detailed methodologies cover specific risks, including optimism bias and climate risks. - For GMPP projects, a Risk Potential Assessment is completed and shared by the lead department with HMT, IPA and Cabinet Office to inform decisions on the assurance process to be followed and promotes early risk identification. - Risk identification and mitigation plans are updated and reviewed as the business case progresses in maturity. - HMT, the IPA and the Cabinet Office oversee compliance with these requirements as part of project assurance. - Large delivery departments also have sophisticated risk management practices to manage risks at the project and portfolio level. - Notwithstanding these tools, the quality of cost estimation remains a major challenge in project implementation. - The Department for Transport and HMT are reviewing the approach to management of transport project contingencies. - Agencies are increasingly moving to estimation of cost by ranges in line with the IPA's Cost Estimation Guidance. ### Alternative infrastructure financing and related context - An extensive regulatory framework supports effective competition in all key markets for economic infrastructure; independent regulators (Ofgem, Ofcom, Ofwat, and the Office of Rail and Road) are long-established and enshrined in legislation. - The Principles for Economic Regulation released in 2011 have guided design and evolution of regulatory frameworks in energy, water and digital infrastructure, incorporating periodic price reviews; statutory obligations for regulators; strategic policy statements from government; competition; and expert bodies to hear appeals. - Government committed to consult in 2022 on measures to strengthen the framework, focusing on delivering investment, increasing innovation, promoting growth and better outcomes for consumers and investors. - The UK Government prefers alternative approaches to private sector finance in infrastructure delivery after ending the PFI scheme, although PFI type arrangements are still implemented by devolved administrations and local government. - The UK was a pioneer in PPP through PFI (1992) and successor PF2 (2012); in 2018 the UK Government decided to suspend new approvals under PFI noting the model was "inflexible and overly complex" and that the OBR had "also identified private finance initiatives as a source of significant fiscal risk to government." - Strong policies are in place for management of existing PFI contracts. - PPPs continue to be used by devolved governments and local governments under different modalities (examples: Welsh Mutual Investment Model; Scotland's managed investment model and non-profit distributing PPP models). - The Government’s 2020 National Infrastructure Strategy concluded forming the UK Infrastructure Bank (UKIB), improving independent economic regulation and developing innovative tools were the preferred approach to accessing private sector finance; the Government is open to considering other PPP structures where benefits outweigh costs. *Source: UK Infrastructure Projects Authority, Annual Report on Major Projects 2020-21, July 2021, and HM Treasury.* ### 42. Oversight of public corporations is undertaken by UK Government Investments ### 42. Oversight of public corporations is undertaken by UK Government Investments ### Oversight arrangements and role of UKGI - Oversight of public corporations (PCs) is undertaken by UK Government Investments (UKGI) and departments, with centralized financial reporting and oversight of large projects. - Given the extent of privatization, public corporations (PCs) play less of a role in UK infrastructure delivery than in most other countries. - UKGI is the ownership authority for some public corporations, including the Nuclear Decommissioning Authority and National Highways. - Major projects are subject to scrutiny through standard processes for project development and approval in accordance with HMT and IPA guidance. ### UK Infrastructure Bank (UKIB) framework and expectations - The UKIB (which is an operationally independent ALB of the Treasury) will be expected to make a sustainable return over time, recycling capital and reinvesting returns from its initial £22 billion of financial capacity. - While it is envisaged to be operationally independent in its day-to-day activities (such as its investment decisions), the UKIB will operate within a strategic framework set out by government and it is expected that there will be overarching coordination to ensure conflicts between UKIB and other government activities are minimized. - The government plans that UKIB will be put on a statutory footing this year. ### Transparency, accountability, and reporting of public corporations - There is no requirement in place to publish a consolidated report of public corporations' expenditure plans but there are strong procedures for accountability and transparency of individual PCs. - The CBG requires that departments agree forward plans with PCs, and that they monitor capital expenditures as part of portfolio management. - The Guidance requires departments to obtain and monitor wider performance information on their PCs and report this information to HMT for the purposes of the preparation of the whole of government accounts. - Individual entities also disclose capital plans and financial information through their Annual Reports. ### Recommendations for Planning Institutions — Overview - Issue 1: National and Sectorial Strategies - Recommendation 1. To ensure full alignment of investment planning and maximum efficiency in investment execution, broaden the scope of the next NIS to incorporate social infrastructure. (HMT by Q4 2022). - Note: While the next NIS is not anticipated until 2024/25, decisions on what will be in scope should be taken earlier to facilitate research, analysis and policy development. - Issue 2: Management of construction sector capacity to deliver the infrastructure program - Recommendation 2.1 Review coordination mechanisms between IPA, NIC, HMT and BEIS on managing future construction and infrastructure sector workforce and capacity (BEIS to lead in consultation with IPA, HMT, NIC by Q3 2022). - Recommendation 2.2 Develop a strategy to improve construction sector capacity and workforce to meet the national infrastructure construction pipeline (BEIS by Q3 2022). - Issue 3: Investment planning at the local level - Recommendation 3.1. Increase the funding horizon of capital grants for local governments to match their capital planning horizon (HMT in coordination with DLUHC by Q4 2022). - Recommendation 3.2. Continue the consolidation of existing funding instruments for local governments (HMT in coordination with DLUHC by Q4 2023). - Issue 4: Strengthening the transparency, independence and implementation of project appraisal and assurance - Recommendation 4.1. Put in place procedures to increase independent scrutiny and project challenge and validate cost and schedule forecasts for major capital investment projects (HMT/IPA by Q4 2022). - Recommendation 4.2. Commence publication of business case summaries in line with Government’s existing commitment to do so (HMT in consultation with departments, Immediately). - Recommendation 4.3. Publish business case summaries retrospectively for already approved major projects (HMT in consultation with departments by Q3 2022). - Recommendation 4.4 Implement HMT’s existing plans to streamline project approvals and assurance, making it easier for agencies to navigate HMT, IPA and Cabinet Office approvals (HMT, Q2, 2022). - Issue 4.1: Cost overruns on major projects - IPA guidance requires the use of the P-50 or median forecast as the project’s Anticipated Final Cost. - Recommendation 4.5. Establish protocols for risk appetite and governance of contingencies in major projects (HMT by Q4 2022). ### Multi-year budgeting, Spending Reviews, and capital allocations - HMT carries out Spending Reviews to determine government plans for public spending, which include multi-year departmental budget allocations for public investment. - Spending Reviews set budgets over multiple years, typically on a three-yearly basis, with the overall spending envelope set in line with fiscal rules. - Capital allocations are typically made for only the period of the Spending Review, though in recent years some steps have been taken to improve certainty for departments about future allocations. - Generally, multi-year Spending Reviews set budgets for three to five years, providing capital allocations to departments for the same period. For example, Spending Review 2021 set budgets to 2024−25. - By design, the length of the period of each department's planning certainty shrinks with the passing of every year because capital budgets are not rolled over for an additional year in each subsequent budget but are only extended at each Spending Review. - On a case-by-case basis, the government makes longer-term spending decisions to provide more planning certainty to specific projects or programs of certain departments. Example: the 2020 Spending Review provided multi-year capital settlements for 21 capital programs in the sectors of Transport, Climate Change, Housing, Public Services and Defense, Security and Science. Longer term allocations have also been made for specific projects e.g., the allocation for Project Gigabit in the 2020 Spending Review. - As shown in Table 3.4, 42 percent of CDEL was part of the multi-annual settlements in the Spending Review-period 2021−22. ### Key figures from Spending Review 2021 (as presented in Box 3.8 and Table 3.4) - Spending Review 2021 set departmental budgets from 2022/23 to 2024/25. - £ billion — departmental capital budgets (CDEL) and related totals: - Total Managed Expenditure: 1045.4 (2022/23), 1081.4 (2023/24), 1107.6 (2024/25) - Total Departmental Capital Budgets (CDEL): 106.8 (2022/23), 115.5 (2023/24), 111.9 (2024/25) - Business, Energy, and Industrial Strategy: 17 (2022/23), 20.8 (2023/24), 21.2 (2024/25) - Transport: 19.5 (2022/23), 19.9 (2023/24), 20.5 (2024/25) - Defense: 15.6 (2022/23), 15.8 (2023/24), 16.2 (2024/25) - Health and Social Care: 10.6 (2022/23), 10.4 (2023/24), 11.2 (2024/25) - DLUHC Levelling up, Housing and Communities: 8.9 (2022/23), 6.9 (2023/24), 6.8 (2024/25) - Education: 6.3 (2022/23), 7 (2023/24), 6.1 (2024/25) - Foreign, Commonwealth and Development Office: 2.6 (2022/23), 3.5 (2023/24), 4 (2024/25) - Environment, Commonwealth and Development Office: 2.2 (2022/23), 2.9 (2023/24), 2.7 (2024/25) - Levelling Up Fund: 0.9 (2022/23), 1.4 (2023/24), 1.4 (2024/25) - Justice: 1.7 (2022/23), 2.2 (2023/24), 1.4 (2024/25) - Other: 21.5 (2022/23), 24.7 (2023/24), 20.4 (2024/25) - Table 3.4 — CDEL and Multi-year Programme Settlements: - CDEL, £billion: 100.4 (2021/22), 107.3 (2022/23), 109.1 (2023/24), 112.8 (2024/25) - Multi-year settlements, £billion: 41.8 (2021/22), 47.1 (2022/23), 49.2 (2023/24), 37 (2024/25) - Multi-year settlements, % CDEL: 42% (2021/22), 44% (2022/23), 45% (2023/24), 33% (2024/25) ### Carry forward arrangements and fiscal treatment - Departments have some flexibility to carry forward expected CDEL underspends related to significant investment programs. - Consolidate Budgeting Guidance (CBG) sets the conditions under which departments can request approval from HMT to qualify for carrying forward CDEL underspends. - Conditions include: - the program must be bigger than £50 million in the year in question; - the carry forward may not exceed 20 percent of the program's CDEL in the year from which it is being carried forward; - and if approved, the carry forward may be spread across multiple years. - An 'allowance for shortfall' is calculated by OBR based on historical capital underspends and an expected forecast. It reflects the impact expected future capital underspends are expected to have on fiscal aggregates and targets. ### Publication and information gaps on project costing and changes - The total costs for major projects are estimated and published, but there is no multi annual capital spending plan with information about how costs are spread over each project's horizon. - As laid out in the Green Book, and the CBG, the valuing of a new investment project should cover the lifetime period of the assets and therefore be based on a whole-life costing approach. - The total costs of major projects are published in the GMPP Data documents, but the Spending Review and annual budget documents do not publish information about the distribution of the yearly costs of projects over an, e.g., five-year horizon. - Without such information, it is difficult to compare total project costs vis-a-vis available resources over the medium term, how projects are prioritized over a multi-year horizon and how they are accommodated within the long-term fiscal constraints. - The government does not transparently explain changes in the estimated costs of investment projects in the budget documents. Total costs of major investments are published in GMPP data document, and as stated by HMT, changes in costs of projects are discussed with departments in the context of changes to spending approval as agreed when approving the business case. However, budget documents do not comprehensively and systematically publish in-depth information that explains all these changes. - If budget documents do not explain when and why cost estimates are changed and do not provide a reconciliation of such changes over time, the relevance of cost estimation and publication is reduced. ### Budget comprehensiveness and unity - Capital spending is undertaken through the budget. The CBG sets out the budgeting framework for expenditure control for public bodies. - Budgets are prepared comprehensively, with budget estimates (including capital estimates) covering UK government departments. - Departments are required to present estimates covering their ALBs, PPPs, non-departmental public bodies, Local Authorities and PCs. - All capital spending of the entire public sector is published in fiscal reports. Disclosure about the total amount of capital spending in the UK public sector is full and comprehensive. - The Main Estimates presented in April each year contain information by department on the capital spending in the budget year under each of the government's main policy areas and the same line is included for the Department's ALBs. - HMT publishes the annual Public Expenditure Statistical Analyses (PESA) report, which brings together recent outturn (capital and recurrent) budgetary data, estimates for the latest year, and spending plans for the rest of the current SR period for the entire public sector. - Capital and recurrent budgets are prepared in an integrated process and spending for both is presented together in the same budget documentation. - As required by the MPM and the Green Book, the department responsible for capital projects reviews the whole life costs of an investment project, which includes the current cost estimations of a capital project. - Investment projects are approved based on the estimated capital and recurrent spending. Ideally business cases from one department incorporate the consequential impacts on other spending departments so that a complete cost picture is presented. *Source: IMF Country Report content unit 1gbrea2022012.* ### 51. Capital and recurrent costs are presented by department against standard program ### 51. Capital and recurrent costs are presented by department against standard program classifications. ### Budgeting for Investment (Strength—Medium; Effectiveness—High) - The UK Parliament appropriates budgets annually but is not systematically provided with information on total project costs and project specific multi-year commitments. - UK Parliament approves the annual budget for each department for the budget year ahead. Projections of multi-annual spending published in budget documents are grouped by department, not project, and are subject to confirmation or revision in future annual budget decisions. - For very large projects (example: High Speed 2), legislation provides planning consent and the Government reports to Parliament on a six-monthly basis with information on project progress and contracts awarded under the allocated budget. - Departments can switch expenditure from capital budgets to current budgets only with approval by HMT. CBG states HMT should retain control over the level of current spending via the resource budgets. Exceptions require HMT approval and adjustments are normally presented to Parliament through the Supplementary Estimates process. - HMT oversight is effective at ensuring capital spending is protected; departments do not frequently request approval for transfers from capital to current budgets. A more common adjustment is HMT allowing unspent capital expenditure to be rolled forward into the following year in line with Budget Exchange rules set out in CBG. - HMT provides delegated responsibility to departments to implement ongoing projects for which they have been allocated funds for the Spending Review period and have delegated authority over their budget. Departments cannot use allocated funds for ongoing projects for alternative purposes without HMT approval. Ongoing major projects receive the required funding. ### Maintenance (Strength— Medium; Effectiveness—Medium) - Standard methodologies exist for routine and capital maintenance; capital maintenance is addressed in sectoral plans. Maintenance is a delegated responsibility; Accounting Officers of Government departments are responsible for managing their assets. MPM stipulates that organizations need a clear grasp of their current asset base and what this means for acquisition, use, maintenance, renewal, upgrade and disposal. - Example: Department for Transport provides strategic direction and funding to Network Rail, which manages and maintains approximately 20,000 miles of rail track, 6,000 level crossings, 30,000 bridges and 2,500 stations. - There is evidence of maintenance backlogs; SR21 provided £8 billion for local roads maintenance and upgrades. - The Green Book requires that costs of investment projects be calculated over the lifetime of the capital project and that maintenance and renewal costs associated with servicing the asset be included when estimating the total cost of a capital project. Costs for maintenance need to be based on organization-specific maintenance policies. - The Office for Government Property develops standards and tools for planning, managing, and costing maintenance over the whole life cycle of government estate. Accounting Officers can request additional funding for maintenance through budget allocation processes (e.g., at Spending Reviews). - Routine and capital maintenance spending information is not systematically disclosed in budget documents; it is published mostly through agency-specific financial reports. There is no comprehensive centralized reporting on routine and capital maintenance in departmental budgets. Budget documents mention maintenance spending on a case-by-case basis. Example: Spending Review 2021 announced expenditure of £22 million over the Spending Review period for maintenance of flood defenses, a Manifesto Commitment. - Because information on maintenance spending is minimal, budget documents do not provide the legislature with the information to develop a view on the adequacy of short, medium, and long-term allocation for routine and capital maintenance of all public organizations. - The framework does not sufficiently ensure that maintenance of public assets is prioritized over new construction. Under-investment in maintenance negatively impacts useful life and value of public sector assets. Deferring maintenance creates backlogs and can multiply costs, while asset maintenance can support operational improvements to public services. - HMT indicated it introduced tools and processes to identify value for money maintenance investment at the two most recent Spending Reviews (2020 and 2021), but incentives and institutions are still to be fully developed. ### Project Selection (Strength-Medium; Effectiveness-Medium) - Spending Reviews are the primary means of determining budget allocations for major public investment projects. Multi-year Spending Reviews set capital and recurrent budgets for three to five years. For capital investment, Spending Reviews make allocations for (i) continuing projects and programmes, (ii) new projects that are selected in the SR-process, and (iii) broader capital allocations not tied to specific projects or programmes (for example, on-going maintenance investment). Spending Review allocations are determined by the Chancellor of the Exchequer, in consultation with the Prime Minister and other Cabinet Ministers and set out in documents presented to Parliament. - Projects can be considered for funding in the Spending Review process regardless of the stage of the project and the maturity of the business case. Business cases are subject to robust review and assurance as part of business case development, but this is not synchronized with the process for allocation in the Spending Reviews. The competition for allocations in the Spending Review is between all potential projects, not just appraised and mature projects. - HMT undertakes a simultaneous assessment of all potential projects at each Spending Review—the capital appraisal process. At Spending Review 2021, investment proposals, whatever their stage, were required to be supported by a business case with key details captured in a Business Case Summary Sheet. Business case summaries are prepared by departments before review by HMT, and depending on the proposal, the IPA and Cabinet Office, before Spending Review allocations are made. - The Business Case Summary Sheet template for the 2021 Spending Review summarizes the five cases (strategic, economic, commercial, financial, and management) and other data to inform budget decisions. It includes information on impacts on Net Zero, alternative options, and geographic impacts. The IPA advised on project deliverability and risk of major projects as an input to project selection. There are no additional specific selection criteria for projects to receive budget funding in place. - Formal approvals to proceed with funded projects are governed through a separate Treasury Approvals Process, which is de-linked from the budget process. - Pipelines of future projects are maintained at a sector level covering appraised and unappraised projects and are generally shared with HMT. These are consolidated by HMT for periodic Spending Reviews but are not otherwise formally maintained consistently across sectors. A consolidated pipeline of appraised projects ready for consideration for budget funding is not maintained. ### Treasury Approvals Process (summary) - Applies to projects and programmes above an agency’s delegated authority limit, or proposals that are “novel, contentious or significantly repercussive for public finances in future.” Last updated March 2022. - Approvals required at Strategic Business Case, Outline Business Case and Full Business Case (contract award) stages. - Establishes requirements to follow Green Book and Supplementary Guidance. - Allows HMT to determine that some projects should join the GMPP, in which case Risk Potential Assessments apply. - Requires Integrated Assurance Approval Plans (IAAPs); IAAPs were made mandatory for all central government major projects in January 2011. - Sets detailed processes for assurance of major projects as they progress through stage gates; heightened rapid engagement by IPA for projects that receive a status of “red”. - Requires business cases submitted for approval to be signed off by Senior Responsible Officers, Accounting Officers and the relevant finance division. - Approval arrangements include review by: - Treasury Approval Process Panel (for projects below £1 billion) - Major Projects Review Group (for projects above £1 billion and that are highly novel or contentious) ### Recommendations for Allocation Institutions - Issue 5. Multi-year budgeting: Effective capital planning requires longer-term funding certainty. The Spending Review horizon only provides certainty for 3−5 years, and the funding horizon shrinks with the passing of every year. The timing and duration of Spending Reviews is set at the government's discretion, providing further uncertainty. - Recommendation 5.1. HMT to provide and publish five-year departmental capital budgets and add an additional year on a rolling annual basis (HMT, upcoming Spending Review). - Issue 5.1. Multi-year budgeting & budgeting for Investment: Departments do not publish integrated multi-annual capital spending plans, nor information on distribution of costs of investment projects over the project’s horizon. - Recommendation 5.2. HMT to instruct departments to publish a multi-annual overview of major capital programs and projects—including the cost distribution for each project, identifying and explaining significant changes (HMT and departments, Q4, 2023). - Recommendation 5.3. Departments to record multi-annual commitments and report to HMT, as requested (HMT, Q2 2023). - Issue 6 Incentivizing maintenance: The importance of adequate capital and routine maintenance of public assets is not sufficiently acknowledged in the PIM-framework, and more complete information relating to capital and routine maintenance funding in budget reports should be made available. - Recommendation 6.1. Publish information about maintenance spending in budget reports. (HMT by Q3 2023). - Recommendation 6.2. Integrate maintenance-performance indicators in the Outcome Delivery Plans. (HMT by Q3 2023). - Issue 7. Spending Reviews may allocate budget funding before project proposals are ready for an investment decision. Setting a minimum project maturity for consideration in the Spending Review would help ensure projects are ‘locked in’ to the budget only after they have been adequately developed and considered. Companion reforms could include increasing unallocated capital expenditure and establishing a periodic and prioritized process to consider budget funding for maturing proposals. - Recommendation 7.1. Set a minimum level of project maturity to receive a Spending Review allocation (HMT by Q2 2023). - Recommendation 7.2. Consider companion reforms including increasing the reserve for unallocated capital expenditure and allow maturing bids to come forward for consideration in an interim round at least once within each Spending Review period (HMT by next Spending Review). *Source: 1gbrea2022012 - 51. Capital and recurrent costs are presented by department against standard program classifications* ### 11. Procurement (Strength— Medium; Effectiveness—Medium) ### 11. Procurement (Strength— Medium; Effectiveness—Medium) ### Procurement openness and publication systems - Procurement of major projects is open and competitive with requirements to advertise tenders for public works contracts, concessions, and utilities. - UK Government Authorities are required to publish details of all procurements in excess of £10,000 (£25,000 for sub-central Authorities). - The majority of procurement is undertaken through e-procurement systems: - Contracts Finder for procurements in excess of £10,000. - Find a Tender for contracts valued over £118,000. - Results of contracting processes are published online. - The Open Government National Action Plan, 2019−21 set targets to achieve up to 90 percent of publication of in-scope tender notices by April 2021; this target was achieved in March 2021. ### Transparency of contract awards and documentation - Transparency requirements mandate the publication of contracts upon tender award, with certain arrangements for redaction where necessary. - Minimum required published award information: full company name of the winning contractor, date on which the contract was entered into, total value of the contract, and an indication of whether the contractor is an SME or a Voluntary, Community or Social Enterprise. - Government departments are also required by policy to publish contract documents in addition to the award notices. - Internal monitoring data (January 2020 to April 2021) showed substantial variation in document publication across Departments: - Six departments published more than 80 percent of awards with full documentation attached. - Six departments published less than 40 percent of awards with documents attached. - Planned procurement reforms, including the Procurement Bill, aim to enhance transparency. ### Construction Projects Pipeline and Modern Methods of Construction (MMC) - The IPA provides the Construction Projects Pipeline with advance notice on planned procurements in the coming 18-month period; the most recently published pipeline detailed more than 400 contract opportunities commencing procurement in the 2021/2022 financial year. - The Pipeline includes estimates of the likely construction workforce required to deliver the planned contracts. - Recommendation: IPA could consider publishing greater detail on expected opportunities including additional information on project maturity, risk and link to overall national and sectoral investment strategies; publication of project business cases would assist industry understanding and benefits realization. - Box 3.13 — Estimated forecast of pipeline to include Modern Methods of Construction (£m): - Transport: 2021/22 12,037; 2022/23 11,723; 2023/24 11,663; 2024/25 12,262; Total 47,685 - Utilities: 2021/22 5,500; 2022/23 5,526; 2023/24 5,299; 2024/25 4,433; Total 20,758 - Social infrastructure: 2021/22 3,124; 2022/23 1,809; 2023/24 1,754; 2024/25 1,747; Total 8,434 - Digital Infrastructure: 2021/22 239; 2022/23 400; 2023/24 375; 2024/25 464; Total 1,478 - Flood and coastal erosion: 2021/22 1.2; 2022/23 1.2; 2023/24 1.1; 2024/25 1; Total 4.6 - Science and research: 2021/22 86; 2022/23 123; 2023/24 95; 2024/25 89; Total 393 - Total: 2021/22 20,988; 2022/23 19,582; 2023/24 19,186; 2024/25 18,996; Total 78,751 ### System-wide monitoring, reporting gaps and planned reforms - High-level analytical reports for monitoring elements of the procurement system are published as part of the Open Government National Action Plan; progress against targets for contract publication is published with remedial action taken where necessary. - Gap: No timely, comprehensive overview of the operation of the system including number of bids received, details of winning contractors and aggregate data to identify trends across the procurement system. - Recommendation: Introduce a new periodic reporting process to support greater transparency, timely identification of barriers, and prompt detection of emerging market trends. - Planned reforms: - A new central digital platform will hold comprehensive data on procurement notices and awards and wide-ranging KPIs. - Transparency requirements will include mandatory reporting of contract performance throughout the project lifecycle, not just at tender publication and award stage. ### Construction Sector Playbook and contracting practice - The Construction Playbook is mandatory for all public works projects and programs (central government departments and ALBs on a ‘comply or explain’ basis). - A common suite of contracts is used for procurement of major projects; these include international standard forms of contract (NEC 3 or NEC 4; JCT 2016; PPC2000/TAC-1 and FAC-1). - The Playbook sets out fourteen policy approaches across themes including project preparation and planning; procurement publication and advertising; selection; evaluation and award; and contract implementation. - The Playbook promotes embedding digital technologies via the Information Management Framework and greater cost certainty via “Should Cost” modelling. - Industry feedback: need to ensure full adherence to the Playbook across contracting authorities; while standard forms are adequate, contractual risk allocation practices are not always well suited to enable efficient delivery and should be closely monitored by the Cabinet Office and IPA. ### Procurement reform after EU exit - Following the UK's exit from the EU, a program of procurement reform is underway; main provisions of procurement regulations enacted in line with EU Procurement Directives are still in place. - A White Paper published in 2020 outlines reforms to speed up and simplify procurement processes and provide more opportunities for small businesses, including rationalizing parallel regulations into a single, uniform set of rules for all contract awards. ### Legal challenges, remedies and the Public Procurement Review Service (PPRS) - Legal challenges to procurement processes are handled through the courts; there are no fixed time limits on case resolution. - Standard remedies derived from the EU Procurement Directives remain in place, including a standstill period of at least ten days between conclusion of the tendering process and award of the contract. - Planned reforms seek to streamline arrangements for legal challenge and broaden access, including rationalizing trial processes considering urgency, contract value and degree of factual dispute. - The PPRS (Cabinet Office) is free of charge and allows suppliers to raise concerns about public sector procurement practices, including subcontracting practices of prime contractors. - Process timing varies by complexity and case load; issues relating to live procurement are handled more promptly and can recommend remedial action. - Individual cases are anonymized and reported; monthly updates document key issues and outcomes. - Cabinet Office publishes an annual report detailing number of cases, key issues raised and progress disseminating lessons learned. ### Devolved administrations and procurement reporting - Devolved Administrations publish reports on aspects of the procurement system. - Example: Scottish Procurement Reform (2014) Act requires public bodies with procurement spend in excess of £5 million per annum to prepare an annual report on activities. - The Scottish Government publishes an annual report presenting a range of information including limited data on transparency. ### Portfolio management and oversight of major projects - Major projects monitored through the Government's Major Project Portfolio (GMPP); covers projects subject to HMT approval for financial cost, novelty, complexity, contentiousness, or need for primary legislation. - GMPP classification: infrastructure and construction, transformation and service delivery, military, and information technology. - 2020−21 GMPP annual report included 66 construction and infrastructure projects with whole life costs of £236 billion. - Projects in this category had an average cost of £3.8 billion and schedule of 11 years. - Central monitoring of GMPP is overseen by the IPA and includes systematic data on performance against budget and schedule; departments submit detailed quarterly reports to the IPA covering costs, schedule, benefits and internal management information. - Each project is assigned a Delivery Confidence Assessment; IPA's future assessment will refocus on readiness for stage-gate passage to inform HMT approval decisions. - Box 3.15 — GMPP quarterly reporting notes: - IPA connects over 2,000 discrete pieces of project data each Quarter. - Project reports contain overview data, cost/schedule/benefits and NPV estimate, physical completion rating, and project resources overview. - ‘Vital Signs’ updates include People metrics (size of project team, rate of churn, number of vacancies, share of Senior Responsible Owners (SROs) time spent on the project and summary capability and capacity assessment). *Source: 1gbrea2022012 - 11. Procurement (Strength— Medium; Effectiveness—Medium).* ### 2. Performance – including risks ratings, milestones and variance and current forecast outturn ### 2. Performance – including risks ratings, milestones and variance and current forecast outturn ### Monitoring, data use and portfolio outcomes - GMPP data informed Spending Review 2021; each project's Delivery Capability Assessment (DCA) was a key consideration in funding allocation. - IPA Annual Report on Major Projects finding: among projects on the GMPP for over a year, the DCA: - improved for 32 projects, - remained the same for 42 projects, - deteriorated for 12 projects. - Quarterly assessment subjects projects outside a tolerance of +/- 10 percent on cost or schedule to further challenge; recent data shows forecasts for the large majority of GMPP projects fall within these limits. - The GMPP covers the largest and most complex programs and projects; portfolio management for the remainder is managed by departments and ALBs within their overall capital allocations. - The Cabinet Office Project Delivery Functional Standard details portfolio management requirements. ### Portfolio management capacity, guidance and recommendations - Maturity of portfolio management capacity varies across departments; departments with substantial programs of technology and business transformation have longer-established practices. - IPA is developing capacity across other bodies and will shortly publish new guidance on portfolio management as part of the Government Project Delivery Framework. - NAO review findings on successful portfolios: - clear objectives and purpose; - clarity on resourcing, governance and funding; - responsiveness to changes in project context. - NAO recommended a portfolio review framework composed of six elements: purpose, information, planning, governance, alignment and risk. - Departments have autonomy to portfolio-manage allocations within agreed limits; HMT approval required to reallocate from ring-fenced project budgets. - Ringfences aim to isolate major investment projects' effects on departmental budgets but may limit capacity to portfolio-manage; some flexibility exists to carry-over unspent allocations from one year to the next. - High rate of capital investment underspends in recent years underscores need for latitude to manage portfolios and re-allocate to more advanced projects. - Project Speed (established in 2020) reviews the infrastructure project lifecycle to identify improvements to deliver projects better, faster and greener; HMT Authorities should ensure departments have sufficient flexibility to portfolio-manage allocations and exploit opportunities to expedite individual projects. ### Ex-post review practice and project lifecycle assurance - Guidance requires ex-post reviews upon project completion, but compliance is mixed. - Government Project Functional Standard includes outcome review as the final project lifecycle stage; Green Book and Magenta Book provide best practice evaluation guidance. - Gate 5 reviews are undertaken on projects exiting the GMPP, but these do not constitute comprehensive ex-post evaluations. - Periodic ex-post reviews occur in certain sectors (example: highways Project Outcome Performance Evaluations). - 2019 Department for Transport and IPA joint study to learn lessons from major transport investments informed project management guidance. - Stronger adherence to ex-post review requirements and periodic incorporation of lessons into appraisal and management guidance would improve delivery performance. ### Management of Implementation: standards, roles and capability - Implementation is managed in line with the Green Book, Five Cases Model and supplementary guidance. - Five Cases Model requires identification of the Senior Responsible Owner (SRO) and preparation of the project delivery plan prior to approval; Management Case covers governance, specialist advisers, change and contract management, benefits realization, risk management, post-implementation evaluation, contingency arrangements and plans. - Project Delivery Functional Standard is the approved reference for government departments and ALBs; it defines portfolios, projects, programs and work packages and articulates governance requirements. - Survey data: 75 percent of respondents in the project delivery function stated that the Standard is improving work practices across the function. - Project Delivery is a designated civil service profession comprising over 14,000 professionals. - Monitoring data shows a high level of vacancies across projects and stretched resources for SROs — identified as a risk to successful delivery. ### Delivery confidence, assurance processes and escalation - IPA undertakes a quarterly review of major projects; projects are assigned Red/Amber/Green status used to inform conditionality on project progression. - Projects with schedule and/or cost profiles beyond tolerances of +/- 10 percent are typically subject to further scrutiny. - Follow-up reviews and escalation procedures are in place, including potential escalation to the relevant minister. - IPA annual reports show evidence of project redesign and/or early project closure in some cases. - Smaller scale and less complex projects not on the GMPP are managed by departments under the Government Project Delivery Standard. ### Red/Amber/Green definitions and recommendations (as applied by IPA) - Green: Successful delivery to time, cost and quality appears highly likely; no major outstanding issues. Recommendation: The project is ready to proceed to the next stage. - Amber: Successful delivery appears feasible but there are significant issues requiring management attention; issues appear resolvable. Recommendation: Proceed to the next stage with conditions and report back to IPA and HMT on time-bound conditions. - Red: Successful delivery appears unachievable; major issues do not appear manageable or resolvable. Recommendation: Do not proceed to the next phase until major issues are managed to acceptable risk and project viability is confirmed. ### Causes of delivery problems and international challenge models - NAO and international literature identify contributing factors to cost overruns, schedule delays and benefits shortfalls including shortcomings in forecasting, issues with scope, system interdependencies and governance; biases in cost and schedule forecasting are highlighted as root causes. - International examples of challenge models: - Australia: Infrastructure Australia reviews investment proposals against a standard framework including deliverability; Infrastructure New South Wales uses an Infrastructure Investor Assurance Framework with monitoring, Gateway Reviews, Health Checks, Deep Dives, and capability building. - Norway (since 2000): external scrutiny of cost forecasts prior to parliamentary approval (QA2) and scrutiny of conceptual solution prior to cabinet (QA1); independent evaluation shows the scheme reduces cost overrun. - Ireland (2022): External Assurance Process for major investment projects (>€100 million) requires commissioned reviewers to assess key project characteristics (validity of cost and schedule forecasts, risk accounting); Business Case and External Assurance Report are presented to the Major Projects Advisory Group prior to Government Approval at two key Decision Gates. ### NAO scrutiny, follow-through and implementation of recommendations - NAO frequently examines major projects; results are scrutinized by Parliament. - NAO publishes a tracker of acceptance and implementation of its recommendations. - Table 3.6 snapshot of follow-through on recommendations from public investment-related reports shows a high rate of implementation: - Completing Crossrail, May 2019: Number of Recommendations 3 — Recommendations implemented 3 - HS2 Progress update, January 2020: Number of Recommendations 9 — Recommendations implemented 9 - Improving Broadband, May 2019: Number of Recommendations 10 — Recommendations implemented 9.5 (Nine recommendations were fully implemented, and one partially implemented.) - Improving the A30, October 2020: Number of Recommendations 5 — Recommendations implemented 4 - Westminster renovation, April 2020: Number of Recommendations 21 — Recommendations implemented 12 ### Asset management arrangements and information improvements - Responsibility for asset management is delegated to departments; MPM Annex A4.15 suggests maintaining asset registers updated at least annually is good practice. - The UK’s preparation of comprehensive, audited financial accounts effectively requires agencies to know their asset base and means assets are recorded. - Sector-maintained asset information is not currently made available in a comprehensive or coordinated way and is not shared with HMT. - Ongoing developments: - National Underground Asset Register (Geospatial Commission) is a digital map of underground pipes and cables becoming progressively available from 2023; the Register will bring together data held by over 650 asset owning organizations, who are legally required to share their data for free. - Estimated economic benefits of the Register: £350 million per year, comprising planning and other efficiencies, reduced asset strikes, and reduced delays to the public and businesses. - Cabinet Office leading development of a Digital National Asset Register — a comprehensive database of buildings and land owned by UK public-sector entities, with intended public release of useful data under the Open Government License. - The Office of Government Property sets Functional Standards for management of land and buildings and monitors performance; departmental asset management plans and brief summaries are published. - Network Rail’s asset management plans include rail assets owned by the government; Office of Road and Rail monitors Network Rail’s license condition on asset management and uses independent technical experts. - IPA maintains a register of PFI contracts and assets to help departments manage PFI contracts and prepare for return of PFI assets to the public sector. - A centralized national fixed asset register incorporating 370 government bodies was last published in 2007. *Source: 1gbrea2022012 - 2. Performance – including risks ratings, milestones and variance and current forecast outturn* ### 98. The government is required to publish a full balance sheet annually that reflects the ### 1gbrea2022012 - 98. The government is required to publish a full balance sheet annually that reflects the ### Annual balance sheet, Whole of Government Accounts (WGA), and asset valuation - The Government Resources and Accounts Act 2000 establishes requirements for production of financial statements under guidelines set by HMT (provided through the Government Financial Reporting Manual). - The latest 2018−19 Whole of Government Accounts (WGA) contain over 9,000 entities including central government departments, local authorities, devolved administrations, and public corporations. - Property, plant and equipment comprises 60 percent of assets in the WGA; the largest component of which is infrastructure assets (largely road and rail networks). - The WGA discusses valuation methodologies for road and rail networks and associated uncertainties. - The 2018-19 WGA were qualified by the NAO on the basis that a material misstatement arises from differences between the financial reporting frameworks used by local government and public corporations, which require historical cost valuation, and the Financial Reporting Manual requirement that central government value these assets at depreciated replacement cost. - NAO considered asset values to be materially understated, estimated by NAO to be at least £58.8 billion, up from £47.8 billion in 2017−18. - NAO highlighted importance of strengthening local authorities reporting of asset condition and timeliness of end of year financial accounts to improve future cost estimation. - Road network assets held by local authorities are currently held at historical cost less depreciation, different from central government valuation basis. The 2018-19 WGA reports local authorities investigated a valuation based on replacement cost less depreciation, but the body that sets standards for local authority accounts decided the costs of implementation outweighed the benefits and decided not to proceed. - The Department for Transport’s annual reports disclose accounting assumptions and valuation methodology for road and rail network; the audit opinion in the 2020−21 departmental accounts concluded the asset values were reasonable. ### Depreciation and asset useful lives - Depreciation is recorded in operating expenditures in departmental financial statements based on asset-specific assumptions and subject to audit. - Guidance to departments on calculating depreciation is included in the Financial Reporting Manual and is consistent with IFRS standards. - The WGA outlines depreciation is calculated for each asset individually based on its estimated useful economic life and residual value. - General timescales for each category are disclosed in the WGA and range to up to 150 years for Scottish water infrastructure. ### Identified implementation issues and numbered recommendations (Issues 8–11) - Issue 8: Comprehensive and timely procurement reports are not routinely published. Regular and wide-ranging reporting of procurement information and publication of awarded contracts can ensure transparency and support confidence in the public procurement system. - Recommendation 8.1. Continue and expand the coverage of monitoring reports on execution of project procurement processes as part of the Open Government initiative (Cabinet Office, Q3 2022). - Recommendation 8.2. In line with procurement regulations, ensure the publication of contracts for major public investment projects, with minimal redaction. Publish timely reports on the rate of contract publication (Cabinet Office, Q2 2022). - Issue 9: There is inflexibility in reallocating funding within and across departments. To exploit opportunities to expedite more advanced projects that can absorb underspends from less advanced projects and enable more strategic portfolio management, arrangements should be developed to allow re-allocation within and between departmental allocations. - Recommendation 9.1. Ensure there is sufficient flexibility to reallocate funds within and across departmental budgets in order to expedite delivery of projects that are ready to proceed (HMT by Q3 2022). - Issue 10: Ex post project evaluations are not routinely undertaken. Mandating post-project reviews for major projects and periodically reflecting lessons learned in project appraisal and management guidance would improve project delivery performance. - Recommendation 10.1. Undertake and publish ex-post project evaluations for major investment projects. (All departments, Q2, 2022). - Recommendation 10.2. Document lessons learned and update project guidance on a periodic basis (All departments, Q2, 2022). - Issue 11: Strengthening management of assets. Departments are not required to maintain asset registers and share information on assets. Some initiatives are underway to improve digital registers for some assets; strengthening expectations on departments would improve practices across the board. - Recommendation 11.1 Strengthen MPM guidance so that entities with material non-financial assets are required to maintain asset registers and establish minimum standards for their upkeep and transparency (HMT, Q3 2023). ### Legal framework, parliamentary role, and devolution - The UK operates a common law system and does not have a written constitution. Powers to manage public spending include common law, primary and secondary legislation, parliamentary procedure, ministerial duties, and other practices. - Parliament: Parliamentary agreement is required to set annual departmental budgets. Supply Estimates process puts departmental estimates to Parliament annually and represents departmental budgets for the year ahead. The Public Accounts Committee holds public hearings on central government accounts and frequently examines NAO reviews relevant to public investment management. - Devolution: Northern Ireland, Scotland and Wales each have distinct legislatures and governments with separate devolution settlements and legislatures. Table 3.7 (as presented) indicates devolution of competence for economic infrastructure sectors: - Transport: Scotland — Devolved; Northern Ireland — Devolved; Wales — Devolved, except rail. - Energy: Scotland — Largely devolved; Northern Ireland — Largely devolved; Wales — Partially Devolved. - Water and sewerage: Scotland — Devolved; Northern Ireland — Devolved; Wales — Devolved. - Flood risk: Scotland — Devolved; Northern Ireland — Devolved; Wales — Devolved. - Waste: Scotland — Devolved; Northern Ireland — Devolved; Wales — Devolved. - Digital infrastructure: Scotland — Not devolved; Northern Ireland — Not devolved; Wales — Not devolved. - Primary and secondary legislation cover certain aspects of the public investment system; regulatory and guidance documents play a central role. The legal framework covers public procurement law and the planning process, both subject to reform initiatives. Independent institutions include economic regulators, the NIC and the OBR. MPM sets the administrative framework within which public investment is executed and issues detailed rulebooks for devolved administrations. ### Information systems and data interoperability - HMT maintains an integrated financial Online System for Central Accounting and Reporting (OSCAR) to manage financial reporting, budget estimates, and collect key datasets. OSCAR 2 has recently been introduced to replace OSCAR and is currently being refined. - Key datasets captured in OSCAR include: - Financial plans for the year ahead covering legal authorities to spend based on the Main Estimates and Supplementary Estimates. - Outturns, both Forecast and Outturns to track spending through the year and inform monthly reporting, and actual outturns. - The PFI database, which includes UK government departments and devolved administrations’ PFI/PF2 data. Data collection takes place annually and includes key dates such as start of the contract, estimated original capital investment, and forecasted future annual payments. This was last published in 2018. - Whole of Government Accounts data (including from devolved and local governments). - Country and regional analysis data for certain larger areas of spending. - The IPA maintains the GMPP dataset used for project implementation monitoring and reporting; a subset is published in the IPA’s Annual Report and a more complete internal dataset is used by the IPA. - Plans to link HMT data on approved spending for projects with GMPP data will improve oversight of project costs. Currently the cost data in GMPP is from a variety of sources and does not necessarily line up with allocations made for projects in Spending Reviews, creating inconsistency that complicates IPA monitoring of project costs. - The UK does not have a public portal on public investment projects approved and/or in delivery by location and value. The most comprehensive publicly available data is via the National Infrastructure and Construction Pipeline (available in excel format). Wales produces a similar Infrastructure Investment Pipeline. - Initiatives underway to create a digital register of land and buildings and a National Underground Assets Register will support improved asset maintenance and planning. ### Capacity building for project delivery - The IPA is the government’s center of expertise for infrastructure and major projects delivery and has developed instruments to increase capability of project professionals across government. - Examples of capacity-building instruments: - The IPA “Project Delivery Capability Framework”: describes roles, capabilities, and learning and contains three elements: a career pathway/common set of job roles, a set of competencies, and a signpost for development opportunities specific to job roles. - The Government Function Standard GovS 002: Project Delivery — sets expectations for governance, portfolio management, program and project management, planning and control practices, and solution delivery practices. - The Major Projects Leadership Academy and the Government Projects Academy — offer training curriculums for officials at all levels, from Senior Responsible Owners (SROs) to project delivery specialists. - The IPA monitors resources needed for successful delivery of projects in the GMPP, including skills of the current project professional population, vacancies, and understaffed teams, to inform allocation and recruitment. - Local and devolved levels: It is often more difficult for local authorities to attract and retain needed skills. Reforms such as local combined authorities in England and UKIB advisory services to local governments engaging in private sector projects should contribute positively. - HMT’s Green Book and Major Projects Unit are working to improve capacity for high quality project appraisals and ensuring training is available for staff preparing business cases and those overseeing them. ### Cross-cutting issues, capacity and information systems recommendations - Issue 12: More capacity is likely to be needed to identify and develop quality projects across sectors and regions as the infrastructure program scales up. - Recommendation 12.1: Continue to build capacity across government sectors and regions to develop project proposals and build a diverse pipeline of quality projects (Q4 2022, HMT, DLUHC, UKIB, IPA). - Issue 13: Improving interfaces between information systems for public investment management would streamline management and improve efficiency. - Recommendation 13.1 Explore opportunities for improved data sharing between information systems for public investment management. (Q4 2023, HMT, IPA in consultation with implementation agencies). ### Annex 1. PIMA Action Plan — selected implementation milestones (planning, allocation, implementation, cross-cutting) - Planning: Broaden the scope of the next NIS to incorporate social infrastructure (Q4, HMT/NIC). - Construction sector capacity: Review coordination mechanisms (Q3, BEIS to lead, with IPA, HMT, NIC, Educ) and develop a strategy to improve construction sector capacity and workforce (Q3, BEIS High). - Local investment certainty: Increase certainty through longer term funding guidance and streamlining instruments (Q4, HMT w DLUHC); continue consolidation of existing funding instruments for local governments (Q4 → HMT w.DLUHC). - Project appraisal independence and transparency: - 4.1 Increase independent scrutiny and validate cost and schedule forecasts for major capital investment projects (Q4, HMT/IPA High). - 4.2 Commence publication of business case summaries in line with Government’s existing commitment (Q2, HMT with public sector Medium). - 4.3 Publish business case summaries retrospectively for already approved major projects (Q3, HMT with public sector Medium). - 4.4 Implement plans to streamline project approvals and assurance (Q2, HMT Medium). - 4.5 Establish protocols for risk appetite and governance of contingencies in major projects (Q4, HMT High). - Allocation: HMT to provide and publish five-year departmental capital budgets and add an additional year on a rolling annual basis (Next SR, HMT Medium). - Implementation highlights: - 8.1 Regularly publish monitoring reports on execution of project procurement processes (Q3, Cabinet Office High). - 8.2 Ensure publication of contracts for major public investment projects, with minimal redaction and report on rate of publication (Q2, Cabinet Office High). - 9.1 Ensure sufficient flexibility to reallocate funds within and across departmental budgets to expedite delivery (Q3, HMT Medium). - 10.1 Undertake and publish ex-post project evaluations (Q2, All depts Medium). - 10.2 Document lessons learned and update project guidance periodically (Q2, All depts Medium). - 11.1 Strengthen MPM guidance to require maintenance of asset registers and establish minimum standards for upkeep and transparency (Q3, HMT Low). - Cross-cutting: - 12.1 Continue to build capacity across government sectors and regions to develop project proposals and build diverse pipeline (Q4, HMT, DLUHC, UKIB, IPA Medium). - 13.1 Explore opportunities for improved data sharing between information systems for public investment management (Q4, HMT, IPA, implementation agencies Medium). *Source: IMF staff (excerpts from the cited chapter).* ### Annex 2. Detailed UK PIMA Scores ### Annex 2. Detailed UK PIMA Scores ### Score legend - Indicator Scoring: 1 = To no or a lesser extent; 2 = To some extent; 3 = To a greater extent. - Color coding used in presenting the scores: Score 1 2 3 — Color Low Medium High ### A. Planning — Institutional Design and Effectiveness (scores listed as "Design Effectiveness") - 1.a. 3 3 - 1.b. 2 3 - 1.c. 3 3 - 2.a. 3 3 - 2.b. 3 3 - 2.c. 2 2 - 3.a. 2 2 - 3.b. 2 2 - 3.c. 3 3 - 4.a. 2 3 - 4.b. 3 3 - 4.c. 3 2 - 5.a. 3 3 - 5.b. 3 3 - 5.c. 2 2 ### B. Allocation — Institutional Design and Effectiveness (scores listed as "Design Effectiveness") - 6.a. 2 3 - 6.b. 2 3 - 6.c. 2 2 - 7.a. 3 3 - 7.b. 3 2 - 7.c. 3 3 - 8.a. 1 2 - 8.b. 3 3 - 8.c. 2 3 - 9.a. 3 2 - 9.b. 3 2 - 9.c. 1 1 - 10.a. 2 2 - 10.b. 2 2 - 10.c. 2 2 ### C. Implementation — Institutional Design and Effectiveness (scores listed as "Design Effectiveness") - 11.a. 3 3 - 11.b. 2 2 - 11.c. 2 2 - 12.a. 3 3 - 12.b. 3 3 - 12.c. 3 3 - 13.a. 3 3 - 13.b. 3 2 - 13.c. 2 2 - 14.a. 3 3 - 14.b. 3 3 - 14.c. 2 3 - 15.a. 2 2 - 15.b. 3 2 - 15.c. 3 3 ### Questionnaire: Selected indicator definitions and scoring thresholds (preserves original wording and numeric categories) - General scoring: 1 = To no or a lesser extent; 2 = To some extent; 3 = To a greater extent. - A. Planning — Sustainable Levels of Public Investment - 1. Fiscal targets and rules - 1.a. Is there a target or limit for government to ensure debt sustainability? - 1: There is no target or limit to ensure debt sustainability. - 2: There is at least one target or limit to ensure central government debt sustainability. - 3: There is at least one target or limit to ensure general government debt sustainability. - 1.b. Is fiscal policy guided by one or more permanent fiscal rules? - 1: There are no permanent fiscal rules. - 2: There is at least one permanent fiscal rule applicable to central government. - 3: There is at least one permanent fiscal rule applicable to central government, and at least one comparable rule applicable to a major additional component of general government, such as subnational government (SNG). - 1.c. Is there a medium-term fiscal framework (MTFF) to align budget preparation with fiscal policy? - 1: There is no MTFF prepared prior to budget preparation. - 2: There is an MTFF prepared prior to budget preparation but it is limited to fiscal aggregates, such as expenditure, revenue, the deficit, or total borrowing. - 3: There is an MTFF prepared prior to budget preparation, which includes fiscal aggregates and allows distinctions between recurrent and capital spending, and ongoing and new projects. - 2. National and Sectoral Planning - 2.a. Does the government prepare national and sectoral strategies for public investment? - 1: National or sectoral public investment strategies or plans are prepared, covering only some projects found in the budget. - 2: National or sectoral public investment strategies or plans are published covering projects funded through the budget. - 3: Both national and sectoral public investment strategies or plans are published and cover all projects funded through the budget regardless of financing source (e.g., donor, public corporation (PC), or PPP financing). - 2.b. Are the government’s national and sectoral strategies or plans for public investment costed? - 1: The government’s investment strategies or plans include no cost information on planned public investment. - 2: The government’s investment strategies include broad estimates of aggregate and sectoral investment plans. - 3: The government’s investment strategies include costing of individual, major investment projects within an overall financial constraint. - 2.c. Do sector strategies include measurable targets for the outputs and outcomes of investment projects? - 1: Sector strategies do not include measurable targets for outputs or outcomes. - 2: Sector strategies include measurable targets for outputs (e.g., miles of roads constructed). - 3: Sector strategies include measurable targets for both outputs and outcomes (e.g., reduction in traffic congestion). - 3. Coordination between Entities - 3.a. Is capital spending by SNGs coordinated with the central government? - 1: Capital spending plans of SNGs are not submitted to, nor discussed with central government. - 2: Major SNG capital spending plans are published alongside central government investments, but there are no formal discussions between the central government and SNGs on investment priorities. - 3: Major SNG capital spending plans are published alongside central government investments, and there are formal discussions between central government and SNGs on investment priorities. - 3.b. Does the central government have a transparent, rule-based system for making capital transfers to SNGs, and for providing timely information on such transfers? - 1: The central government does not have a transparent rule-based system for making capital transfers to SNGs. - 2: The central government uses a transparent rule-based system for making capital transfers to SNGs, but SNGs are notified about expected transfers less than six months before the start of each fiscal year. - 3: The central government uses a transparent rule-based system for making capital transfers to SNGs, and expected transfers are made known to SNGs at least six months before the start of each fiscal year. - 3.c. Are contingent liabilities arising from capital projects of SNGs, PCs, and PPPs reported to the central government? - 1: Contingent liabilities arising from major projects of SNGs, PCs, and PPPs are not reported to the central government. - 2: Contingent liabilities arising from major projects of SNGs, PCs, and PPPs are reported to the central government, but are generally not presented in the central government’s budget documents. - 3: Contingent liabilities arising from major projects of SNGs, PCs, and PPPs are reported to the central government, and are presented in full in the central government’s budget documents. - 4. Project Appraisal - 4.a. Are major capital projects subject to rigorous technical, economic, and financial analysis? - 1: Major capital projects are not systematically subject to rigorous technical, economic, and financial analysis. - 2: Major projects are systematically subject to rigorous technical, economic, and financial analysis. - 3: Major projects are systematically subject to rigorous technical, economic, and financial analysis, and selected results of this analysis are published or undergo independent external review. - 4.b. Is there a standard methodology and central support for the appraisal of projects? - 1: There is no standard methodology or central support for project appraisal. - 2: There is either a standard methodology or central support for project appraisal. - 3: There is both a standard methodology and central support for project appraisal. - 4.c. Are risks taken into account in conducting project appraisals? - 1: Risks are not systematically assessed as part of the project appraisal. - 2: A risk assessment covering a range of potential risks is included in the project appraisal. - 3: A risk assessment covering a range of potential risks is included in the project appraisal, and plans are prepared to mitigate these risks. - 5. Alternative Infrastructure Financing - 5.a. Does the regulatory framework support competition in contestable markets for economic infrastructure (e.g., power, water, telecoms, and transport)? - 1: Provision of economic infrastructure is restricted to domestic monopolies, or there are few established economic regulators. - 2: There is competition in some economic infrastructure markets, and a few economic regulators have been established. - 3: There is competition in major economic infrastructure markets, and economic regulators are independent and well established. - 5.b. Has the government published a strategy/policy for PPPs, and a legal/regulatory framework which guides the preparation, selection, and management of PPP projects? - 1: There is no published strategy/policy framework for PPPs, and the legal/regulatory framework is weak. - 2: A PPP strategy/policy has been published, but the legal/regulatory framework is weak. - 3: A PPP strategy/policy has been published, and there is a strong legal/regulatory framework that guides the preparation, selection, and management of PPP projects. - 5.c. Does the government oversee the investment plans of public corporations (PCs) and monitor their financial performance? - 1: The government does not systematically review the investment plans of PCs. - 2: The government reviews the investment plans of PCs but does not publish a consolidated report on these plans or the financial performance of PCs. - 3: The government reviews and publishes a consolidated report on the investment plans and financial performance of PCs. - B. Ensuring Public Investment is Allocated to the Right Sectors and Projects - 6. Multi-Year Budgeting - 6.a. Is capital spending by ministry or sector forecasted over a multiyear horizon? - 1: No projections of capital spending are published beyond the budget year. - 2: Projections of total capital spending are published over a three to five-year horizon. - 3: Projections of capital spending disaggregated by ministry or sector are published over a three to five-year horizon. - 6.b. Are there multiyear ceilings on capital expenditure by ministry, sector, or program? - 1: There are no multiyear ceilings on capital expenditure by ministry, sector, or program. - 2: There are indicative multiyear ceilings on capital expenditure by ministry, sector, or program. - 3: There are binding multiyear ceilings on capital expenditure by ministry, sector, or program. - 6.c. Are projections of the total construction cost of major capital projects published? - 1: Projections of the total construction cost of major capital projects are not published. - 2: Projections of the total construction cost of major capital projects are published. - 3: Projections of the total construction cost of major capital projects are published, together with the annual breakdown of these cost over a three-five-year horizon. - 7. Budget Comprehensiveness and Unity - 7.a. Is capital spending mostly undertaken through the budget? - 1: Significant capital spending is undertaken by extra-budgetary entities with no legislative authorization or disclosure in the budget documentation. - 2: Significant capital spending is undertaken by extra-budgetary entities, but with legislative authorization and disclosure in the budget documentation. - 3: Little or no capital spending is undertaken by extra-budgetary entities. - 7.b. Are all capital projects, regardless of financing source, shown in the budget documentation? - 1: Capital projects are not comprehensively presented in the budget documentation, including PPPs, externally financed, and PCs’ projects. - 2: Most capital projects are included in the budget documentation, but either PPPs, externally financed, or PCs’ projects are not shown. - 3: All capital projects, regardless of financing sources, are included in the budget documentation. - 7.c. Are capital and recurrent budgets prepared and presented together in the budget? - 1: Capital and recurrent budgets are prepared by separate ministries, and/or presented in separate budget documents. - 2: Capital and recurrent budgets are prepared by a single ministry and presented together in the budget documents, but without using a program or functional classification. - 3: Capital and recurrent budgets are prepared by a single ministry and presented together in the budget documents, using a program or functional classification. - 8. Budgeting for Investment - 8.a. Are total project outlays appropriated by the legislature at the time of a project’s commencement? - 1: Outlays are appropriated on an annual basis, but information on total project costs is not included in the budget documentation. - 2: Outlays are appropriated on an annual basis, and information on total project costs is included in the budget documentation. - 3: Outlays are appropriated on an annual basis and information on total project costs, and multiyear commitments is included in the budget documentation. - 8.b. Are in-year transfers of appropriations (virement) from capital to current spending prevented? - 1: There are no limitations on virement from capital to current spending. - 2: The finance ministry may approve virement from capital to current spending. - 3: Virement from capital to current spending requires the approval of the legislature. - 8.c. Is the completion of ongoing projects given priority over starting new projects? - 1: There is no mechanism in place to protect funding of ongoing projects. - 2: There is a mechanism to protect funding for ongoing projects in the annual budget. - 3: There is a mechanism to protect funding for ongoing projects in the annual budget and over the medium term. - 9. Maintenance Funding - 9.a. Is there a standard methodology for estimating routine maintenance needs and budget funding? - 1: There is no standard methodology for determining the needs for routine maintenance. - 2: There is a standard methodology for determining the needs for routine maintenance and its cost. - 3: There is a standard methodology for determining the needs for routine maintenance and its cost, and the appropriate amounts are generally allocated in the budget. - 9.b. Is there a standard methodology for determining major improvements and are they included in national and sectoral investment plans? - 1: There is no standard methodology for determining major improvements, and they are not included in national or sectoral plans. - 2: There is a standard methodology for determining major improvements, but they are not included in national or sectoral plans. - 3: There is a standard methodology for determining major improvements, and they are included in national or sectoral plans. - 9.c. Can expenditures relating to routine maintenance and major improvements be identified in the budget? - 1: Routine maintenance and major improvements are not systematically identified in the budget. - 2: Routine maintenance and major improvements are systematically identified in the budget. - 3: Routine maintenance and major improvements are systematically identified in the budget and are reported. - 10. Project Selection - 10.a. Does the government undertake a central review of major project appraisals before decisions are taken to include projects in the budget? - 1: Major projects (including donor- or PPP-funded) are not reviewed by a central ministry prior to inclusion in the budget. - 2: Major projects (including donor- or PPP-funded) are reviewed by a central ministry prior to inclusion in the budget. - 3: All major projects (including donor- or PPP-funded) are scrutinized by a central ministry, with input from an independent agency or experts prior to inclusion in the budget. - 10.b. Does the government publish and adhere to standard criteria, and stipulate a required process for project selection? - 1: There are no published criteria or a required process for project selection. - 2: There are published criteria for project selection, but projects can be selected without going through the required process. - 3: There are published criteria for project selection, and generally projects are selected through the required process. - 10.c. Does the government maintain a pipeline of appraised investment projects for inclusion in the annual budget? - 1: The government does not maintain a pipeline of appraised investment projects. - 2: The government maintains a pipeline of appraised investment projects but other projects may be selected for financing through the annual budget. - 3: The government maintains a comprehensive pipeline of appraised investment projects, which is used for selecting projects for inclusion in the annual budget, and over the medium term. - C. Delivering Productive and Durable Public Assets - 11. Procurement - 11.a. Is the procurement process for major capital projects open and transparent? - 1: Few major projects are tendered in a competitive process, and the public has limited access to procurement information. - 2: Many major projects are tendered in a competitive process, but the public has only limited access to procurement information. - 3: Most major projects are tendered in a competitive process, and the public has access to complete, reliable and timely procurement information. - 11.b. Is there a system in place to ensure that procurement is monitored adequately? - 1: There is no procurement database, or the information is incomplete or not timely for most phases of the procurement process. - 2: There is a procurement database with reasonably complete information, but no standard analytical reports are produced from the database. - 3: There is a procurement database with reasonably complete information, and standard analytical reports are produced to support a formal monitoring system. - 11.c. Are procurement complaints review process conducted in a fair and timely manner? - 1: Procurement complaints are not reviewed by an independent body. - 2: Procurement complaints are reviewed by an independent body, but the recommendations of this body are not produced on a timely basis, nor published, nor rigorously enforced. - 3: Procurement complaints are reviewed by an independent body whose recommendations are timely, published, and rigorously enforced. - 12. Availability of Funding - 12.a. Are ministries/agencies able to plan and commit expenditure on capital projects in advance on the basis of reliable cash-flow forecasts? - 1: Cash-flow forecasts are not prepared or updated regularly, and ministries/agencies are not provided with commitment ceilings in a timely manner. - 2: Cash-flow forecasts are prepared or updated quarterly, and ministries/agencies are provided with commitment ceilings at least a quarter in advance. - 3: Cash-flow forecasts are prepared or updated monthly, and ministries/agencies are provided with commitment ceilings for the full fiscal year. - 12.b. Is cash for project outlays released in a timely manner? - 1: The financing of project outlays is frequently subject to cash rationing. - 2: Cash for project outlays is sometimes released with delays. - 3: Cash for project outlays is normally released in a timely manner, based on the appropriation. - 12.c. Is external (donor) funding of capital projects fully integrated into the main government bank account structure? - 1: External financing is largely held in commercial bank accounts outside the central bank. - 2: External financing is held at the central bank, but is not part of the main government bank account structure. - 3: External financing is fully integrated into the main government bank account structure. *Annex 2. Detailed UK PIMA Scores (as presented in the source).* ### 13. Portfolio M anagement and O versight: Is adequate oversight ex ercised over implementation of the entire pu ### 13. Portfolio Management and Oversight: Is adequate oversight exercised over implementation of the entire public investment portfolio ### 13.a Are major capital projects subject to monitoring during project implementation? - Most major capital projects are not monitored during project implementation. - For most major projects, annual project costs, as well as physical progress, are monitored during project implementation. - For all major projects, total project costs, as well as physical progress, are centrally monitored during project implementation. ### 13.b Can funds be re-allocated between investment projects during implementation? - Funds cannot be re-allocated between projects during implementation. - Funds can be reallocated between projects during implementation, but not using systematic monitoring and transparent procedures. - Funds can be re-allocated between projects during implementation, using systematic monitoring and transparent procedures. ### 13.c Does the government adjust project implementation policies and procedures by systematically conducting ex post reviews of projects that have completed their construction phase? - Ex post reviews of major projects are neither systematically required, nor frequently conducted. - Ex post reviews of major projects, focusing on project costs, deliverables and outputs, are sometimes conducted. - Ex post reviews of major projects focusing on project costs, deliverables, and outputs are conducted regularly by an independent entity or experts, and are used to adjust project implementation policies and procedures. --- ### 14. Management of Project Implementation: Are capital projects well managed and controlled during the execution stage? ### 14.a Do ministries/agencies have effective project management arrangements in place? - Ministries/agencies do not systematically identify senior responsible officers for major investment projects, and implementation plans are not prepared prior to budget approval. - Ministries/agencies systematically identify senior responsible officers for major investment projects, but implementation plans are not prepared prior to budget approval. - Ministries/agencies systematically identify senior responsible officers for major investment projects, and implementation plans are prepared prior to budget approval. ### 14.b Has the government issued rules, procedures and guidelines for project adjustments that are applied systematically across all major projects? - There are no standardized rules and procedures for project adjustments. - For major projects, there are standardized rules and procedures for project adjustments, but do not include, if required, a fundamental review and reappraisal of a project’s rationale, costs, and expected outputs. - For all projects, there are standardized rules and procedures for project adjustments and, if required, include a fundamental review of the project’s rationale, costs, and expected outputs. ### 14.c Are ex post audits of capital projects routinely undertaken? - Major capital projects are usually not subject to ex post external audits. - Some major capital projects are subject to ex post external audit, information on which is published by the external auditor. - Most major capital projects are subject to ex post external audit information on which is regularly published and scrutinized by the legislature. --- ### 15. Monitoring of Public Assets: Is the value of assets properly accounted for and reported in financial statements? ### 15.a Are asset registers updated by surveys of the stocks, values, and conditions of public assets regularly? - Asset registers are neither comprehensive nor updated regularly. - Asset registers are either comprehensive or updated regularly at reasonable intervals. - Asset registers are comprehensive and updated regularly at reasonable intervals. ### 15.b Are nonfinancial asset values recorded in the government financial accounts? - Government financial accounts do not include the value of non-financial assets. - Government financial accounts include the value of some non-financial assets, which are revalued irregularly. - Government financial accounts include the value of most nonfinancial assets, which are revalued regularly. ### 15.c Is the depreciation of fixed assets captured in the government’s operating statements? - The depreciation of fixed assets is not recorded in operating statements. - The depreciation of fixed assets is recorded in operating statements, based on statistical estimates. - The depreciation of fixed assets is recorded in operating expenditures, based on asset-specific assumptions. --- ### Cross-cutting issues - A IT support. Is there a comprehensive computerized information system for public investment projects to support decision making and monitoring? - B Legal Framework. Is there a legal and regulatory framework that supports institutional arrangements, mandates, coverage, procedures, standards and accountability for effective PIM? - C Staff capacity. Does staff capacity (number of staff and/or their knowledge, skills, and experience) and clarity of roles and responsibilities support effective PIM institutions? *Source: 1gbrea2022012 - 13. Portfolio Management and Oversight: Is adequate oversight exercised over implementation of the entire public investment portfolio* --- _Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1gbrea2022012.pdf_