I think there's now too much "managerialism" involved in both
DfT» and
NR» . That's my name for the belief that every project can have a single cost and timescale known in advance, and can be managed to meet that unless those involved are incompetent. It underlies the style of management that responds to a project deviating from its plan by threatening to waterboard the project manager and expecting the threats and arm-twisting to be communicated down the hierarchy, expecting the result of getting it back on target.
This always collides with the real world, which isn't like that. Hence the difficulty of explaining who was at fault for the supposedly "inadequate" planning. I'm pretty sure those involved knew how much they didn't know, and that the initial "known costs only" estimates could only go up. But the quickest and most reliable way to better scope those unknown costs is to get started and find out. Sitting at a desk won't tell you. Expensive consultants very likely can't tell you either. And all this detailed planning-for-every-possibility costs money; a lot of money.
The traditional way to manage the inevitable cost overruns is to allocate a big contingency, not to the project but higher up so it averages several projects at different stages. With NR's old "fake private company" funding approach most of their money was borrowed anyway, so a couple of big overruns just added a bit on top of that. Not crazy at all, just incompatible with the several extra layers of project "management" now peering over the shoulders of the guys actually running the work.
Oddly, Philip Rutnam struggled to explain to the PAC how DfT was doing exactly the same thing with its own £330M extra costs on this project (more bimodes etc.).
Philip Rutnam: Which costs?
Kevin Foster: The £330 million cost of delays we have seen on this project, which is the figure cited at the start of the Report. Does that mean we will potentially see cuts in spending elsewhere in your Department’s budget?
Philip Rutnam: No, it does not. We are talking about different pots of money here and different budgets. Mr Carne has been talking about the £15.7 billion envelope within which Network Rail needs to manage its enhancement portfolio in this control period. The costs that exist in the up to £330 million estimate included in the Report for consequential impacts on the Department associated with these delays sit elsewhere. There are two principal elements within that figure of up to £330 million. One is associated with the decision we have taken to make all the trains we are buying for this part of the country bi-mode. The other is the effect on the revenues of Great Western Railway, the franchisee associated with running the trains, because electrification is happening a bit later and the service change is happening a bit later.
Q76 Kevin Foster: Will they bear that cost themselves, or will that cost be with the Department?
Philip Rutnam: Both those costs sit with the Department, rather than with Network Rail. As you would expect in a large complex organisation like the Department, we have budgets that include certain amounts of contingency. These costs are also spread over a number of years, so I am not anticipating that we will need to make any reductions in other areas of the Department’s spend associated with these costs crystallising.
Ultimately risk can't be reduced, just moved around from one place - or budget - to another. Of course adding a big number to the initial cost estimate always makes it easier not to overspend...
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