AUDIT COMMITTEE CRITICISES HOLYROOD PARLIAMENT PROJECT COST REPORTING

The decision by Scottish Office civil servants not to disclose the full estimated cost of the new Holyrood Parliament building was "unnecessary and wrong" says a hard-hitting report published today by the Parliament's powerful Audit Committee.

Deputy convener Nick Johnston said:

"The fact that the Auditor General undertook an examination of the Holyrood Project when the building shall not be completed for well over two years is a sign of the seriousness of concerns expressed over the project's stewardship and the amount of public expenditure it will incur.

"The findings of today's report draw heavily on our own detailed cross-examination of Muir Russell and Paul Grice, the two respective Accountable Officers responsible for monitoring costs during the project's split ownership."

The conclusions and recommendations from the committee's report are as follows:

Conclusions

• It was not helpful that, from the outset of the project, a misunderstanding in the public mind should have been created (by the Scottish Office) about the full costs of this project (ie the construction costs plus dependent costs). It was unnecessary and wrong not to disclose the estimated full costs once they were available.

• There should have been much greater transparency in the cost reporting arrangements for this project. Reporting systems were unsystematic and did not adequately reflect the political dimension of this project.

• Bearing in mind the exceptional and high profile nature of the project, we consider that the Accountable Officer at the Scottish Office should have been given information on cost estimates from the earliest stages. If that information was not forthcoming, then he - as the Accountable Officer - could have done more to seek it out. The evidence led the Committee to believe that Mr Russell was semi-detached from the process.

• The risk assessment policies which were in operation prior to the agreement of a cost plan were clearly insufficient and at odds with HM Treasury guidance. It is alarming that such fundamental variances in positions should exist on this matter.

• The forecast construction costs of the Holyrood project increased from £62 million to £108 million after the transfer of client responsibility from the First Minister to the Scottish Parliamentary Corporate Body in June 1999. As a result of the quality of the evidence given, we are not in a position to say conclusively when the underlying causes of the increased costs projected in the late summer of 1999 first arose. However we are persuaded that the redesign of the chamber that the SPCB instructed in June 1999 did not alter the forecast construction costs greatly although it did have a significant impact on the overall progress of the scheme. To our knowledge, no other fundamental changes were instructed by the SPCB in the period from handover to August 1999, when the risk of greatly increased costs was first identified.

• We do not have confidence in the former Accountable Officer's view that the project, when transferred in June 1999, was clearly sustainable within the budget set.

• There should have been an independent review of the state of the project in June 1999. This would have provided more positive assurance about the prospects for completion on time and on budget and would have usefully highlighted the remaining risks and uncertainties to be faced.

• We disagree with the judgement taken by the Clerk and Chief Executive of the Scottish Parliament, once he became the Accountable Officer, not to inform the SPCB of the cost consultants' estimate in August 1999 that construction costs could reach £115 million. The SPCB was entitled to receive all relevant information and it is unacceptable that this information was withheld from that body.

• The Spencely report appears to have been a turning point for the project and there are several indicators of improved management now in place. The Holyrood Progress Group has added an element of independent scrutiny and political control that was not previously evident. It is noted that there is now a settled design and cost plan in place.

• We still have concerns about the impact of construction inflation and we have accepted the offer of the Clerk to the Parliament to report to us the details of the global figure showing the results of the major tenders and the extent to which it varies from the target in the cost plan. The trend will be much clearer following the release of that information.

Recommendations

• For future high profile projects we recommend that accountable officers within the Scottish Administration and other public bodies consider carefully their responsibilities to answer to Ministers and to the Parliament for the exercise of their functions. In the interests of good stewardship and public accountability they should, for any major project for which they are accountable, ensure that they are informed and can consider the consequences of the risk of increased costs becoming real as well as the likelihood of this occurring. Where the consequences may be so great as to undermine confidence in the viability or value for money of the project the accountable officer should consider informing Ministers, who may then inform the Parliament.

• The Scottish Executive should conduct a review of its policy on fee incentivisation with a view not only to maximising value for money but also achieving best value.

• The Scottish Executive should act to clarify the application of Treasury guidance on risk assessment and tackle the problematic yet critical issue of how risk assessment can be achieved in a robust manner but in a way which does not encourage cost inflation. As part of this review, we suggest that Ministers may wish to consider guidelines under which accountable officers present monitoring reports to them. We recommend that the Scottish Executive considers the issues pertaining to public reporting and overall public expenditure planning. We consider that the type of questions which need to be addressed include defining the circumstances where risk assessment figures should - as a matter of course - be reported to the Parliament, and hence made public.

• For future major capital projects we recommend that the Executive, and other public bodies in Scotland, consider the appointment of independent scrutineers to reinforce project monitoring at critical stages.

BACKGROUND NOTES

The committee’s full report is available on the Parliament’s website or can be purchased from outlets of the Stationery Office.