10 important points to consider, before spending public money


My prior post on the UK’s massive NHS IT project referred to Edward Leigh MP, the retiring head of the Public Accounts Committee of the UK house of Commons.

Mr Leigh has distilled a number of his observations into an Open Letter to MPs. He has suggested 10 Key Lessons to be learned from the time he has spent, over 9 years, looking into projects and how public money has been spent. He expanded on these themes in another Open Letter to whoever succeeds him. It is well worth reading.

These lessons are:-

1.       Complexity impedes effective delivery. Public services are often complex, inflexible and inefficient.  Services should be kept simple, with less means testing and more standardisation.

2. Project management must be improved. In particular, public bodies must reduce optimism bias in their planning of projects and be more honest about what can reasonably be achieved and the risks to delivery.

3.      IT procurement is particularly weak.  Projects are over-ambitious, overly complex and fail to deliver what is promised while costs rocket.

4.      Core management skills are in short supply.  Too many bureaucrats have never run anything outside the public sector.

5.      Information must be used intelligently. Accurate information is needed to know what is happening and to make timely, informed decisions about how to get things back on track or, if necessary, call a halt to projects and programmes that are failing.

6.      Efficiency savings must be real. Departments are always promising efficiency savings but the reality rarely lives up to the rhetoric.

7.      Government purchasing power must be maximised. Though it is a hugely powerful customer it rarely gets the best deal when buying goods and services and is too often ripped off by suppliers.

8.      Fraud and error must be tackled head on. Taxpayers lose faith in government when they see their hard earned cash seeping from the system.

9.      Government must learn from experience. Government needs to learn from its failures and its successes, so that mistakes in one part are not repeated elsewhere.

10. Public scrutiny adds value. It must be taken seriously by senior civil servants.

These seem eminently sensible and straight forward to me, but then I am a simple soul.

Now Mr Leigh wrote these 10 points in the context of the UK, but the principles would seem to be of a more general application in the context of public expenditures and to apply equally well in NZ.

Indeed,as a tangential observation, I venture to suggest that with a little bit of amendment, a number of these principles would be applicable in the private sector as well. However, I digress.

I found his comments on IT procurement especially interesting:-

Reliable information is at the heart of efficient and effective government but, where this has been recognised, too often the response has been to buy a new IT system without planning what they need and allowing for adequate testing. Time and again, Departments have wasted millions on IT systems that fail to live up to promise, come in late and cost hugely more than forecast.

He then gave a number of examples. Mr Leigh concluded his comments in this area with the following:-

Successful delivery of IT projects requires adherence to three common principles: ensuring senior level engagement; acting as an intelligent client; and making sure that you have means of realising the benefits from the project. Problems have occurred where board level engagement with major programmes and projects has been found
wanting, resulting in a failure to identify and act on imminent risks to delivery. Departments have not always shown themselves to be intelligent clients, with poorly defined requirements and a lack of capacity to engage effectively with suppliers; and only a minority of programmes and projects have carried out final Gateway Reviews to determine if they have delivered the benefits they set out to achieve.

A key point in his comments is the last, which I have highlighted. The issue of benefits achievement is critical to my way of thinking. Delivering the system is the beginning, unless it does the job, then it may well be valueless.

As someone involved in looking at a large number of projects in both the public and private sectors over many years I understand where Mr Leigh is coming from with his remarks.

I am sure that a number of my readers will be able to think of their own examples.

Mr Leigh has some interesting things as well to say about efficiency savings. These are relevant given our government’s desire to constrain costs, gain efficiencies and improve ‘front line‘ services:-

Given the pressure in the current economic climate to deliver more for less, it is particularly disappointing that when it comes to real efficiency savings, the reality rarely lives up to the rhetoric. The reviews of government efficiency programmes by my Committee have shown that claims of achieved savings do not stand up to close scrutiny. In 2007 we found that there was a question mark over nearly three-quarters of the claimed £13.3 billion annual efficiency savings. If efficiency gains are to be anything other than empty words, more must be done to make them real and demonstrable. They must not be one off cuts, but savings deliverable year after year. And they are not genuine if, as we have found in a number of cases, they are achieved at the expense of the quality of the service provided.

It would be interesting to see what the situation is in a NZ context.

Overall though the message that comes through though is very clear:-

  • robust governance – to ensure accountability and clear understanding of roles, responsibilities and obligations of all concerned
  • strong and critical qualification of projects to seek to minimize risk from over complexity and ‘gold plating’
  • transparency
  • focus on benefits to be achieved, and ensuring that they are real and not a mirage
  • rigorous assessment of aims
  • rigorous review of outcomes to determine lessons to be learned and communicated to all involved across the public sector

Perhaps it would be appropriate to consider Tim Pullar-Strecker’s recent articles here and here, for example, in The DominionPost on a potential new system for Housing Corporation against the backdrop of Mr Leigh’s comments.

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5 responses to “10 important points to consider, before spending public money

  1. Like a lot that comes out of the UK public sector, these ‘lessons’ are a bit all over the place, and difficult to judge or apply in a satisfactory way. I remember reading some advice given by Sir Roger Douglas re UK public sector reforms, and he really cut through the clutter and gets to the underlying issues.

    I am taking a management accounting paper now that has covered public sector management and performance measurement, based on the approach introduced by Douglas, and it makes a lot of sense.

    • David

      I think you might be a little too sweeping in your comment. Leigh has looked at many projects over his time with the PAC. I did not quote all the numbers, but he reckons the PAC has been a major contributor to improving the conduct of projects.

      I will be posting more on this area, but a number of his comments fit within both ISO 38500 when he is discussing IT and within the framwork of the 4 Ares again when looking at IT.

      More importantly, at the end of the day Leigh is concerned with getting value for money.

      Love to discuss further.

  2. Peter, you know what bugs me? I sat through maybe 10 management accounting lectures on public sector management and performance measurements by a senior academic who has experience putting these structures and methods in place, and all the while having trouble putting it into a context. Too many unstated assumptions, no discussion about the role of the state, no discussion about the limitations of the public sector, no discussion about the differences between the public and the private sectors. I have to conclude in the end that this subject is positively loaded with political and ideological baggage.

    The 10 lessons ask more questions than they provide answers, and have plenty of baggage too.

    Lesson 1, I would hotly dispute. Most government expenditure in NZ is directed towards programmes that have the primary purpose of redistributing income or services toward those with lower incomes (transfer payments about 13% of GDP, health 6% of GDP, education 6% of GDP). The result is that means testing is very important to incentives, and to the markets for health, education, savings and insurance (the last two being market substitutes for government transfer payment programmes). I believe that a unified, consolidated means testing system could help liberate much of our economy from government ownership and control, and reduce the burden of taxation, too.

    Lessons 2, 3 and 8 are nothing more than asking for improvement in a specified area, and do not provide any basis for how the improvement can be made.

    Lessons 4-7, and 9-10 raise the real question about central planning vs. free markets. If government programmes are replacing market services, the management of them will of course suffer from the problems of socialism both for incentives and for the calculation problem. This is more of an economics than a management issue, and I don’t think it can be solved by improving management when the real issue is not the quality of management but the institutional structure. In fact, these lessons are a cop-out from addressing the politically charged and controversial case for withdrawal of the state from much of what it sets out to do.

    What needs to be tackled head on is need for and merits of government programmes, both specifically, and generally. Leadership is doing the right thing, management is doing things right. The latter is not a substitute for the former, and we need the former to have the courage to ask more fundamental questions about whether we should have ACC, whether the government should be owning and operating schools and hospitals, whether we should expect and encourage people to have their own savings and insurance plans to provide for their risks and lifecycle income needs where possible and so on. In this country these days it appears we can’t even privatise TV stations, coal miners, farmers, electricity generators and tranmitters and railroadsm, but we can put failing finance companies on government life support for a few years and talk about bailing out Fisher and Paykel Appliances.

  3. Pingback: Major Projects Part 1 | Some Thoughts - Peter Salmon's Website

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