In a Covid battered economy, where do we go now with government projects?

Commentary by David Finlay

We are all sailing in uncharted waters. We wait to hear when and how the government will ease the lockdown imposed to manage the COVID-19 pandemic. We know that the economy has taken a huge hit as a result of the drastically reduced level of business activity, possibly as much as a 35 per cent reduction in the short term if the Office for Budget Responsibility (OBR) estimate proves correct.  And government borrowing will hit record levels as a result of the various support packages for businesses and the self-employed.

So what does the future hold for government projects given this huge level of uncertainty and a weakened economy?

Let us consider two important issues.  Firstly, plans for new government projects and secondly changes that will be necessary to the way that existing projects are managed.

We do not need to assume total gloom and despondency regarding new projects.  The government will be keen to rebuild business activity as soon as the worst of the pandemic has been dealt with.  New infrastructure will always be part of improving economic output.  But the big questions now will be: to what extent will the world of business and public services change as a result of our recent experiences when we return to more normal times?  How will this impact on previous plans for new projects?  And how will government pay for new projects when it has already borrowed so much to support businesses and individuals during the current crisis?

It will be essential that those leading government projects learn from previous mistakes which were made during more stable economic conditions.  In the National Audit Office’s 2016 report on Delivering Major Projects in Government the NAO identified recurring issues which had impaired the government’s record in this area.  The issues included: an absence of portfolio management at both department and government level; a lack of clear accountability for leadership of projects; poor early planning; and the need for better and more consistent data to measure performance.

In the new world we are moving into, projects will really need to demonstrate that they can deliver a high level of relevant benefits if they are to get the go ahead.  Priorities will change as we continue through and then emerge from the current pandemic.  If people reduce the amount of travelling because video meetings become the norm what impact will that have on transport projects?  Will the public demand greater spending from government on projects which will benefit the health and social care systems?  Do we need more IT investment to help people to connect quickly and securely with each other?  Government will need to answer these and many other questions as well as encouraging private sector investment to supplement the constraints on the public finances.

For those overseeing existing projects the economic downturn makes it essential that contract managers take steps to monitor whether suppliers of goods and services are experiencing difficulties which could impair their ability to deliver their input to projects.  The collapse of Carillion whilst it was providing services to hundreds of government projects was an early warning of the problems that commissioners of services can face if suppliers fail.  In the current downturn businesses may be facing financial or workforce issues or their own supply chain difficulties if suppliers they rely on, or sub-contractors they outsource work to, have problems.  The best way to monitor the risks your suppliers are facing is to build an open working relationship where there is regular communication and all parties feel able to talk about the issues they are dealing with.

So as we start to contemplate the world as it will be going forwards, thinking about which new projects should be funded and monitoring the risks underlying current projects will be paramount.

David Finlay, a Cityforum Associate, has worked in the commercial sector and is a former Director of the National Audit Office Infrastructure team.  He is currently a member of the regional NHS Board for Cambridgeshire and Peterborough.