Management of the Holyrood building project (PDF ... - Audit Scotland

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etc for the Holyrood project (current
estimated outturn cost £68 million).
Project management did not resolve
important questions about the basis
of each consultant’s fee
remuneration until August 2003
comparatively late in the project. I
examine this issue later in this part of
my report.
5.27 Until July 2003, reporting by the
Accountable Officer to the Corporate
Body usually focussed on the value
of current construction contract
commitments and recent awards.
Because no budget for the overall
cost of the project had been set
there was no routine report or
commentary on overall project costs
and trends or the constituent
elements, relative to what would be
in any budget.
5.28 In any project it is important
that all the parties have a clear
understanding of how budget, risk
and contingency relate to each
other:
• A budget is an approved sum
allocated for a project (a pot of
money). Only the authority that
approves a budget can vary it
once set. A budget is not the
same as a forecast, which will
vary through the life of the project
as circumstances unfold.
• A risk is an event that may occur
and may have an impact on the
outcome of the project.
• A contingency is an allowance
within the budget for unidentified
costs, including risks. Similarly a
forecast is likely to include a
contingency.
5.29 At different times project
management and the Progress
Group acted to contain or reduce
costs. However the normal financial
discipline of named individuals being
accountable for controlling
expenditure within limits specified in
an approved budget was not present
on this project. It seems that project
management regarded the regular
reports from the cost consultant on
construction costs and on risk costs
as setting a construction budget,
when they were no more than
forecasts. An example of this is that
before payment project management
checked each trade contractor’s
invoice to ensure it did not raise total
payments above the total estimated
cost for the package reported by the
cost consultant. The danger of
confusing forecasts with budgets is
that forecasts will become selffulfilling
if effective action is not taken
to contain the cost.
5.30 Exhibit 47 illustrates how the
estimated construction costs
including risk reported to the
Progress Group and the Parliament
have steadily increased since 2000.
Generally estimated construction
expenditure and construction risk
costs reported to the Parliament has
initially been lower but has then risen
to the same level as the cost
consultant’s forecast.
The approach to risk management
was not fully consistent with good
practice
5.31 In my 2000 report I concluded
that accounting for risk was
insufficient. I showed that contrary to
good practice there was no
quantified allowance for the major
risks facing the project. I
recommended that this should be
established and the results used as a
basis for an action plan to manage
the risks.
5.32 In Part 2 of this report I show
that project management introduced
a process for quantifying risks from
October 2000 and has conducted risk
reviews since then. However in
some important respects risk
management for the Holyrood
project has not been consistent with
good practice. Under the draft project
execution plan prepared in October
2000 it was project management’s
responsibility to arrange and convene
risk management meetings at
relevant intervals to review progress
on all aspects of risk as they affected
the project.
5.33 Twelve risk workshops did take
place, between October 2000 and
December 2002. In accordance with
good practice representatives from
project management, the design
team and the cost consultants
participated. An experienced risk
management specialist employed by
the cost consultant led these events,
in accordance with the cost
consultant’s contractual responsibility
to undertake and lead risk
assessments as part of its service.
5.34 A fundamental feature of risk
management is to allocate or assign
each risk to whichever party is best
placed to manage it. Usually a named
individual or party (an owner) is
assigned to mitigate or manage out
the risk, with the aim to lead action
to eliminate, or at least reduce the
impact of, specific risks and therefore
minimise expenditure on
‘contingency’ or ‘risk allowance’.
5.35 Although the risk workshops for
the Holyrood project did identify
owners for specified risks there was
no monitoring or feedback on
subsequent action. It is not clear that
the workshops from 2000 to
December 2002 succeeded in the
aim to reduce or manage risks out.
5.36 From December 2002 risk
management operated differently.
There were no further workshops
with the previous wide participation.
There was thereafter no systematic
basis for any action by project