Committee for Regional Development slams DRD in Coleraine-Waterside inquiry

Seven months after agreeing their report from the Inquiry into the Coleraine to Londonderry Rail Track Phase 2 Project on 1 July 2015, the Committee for Regional Development appears to have lost patience waiting for the report to be laid before the Assembly, and has therefore quietly published it on their own website.

The report is critical of Translink, but the most damning criticism is reserved for DRD itself: “The Committee supports the political decision to proceed with the project but remains concerned that sufficient lessons have not been learned from the upgrade of the Belfast to Bangor rail track and has no confidence that the Department has sufficient experience or expertise to adequately challenge NITHCO/Translink.”

This is not a new criticism, and here the Committee for Regional Development not only echoes previous comments it has made, but also comments from NIAO that DRD does not have the skills to “effectively manage public transport in Northern Ireland.”

The tenor of the report is very much that Translink has had failures, but with proper management DRD could have mitigated those failures.

If this blog is a bit TL:DR, an abridged version is available on Slugger O’Toole.

Report summary

The report focusses on the procurement process by which McLaughlin Harvey was appointed to carry out civil engineering works, primarily at Castlerock and Bellarena stations, and Babcock to upgrade the signalling between Coleraine and Waterside stations as sole tenderer.

The Committee recommends that the Department and NITHCO/Translink put in place processes that ensure that they comply with all relevant guidance.

Translink is criticised for understating Optimism Bias, a mechanism for quantifying risk in economic appraisal in the original tender process leading to Invensys being the sole firm to tender for the work in 2012.  The cost estimate was only increased by 20.2% due to Optimism Bias, but Network Rail practice at a stage when work is so undefined is to use a cost enhancement of 66% to reflect the high risk of cost increases as a project gains higher definition.  DRD is criticised equally for failing to detect this.

The Committee recommends that the Department and NITHCO/Translink devise a market engagement strategy for all capital programmes. This should include a commitment to encourage value for money through competition in the market.

In addition, the Committee strongly recommends that the Department cease forthwith the practice of announcing budgets that have been established for projects as this has the potential to inflate the market cost.

The Committee is incredulous that an estimated figure should be publicised by DRD for the project, given the likelihood that only a single tender might be received for the work.  This is problematic, because public representatives do ask for estimated budgets in written questions to the Assembly and the House of Commons.  In addition, it is less than clear that keeping the estimated budget figure confidential would have led to lower bids in what is undoubtedly a sellers’ market.

But this is something that has history anywhere and everywhere in procurement.  Firms tender according to the convenience of taking on the work – the cost of ensuring adequate staff, materials and plant, including diversions from other work already in hand and the occupancy of suppliers.  If they don’t particularly want the work, they may bid at a level where it is worth their while if they are the only bidders, but not so high as to be overlooked the “next” time.

Nevertheless, the Committee considers that failure to factor in market engagement and other strategic marketing was a failure on the part of DRD, together with announcing budgets publicly due to the potential to inflate market costs.

The Committee endorses the PAR report recommendation regarding the use of dashboards – management information systems that map progress against key performance indicators – as a means of enabling not just instantaneous and informed decisions, but also as a means of effectively communicating the project objectives and commitments.

This arose from Translink not being made aware that the Phase 2 project was a Programme for Government commitment on the part of the Executive.  The Committee states that Translink and DRD were therefore in danger of failing to comply with the requirement for effectiveness in public procurement.

DRD is criticised over the 2013 Invensys bid for the work, which was rejected due to being substantially over budget, but as later estimates revealed, once the undefined part of the works had been identified, it was estimated that Invensys could have been slightly cheaper.  An opportunity was therefore missed, although with the later additions (platform extension at Castlerock and replacements at Bellarena and expanded signalling requirements including a VDU solution instead of extending a 25 year old time-limited physical panel in Coleraine) the final contract sum may not have been much less.

The Committee continues to criticise DRD and Translink for not releasing the Project Assessment Review for the Invensys bid, but to an extent this undermines statements that project budgets should not be put in the public domain in case potential bidders should take advantage, because the PAR includes the cost estimates.

The Committee recommends that the Department ensures that robust cost-estimation and accurate forecasting techniques are identified and applied for all capital projects currently in development to ensure that sufficient optimum bias levels have been included.

The report identifies that the increased costs created by phasing the overall scheme to relay and resignal Coleraine-Waterside were not correctly identified as they ought to have been, and decision making was faulty as a result.

Mention is made of a 2007 Booz Allen Hamilton report predicting a 25% rise in travellers, which actually turned out to be 238%.  However, it has to be understood, and I don’t think the Committee fully appreciate this, that any consultant suggesting such a massive increase in passengers would have been laughed out of the room as beyond credibility.  Such an increase is the stuff of fairy tales, or perhaps the determination of NIR management to prove everyone wrong by running services at times and frequencies that made them desirable.

The Committee does not criticise either DRD or Translink over the remainder of the principles of Public procurement in Northern Ireland for their consistency in approach to all suppliers; fair-dealing with all suppliers; integrity; legality and responsiveness.  They do raise the risks to integration with overall Executive economic and social policy created by the overall threat to the project caused by the bad cost forecasting.

The Committee recommends that the Department conduct an urgent review of the NITHCO/Translink project management framework to ensure that the failures recorded by the Committee and in the PAR report are negated.

The Committee completely disagrees with the PAR statement that “There is a strong internal Translink project management framework in place which forms a sound base for taking the recommendations of this review to strengthen the project’s delivery confidence”, citing the change of direction of the policy proposal without the Minister’s authority, not challenging the cost estimates, not challenging the passenger number estimates, and not having a contingency plan.

Now, I am not sure that stopping a procurement process because it has come in over budget and reassessing it constituted a change of direction in the policy proposal, and I’ve already challenged the comments about the passenger number estimates, but the problem is that the contingency plan when the work costs more than the budget can only be one thing: reassess the project to see what went wrong and what can be afforded within the envelope (or whether additional funds can be made available if everything else stacks up, as would eventually happen with Babcock’s bid), and to make do and mend in the meantime.  If the money isn’t there, there is no alternative.

The Committee recommends that the Department urgently commences an Internal Audit review of the governance arrangements currently in place in respect of the organisations working on its behalf and to ensure that their scrutiny role is vigorously enhanced. The Committee requires that a report on the findings of the review is forwarded to the Committee.

The Committee entirely endorses the PAR report recommendation to with regards to tightening reporting mechanisms but would itself recommend that an urgent review of communication within and between the Department and NITHCO/Translink is required.

The Committee remains critical of the Department for not bringing the necessary clarity to this role. The Committee endorses the recommendation contained within the PAR report and recommends that the Department review the roles of all representatives on project boards urgently. The Committee further recommends that the Department advise other Executive departments of the PAR report recommendation on making departmental representatives more active on project boards.

This was inevitable.  The Committee perceives the relationship between DRD and Translink to be “cosy”, much as the experiences of passengers suffering fare rises, service cuts and old and unreliable trains and buses caused by the failure of DRD to fund Translink properly will tell a very different story.  However, this is far from the first report that I have reviewed, let alone actually published, that has called into question the ability of DRD to manage a public transport organisation due to lack of skills.

Conclusions

This report will have been anything but comfortable reading for Translink, because mistakes were made. A correct optimism bias assessment could have seen the works completed before now, with a passing loop at Eglinton, but with variations for a VDU solution for the signal cabin at Coleraine, and extending the Up platform at Castlerock and providing a new platform at Bellarena, and with the state of the signalling market, we could have ended up with a similar final contract sum.

However, while the recommendations are directed at both DRD and Translink, the report is utterly damning of DRD’s supervision of Translink and failure to catch potential problems in good time.  Additional staff are required to give DRD the skills identified by NIAO and the Committee, against the background of reducing headcount.

Phase 2 will now continue to completion, but in the medium term a lot of work will be required to restore confidence between the Committee and the Department, and indeed their successors after the Assembly election in May.

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