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.

Recommendations

I have summarised the report on my own blog (to avoid TL:DR), but these are the recommendations arising:-

  • The Committee recommends that the Department and NITHCO/Translink put in place processes that ensure that they comply with all relevant guidance.
  • 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 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.
  • 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 Committee recommends that the Department conducts 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 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 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 reviews the roles of all representatives on project boards urgently. The Committee further recommends that the Department advises other Executive departments of the PAR report recommendation on making departmental representatives more active on project boards.

Key issues

Issues are raised within the report, which I feel need further comment:

Market engagement

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 – if Babcock could not know how many other firms would formally tender for the scheme, they would have offered less.

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.  This is a risk in any situation where the bidding companies are not based in Northern Ireland.

Project Assessment Review

Among the issues raised was the failure of effective communication between DRD and Translink, for example over the status of the scheme as an Assembly Programme for Government commitment with consequent impacts on timescales.  The point has been repeated concerning the release of the PAR to the Committee.

However, 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.

Informed decision making

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.

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.

Optimism bias

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 2013.  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.

It becomes clear reading through the associated papers that a great deal of the problem was the lack of definition in the scheme – an innate risk in a Design and Build tender, where some elements cannot gain definition until the tendering firm actually gets into the detail of the design, and this is reflected in the Network Rail Optimism Bias figure of 66% for a scheme with many unknowns.   It appears that Invensys’ bid of £14.6 million was insecure because the full scope of the works required and that they could expect to bill for was in the region of £27 million, the pre-tender estimate increasing to £35 million after the decision was made to move the proposed passing loop from Eglinton to Bellarena and build a new passenger station, and including a new signalling system in Coleraine signal cabin.

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, although I personally suspect that the contract would have been varied to include a VDU solution for the signal cabin at Coleraine rather than extending the 25 year old physical panel (future proofing to avoid spending even more money in a few years), extending the Up platform at Castlerock and in order for good relations with the owner of the Bellarena railway station building, a new platform would have been needed there anyway.  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.

Andy has a very wide range of interests including Christianity, Lego, transport, music, and computers. Anything can appear in a post.

Andy tweets at @andyboal