In order to obtain government funding for major projects, the government agencies must follow the approval and assurance guidance processes as outlined by the Treasury of the UK. These revised procedures for the assurance, major projects support, and ensuring integration with strengthened Treasury approval processes were introduced in 2011 (HM Treasury 2012). The main areas of the guidance which are extracted below, outlines these procedures that would have a significant impact in improving major project performance. This is accomplished by applying appropriate scrutiny and assurance at the right time under an integrated assurance and approval framework.
A Major Project is defined as ‘a central Government funded project or programme that requires HM Treasury approval during its life, as set out in Delegated Authority letters’. Projects which exhibit any of the following characteristics will also be classed as Major Projects:
‘ could create pressures leading to a breach in Departmental Expenditure Limits, administration costs limits, or Estimates provision;
‘ would entail contractual commitments to significant levels of spending in future years for which plans have not been set;
‘ could set a potentially expensive precedent;
‘ are novel and contentious; or could cause significant repercussions for others;
‘ require primary legislation; or
‘ Treasury consent is a statutory requirement.
HM Treasury project approval processes: HM Treasury approval is required for Major Projects at 3 key business case stages:
1. Strategic Outline Case (SOC), done at the project initiation stage, all new Major Projects to ensure strategic fit, value for money and deliverability. Approval required before any public commitment is made
2. Outline Business Case (OBC), done at the pre-market phase, all Major Projects are to assess all options in detail. Approval required before going to the market
3. Full Business Case (FBC), done at the pre-final negotiation stage, all Major Projects pre’spending commitments, approval required before finalising commercial contracts. For projects using competitive dialogue as a procurement route, approval required before close of dialogue.
After the completion of the Full Business Case stage, the Treasury’s experience is that projects often go off track. Therefore, in addition to these key stages, where approval must be sought for each project or programme, the Treasury will agree to a set of milestones with the department. Where required, the Treasury reserves the right to include additional milestones.
After the FBC approval and until the Major Project is operational, the Department must continue to provide the Treasury and the Major Project Authority (MPA) with details of Major Projects. Relevant information will as a minimum, be partly provided through the regular reporting by Departments to the Government Major Projects Portfolio (GMPP). The aim of the MPA is to create the successful delivery of Major Projects across central Government while working with departments to ensure the suitability and quality of Major Projects throughout their lifetime. This will be achieved by introducing revised procedures for the assurance and support of Major Projects.
Approval processes: Spending teams through one of the following processes will analayse All Major Projects for approval at varying levels, depending on project cost and risk. This is also influenced by the Department’s history for managing project spending.
‘ Major Projects Review Group
‘ Treasury Approval Point (TAP) with panel meeting
‘ TAP without panel meeting
The Major Projects Review Group (MPRG) approves the UK Government’s largest and most complex Major Projects. In order to improve the performance of major projects and to advise HMT Ministers of the viability of ongoing projects, the Major Projects Review Group (MPRG) was established in January 2007. The largest and most complex major government projects are analysed by panels formed from the MPRG pool of experts. MPRG Panels challenge projects on deliverability, affordability and value for money at key points in the HMT approvals process (SOC; OBC; FBC) and as required at other points during their lifecycle.
‘ Deliverability ‘ The extent to which a project is deemed likely to deliver the expected benefits within the declared cost/time/performance envelope.
‘ Affordability ‘ The extent to which the level of expenditure and financial risk involved in a project can be taken on, given a parent department’s overall financial position, both singly and in light of its other funding priorities.
‘ Value for money ‘ The optimum combination of whole-life cost and quality (or fitness for purpose) to meet the users’ requirement.
Projects are selected for MPRG review according to the following criteria:
‘ Projects with a whole life cost over ??1bn.
‘ Projects that are high risk and complex in their procurement and delivery of benefits.
‘ Projects that set a precedent, or are highly innovative
‘ Other projects ‘of concern’ (as agreed by Chair MPRG; may be recommended by HMT, MPA)
Treasury Approval Point (TAP): Treasury approval is required for expenditure outside departments’ delegated authorities, as defined in departments’ delegated authority letters. TAP is the process by which the Treasury scrutinises and approves project spending outside delegated authorities. The TAP process has an agreed end date (usually 28 days from when the business case is received) after which HMT will communicate a decision to the department in writing. If deemed necessary by Treasury, there will be a formal panel meeting at the end of the process, chaired by a Treasury Director or Deputy Director, to resolve any remaining issues or queries.
The TAP process aims to improve the quality of scrutiny of projects by the Treasury to achieve better value for money. The TAP approval process will review those projects that are outside departmental delegated authority but fall below the MPRG scrutiny requirements. The Treasury Approval Point process now applies to all Departments for all Major Projects that do not qualify for MPRG. The process has been made more flexible so that the approach taken is proportionate to the cost/riskiness of the Major Project. TAP had previously been in a pilot phase and used for four departments. Scrutiny and approval of Public/Private Partnerships (PPPs) falls in line with Treasury processes and will also be considered under the TAP framework.
Therefore, spending teams through one of the following processes will analayse All Major Projects for approval at varying levels, depending on project cost and risk. This is also influenced by the Department’s history for managing project spending.
‘ Major Projects Review Group
‘ TAP with panel meeting
‘ TAP without panel meeting
Treasury will not normally approve Major Projects unless they have an Integrated Assurance and Approval Plan (IAAP) and have complied with that plan. Integrated assurance and approval is the planning, coordination and provision of assurance activities and HMT approval points throughout the lifecycle of a Major Project. Departments are required to submit a draft IAAP for each Major Project for validation by both the MPA and HMT. A simplified representation of the major project selection and appraisal process of the UK is shown in Figure 3.2