Monday, 5 November 2012

Procurement sums up at the House of European History

The EU's House of European History will double its estimated £58m cost to £112m, while its annual running costs are estimated to soar by 80% to £12m per year. Part of the cost increase is said to be the finding of an underground river; were there no historical records of the river? When the underground river was located, were the additional costs fully understood and the business case reviewed prior to continuing to pour money into the project?  These are fairly obvious questions.

However, I think the real scrutiny should be on the calculation of running costs. The previous example of the Scottish Parliament construction suggested that the recurring costs of window cleaning had been unnecessarily increased through a poor design of windows.  But why have the running costs of the House of European History increased so dramatically?  Were they miscalculated at the start?  How many years have they been based on?  What was previously not included that now needs to be included?  An 80% increase on running costs suggests something was seriously wrong, a lack of due diligence, and a lack of scrutiny! We know that good procurement should be concerned with Whole Life Costs, and that capital costs frequently are far exceeded by ongoing revenue costs.  In fact there are plenty of examples of ongoing revenue costs leading to decisions being made that some investments can no longer be sustained.

Either way this is another example of poor cost estimates and/or poor procurement. But it also strikes me as weak project management and risk management. It begs the questions: 'Where will the line be drawn in cost overruns? and 'Who will be accountable for the additional costs?'  It can be assumed that European citizens will pick up the tab for something which the vast majority will never set foot in. Surely, when reviewing EU procurement there has to be scope for exploring a shift of responsibility from the  client having to pick up the tab when their advisers get it wrong. (I have previously discussed the deference given to experts.) 

I think there also needs to be some form of policy shift, particularly when citizens are being faced with austerity and asked to live within their means. Why can't tolerances be set within which projects have to be delivered; if those tolerances are exceeded then there needs to be serious and meaningful expert or political accountability?  Had such a tolerance been set perhaps this history lesson would have stopped once the underground river was located and the burden of an additional 80% of annual running costs laid at the feet of those who got it wrong, as opposed to being passed to the innocent European citizen.

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