Corporate Realist

HST2 UK project costs are now being adjusted for reality

The estimated price tag for High Speed 2, the next-gen flagship UK rail project, has now risen from £33bn to over £106bn. This, unsurprisingly, is leading to a lot of comment in the UK, most of it negative.

Every major project I ever came into contact with in I.T. has the same challenges. Somebody cooks up an initial estimate from Cloudcuckooland, then an approved project starts with an estimate from Lalaland. Then reality slowly intervenes. The final cost is usually a multiple of the initial estimate, sometimes embarrassingly so.

Infamously, the Confirm program, a first attempt to build a multi-partner travel industry booking system that I read about in the early 1990s was cancelled half way through, with the costs having multiplied by several multiples of the initial estimate. The project had multiple stakeholders with competing interests, which made actually completing an agreed solution specification almost impossible. As a get-out they blamed the technology. This is, incidentally, a classic excuse in I.T. when projects fail. This is seldom true. Whenever I hear somebody blaming the technology for an I.T. project failure, I immediately look elsewhere for the root causes of the failure.

I remember mentioning this phenomenon to a work colleague a few years ago. His (slightly cynical) response was “Well, if they were totally honest about the final likely cost upfront, most of these projects would never be started because you wouldn’t be able to remotely justify them”.

Now, High Speed 2 is not exactly your average I.T. project, and there are multiple considerations that come into play when creating benefit statements for it. The UK, a relatively small country, has become very dependent on road transport, which creates higher emissions than rail transport. The shrinkage of the UK rail network in the 1960s, which led to the abandonment and closure of one or two rail lines which would actually have been easier to upgrade today (like the Great Central Railway, built with larger bridges and tunnels), has been proven to be a long-term mistake, officially acknowledged by the government’s announcement of the Beeching Reversal Fund. Now money is being spent to re-open lines closed to passengers or totally abandoned. So, High Speed 2 can be partially justified on the grounds of environmental stewardship, although it is notoriously difficult to quantify those kinds of benefits in money terms.

Covid-19 certainly has impacted all projects which were up and running. The government has directly or indirectly had to pay money to keep project teams active in a difficult working climate. However, I doubt that this is the major contributor to the price inflation. The more usual inflation is due to the dreaded scope creep – the addition of new features to the solution, or the discovery of activities and deliverables that nobody realized were required when the original estimate was finalized.

Scope creep is an issue that is particularly bad on government projects. In the military arena, scope creep helped to sink the entire Nimrod AEW program in the late 80s, which was cancelled in favour of the UK buying Boeing AWACS planes. The military kept changing the specification requirements for the radar, which took it beyond the design envelope of what was already a tightly packaged airframe and computing combination with little scope for expansion.

Another factor in government projects is lobbying by elected representatives impacted by the project, to get more “goodies” (“pork” here in the USA) for their constituents. Here in the USA, representatives would probably sell family members to the highest bidder if they could get a US Navy ship home-ported in their district, since that generates thousands of jobs. It is not clear to me if High Speed 2 offers members of parliament the same pork opportunities, but I would not be surprised if that is a factor behind the scenes.

Ideally, there would be a full review of the entire program to see if cost savings can be made, and a tough line taken on scope, as in No More Scope. However, government projects, which are often pursued for vanity reasons by the government, are notoriously difficult to rein in or cancel once started. The loss of face alone tends to lead to the government continuing. The Nimrod AEW program was very much an exception, with the government refusing to fall for classic fallacious arguments made by supporters and contractors (principally the Sunk Cost Fallacy) and taking an unsentimental approach despite the deployment of the “British Technology” argument. They saw only continued cost escalations and cancelled the program.

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