Finance – Lessons Learned

Issue 1 - The Contractor would not provide invoices or third-party invoices during the project when requested as these had not been requested previously.

Recommendation 1 - Authorities should request Contractor invoices plus other supporting documents at regular intervals throughout the contract term. Where third parties are used by Contractors, authorities should have visibility of third-party costs. There should be visibility and transparency of all costs from outset of contract.

Issue 2 - Need for clear financial records on all projects, including visibility of total costs on multiyear projects.

Recommendation 2 - New processes put in place including on budget sheet to ensure appropriate monitoring – and kept under review to ensure that it is meeting requirements.

Issue 3 - Business case costings were well considered and forecasts for demand were based on historical data. However, it was noted that this could/should have been done earlier in the project.

Recommendation 3 - Establish costings at earliest possible time and continue to ensure they are realistic and based on historical data to give the most accurate forecast.

Issue 4 - Change in how rates are calculated not factored into Business Cases – approximately 3 times estimates.

Recommendation 4 - Include worst case scenario rates estimates in Full Business Case.

Issue 5 - Financial model was not updated when each change request was developed and when contract was extended.

Recommendation 5 - Ensure financial model is regularly updated.

Issue 6 - There was a lack of good quality and up-to-date management and financial information. It was difficult to obtain accurate actual expenditure to compare against estimated spend.

Recommendation 6 - Produce up-to-date management and financial information to track financial performance of the project.

Issue 7 - Complicated financial model caused confusion with bidders.

Recommendation 7 - Award criteria to include a less complicated financial model.

Issue 8 - The costs of the scheme were not laid out in advance and the UK Government had not committed to covering costs, therefore creating a matter of dispute between the UK Government and NI executive.

Recommendation 8 - The source of funding should be clear and at least provisionally agreed upon before initiation.

Issue 9 - The costs provided by supplier were estimates only. Any delay to the delivery of the project will inevitably result in higher resource costs. Supplier's use of external sub-contractors increased costs also.

Recommendation 9 - Ensure the estimates provided by the supplier includes any potential costs for external providers e.g. external automated testers, developers etc. Any cost changes to the delivery of the project must be assessed financially before being approved against the agreed business case ensuring project operating within agreed tolerances. Project Manager to monitor time spent vs forecast days in project plan.

Issue 10 - Operational and maintenance costs not fully considered in business case.

Recommendation 10 - Make sure to budget for maintenance.

Issue 11 - The deficiencies in the service provider's approach to recording and reporting costs were not identified at the outset. If this had been addressed at the start of the contract the VFM provisions of the contract could have been correctly and transparently applied over the contract term.

Recommendation 11 - The Contract Management team should ensure that the approach to recording and reporting costs is transparent and in line with the contract.

Issue 12 - The project underspend was partly due to a lack of understanding of projects of a similar scale in the past.

Recommendation 12 - Use this project as a benchmark to provide better financial projections for future projects of a similar scale.

Issue 13 - It was difficult to understand costs relating to sub-projects. This was possibly due to more junior resourcing, and the provision of training should be considered.

Recommendation 13 - Consider all areas of expenditure in sub-projects to forecast realistic and accurate budgets and ensure skills are distributed appropriately.

Industry guidance/ further reading

APM, APM Body of Knowledge, 7^th edition (2019), sections 1.3.6. and 4.2.8.