Finance Committee urges improved approach to capital investment

16/12/2008

The Scottish Parliament’s Finance Committee is calling on the Scottish Government to improve the way it costs and assesses all options for capital investment projects.

Reporting on its inquiry into the methods of funding capital investment projects, the committee makes a range of recommendations to ensure that the public sector achieves value for money. It calls for comparable and transparent information to be available on the whole-life costs of all types of projects.

The committee’s conclusions and recommendations include:

  • That the Scottish Government produces a robust appraisal framework to assess investment options to provide consistent and comparable information on the life-cycle costs for future capital investment projects, regardless of funding method;

  • Improved processes to ensure that any risks which could impact on overall project costs are measured and accounted for in a systematic manner, providing consistency across all investment methods and allowing accurate comparisons to be made;

  • Procurement should be managed to minimise repeated development costs, encourage the participation of smaller Scottish companies and ensure that there is adequate competition in the future;

  • The method for triggering refinancing provisions in public-private partnerships, and the sharing of any benefit accruing from them between the public and private sectors, should be transparent and equitable;

  • Clarification is required on the scope for extending borrowing and simplifying systems to encourage joint working across the public sector;

  • Public bodies need to maintain a steady flow of projects to provide a regular supply of opportunities to the construction industry.

Committee convener Andrew Welsh said: “This has been a thorough and detailed inquiry. We have benefited from the expertise of many witnesses and have sought to move beyond some of the myths about both public and private sector involvement in capital investment.

"We recognise that there are political differences, and we also have to acknowledge the difficulties of planning investment in the current economic climate.

"However, many of the most important themes raised in evidence can apply to all approaches to capital investment and are about securing value for money in the long-term and not just about reacting to short-term developments.

"There is no reason why the incentives and disciplines claimed for private sector project management should not be adapted and applied by the public sector in any future arrangements. Our report identifies major issues that should be considered in any approach to public capital investment to ensure that it delivers appropriate services and value for money.”

Background
The committee took evidence over a series of meetings earlier this year, and also received written evidence from many interested parties.