The big interview with Gareth Davies

Do major government projects – from long-running epics like HS2 and HMS Queen Elizabeth to unanticipated new arrivals like the government’s furlough scheme and the vaccine roll-out – represent good value for money? Why do some end up late, over budget or beset by operational problems, while others seem to progress with barely a hitch? And ultimately, how can all such projects be better managed in the future?

These are, by any standard, important questions, albeit tricky to answer. However, with 125 major programmes currently underway, representing expenditure of around £450bn of taxpayers’ money, it’s vital that we attempt to do so. So says Gareth Davies, head of the body that does just that, the National Audit Office (NAO).

“Major projects are a big theme of our work, especially on the value-for-money side, simply because of how much public money is involved and the levels of risk over many years in these contracts. In the 18 months I have been here, we have reported on HS2, the full-fibre broadband upgrade across the country and major defence projects.”

Davies (whose impressive job title is comptroller and auditor general) explains that the NAO’s work is split into two parts: audit – making sure the government accounts are accurate and coherent – and value for money, the higher-profile analysis work that earns the NAO its oft-applied ‘spending watchdog’ sobriquet.

The audit side is essentially similar to the work done by accountants in the private sector, albeit complicated by the sheer breadth of government activities. “We audit every government department and some arm’s length bodies like the BBC too. It’s a third of the economy – a very substantial chunk of money.” The only bit the NAO doesn’t directly audit is local government.

But it’s the spending watchdog side that gives the NAO its unique role in helping not only to improve the quality of work done by the government, but also to hold it accountable for expenditure. “We also look at value for money. The reason you have that in the public sector is that, in the private sector, if you don’t like the way a company is being run, you can withdraw your investments or stop being a customer. In the public sector, you have to pay your taxes; you can’t withdraw your investment, whatever you think.”

The NAO’s remit is thus wider than major projects alone, covering an eye-watering £1.7 trillion of public expenditure in the year 2019–2020. But the nature of government means that major projects are widely distributed across Whitehall, from the Department of Transport to the Home Office. They inevitably attract a good deal of NAO attention, frequently more than once. “Because of the length of some projects we will come back repeatedly – so we’ll be reporting again on Crossrail later this year, for instance, which has already had NAO coverage in previous years.”

It’s a lot of ground to cover – as well as poring over 400 government accounts and producing 42 value-for-money reports in the last complete financial year, the NAO audits the BBC, Welsh language TV broadcaster S4C, the Financial Reporting Council and the multibillion-pound project to restore the Palace of Westminster. It also routinely produces material to service two hearings of the Public Accounts Committee (PAC) every week. 

The PAC, of course, is that famous gladiatorial forum where senior civil servants, and even the occasional big company boss, are put under the spotlight by a cross-party group of MPs alive to any hint of profligacy with the public purse. “We provide the technical scrutiny and the politicians provide the parliamentary scrutiny – that combination is potentially very powerful.”

Davies and his 850-strong team thus enjoy a rare hilltop view across the whole of government and have amassed a substantial body of expertise in their field. “I don’t think anyone is going to put us in charge of delivering a major new railway, but that’s not our job. Our job is to understand how well these things are being put together and I think people acknowledge that we have real credibility in reviewing projects.”

Davies is hardly lacking in credibility or experience himself. He trained as an accountant and started out as a trainee auditor for the now defunct Audit Commission – formerly the local government equivalent to the NAO – where he spent 25 years, followed by a stint in the private sector. He returned to the public sector in June 2019 when he joined the NAO in his current role.

“I’ve been auditing public money for 33 years. It’s always been a really interesting challenge – how do you achieve these important objectives with limited resources? The NAO has to be independent. You can’t give an independent assessment of how well a project has been run if it has your fingerprints all over it.”

Appropriately enough, the NAO has just produced a short paper pithily entitled Lessons Learned from Major Programmes, which contains some important insights into what makes a good – or bad – programme. “Many of the problems we find have been baked in very early on, in the planning phase. Problems around scope and being realistic about cost and timetable. Quite rightly, there’s a lot of political pressure on civil servants to deliver manifesto promises, but sometimes that butts up against engineering reality or the availability of resources.”

What can project managers contribute to the process? Davies highlights the key findings. “Solving that problem of promising everything to everyone and failing is crucial. So, clarity on scope up front, and also on competing priorities. One of the things that distinguishes public-sector projects is the need to balance competing priorities, so be really clear about what these are and what order they are in. If something has to give, what should it be?”

On the other side of the table, there needs to be more willingness to recognise the contingent nature of early cost and schedule estimates. “The information you have at the start of these big projects is not going to be perfect. That means that you can’t set a fixed cost and delivery date, or if you need a fixed delivery date, like for London 2012, then it’s going to have implications – you may well have to compromise on cost to get there.”

Consequently, the NAO is taking a leaf from the private sector’s book, in particular the oil industry, where degrees of budget uncertainty are recognised explicitly by providing ranges rather than single-figure estimates. The greater the range, the more provisional the estimate and the more imperfect the information used to create it, so the spread should narrow as a programme progresses and better data becomes available. “We’re encouraging greater transparency and honesty here, because otherwise you are doomed to always be explaining why you haven’t met the original budget.”

In the spirit of trying to put its own work under the same kind of critical spotlight it shines on others, one of the first things Davies did when he took over the top spot was to instigate a strategic review of the NAO’s activities. The result was a five-year plan centred on three key priorities – first, to improve their ‘bread and butter’ audit work with higher-quality and higher-tech processes; second, to produce more insightful, practical and timely recommendations on how public services can be improved; and third, to make the NAO’s learning and insight more accessible and easier to digest.

“We know a huge amount about how government operates and what is and isn’t working well. The review told us that we should be sharing more of this knowledge and synthesising it in a way that is more useful and accessible to practitioners.” So, as well as its regular and highly detailed full reports, the NAO is also producing a range of more timely and concise condensed learnings, of which the aforementioned Lessons Learned... series is one example. “There’s more of that coming across things like digital, which are common to all areas of government,” he says.

The role of the NAO has arguably become more important than ever during the pandemic, a crisis which has resulted in unprecedented amounts of public money being spent at equally unprecedented speed. Davies says that, as ever, there have been good and bad outcomes, but that overall the response has been remarkable. “Take the vaccine roll-out; some very good commercial judgments were made there very early on. There was risk, but it was well managed. Also, the jobs retention scheme – it was genuinely impressive that millions of people could have their income supported within weeks of having identified the need to do that.”

On the other side, the NAO’s analysis of Test and Trace in November found that it was failing to hit its targets despite huge costs of £22bn. “The approach was taken to stand that up from scratch. It was a different kind of challenge because we had nothing like that capacity before; you couldn’t scale up existing processes. But we do think some opportunities were missed – how well were local expertise and existing public health capacity built on?”

Passing judgment on such politically sensitive issues inevitably puts Davies in the spotlight, despite the image of auditors as perhaps the quintessential backroom experts. How does he feel about being the public face of the profession? “It’s not why I do my job, but I do enjoy explaining what we do. We all have to pay our taxes and it’s a big chunk of what everyone earns. So giving some kind of assurance that people are doing their best to use that money well feels like a really important job to do.”

It’s also a vital part of his responsibility to his team. “Motivating people to get the best out of them in the public sector is about impact – people aren’t motivated by bonuses, because they aren’t available. If you ask almost anyone who works for the NAO, they will say they joined because they want to make a difference to something that is important,” he concludes. “That kind of energy in the organisation is really exciting.”

The NAO’s next big step? Gearing up for zero net-carbon emissions, a major hurdle, but one where Davies believes it’s particularly important to set an example. “We are aiming to be net zero by 2029. We’ve got the same challenges as everybody else, but we are planning to do it. We push ourselves pretty hard, because if we can’t demonstrate that we do it to ourselves, then people won’t listen to us when we review them.”

CV: Gareth Davies
2019 Comptroller and auditor general, NAO
2012 Partner and head of public service practice, Mazars
2010 Managing director, audit practice, Audit Commission
2002 Regional director, Audit Commission
1987 Trainee auditor, Audit Commission
1984 MA mathematics, University of Cambridge

by Andrew Saunders

THIS ARTICLE IS BROUGHT TO YOU FROM THE SPRING 2021 ISSUE OF PROJECT JOURNAL, WHICH IS FREE FOR APM MEMBERS.

_{Image: Credit Will Amlot}