 I welcome everyone to this, the 15th meeting of the Public Audit Committee in 2022, as we resume again in public session. Agender item 3 on the committee's agenda this morning is a look at major capital projects. We get regular reports on the performance of major capital projects. What we were keen to do this morning was to examine the governance and accountability arrangements. I'm very pleased that we've been joined by a panel of five to help us to understand how those governance and accountability issues work. I welcome this morning Helen Carter, who is the Deputy Director of Infrastructure and Investment, Nick Ford, who is the Director of Scottish Procurement and Property, Alan Morrison, who is the Deputy Director of Health Infrastructure, Investment and PPE. Andrew Watson, who is the Director for Budget and Public Spending in the Scottish Government and, last but not least, Lauren Shackman, who is the Director of Major Projects at Transport Scotland. We've not asked you to make an opening statement. Andrew, I think, if it's okay, we'll use you as the conduit, but obviously there will be questions that relate to particular areas of work and feel free to direct. If other members of the panel want to come in at particular points, if you just indicate to me or to the clerks and we'll do our best to bring you in. I want to begin by asking the Deputy Convener, Sharon Dowie, to open up with a question. Good morning, everybody. Can I start by asking more about the governance and management structures for overseeing the IIP, including how the IIB carries out its role and interacts with other boards and groups? As we set out in our paper, I hope that it was a helpful scene-setter for this, the IIB is a place where we can draw strategic advice from across Government to inform the developments of products such as the infrastructure investment plan, the IIP. We produce an IEP roughly every five years and the intention behind the plan is to set out medium-term vision in terms of the infrastructure projects and programmes that the Government wants to take forward with delivery partners. In the case of the most recent IIP, that was very much informed by the findings of the Independent Infrastructure Commission Scotland. One of the points that I would put across about the development of the IEP is that we tend to take quite a consultative approach to that. In the case of the current IEP, that was put out for consultation and the final version of the IEP reflected some of the views that came back. The IEP as a board has a role, but it is by no means the only at place where input comes into the infrastructure plan. In relation to the development of the IEP, you will understand that each IEP does not start with a blank sheet of paper. Given the nature of infrastructure investment, multi-year programmes and projects and the need to maintain the existing public sector asset base, each IEP is the next step in the journey, if you like, rather than completely redrawing the infrastructure plans that we are taking forward. In relation to how the plan is developed, working with portfolios, we engage through my team in the infrastructure division with the large infrastructure requirements, projects and programmes. We look at the requirements, their forecasts and also intersect between some of the vision and overarching objectives that we want to set for our overall plan with the plans that are developed in individual sectors. For example, in transport, things like the student transport projects review, long-term infrastructure plans within health, so that our overall infrastructure plan needs to take into account the plans that exist in those sectors. There is a lot of engagement with portfolios in order to do that. The last initial point that I would make is that you will be aware that the most current infrastructure plan was published at the same time as a capital spending review. Another key link there is between the budget and the funding available to us and the projects and programmes that we want to take forward. In relation to the current plan, it was published not just to set out the policies and programmes that we want to prioritise but also matched alongside the budget process. There are a few observations, but I am happy to say a bit more if that would be helpful. Can you tell me more about how you monitor overall progress and what information is provided to you once you have given out the plans? What updates do you get? In many respects, similar updates to yourself as a committee. The convener mentioned at the outset that you have six months of reporting around the pipeline of major projects. We use that ourselves internally and then use it to show transparency around the delivery of the plan and engage with groups such as the committee. That enables us to track progress against the plan overall. The point that I would make is that, in terms of the individual delivery of specific projects and programmes, there is distinct accountability for the delivery of those within the portfolios and the procuring authorities that are responsible for those projects. From the perspective of investment board, we are interested in the overall delivery of the plan and the contribution that it is making to some of the high-level outcomes that the Government has set around net zero economic development and the delivery of the national infrastructure mission. We take a strategic view of that, but, as you have seen from the information that we have produced, we have that information at a project and programme level. What relationship do you have once the project, or use of areas, for example? What communication do you have when the project starts to go wrong? Through the pipeline and project reporting, we are able to see where projects, how projects are comparing to the outline business case, how they are performing in relation to time and cost. We have that information about any variance within the different projects compared to the original plans. We have that as a basic level of information. The composition of the infrastructure investment board is deliberately set so that the members of the board represent the key areas of infrastructure development in the Scottish Government, such as transport, health and so on. We have that interaction at the high level with senior officials from the main areas of infrastructure. At what point do flags get raised with overspender overruns of projects? What is deemed as acceptable? When will that be reported to Parliament? The starting point for that would be that, in many respects, movements in budget on capital projects are similar to the rest of our budget approach. There is monthly monitoring of out-turns against budgets. That would include on capital budgets. If there are material changes that need to be made at the level of portfolio budgets, that would bring forward to Parliament through autumn and spring budget revisions in relation to multi-year investment plans that might have the opportunity to adjust that at annual budgets and in terms of periodic capital spending and so on. At the macro level, that would feed through our overall budget processes. In terms of specific projects, circumstances vary a little bit depending on the portfolio responsible and the procuring authority. In the larger areas, where portfolios are managing a suite of projects and programmes, it is their responsibility to ensure that those are brought in within the budget available to them. However, managing across a number of different projects as a portfolio, you might have some scope to reflect and overspend in one bill and underspend in another and manage that as a portfolio of projects. There is a distinction between the central budget processes and the delegative responsibilities around individual portfolios and procuring authorities. It is an annual update in the annual budget. There are a number of opportunities over the financial year. At the highest level in terms of our budget process, we tend to have two moments per year in which in-year adjustments can be made. As you know, that is the annual budget process. At the macro level, in terms of the management of individual projects and programmes, we would expect portfolios to manage those and movements in all sorts of spending programmes within the accountability that is being set for them. They will be able to make changes during the year in terms of their management of individual projects and budgets. I am going to paragraph 19. I have all accountable officers, whether they are director-genres or chief executives of executive agencies or NDPBs, are personally answerable to the Parliament for the exercise of the functions of a duty to ensure propriety and regularity of public finances, ensure value for money of all related resources judged for the public sector as a whole, have clear lines of delegation and accountability and support for undertaking those functions, ensure risks are managed effectively, make sure procurement guidelines are met, secure best value and seek written authority from ministers if any action is inconsistent with proper performance of the accountable officer's functions. Why would that go so badly wrong? I am looking specifically at the ferries stuff, why would that go so badly wrong? Every single one of those guidelines seems to have failed, by the way. You appreciate that I am not personally involved in the ferries project. For any other kind of procurement thing that we have, because that started off with the procurement, so there are lots of issues that have been raised with procurement. I am just trying to see what it is that we would be put in place to make sure that we do not have any of those things on-going, because that is quite disastrous really what happened with the ferries, so why did that happen in the first place when we have got those rules in place? I might ask Nick Ford to say a little bit more about some of the procurement rules that we follow in the guidance and support that we offer to portfolios in respect of that. I am not in a position to comment in detail on the specific example of the ferries case, and you will appreciate that. For my central infrastructure perspective, one of our key interests is in learning lessons from experience across the infrastructure portfolio. We are extremely interested in terms of the overall support that can be provided to those managing significant contracts and the guidance that we offer to accountable officers and senior-responsible owners for projects and programmes. There is a lot of advice and guidance set out in documents such as the Scottish Public Finance Manual, and there is a range of support for those that are leading major projects and programmes. If there are lessons to be learned from particular experiences, we would want to feed that back through into the processes that we have. I might ask Nick Ford to say a little bit more about the support that we offer. Obviously, I was not directly involved in the ferries either, but I can talk about it from a general perspective of how we manage procurement. The assurance process is very similar to empowered accountability, so every public body that is part of the Scottish Public Finance Manual needs to follow the procurement processes that are laid out, and they will have their own procurement governance procedures in place. The SRO and the contracts and authorities are ultimately accountable for the procurement and insurance procurement processes followed. In the good governance, which is what we operate on during the PPM design principles, you are around the first line, the second line and the third line of defence reporting. The first line is fundamentally the project team delivering, in this case delivering the ferries. My director within Scottish Government is really in that second line, so we provide the policy, the guidance. If they come under SBFM, then obviously we provide the legislation since procurement is a devolved matter, which they must follow. We provide the tool set, we provide capability building, and we can provide assurance and support to the teams, but accountability very much rests with the SRO because, fundamentally, the SRO and the accounting officer is best placed to understand the context, the risks, how to mitigate and follow through on that. That is how it works, but the procurement part is quite often used in a broad, liberal sense, because there are different stages where it is a design part, the actual specific procurement process itself, or then more in the contact management phase. Within the ferries, it is more in that contact management phase, where the issues occurred rather than in the procurement aspect. Another key part to pick up is the lesson learning, which feeds back from, obviously, part of my director's role, to spread that good practice, case studies, back out and capability building within procurement teams, what may sit within a director of public body. Just one of the points, I think that you just said, that if there are lessons to be learned, one of the things as well as it does, say finally that IIB has a role to ensure that there is a reflection in learning taken from new, complex, or innovative investments and that these are effectively shared across portfolios. Again, all the issues that have been raised through—again, it is the ferries that I am specifically referring to—there are lots of lessons to be learned. What have you taken from that so far and implemented and shared among all the other portfolios so that it does not happen again? The likes of recording meetings and making sure that paperwork does not go missing. What actions have you taken based on what you have already heard from the issues in the ferries contract? I might start to answer that in a minute, but I will ask Helen Carter to say a little bit about some of our improvement programme that is under way. In relation to issues such as recording meetings, that is in some respects a wider issue around the operation of Government and not specifically a point about infrastructure. However, we would always expect good practice to be shown in relation to the audit trail and documentation around large structure projects and the way in which contracts are managed. There probably is quite a good set of guidance already around what good practice looks like in relation to the management of contracts. What the infrastructure investment board tends to do is to look for strategic trends across the management of projects. For example, recent issues that we have been looking at include the impact of Covid and things like supply chain risks and inflation on the delivery of the infrastructure programme. Those are the types of issues that we tend to look at in this particular forum that we are describing to you today. We have an existing programme of improvement across the infrastructure investment landscape. In the first instance, it is informed by the recommendations of the Independent Commission on Infrastructure. However, we also clearly look at audit Scotland reports and other reports and findings into the delivery of projects. I would say that there is a natural home there to apply lessons learned from other experiences. If it is helpful, I might just ask Helen to say a little bit about our existing improvement programme. Thank you. As Andrew said, the Infrastructure Commission for Scotland set out a number of recommendations, some of which were taken forward in the current infrastructure investment plan that we published in February 2021. However, it also suggested some improvements that could be made over the course of the current infrastructure investment plan in time for the next publication in 2025-26. There are three components that we are working on for improvement, including a long-term needs assessment to inform what is required for Scotland to meet future infrastructure needs. The Infrastructure Commission looked at a 30-year horizon, so the current IEP only spans five years. What is the next step in that to be taken forward and planning for the future? We will also look at the appraisal and prioritisation frameworks that are in place in order to assess where the capital investment is best utilised, and we will also look at public engagement and have an enhanced role for public engagement and future plans. IEP's role in developing the overall strategic direction for infrastructure investment and in balancing competing priorities between and within different portfolios and programmes. I will kick off on that and draw on a couple of colleagues. I suppose that some of the points that I made earlier are relevant to that question in relation to how the IEP has developed drawing in perspectives from across Scottish Government portfolios in relation to the key sectoral plans, such as health, transport and so on. In relation to the current IEP, it was very much informed by the findings of the Infrastructure Commission and its based-round priorities, such as net-zero and the need to develop a strong resourceful economy. Your point about competing priorities is a really challenging one for anybody involved in infrastructure at the level of government. The IEP tries to strike a good balance between achieving different objectives across what is a very wide-ranging programme. In relation to the current IEP, one of the things that we very consciously did was to try to shift spending towards the achievement of our climate change targets. You would find within the IEP the announcement of the low-carbon fund. In developing the IEP, we used that as a particular driver for how we prioritise across so many different portfolios and sectors in a way that achieves a cumulative impact on net-zero. That was a device that we employed in the IEP that we had not done previously, and I think that it is borne out in terms of the shifts that we are seeing towards net-zero expenditure. Another way of approaching the question is to look at some principles for investment. One of the themes for the current IEP was around the benefit of maintaining existing assets and prioritising that. It does not mean that we do not invest in new projects as well, but there was a finding from the commission that prioritising maintenance was important for a number of reasons. If you can find some overarching principles that are neutral in terms of individual portfolios or policies or sectors, that enables you to arrive at some conclusions about how to prioritise across what is a very diverse set of options. Those are the two themes that I would point out from the current IEP in relation to our approach to that. Can I give a perspective from health? Our governance, in some ways, reflects or is similar to the way that Andrew Dysguide described the infrastructure board. NHS is its own infrastructure board. The co-chair of that is a member of the Scottish Government's infrastructure board, so he provides feedback on the issues that are important to health. Equally, he will reflect the priorities of the Scottish Government's infrastructure board and make sure that that is reflected in our infrastructure plan. When we, for example, Andrew Dysguide mentioned the importance of maintaining our existing estate over the five-year period in the infrastructure plan, we were committed to doubling our maintenance over that five-year period. Another example would be in terms of net zero requirements. We have basically said to NHS boards that if you are going to develop an infrastructure project, it needs to be net zero. That, in itself, is quite challenging. We have put the challenge to boards to come up with innovative designs and ways of designing new healthcare facilities that reflect that Government priority. That is a clear example of where we link in with the Scottish Government infrastructure priorities at the same time as we get the opportunity to put forward our case for investment in health and social care. We have recently published a packet earlier this year, the strategic transport projects review, which looked at all transport infrastructure across Scotland and looked at what the gaps and shortfalls in the networks were, whether they were the ferries that you mentioned earlier, the rail network or the road network. However, that was on the back of a national transport strategy refresh that was published a couple of years ago, which is aiming towards sustainable modes. In terms of competing priorities, sustainable modes are much more favoured over roads, for example, although roads are still able to go forward if they have environmental or safety benefits, for example, and people who mentioned maintaining existing assets and making sure that they were safe. There is quite a scale of different priorities. The emphasis is changing away, perhaps from a lot of road building, unless it is targeted improvements for more infrastructure around cycling, walking and public transport-related infrastructure. I will put a big shout out for the E77, if you have any spare cash. That is me. Thank you, convener. Right, thank you very much. Just for the avoidance of doubt, this is not an unscheduled proxy session on the delivery of vessels 801 and 802. Let me return to governance and accountability. Andrew Watson mentioned that you had given us a written submission in advance, which I think is very useful to us. In one part of the paper, you say that infrastructure strategy is developed through a range of mechanisms. When I read through the paper and I see that there is a Scottish Futures Trust, an infrastructure investment board, an infrastructure commission for Scotland, an infrastructure advisory group and Alan Morrison has just told us about a departmental infrastructure board. How do those all fit together? One of the respective roles is the duplication. Is it over bureaucratic, or do you view it as working perfectly well? I think that it is working well. We should always challenge ourselves to avoid duplication, and the way of mitigating against that is to be really clear about the different roles and responsibilities of different parts of our structure. We have that in place. Some of the examples that you mentioned are not permanent, so the Infrastructure Commission for Scotland was established for a particular purpose and has reported. What the structure and mechanisms reflect is the complexity in the landscape here. As we have already discussed, it is a diverse brief in our infrastructure investment programme, multibillion programme per year and the level at which you need the expertise, oversight and accountability for individual projects. That requires the infrastructure to be put in place around that to ensure effective delivery of governance and so on. Rightly, we have a system of delegated responsibility within portfolios and public bodies for the delivery of individual projects and programmes, and we then need a governance structure on top of that that reflects that system. In relation to points in the governance such as the infrastructure investment board, as we have said in the paper, that is primarily a strategy setting board. The reason that there is and there is behind having that is to say that we need somewhere where, across Government, we can bring in those different perspectives to chart a vision in a clear direction at the highest level across infrastructure. If you look at bodies such as the Scottish Futures Trust, again, their remit is different. They have been established to do a number of things. In the early years of the Futures Trust, you will know that it was particularly engaged in the revenue financed programme for infrastructure, but it also provides a range of expert services and advice across Government and indeed beyond Government into public bodies where they have a professional view and skills to offer. I would say that each part of the landscape does something a bit different and distinct. It is quite complex, but it hangs together recently well. You mentioned the Scottish Futures Trust and it is listed in your paper as being a key adviser to the IIB, but the IIB has also got an infrastructure advisory group. Who is on the SFT and who is on the advisory group and why are their roles different? What advice do they give you which is different or is it not just duplication? I do not think that it is duplication. I think that the infrastructure advisory group is primarily a place where those developing policy in different parts within Scottish Government can come together to ensure that there is a consistency and a join-up, that things are moving in a reasonably coherent direction to deliver things like the infrastructure investment plan and some of the overarching outcomes that span more than one part of Government. That supports the IIB in many respects. The Scottish Futures Trust is a public body in its own right with a whole range of different functions. It has a different set of skills within that. It does not only provide an input to the IIB, but it also works in partnership directly with delivery bodies delivering projects on the ground. It also brings in some of the skills that we see between the public and the private sector in a way that, within Governments, can be more difficult. It has a range of functions, not just to provide an input to the IIB but to work across the public body landscape in Scotland. My final question for the moment is, Helen, Nick and Andrew, you are on the IIB. Who is on the infrastructure advisory group? We can provide membership of that for the committee, if you would like. It is a slight generalisation, but I would say that the IIB brings together the senior leaders across the main functions in Government that have a stake or a role to play in the delivery of infrastructure. Next year, as an example, procurement is a cross-cutting function that provides professional support across Government. We also bring in senior officials from Health, Transport Scotland and so on. The infrastructure advisory group tends to be at director and deputy director level, bringing together policy makers from across the main parts of Government. There is a bit of a distinction around the seniority of the membership of the different groups. That has a bearing on the agendas and the topics of discussion for the different bodies, if that makes sense. The minutes are available publicly. We provide the IIB minutes to Audit Scotland. Have they published on the Scottish Government website? You can get back to us with more detail on that, if that would be useful to you. I am now going to turn to Craig Hoy, who has some questions to put. Craig, how are you? Good morning, Mr Watson. I would like to take a little deeper into the Government's assurance and oversight at both the portfolio and the project level, and to see if there is any tension overlap or gaps that exist within that. First, if you or a colleague would like to explain more about the role of the portfolio investment boards in authorising projects and whether those arrangements differ across different portfolio areas, for example, with Mr Watson in health or Mr Shackman in transport. Allan and Lawrence, to give you some examples from their two areas. My only comment would be, as you said, there is a bit of diversity across the portfolios given their size and their scale and their functions, so there is some discretion for local arrangements to reflect that. The risk of throwing another group into the mix is that there is an NHS capital investment group that specifically reviews business cases submitted to the Scottish Government for capital projects. It basically covers all projects that are above a board's delegated level. In general terms, for the bigger boards, such as Greater Glasgow and Clyde and Lothian, anything more than £10 million needs to come to Government. The smaller boards, roughly about £5 million, anything excess of that needs to come to us. We have our own bespoke guidance, the Scottish capital investment annual that we provide that sits underneath the Scottish public finance annual that basically has a step-by-step process for boards as to what they need to do in order to develop a business case that will be supported. It is three stages. There is an initial agreement, there is an outline business case and then there is a full business case, so it takes a long time. It is something that we are conscious of, whether we can speed that up and make that quicker. Effectively, the capital investment group includes representatives from across Scottish Government health and social care directorates. It also has Scottish Futures Trust to provide invaluable challenge and thought on boards' proposals and Health Facility Scotland, NHS Assure, who sits on that group. They will then make a consideration as to whether the business case is supported or not. If we recommend it for approval, it then goes to the director general, and it is her that makes the ultimate decision. If we do not accept it, which is not particularly unusual, we will go back and we will say that your business case fell short in these various areas, and then you need to go back and almost always reconsider, re-submit it and then go through the process again. In Transport Scotland, the chief executive is the accountable officer. He has a system in place investment decision makers process that uses the other directors in Transport Scotland to advise him on whether projects should proceed through the various key gateway stages, strategic business case, outline business case and final business case in particular. It will also be guided by outputs from gateway reviews that are undertaken at key stages of projects. We would feed our projects into IIB. I think that typically over £20 million projects will be registered with IIB, and they are updated on the sixth monthly basis, as previously mentioned. We also have another fairly independent body, ARC, which is the risk body within Transport Scotland, which has a challenge function, accountability and risk committee, which has a challenge function to the various projects to make sure that they are going through due process properly, that they have the adequate funding in place, that they have looked at the risk profiles, and that is fed back into the projects themselves, which are governed at project level in the particular directorate within Transport Scotland, whether it is roads, ferries, rail, et cetera. There is a higher degree of assurance of projects going through that investment decision makers process and onwards to IIB for reporting purposes. Typically, how long would that process take to complete to your satisfaction? For a particular project, it could take years. Generally, road projects, for example, take several years to come to realisation. I pick on the Queensford crossing. That took 10 years from start to finish, from implementation to completion, and that will have gone through several gateway reviews. It will have been subject to Audit Scotland reviews. It will have gone through investment decision making processes at a much more pointed level, if you like, because the chief executive actually sat on a project board, a bespoke project board, which met typically every six weeks. There was a high degree of control on the project and oversight to make sure that things ran smoothly and that, if there were any problems, they were picked up and obviously acted on timuously. There is obviously a natural tension between the need to do things properly and to get the infrastructure projects in place quickly because they tend to follow demand, take, for example, Sheriff All Roundabout, for example, being one. Is there anything in the process that could be done to make sure that you could keep all the checks and balances in place but to accelerate those projects where there is a need to get them done with some urgency? The issue is that there is a statutory process that we have to go through. People have to have their say on a project. It has to be open and transparent. We use our website to a very large degree to make sure that the public are informed about our projects and that they have a chance to give their views. In the case of Sheriff All Roundabout, I know that a huge number of letters of objections have been raised and it is likely to go to a public local inquiry so that people can have their views heard and an independent reporter will report on that. It is not always easy to accelerate projects. Sometimes it is because of where they are, they impact on a lot of people, some other projects have minimal impact if I can put it like that, or they may have different kinds of issues. They might be environmental issues or they may be people-driven issues. Wherever possible, we will try to speed processes up to go back to the Queensford crossing. On that particular project, we ran a parallel bill process to get the authorisation for the project alongside the procurement process, which saved at least a year on the project programme. It is possible to do those sorts of things. What is the role of the individual portfolio investment boards in overseeing the programmes and the projects that they develop? What nature is the engagement that they have under interaction with the other bodies delivering the projects and the individual project managers? How does that all relate to the infrastructure investment board as a project develops? I might ask Alan Lawrence to say a bit more about that and then I will come back with the IAB link at the end. We review post-project evaluations. It is a mandatory part of the guidance that we issue. What we do is that we have a network that we arrange with NHS staff, where we update them on a range of issues. If we thought that there was anything particularly coming out of any post-project evaluation, we would share that with the people who are similarly developing projects. It is probably something that we could do better. It is quite difficult finding the balance between somebody writing an honest appraisal of where things could get right. There is sometimes a natural inclination to not necessarily be that open about where things could go on. We try to put it in a way that it is supportive to help the people that are coming behind them. If you could do it better, why aren't you doing it better? One of the challenges is the range of time that it takes to cover a big project. The people that started out with the idea to develop a piece of health infrastructure are often not there at the end. Having that continuity can sometimes make it difficult to go back and sense what they do. Quite often, a key thing is your benefits realisation that you are going to do right at the start of the project. If you find out that that is not being as good as it should have been, it makes it difficult to make that assessment. That is one of the things that you asked about. It is a really important question about whether we can do things quicker. We will get business cases. We will look at the benefits realisation. We think that that is not good enough. We need you to go back and develop it better. That is where there is a tension between, we realise that that will lengthen the project and it will make it take longer, but we try to make an assessment as to whether a project starts six months later or not. We try to look at the whole life cycle and the whole project that will be in use for 50, 60 or 70 years and try to look at it that way. It is difficult to find that right balance. Would the SickKids be an example of that, for example? There is obviously a lot of reviews going on about the SickKids and the public inquiry. There will be lessons coming out from that. We have, because boards have been focused on managing the pandemic, we have not been as demanding of post-project evaluations coming in, but that is certainly something that we will look at and share in terms of what we need to learn from that. We have processes in place to make sure that we undertake robust post-project evaluation. Those, as Alan was saying, are key to the objectives that are set out right at the beginning of the project, because otherwise, why would you have the objectives if you haven't actually realised the benefits from them? There are various other things to consider as well about interaction with the public and lots of different evaluation points, not just the functionality of the infrastructure that has been built. A good example of a post-project evaluation process is the Borders Railway, which was built a few years ago, now five or six years ago. That had a benefits realisation process applied to it, which looked at how the railway had impacted on the area, how it was built, the impact during construction, and how it was managed. There are several other examples of projects that could go on about Queensbury crossing again. The project that benefits realisation is really keyed into what were your original objectives and have you achieved those, have you exceeded those objectives, have you met them? That is also tied into the lessons learned, which we have mentioned earlier, and how we can actually improve processes. We have seen that, as projects have developed over the years, and I mentioned that a lot of the transport infrastructure projects take several years to develop and deliver, we have seen that, like with modern technology, we can do better things with communicating with the public. We do not just have face-to-face meetings anymore because of what has happened with Covid to a large extent. We can have virtual exhibitions over laptop. We can get people to participate in communication exercises and express their views via online surveys. There are a lot of new methods, and that is where lessons learned really comes to help us a lot. I will listen to I.B. What we would do is take the overall learning from the different portfolios and consider whether there are particular things that need to be emphasised in the way in which the organisation is working more generally. Some of those could be in the procurement space, in the project management space, in learning and development for staff. There could be issues around capacity, and the I.B might take a view on capacity within Government and public bodies. Alan mentioned the issues around legislation and statutory requirements. There would be a range of what I described more as the cross-cutting lessons learned from across a number of different experiences that the I.B might then want to take a view on and influence the overall direction of the way in which the Scottish Government approaches those things. I have one very brief question on where we are short on time. Obviously, the two big risks are cost savings and overruns, and when projects do not run to schedule. Are those being effectively managed across portfolios? Do you understand that on the lines of communication between the various authorities are they effective to make sure that we really get on top of those cost savings or project overruns? I would say that they are effective, but we are always open-minded about areas for possible improvement. You have seen yourself from our reporting that we have a good awareness, a good grasp of the position on the major projects in terms of further performing against time and budget. I mentioned earlier that we have had a particular interest in recent years, as you would expect, on the severe impact of Covid on project delivery. It is an obvious statement, but it has just been the key factor. That has been bor out in some of the reports that we have provided. To come out of that phase of activity, I am looking at issues around the impact of inflation on costs. We need to make sure that we understand those impacts and are able to understand the cumulative effect across the Government's overall programme. It does not remove the need for individual budget holders, portfolios, delivery authorities to manage those risks and build them into contracts and procurement. One of our roles is to continue to ensure that people have the right guidance and skills around that. We have a range of action in hand to ensure that that is the case. I am now going to bring in Willie Coffey, who has got some related questions to this area. Thank you very much, convener. Good morning. Tyridway, could I maybe take you back to the beginning of all processes for all projects? Andrew, this committee has been focused over many years about quality standards and the application of standards in the design specification part of any project. We are believers that, if you get it right at the outset, you are likely to get it right at the end. The opposite is true. If you do not get it right at the beginning, you are unlikely to deliver anything on time and budget. I have mentioned a couple of examples today. Lawrence mentioned the Queensferry crossing, so at both ends of the scale, we can see the successes in the Queensferry crossing border railway and even the A77 may bowl bypass. On the other end of the scale, we are seeing the ferries issue. Do you, as a team, insist that quality standards are in place for all projects? No matter what we are building, it could be a bridge, a road, a school, either a piece of software or a ferry. Do we look at the whole range of projects that are on the books and look specifically for the presence of that, and do we require it of all those projects? It seems to me that, if you do not, you are at great risk of projects just running out of kilter and overcoast. Do we require that at the outset? I have mentioned at the outset some of the responsibilities for accountable officers and budget holders around value for money and a regularity of expenditure and so on. There is a whole set of requirements around the management of public money, including in relation to infrastructure projects. I might ask Nick to say just a little bit more about some of the standards that we have set around procurement and contract management and so on, because you are right that there are some guidelines around that, good practice and the importance of applying good PPM principles to those projects. I think that procurement or programme management is a bit of a similar example. If you take the first line, the second line and the third line, I described earlier, the procurement, if I use procurement professionals, because obviously that is my home, it is a very broad church. When we look at the people undertaking public procurement across Scotland, scattered length and breadth of Scotland, whether that is in the local authority, a health tour store or in central government, and how do we drive up the capability of those individuals, so you have that consistent application of good practice and good standards across all procurements that are undertaken. Obviously, from the centre, we provide, as I mentioned before, the legislation, the policies and the guidance. We have actually got an industry lead in procurement journey, which is an online platform that is available free of charge, so the Scottish Government provides for all public procurement professionals, where we put the guidance, the tool sets, the standards, what we expect, tools that can help measure their capability against, and obviously we can update that really quickly when we bring in new lessons. The challenge, though, is obviously because it is a broad church and our remit is more in that second line, is how do we get that level of insurance that really drives up, and bearing in mind, with changes in staff and personnel, it is a difficult and challenging job, I think, to keep raising the bar on the standards, but that is absolutely what we need to try and drive. I think that the leadership and capability is probably one of the key areas where we focus on good PPM. When you talk about lessons learned, we have mentioned that a lot. That is at the project level, whether it is at the functional level or whether it is third line in all of the Scotland reports. Plenty of lessons learned, but how are we really building that learning culture and teams so that they are absorbing it, they are embracing it, they are taking on, they are seeking out best practice, and then they are replying it. That is probably the next step that we need to continue to work on. At the outset, do you think that we invest enough time and effort at the beginning of any of those processes for the work going on in the capital programme to make sure that specification and design and cost estimates are for a good, reliable and deliverable, all of that? There are great examples of great delivery, but there are spectacularly bad ones. What I am interested in is why cannot we spot it early enough to stop it becoming a bad one? There must be key ingredients that are going wrong in a specific project that we must surely be familiar with, with all the tools at our disposal. What are the secrets to finding out as early as we can that something is potentially going to go wrong? Again, from a health perspective, we had a couple of major problems with the Edinburgh Children's Hospital and Queen Elizabeth. It resulted in the public inquiry being set up, but pretty much immediately after the ventilation problems were identified in the Edinburgh Children's Hospital, we accepted that we needed to do something different, so we established NHS Assure, which is an assurance role that is run through National Services Scotland, who, at outline and full business case, go through a key stage assurance review with the board and go through, effectively, looking at the six key critical systems from water, ventilation, electrics, fire safety, and they will challenge the board. They will say, well, does it comply with all the NHS standards? Do they have the strategies in place to ensure that they will deliver it? Again, where we find it is that challenge, because sometimes the board needs to go back and either do things differently, and that can push out the timeline for when the project starts, the construction phase. However, we think that the potential time saved by identifying a problem is worth that investment, because it is a relatively new body, so most of their work has been focused at the business case development. It is a key part of our—we will not approve a business case unless NHS Assure has said its support of it going forward. As we have more projects going into the construction phase, we expect on-site visits and reviews of the construction taking place, so that is what we have put in place to address the problems that we clearly had in our programme. Does it not tend to happen that, after the event—in that example—the thing was built and installed and it was done? Why cannot we support that there is an issue before it is done? We recognise that that was the problem, and equality has been an issue. We are going back to the design phase. All the design drawings will be submitted to NHS Assure, and they will go through it and undertake a technical review of it. They have all challenged anything that they see. I cannot give details as to what the things that they are looking for, but the compliance with the technical guidance that is produced by the NHS is a key part of that review. What we are expecting is that that will lead to better quality, and it will also lead to identifying problems in advance. You fix them then, rather than halfway through the build, you cannot go, this does not fit into that whole. I do understand what you are saying, and I am familiar with that, but the issues that come in front of us in the Auditor General discovers them in the committee that gets oversight of it. The committee members always live one, and why could we support those things earlier? Is there a lack of rigor in the design phase? We heard the example with the ferries that the cables were not even long enough on the boat to reach where they should have reached. Why cannot we see that earlier, even in a design document, to avoid doing it? It tends to happen when we try to correct it and learn the lessons at the end and feed it back into the next process, which is great. It is the right thing to do, but I am really curious about why we cannot see it at an earlier stage to prevent the errors initially. Lawrence? I cannot comment on the ferries issue that you just mentioned, but certainly in terms of road projects, things have moved on in leaps and bounds over the last 20 years, I would say 25 years, in terms of how we monitor the projects right from the initial phases of development and also spending money at an early stage on things like ground investigation, because most of the problems on civil engineering projects are actually emanate from what is in the ground or what is not in the ground sometimes. Doing our homework at an early stage and getting the right team in place. You have a good professional team, which is often a blend of civil servants and consultants who are professionally qualified to develop designs and implement them through the procurement processes that Nick alluded to just now. Quite often, the devil is in the detail, so you need to have people looking at the documents and making sure that your contract documents are written correctly and that they are checked and double checked. Also, when you get out on site, you have the right monitoring team there so that you do not miss things out and you do enough competence checking, if you like. A lot of the civil engineering projects that we have in Transport Scotland are self-certified in that the contractor has to sign up to all the drawings that he does that the actual works that are undertaken are designed and checked by not only the contractor but also the contractor's designer so that there is a high degree of confidence that what you have built out on the park or wherever it is is actually competent and complies with all the relevant standards. A lot of things go into making sure that a project does stand up to the rigors that it should be judged on. A lot of the time now in the last 20 years we have moved much more towards collaborative contracts, so Transport Scotland as a client has really tried to collaborate with industry, so the contractors and the designers that are actually helping us to deliver these projects. Sorry to go back to Queen's Free Crossing, but that is an example of where all the people involved in the project were all co-located on the site to try and make sure that there are issues that arose and every project has issues that they were addressed as quickly as they could be and that everyone could see everyone else's angle. If Transport Scotland are working on a briefing for a committee such as this, we used to go to committees regularly throughout the whole of that programme to report on progress, that everyone understood their role and that we could work together as a team as much as the contract allows, of course. Contracts are moving on all the time to be more collaborative and make sure that those issues are foreseen and solved as soon as possible. Those principles that you described are applicable no matter what you are building. The question for us is, are they being applied across the board to other sectors? I mentioned a range of things that we might build in this capital programme. It is that level of depth and rigor in investment and time and effort in design and specification and so on. If that is replicated across the board, we stand a good chance of delivering all of that stuff in the programme on time and budget. Can you, Andrew, give the committee an assurance that that is your understanding of the whole range of what is in front of us, what is in the programme right now, and whether that rigor across the board that Lawrence described in his sector can be applied to all of the capital programme and we can look forward to them all being delivered on time and budget. I can personally guarantee that every single project in our wide programme will be delivered on time and budget. Nobody could do that. We spoke earlier about the relative complexity of our structures, but they are designed to help to ensure that some of the learning across these quite different portfolios is applied more generally. There is a space to consider that and feed those standards, those experiences into the guidance that we offer across Government through our procurement practices, through our recruitment approach in terms of people coming into Governments and delivery authorities, the construction of teams and so on. I think that there are a number of parts of the public sector that have long experience in delivering major projects. You have heard about two just now. I think that one issue that we are thoughtful about is areas in which there is a lack of experience in delivering a project in a portfolio or a lack of scale. That is where we bring in some of the support that we can offer from procurement perspective, sometimes bodies such as Scottish Futures Trust and so on. There is something around creating that supportive culture to ensure that the very best standards that you have heard about from colleagues in health and transporters spread across the piece. Very helpful answers. Thank you very much. Thanks, Willie. I am conscious of time, but Colin Beattie is next. I am calling over to you. I am looking at prioritisation and funding of the major capital project. A slightly lumpy question for you to answer. How do you determine the overall budget and type of funding for different programmes and projects? How do you prioritise between portfolios, including what the roles are for ministers and for officials? I do not know if that is something that you would answer under. Talked a bit about in the session around the development of the IEP and what goes into that. One of the purposes of the infrastructure investment plan is to set that overall strategy for the projects and programmes that we want to take forward. That can give us the ability to shift priorities if we want to or reach difficult decisions about competing priorities. I have talked a little bit about the focus on net zero and maintenance as two examples of that. That overall strategy helps with the prioritisation approach. I mentioned that each IEP does not start from a blank sheet of paper, so one of the key factors in our budget setting is existing projects, programmes and the maintenance of our existing assets. In setting annual budgets or through a spending review, a multi-year financial plan clearly will look at existing legal and contractual commitments, and we need to factor that into our budget setting. In relation to the current IEP, as I mentioned earlier, we worked in parallel on the capital spending review to ensure that we had a multi-year budget plan that is stacked up against the policies and programmes in the IEP. In terms of the annual budget process, you will be familiar with the fact that we have set out updated annual capital spending plans in each successive budget. That is part of our routine budget processes, engaging with portfolios about their spending projections and priorities for the year ahead. We look at the mix of funding sources, so you will be aware that we have a strategy for capital borrowing as an example, which we set out in our medium-term financial strategy. We have a medium-term plan on capital borrowing and how that supports our programme. We may also take annual decisions about actual borrowing in any given year depending on spending its budget and trends in that sense. There is a whole range of processes around the budget that are relevant. The role of the IEP is setting the overall strategy. We are engaging with portfolios on the state on the ground in terms of existing projects and the strategies for going forward. Ultimately, we have the task of supporting ministers in reaching an overall view about how to prioritise and allocate budgets between all those different things. As you know, we have also made significant efforts to ensure that that is a public process. It is so clear that the Parliament has to approve the annual budget, but we have also been consulting widely on our infrastructure plans and feeding that into our process. You mentioned giving ministers advice on the value of prioritisation and projects and so forth. Is that a lengthy process? Is it a complex process? It is a continuous process in many respects because you have the need to set a medium-term perspective on financial planning and projects. You have the annual budget process and you have the management of spend in the year as well. There are many layers to that, so it is a continuous process, but we also have other factors as well. There could be movements in our overall funding position as a result of, for example, UK fiscal events, UK spending reviews, cost increases and so on. It is a complex set of issues that we need to manage. Some of that is managed within our overall budgeting processes and some of it is specific to infrastructure. I describe it as a continuous process, which is probably the best way. That is an extension of that. To what extent is the affordability of planned infrastructure investment determined or dependent on external factors? A number of external factors are there bearing, so we have talked a little bit about issues around supply chain and inflation. The cost profile of projects is subject to some fluctuation because of those external factors. We are in terms of the overall composition of the Scottish budget. A lot of that is still determined by a block grant from the UK Government, including on capital, so that can also have an impact on the overall funding envelope that is available to us for projects. We have discussed movements in the time and budget of individual projects this morning, so we need to take that into account as well. Overall movements in the economy can have an impact. Yes, you are right, there are a wide number of factors that need to be taken into account. That is one of the challenges in setting a strategy for infrastructure. It is the right thing to do in my opinion to say that the medium-term strategy gives you the capacity to plan, but you also need the ability to be flexible as you deliver each of those medium-term strategies along the way. Just turning to a slightly different aspect again, NPD has been with us for quite some time now. We have had discussions in this committee over a number of years. Can someone supply me or the committee with a copy of the formula for NPD as it is at the moment? I am not necessarily asking you to give us a dissertation on it now, but if you could supply... I am very happy to do that. There is a range of information about the underpinning of NPD on the Scottish Registration website. We have provided a fair bit of information on that to parliaments over the years. As you see, it has been quite a long-standing programme, but rather, given your time, I will take that away, but we can provide some further information. You are busy developing a new model, a mutual investment model. How far along the road is that yet? As part of the national infrastructure mission, which the Government agreed to increase the level of infrastructure investment by 2025-26, the Scottish Future Trust was commissioned to prepare a paper on the use of the mutual investment model. It set out the sectors that it would be applicable to. The Government reviewed that. People went to IIB as well, and then ultimately ministered to the decision to agree that the mutual investment model could be considered as a future funding route for central government projects, as opposed to local authority projects, because local authorities have access to PWLB borrowing, whereas central borrowing is constrained. On the Welsh model, there are a couple of projects that are under way using that in Wales, and consideration is being given to using it for projects in transport. However, we have said in the capital spending review that it can be considered for the remaining elements of the year 9, but, as yet, there are no active projects and no decision has been taken on the use of it going forward. However, there is another tool in the toolbox, if you like, to maximise infrastructure investment within the national infrastructure mission, utilising all the various funding sources that we have at our disposal. Would it be possible, since it seems to have been fleshed out, to see the formula for that? I am very happy to take an action away to give you a paper on the fundamentals of the NPD and the MIM. Let me deal with a contemporary issue that has got its roots in a bit of history. That is the PFI contracts and PPP contracts, Alan Morrison. I am reminded that the First Minister announced in the programme for government that, fairly recently, the 24-bed East Aesha community hospital was going to be taken out of PFI and brought back into the public sector, and it was almost an early glimpse of what was to come. We know that those contracts are now coming up towards the end of their period of private operation. We are just interested in understanding a bit more about how that is working and what the plans are to manage that transition, because the 24-bed East Aesha community hospital is quite small but there are some big projects with, presumably, quite significant revenue implications for the public sector, which are coming towards the end of their life in the private sector. Are they all coming into the public sector? What does that look like? What plans has the Government got to manage that transition and then to run those assets after they have transferred? I will start with Andrew Watson. I will offer a couple of comments to the health position. We have produced guidance on those matters in 2020, so there are some guidance available through the Scottish Features Trust for those who have issues on their plate. We are providing support in that sense to the range of authorities that are affected by the issues that you have described. Alan, if you could ask you to comment a little bit on how the NHS is approaching this issue. It is something that we are very aware of. We have a separate team that is looking at the PFI landscape. One of the things that is key is that the horizon scan needs to be years in advance because all the contracts are different. Some of the assets will turn to the public sector, some will need to buy it back and some will need to be extended as a PFI extension. We need to make sure that the best decision, rather than the only decision that we can make, because we do not have the time to do everything in advance. A key consideration is maintenance, making sure that the contractor has been maintaining the asset in the way that the contract stipulates, so that if we take it over and think that we have £15 million of backlog maintenance, that is no use. We need to get ahead of that. The East Ayrshire community hospital was opportunistic. The PFI provider was open to a buy-out. It was initially proposed by NHS Ayrshire and Arran. That is not always the case. It is not unusual for the PFI provider to think that they are very happy with the contract and they do not want to buy it out. It is not something that we are anticipating happening very often in the near future. Most of our first wave PFIs are still at least five years away from coming to the end of the primary period. We have that time, but there is a lot of work that needs to be done just to make sure that we do not inherit something that we do not want and that it is not at the standard that we expect it to be. I understand that from an operational point of view. I know that you cannot speak on matters of policy, but is it not a matter of government policy that they wish to see those contracts brought back into the public sector? Have I misunderstood that? We would look at the individual specifics. As Alan says, there is quite a variety in terms of the contracts. I guess that looking back over the periods of what we have aimed to do with things such as the NPD programme is to see where improvements can be made in relation to that approach to contracts. You see some of that reflected in the more recent revenue-funded projects that are delivered through NPD and HUB. As Alan has described, it is difficult to generalise when you have such a variable picture in terms of the state of contracts and the position of those in possession of the contracts. What we would always do is to ensure best use of public money and how that is used to ensure the outcomes that we want to deliver from particular projects and assets. That is helpful. In addition to the information that you have agreed to supply to the committee following the questions that Colin Beattie, for example, he will be useful if he could furnish us with a copy of your 2020 guidance. If you are in a position as well to supply us with the current policy guidance that you receive as civil servants and the plans that you have, we understand that there is a multitude of different contracts and different exit arrangements and so on. However, to the extent to which you can furnish us with the information that allows us to get the overview of where things are, I think that that would be really helpful. I am really sorry that we have run out of time, and I appreciate the fact that you have given us an undertaking to provide some of the evidence that we were looking for in writing. That is very helpful indeed. I want to thank you again for coming in this morning to give us the benefit of your insight into how the governance arrangements are working on these major capital projects. I thank you and I will draw the public part of the committee's session today to an end.