Domenomics is a new and little-known branch of economics that I just invented that is helpful in understanding why the British public sector takes and wastes so much money on big projects that almost always turn out to be catastrophically costly failures. .
Domenomics is named after that great triumph of public sector waste the Millennium Dome. The Dome should have cost us around £ 399 million. But we ended up with a bill close to £ 800 million.
In the private sector, unless you are a banker, when you spend a few hundred million pounds or even billions on a project, you are expected to get some kind of return on investment. Also, if your costs start to skyrocket above your original budget, you will usually be taken to your boss to explain why you are consuming so much money. Unfortunately for us taxpayers, this is not how things work in the public sector.
Each public sector project will be slightly different, and the excuses for overspending and management failure can be varied and creative. However, despite their differences, many will follow a similar, sad and predictable trajectory.
Step One: The Three Ps: Personal Vanity, Politics, and Profit. First, many large public sector investment projects are political decisions based largely on the personal vanity of ministers or the greed of their associates and sponsors, rather than being justified by any appearance of economic or social need. For example, a prime minister wants to celebrate the millennium in style with his parasites, fellow show businessmen, and other cronies; or a minister wants to be seen opening a shiny new hospital; or a minister has been fooled by fee-hungry consultants into believing that a new billion-pound singing and dancing computer system will magically “transform” the performance of his department.
Step Two: The Big ‘Little Cost’ Lie. For a project to be approved by the cabinet and accepted by the public, ministers collude with race-focused public officials to massively underestimate the actual likely costs. They will typically get help from private for-profit contractors, all eager for their lucrative share of the action should the project get the go-ahead. In polite terms, this tendency to downplay the actual potential cost is called the “optimism bias,” because ministers are said to be “optimistic” about the eventual costs. At a public sector supplier conference, a senior executive made the audience laugh out loud when he explained that they always presented their public sector projects at a price they knew would be accepted, because once they had gotten the deal, they could increase the price. cost as much as they wanted and none of the officials involved would ever complain.
Step three: spend, spend, spend. Once a project has started, it doesn’t seem to matter how much is spent. Politicians will never stop a project because this would mean losing face and possibly damaging its political advance. In the same way, an official will never ask a minister’s pet project for time, no matter how much our money is bleeding. If a senior official dared to criticize a minister’s masterpiece scheme or was seen to be genuinely involved in eliminating one disaster or another, then he or she could risk damaging their prospects for promotion and even their chances of success. Get your OBE or your knighthood. The waste of public money has never affected a civil servant’s career, but acting to prevent waste can be very damaging. Anyway, many large projects last several years, so with an average of two to three years in each position, most high-ranking civil servants will be out of trouble when the real costs of a project have been done. obvious. So why rock the boat? On the other hand, if you’ve inherited a disaster from someone else, just keep spending as you can blame your predecessor for any issues.
Step four: fool the PACman. With some of the worst projects, usually when it’s too late to do something, the toothless and politically subordinate watchdog, the National Audit Office (NAO), will make a half-hearted attempt to find out what went wrong and where. all our money is gone. Your report will be watered down by the department that has wasted hundreds of millions or even billions and then presented to the Public Accounts Committee (PAC). The PAC MPs will summon a couple of senior officials involved, huffing and puffing in histrionic outrage at the amounts of money that have vanished, and will try to question those who should have been responsible as to why things went so horribly wrong. Knowing they only have to face the PAC for an hour or so, public officials will crouch and cleverly weave denying any responsibility for anything and coming up with an extraordinary number of new excuses to refrain from any blame. If things get really tough, and they rarely do, senior officials sometimes go so far as to admit that “important lessons have been learned.” The PAC chair will then announce that whatever project they are reviewing is the “worst example” of incompetent management the PAC has ever seen. The Child Support Agency’s IT system was called one of the “worst civil service scandals in modern times” and we were told that “the facts are incredible”; The Department of Transportation shared services project was implemented with ‘stupendous incompetence’ it was ‘one of the worst cases of project management seen by this committee’; Libra’s IT system for magistrates’ courts was called “one of the worst PFI deals we’ve seen”; Building schools for the future was “perhaps the worst case of using consultants”; and the latest C-Nomis project of the Ministry of Justice to track criminals was “one of the worst reports I have ever read.” This is just to name a few; there are many more that the PAC has described using various negative superlatives that generally include the word “worst.” Once this charade is over, everyone will wisely nod and agree that ‘this must never happen again’ and the exact same procedure will be repeated on the next project and the next and the next.
At the beginning of a PAC meeting in 2009, the president finally seemed to understand the total futility of the entire exercise when he told a senior public official: ‘You will come with the classic line of defense, which of course you were not there, everything is in shake hands now, you have learned the lessons, in the kind of school that permanent secretaries learn when they come to this committee. However, I’ve had all of this before and frankly I don’t know if it really makes any sense to continue. ” But they continued with the charade. At the end of the meeting, the president summarized: “Clearly this project was poorly managed, achieved poor value for money, many of the causes of delays and cost overruns could have been avoided. I could make a great and eloquent statement about how we never expect this to happen again in the Civil Service, but I suspect I would be wasting my breath. ‘