edwin_m
Veteran Member
I'm not putting forward a fully-worked-through solution and I agree anything like this would need a lot of detailed thought.The problem is that you can very easily end up in a situation such as that described by @bspahh above where the full costs of a project are not know when you authorise physical work at an early stage of the project life-cycle.
At that stage your business case is based on nothing more than a guess, hopefully a good guess, but a guess nonetheless. IF you accept that then your contingency is going to have to be massive as your risk landscape will be very wide ranging and very vague which, of course, impacts on health of the business case. This also means that money has to be provided which (bizarrely but accurately) hopefully sits around doing nothing. That, of course, has a cost both in interest and in lost opportunity elsewhere. You don't even, really, know your scope at such an early stage! What do you do when you run out of money because of the unknown mineshafts, failed earth works or underground water courses that aren't on the maps?
This idea does work for smaller, repeatable projects with relatively fixed and well known costs ( IT being an example) but how could you hope to provide an accurate and reliable cost estimate for a 30 mile long new railway at such an early stage?
Perhaps the current "optimism bias" could be a basis for defining a contingency amount to be added at the initial stages? The scheme would then proceed automatically if it remained within this funding limit, but if it went above then the funders would have the right to call a halt. This is an incentive to stay within agreed funding, although it may also be an incentive to over-inflate the estimates at the start.
The money wouldn't physically be set aside on day 1 so there wouldn't be a loss of interest or opportunity cost. It would be earmarked for some time in the future, probably for release on a fixed date to aid forward planning and give another incentive to have the scheme developed in time. This is of course committing future goverments to things, which is supposed to be forbidden, but I think that pass was sold long ago with PFI and similar.
I'm not advocating reducing the amount of development work before starting construction - I'm trying to get rid of the long waits at each stage of development while the powers that be decide if it's worth proceeding to the next one. So the risks of unforseen circumstances should be no greater than today - and actually will be lower because it's less likely someone's built a housing estate on your alignment since you did the feasibility study.