Are we laying the right foundations for levelling up projects to succeed?

‘Levelling up’ is a government policy to address inequality by improving services, facilities and infrastructure across the UK. It has the potential to deliver substantial benefits to the country. At the heart of this change are more than 1,300 individual projects under the Levelling Up Fund and Towns Funds and more than 3,000 projects under the UK Shared Prosperity Fund¹. The creation of thousands of exciting project opportunities is great news for the project profession, but are these projects working?  

A recent report by the UK Parliament’s Public Accounts Committee (PAC), which scrutinises the value for money of public spending, was critical of the progress of the levelling up policy, with 80% of the “shovel ready” projects from the first funding round expected to miss their March 2024 completion date². This is particularly striking when we consider the more “impactful bids” that lost out to these projects.  

The PAC report also found that projects classed as ‘underway’ have not necessarily begun construction work, and there is limited evidence of their delivery. Over 10% of the projects awarded by the Future High Streets fund have been paused and risk not being completed. Many projects have been granted more flexibility and extended timeframes, but the PAC warns this could veil issues with the projects themselves and backload expenditure. With limited contingency funding, there’s a strong chance a lot of these projects will fail (funding shortfalls are believed to be the biggest risk to project delivery, according to 36% of project professionals³). 

Why were these projects classed as “shovel ready” and favoured over more effective bids, when clearly, they were not ready to begin? The PAC highlighted “optimism bias” as responsible for blinding decision-making at the expense of more achievable and effective project bids⁴.  

Optimism bias, where benefits are overestimated, and costs underestimated, is not an isolated phenomenon in projects and can be frequently observed in decision-making across all sectors. For example, APM’s report Are we ready for net zero in project management?  found that project sponsors’ inclination was to favour impressive projects that exhibit technical novelty over those which demonstrate genuine carbon efficiency⁵.  

Optimism bias can cause decision makers to overlook the challenge of ‘project professional readiness’ and is certainly applicable to levelling up projects. In the net zero context, teams faced challenges integrating carbon mitigation as a realistic deliverable due to factors inhibiting ‘readiness’, such as limited carbon data, under-resourced project teams, lack of training and limitations of carbon estimation tools. 

How do we address this optimism bias and reduce its wasteful impact? Decision makers need crucially, to be more objective, and consider the readiness of local authorities to overcome any challenges a project business case may present. For example, does the team have adequate resources, training, and tools to conduct the project? In addition, effective project proposal analysis is essential in decision-making to achieve the best value for the public purse. This will enable decision-makers to rationally weigh the gains, losses, and probabilities, and conduct cost-benefit analyses that supplement forecasting with statistical analysis⁶. 

As well as ensuring objective decisions are made about projects, local authorities must be given effective application guidance. Each council spent on average £2.25m a year applying for government funding, however, rule changes prevented applications for consecutive pots of money. These changes were not effectively communicated to local authorities, consequently, some wasted precious resources chasing funds they were not eligible for. Three quarters (618 out of 834) of bids, valued at £9.74bn, submitted to Rounds 1 and 2 were rejected – it’s unclear how many were rejected due to repeat applications. The impact of wasted resources is not being addressed by current expenditure plans and this is particularly concerning given one in five local authorities are at risk of bankruptcy over the next year⁷.  

Leaders must recognise that even if local authorities are given effective guidance on funding eligibility, their ability to execute projects is hampered by a lack of resources. A 2022 Local Government Workforce Survey of 115 local authorities reported a 43% capability skills gap in project management (where project management training and development was needed) and a 46% capacity skills gap (where project management skills were present but there was no capacity to use them effectively)⁸. Local authorities need to be able to invest in expertise to ensure they are equipped with both the competence and the means to deliver projects to a high standard. 

Our 2023 research found that 58% of project professionals working on social benefit projects in the UK say they don’t have sufficient finances to meet deadlines or quality targets⁹. With this in mind, we really need to consider whether levelling up is truly providing the social value that it was designed to achieve. Levelling up, after all, is designed to tackle inequality, we therefore need to ensure project decisions are measured and practical, or risk not delivering the projects and their much-needed benefits to communities.