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Scottish cost estimates need to improve

Cost estimates for major public sector construction projects have been too optimistic according to a review by public spending watchdog Audit Scotland.

The body found that only two fifths of projects that it analysed were completed within the budget set when they were first approved. Initial project completion dates were similarly optimistic with just a third finished within the original timescale.

But the research also revealed that performance against cost and time estimates improved after contracts were awarded, as by this point plans were more certain and risks had become clearer.

Auditor general for Scotland Robert Black said: "It is good news that projects mostly come in close to the costs and deadlines that are set when contracts are being awarded.

"But there needs to be improvement in the information that is available at the earlier stage when important choices are being made about which projects should be committed."

Audit Scotland's Review of Major Capital Projects in Scotland is the first systematic review of major public sector capital projects.

Between 2002 and 2007 the Scottish Government and its agencies completed 43 publicly-funded major capital projects, valued at a total of £811 million.

And there are currently 104 major projects - valued at £4.7 billion - in progress.

Mr Black said: "Current and planned major capital works in Scotland make up a large programme by any standards, and it requires the Scottish Government to make very important choices about which projects should go ahead.

"Good decisions can only be made if there is accurate and robust information about the likely costs, benefits and timescales of projects."

The report found that the initial cost estimates for projects needed to better reflect risk and uncertainty, and should also take into account a range of inflation scenarios.

It recommended that the Scottish Government should collect information on all projects and get explanations for cost, time and quality changes.

Ministers should also ensure robust procurement strategies and cost estimates have been developed prior to awarding funding to projects.

In addition the report recommends the government take account of market conditions and construction inflation when developing its capital programme.