The Vice-Chancellor at a groundbreaking ceremony at the North West Cambridge siteNatalie Glasberg

The management of the University of Cambridge’s North West Cambridge development project has been strongly criticised for comprehensive, “systematic” failures that have lead to projections of overspend on its first phase totaling up to £76.2 million.

The North West Cambridge project was first conceived in the late 1980s and aims to “provide the facilities and accommodation that will allow the university to maintain its position as one of the world’s leading universities”, as well as provide for the local community.

It is the largest capital project ever approved by the university, with overall budget estimates of the completed project expected to be in the region of £1 billion, jointly funded by the university and outside sources.

The plans include development of the site to be home to 3,000 new homes, split between university workers and residents, 2,000 collegiate accommodation units and 100,000m squared of academic and research space to be divided between the private sector and university faculties.

The site also includes a primary school, shop units, nursery, community centre, hotels and facilities for senior living.

However an audit committee was set up by the university’s Finance Committee in July to investigate the project after the Vice Chancellor “expressed his concern about the governance and management structures” he said had “enabled” costs to escalate without coming to its attention or that of senior officers and bodies, with the aim of reporting back with a series of recommendations to bring the project back on track with initial projections.

The Audit Group sought to establish an account of the “substantial” forecast costs overrun for Phase 1, analysis of current budget setting and cost monitoring processes, and recommend a set of remedial actions to prevent further cost escalation and any other urgent changes required to the management or implementation of the plans.

The damning report, released on Wednesday, reviewed previous increases in projected costs for the first phase of the project, with the initial underlying construction cost estimated at £224 million in January 2013 rising to £315 million in July 2014 and these subsequent overrun projections raising that total to £378 million in July 2015.

The most recent projected cost increases have now breached “financial parameters set by the university”, particularly its borrowing limit.

These additional costs had been produced by multiple late design changes, increases in scope of the first phase, increases in allowance for inflation costs, and other factors the committee was unable to to identify due to “lack of granular and consistent information in the data provided”, totaling £24.7 million. These changes were approved by the Finance Committee.

The report also highlighted failures across a broad range of areas, primarily regarding “project setup and planning”, “project leadership”, “risk management” and “cost reporting”.

In regards to the project setup, it was found that the project’s success criteria conflicted and were poorly defined, and that “development contingency was not adequately defined” with “no delineation or ring-fencing of the component of the contingency that was reserved for risk”.

This lack of clarity regarding budget set aside for contingency meant that by April 2013 that 45% of the contingency budget had already been allocated, this figure rising to 85% by December the same year.

By the time risks began materialising in subsequent years, “the contingency had largely been depleted”.

The report notes that this contingency money was primarily allocated to significant design and quality enhancements, something that was “not normal practice”.

The project’s leadership and oversight was also heavily criticised. The Executives, including Project Director, Deputy Project Director, and Financial Director, were found to be working part time, the Project Director working “approximately one day per week” while spending the rest of the week on wider roles within the university and the Finance Director retaining many previous responsibilities and thus “effectively performing two roles”.

The Syndicate, an oversight body responsible for the “management, development, and stewardship” of the North West Cambridge Development, was also subject to criticism in the report.

The auditing committee said that instead of acting exclusively as an oversight body, the Syndicate was spending so much time on “minor project decisions” that it limited “its ability to provide objective challenge to, and scrutiny over, the Executive”. This was compounded by an “apparent lack of clarity within the membership of the Syndicate as to its responsibilities”.

In regards to risk management, the report criticised the simplistic way risk was reported, the accuracy of its assessment and the lack of a “consistent and rigorous assessment of risk” in calculating financial estimates.

Finally cost reporting was condemned for the lack of consistency and comparability in budget estimates and cost forecasts, and inconsistencies of costs appearing in the budget estimates but not forecast costs, as well as of overall budgets themselves, with different budgets appearing in different reports. The Executive report defined the construction budget as £223 million while the original construction budget approved by Regent House had this at £277 million. None of these inconsistencies were explained.

These failures took so long to come to university attention, the report stated, as increases in construction costs were offset by reductions elsewhere in the budget, such as in development contingency, and so resulting in a net zero effect in the reported cost forecast.

In response to these problems, the Audit Group gave 17 recommendations, including the appointment of full time directors, a comprehensive overview of objectives, success criteria, first phase costs and contingency plans, as well as an overhaul of the membership and composition of the university’s Syndicate.

Despite these significant setbacks, the university’s Director of Finance emphasised that even on the basis of the worst extreme of projected cost overruns, that there remained “substantial headroom” before the project ceased to be of a positive net value to the university.

A university spokesman told Varsity that “North West Cambridge has been confirmed as a financially sound project that is on target to be self-financing and will deliver on its strategic objectives.

“Some difficulties have recently arisen with the development, mainly down to inflation in construction costs and problems with the timely installation of the site-wide infrastructure. The University commissioned a review of the project to understand the projected cost overruns and why the full financial implications were not reported sooner. As a result, we are making some adjustments to elements within the overall development, tightening up governance and management structures and ensuring that sufficient investment is made in key skills for delivery to the current timetable.”

The spokesman confirmed that the university was seeking to appoint a full time Project Director and CEO, would improve financial and risk reporting, and that the university has not yet incurred any additional costs.

“The review made it clear that no single factor was responsible and difficulties in the early stages are not uncommon with projects of such scale and complexity. However, the University is committed to learning from this for North West Cambridge and future projects.”