Select Committee on Public Accounts Sixty-Third Report

#####centon#####SIXTY-THIRD REPORT#####centoff#####

The Committee of Public Accounts has agreed to the following Report:



  1. Portcullis House, the new Parliamentary building, was completed in August 2000 at a cost of £234 million.[1] The building provides offices for 210 Members of Parliament (Members) and 400 staff, together with Select Committee and meeting rooms, a restaurant, and a cafeteria.[2] The project was managed, from April 1992, by House officials under the direction of the House of Commons Commission. House officials were supported by a project team comprising the project sponsor (a House official), a professional project manager, the architect, the engineers, a quantity surveyor/cost consultant and the construction manager.
  2. In line with major capital projects of this type, the Comptroller and Auditor General examined the management of the building's construction from initial approval through to completion to see whether the building was completed to the time, cost and specification agreed at the outset. On the basis of his Report, we took evidence from the Clerk of the House of Commons, and from officials of the House of Commons' Finance and Administration Department and from the Parliamentary Works Directorate. Four main conclusions emerge:

  • The project to construct Portcullis House was delivered broadly to time and to the specification set by the House. As well as a unique and innovative building for the British Parliament, the project has provided much needed additional accommodation for Members.

  • The final estimated cost of the building at 1992 prices is, however, some £28 million (18 per cent) more than the budget of £151 million, in 1992 prices, which was approved by the House of Commons Commission in May 1993. A further £8 million in 1992 prices (£13 million in outturn prices) has been incurred, mainly due to litigation. Whilst delays by London Underground contributed to the construction cost overruns, alternatives to the chosen long life, low maintenance building could have been more fully explored, and techniques such as value engineering[3] could have been used to challenge the design and costs of specific elements of the construction project.

  • Statutory procurement rules were not followed when letting the contract for the building's fenestration,[4] resulting in legal fees and damages payable by the House of almost £10 million (the Harmon case). The Judge ruled that the civil offence of the dishonest abuse of the powers given to a public officer had been committed (the tort of misfeasance). House officials have taken some action in response, for example establishing a post of Director of Procurement and distributing a standard procurement manual to staff. This was a serious judgement against the House, however, and officials should ensure that all staff placing contracts are trained in the requirements of the law, and that such staff understand the importance of being able to demonstrate that the law has been followed for each contract let.

  • The high capital cost of the building is expected to deliver savings in the longer term from the use of durable materials, low maintenance costs and a high level of energy efficiency. House officials should establish the long term savings anticipated for major features of the design, taking account of calculations which supported the original decisions that such design features represented the best value for money. They should also establish arrangements to monitor actual costs to determine whether the design objectives are being achieved, and take action if they are not.

  1. Other important conclusions and recommendations are:
  2. Ensuring value for money

      1. Contracts for professional advice on construction projects, including architects and engineers, should be subject to competitive procedures.
      2. Once appointed, architects should be encouraged to develop a range of designs for a building covering different alternatives such as high cost: low maintenance or lower cost: higher maintenance to ensure purchasers can give full consideration to the options for a site, including alternative architectural designs.
      3. On the Portcullis House project, professional fees were mostly based on a percentage of construction costs, providing little incentive for these costs to be controlled by the professionals advising House officials. Alternatives, such as hourly and fixed fees, are likely to provide a more cost effective basis for consultants' fees.
      4. Following a mid term review of the project in 1999, House officials changed to a fixed fee basis for the project manager and the quantity surveyor, but negotiations with the architect were unsuccessful. Officials did not enter into any negotiations with the engineer whose work was largely complete. Following a similar recommendation from the project manager in 1996, they had not entered into any negotiations with professional advisers but had held discussions within the project team (although this included the relevant professionals whose fees would be affected). More active pursuit of revised contract arrangements might have reduced the overall level of fees on the project which amounted to some £42 million or about 18 per cent of the building's final cost.
      5. Advertisements used to announce competition for contracts should state clearly the criteria on which the selection of the successful contractor will be made.
      6. Where a successful bidder's solution encounters problems, requiring designs to be modified and increasing costs, purchasers should consider whether any of the other original bidders' solutions might offer better value for money.
      7. Delays in the construction of the Underground station cost the House over £9 million, but House officials expect to receive just £0.75 million in compensation from London Underground Limited. A liquidated damages clause in the agreement between the two parties fixed the amount of compensation due and the reasons for which it could be claimed. Before liquidated damage clauses are included in contracts, careful consideration should be given to all the potential costs arising from the situation covered by the clauses, and to whether it would be better not to have such a clause.



        Assessing the building in use

      9. Members' views on the building were sought in 1990, when the design brief was being drawn up, and in 2000, soon after they moved into the completed building. House officials are also assisting with an independent review of the building's impact on Members' work. In the light of the outcome of this review they should assess its implications for Members' working environment.
      10. The building was constructed to be energy efficient, with the promise of much lower energy consumption and costs over its life. The limited number of utility meters in the building, however, does not allow the building's energy efficiency to be measured separately from energy required for, for example, computers and catering equipment. House officials should take action to assess more accurately the level of energy consumption and efficiency being achieved.
      11. Problems have been encountered with the building's natural ventilation and cooling systems. Advice should be provided to the building's users on how to get the best from the building.
      12. Disseminating the lessons learnt from the Portcullis House project

      13. Portcullis House was a building project of unusual size and complexity for House officials to manage, but our recommendations are also relevant to other work to maintain and enhance the Parliamentary estate. The Office for Government Commerce should also consider communicating both good practice and the lessons arising from the project for the benefit of government bodies undertaking or commissioning public construction projects.


  3. Aspects of the project were managed well. Construction of Portcullis House started in January 1998, almost one year later than was originally planned because of delays experienced by London Underground Limited in constructing the Jubilee Line Extension. Once started, however, the construction of Portcullis House was completed only 44 days behind the planned timetable of 30 months. The building, with some minor variations, reflected the accommodation that was specified. The estimated final cost of the building, however, was £179 million in 1992 prices (£234 million in outturn prices), some £28 million (18 per cent) in 1992 prices, more than the budget of £151 million that was approved by the House of Commons Commission in May 1993 (see Figure 1). A further £8 million in 1992 prices (£13 million in outturn prices) was also incurred, mainly attributable to the cost of litigation in the Harmon case.[5]
  4. Figure 1: Cost compared to the forecast approved by the House of Commons Commission in 1993, at 1992 prices



    Forecast cost £ million

    Actual cost£ million

    Difference between forecast and actual cost£ million (%)

    Construction costs



    +17 (+14%)

    Professional fees



    +11 (+52%)

    Risk provision, including the delay to the construction of the Jubilee Line Extension



    0 (0%)




    +28 (18%)

    Source: C&AG's Report, Figure 15


  5. Many of the features of Portcullis House, for example its architectural and heritage significance, its expected long life (120 years), and the engineering difficulties associated with constructing a building over Westminster Underground station, added to the cost of the building. A review by consultants appointed by the House, the Northcroft mid-term review, found that Portcullis House cost more per square metre to construct than other 'unique' buildings such as the Lloyds Building. The House of Commons Commission had not been presented with comparable cost data for other buildings, such as an average office building in London, at the time it was asked to approve the building's construction and budget in 1993.[6]
  6. The architect presented a single design for Portcullis House. At the time the decision was made it was usual to select a designer for a building rather than the design of a building, and then to work with the designer on the building's design. No public competition, or similar, for the design had been held.[7]
  7. Whole-life costing, which considers both the capital and the recurrent cost of a building, is one of a number of techniques used to analyse the value for money in construction projects. House officials applied the technique to the materials used to construct the roof, but not to the building as a whole. For example, the Commission was not presented with alternatives such as the cost of a short-life building with a lower capital cost but potentially higher recurrent costs.[8]
  8. Value engineering examines design and construction options to eliminate unnecessary cost without loss of function. In March 1993, House officials agreed to adopt value engineering, and held a three-day workshop which identified around ten areas where the technique could be applied. Where it was applied, savings arose. For example, around £1.4 million in 1992 prices was saved by reducing the amount of aluminium-bronze used for the roof. However, fewer than half the areas identified in the workshop were actioned. In view of the innovative features of the design and the fact that the lowest tenders for a number of contracts were much higher than anticipated, there was scope for using the technique earlier and more widely in the design and construction process.[9]
  9. A key feature of the design of Portcullis House was the fenestration (the pre-fabricated wall and window units) which cost £37 million, 16 per cent of the project's estimated final cost and the project's largest single contract. European Union law, implemented in the United Kingdom by the Public Works Contracts Regulations 1991, requires contracts for public works to be placed in a manner that treats all tenderers from within the European Union fairly and equally, and which does not discriminate on grounds of nationality. These regulations applied to the construction of Portcullis House including the fenestration contract. In December 1993, the fenestration contract was advertised in the Official Journal. In May 1995, five companies, including Seele/Alvis and Harmon, were invited to tender; and a year later, in May 1996, the Clerk to the House of Commons, in his capacity as Corporate Officer of the House, signed a contract with Seele/Alvis.[10]
  10. In August 1996, Harmon issued a writ against the Corporate Officer of the House for a breach of the procurement procedures. In October 1999, judgement was given against the House. The Judge in the case found that the correct procedures had not been followed in four ways:

  • the statement of the criteria on which the contract would be awarded was not adequate;

  • material changes to the original scheme had been made in post-tender negotiations with Seele/Alvis but the same opportunity was not provided to Harmon;

  • the successful variant bid had been accepted although there was no entitlement to do so; and

  • a policy of buying British had been encouraged or permitted to continue, materially affecting the tendering procedure.[11]

  1. The Judge ruled that the civil offence of the dishonest abuse of powers given to a public officer (tort of misfeasance in public office) had been committed. The Judge concluded that it had been obvious to officials when awarding the contract to the successful tenderer (Seele/Alvis) that to do so would not comply with procedures.[12]
  2. Seele/Alvis had submitted a bid based on a variant design as well as a bid based on a revised design. (The revised design was aimed at reducing the overall cost of the package as the original bids were approximately twice the amount budgeted for the fenestration.) Seele/Alvis' variant bid, which cost around £2.8 million (in 1992 prices) more than Harmon's bid, was considered to be technically superior. House officials did not, however, give the other tenderers the opportunity to submit alternative bids based on the variant bid because they regarded it as commercial-in-confidence. The House accepted the variant bid, and signed a contract with Seele/Alvis in May 1996.[13]
  3. Trials of the variant design in July 1996 highlighted difficulties with its construction. The required modifications made the variant bid virtually the same technically as the design in the Harmon bid. Seele/Alvis offered a price reduction of £0.6 million in 1992 prices. The Seele/Alvis bid was, nevertheless, £2.2 million (in 1992 prices) more than the Harmon bid for an almost identical design. House officials and the project team did not, however, return to the Harmon bid [14]
  4. House officials denied that a 'buy-British' policy had been pursued or encouraged. The Accommodation and Works Committee had discussed 'buying British', but the Committee was made fully aware of the need to comply with European Union legislation.[15]
  5. House officials said that they respected, but did not agree with, the judgement in the Court case. They acknowledged that serious errors had been made and that the correct procurement procedures had not been followed. A lack of familiarity with the regulations had led to an incorrect description of the criteria upon which the successful tenderer would be selected. Compromise solutions had been sought by House officials and the project team because the original bids had not met the project's requirements. The Clerk did not consider that any individual member of staff was to blame. The Harmon case had arisen because of a collective failure on the part of the project team.[16]
  6. In response to the Harmon case, the House had taken a number of steps to improve its procurement practices including the appointment of a Director of Procurement with a central procurement advisory function, and the issue of a standard procurement manual. The structure of the Parliamentary Works Directorate and its relationship with the Serjeant at Arms' Department was also reviewed. House officials had not, however, reviewed other contracts to ensure that they were not subject to the same deficiencies which led to the Harmon case.[17]


1  All monetary amounts are stated in cash terms, also known as outturn prices, unless stated otherwise. Back

2   C&AG's Report, Construction of Portcullis House, the new Parliamentary building, (HC 750, Session 2001-02), paras 1-2 (5th bullet), 5.22 Back

3   Value engineering is a formal review of a project at one or more stages of the design and construction process aimed at eliminating unnecessary cost without loss of function. Back

4   Fenestration is the building's pre-fabricated external wall and window units. Back

5   C&AG's Report, paras 2, 3.47 Back

6   C&AG's Report, paras 3.33, 3.37; Qs 74-77, 101 Back

7   Q106 Back

8   C&AG's Report, para 5.10; Q19 Back

9   C&AG's Report, Figure 26, paras 5.14-5.16, 5.18; Q154 Back

10   C&AG's Report, paras 3.48, 5.27 and Appendix 4 Back

11   C&AG's Report, Appendix 4 Back

12   ibid; Qs 12, 57 Back

13   C&AG's Report, Appendix 4, Qs 78-81 Back

14   C&AG's Report, Appendix 4, Qs 82-87 Back

15   Qs 13-14 Back

16   C&AG's Report, Appendix 4; Qs 9, 12, 51, 53, 80 Back

17   C&AG's Report, paras 5.28-5.29; Q17 Back

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Prepared 24 July 2002