Skip to main contentCambridge University Reporter

No 6403

Wednesday 11 November 2015

Vol cxlvi No 8

pp. 115–157

Report of Discussion

Tuesday, 3 November 2015

A Discussion was held in the Senate-House. Pro-Vice-Chancellor Professor Graham Virgo was presiding, with the Registrary, the Senior Proctor, the Deputy Junior Proctor, and forty-four other persons present.

The following Report was discussed:

Topic of concern to the University: Phase 1 of the North West Cambridge development (Reporter, 6400, 2015–16, p. 53).

Dr R. Charles (University Council, University Information Services, and Newnham College):

Deputy Vice-Chancellor, I am a member of the Council, the Audit Committee, and the Audit Group established to investigate the cost over-runs in the North West Cambridge project. This group has already submitted its first report to the Council and the Regent House in which we identified systemic deficiencies in the project set-up, planning, leadership, oversight, risk management, and cost reporting.

Since the Finance Committee and the Council were made aware of the current problems in July the University’s Director of Finance has taken on the role of interim project CFO. He assured the Council at our October meeting that following remedial actions the financial situation has improved and projected cost over-runs are less severe than those reported in July. Reducing those over-runs remains a priority and a work in progress. A full-time Project Director is also now being recruited.

The Audit Group met again this morning. Our attention is now focused on the broader issues of project governance and the changes the University will undoubtedly have to make not only to ensure the successful delivery of North West Cambridge, but which will also likely form the template for future commercial ventures. The comments I make today are made in a personal capacity.

We are still assured that North West Cambridge remains a self-funding project. It will deliver at least some of the key worker housing our staff so desperately need. This housing must be affordable and remain affordable for those who are priced out of the Cambridge housing market. What is less apparent is what impact the current dispute over the site-wide infrastructure contract will have both in financial terms and on the overall completion of Phase 1 of the project.

What has become abundantly clear while examining the details of the cost over-runs is that syndicates are not the best mechanisms for running the University’s commercial interests. Indeed, with ominous presentience the Board of Scrutiny highlighted shortcomings with this mechanism two years ago in its 19th Report.1 In the case of North West Cambridge the Syndicate consists of senior academics and administrators, stakeholders, and experts from the housing and construction industry. By drawing part of its membership from relevant industrial sectors the Syndicate should have been well positioned to provide the necessary oversight of one of the largest building projects in Europe. Representatives of key stakeholder groups across the University and those in senior leadership roles should have been best placed to look after the University’s interests.

So how did this go wrong? With the benefit of hindsight we got the balance of skills and expertise on the Syndicate wrong. We needed more people with detailed knowledge and experience of the construction industry to represent our best interests. There are of course different views of what those best interests might be. I have heard claims that the architectural and environmental standards to which the project aspires will be the measure by which future generations mark its success. But any definition of success must include measures of the project’s financial control, and also the additional costs arising from any legal disputes emerging from the project.

There is also the issue that parts of the Syndicate believed their role was advisory rather than that of a board governing the project. How this misconception arose is unclear; the true position was stated clearly in the Report which set up the Syndicate, which reads that:2

the Syndicate would act as a ‘board’ for those with responsibility for delivering the project and managing the estate, and would establish procedures and systems for the long-term financial and development arrangements for the site.

The relevant Ordinance is equally clear. It states:

4. Within the strategic and financial framework and any other limitations set by the Council or the University, as amended from time to time, the Syndicate shall be responsible for:

(i)the management, development, and stewardship of the North West Cambridge Estate (being the University’s land and property holdings in the area between Madingley Road, Huntingdon Road, and the M11 motorway);3

The best one can say is that it seems they have been poorly advised.

But how do we fix the current problems? Remedial actions have begun in terms of project leadership and financial controls, and more are needed. But we also need better checks and balances to ensure the University’s interests are safeguarded in this and any future ventures. This has to start with how progress is reported, how issues are raised, and how problems are made salient. The current problems have come to the attention of the Council, the Finance Committee, and the Regent House far too late.

North West Cambridge had reporting lines in place. They started with different project management teams relaying the state of play on individual lots to an overarching project management group who reported overall progress to the North West Cambridge Executive. The Executive reported that progress and lot-by-lot issues to the Syndicate which in turn provided intermittent reports to the Finance Committee and to the Council. Additionally, the Council received a monthly verbal briefing on the project from the Pro-Vice-Chancellor for Institutional Affairs. Yet the Council was generally unaware of the significant issues that had been brewing since at least 2014.

Why? As information flowed upwards it was redrafted at each step and an increasingly positive picture painted. Having read through the Syndicate papers from 2013 onwards it is clear to me that inconvenient truths were omitted or restated in far more positive tones. By the time bad news reached the top of the reporting chain it was presented as little more than minor hiccups which could naturally be expected in a project of this scale.

Questions were asked when there were hints of trouble, but assurances given that all was well. For example at our April meeting this year the Council received a written update4 referring to the site-wide infrastructure project as ‘continuing to be pressured’. This goes on to note that the Syndicate Chair and other senior officers met with the CEO of Skanska twice in the preceding month. I remarked at Council that this was highly concerning and asked the Pro-Vice-Chancellor to elaborate on what was going on. Members of the Syndicate present assured the Council that the matter was under control and was of no lasting concern. We now know that these meetings related to the site-wide infrastructure project which is at the centre of the current dispute. To my deep regret this exchange passed unminuted.

But these reports were not the only source of information. The project rightly drew the attention of previous Boards of Scrutiny. The Board’s recent Reports have consistently recommended careful monitoring of the project.5 Our internal mechanism for doing this are audits and the project has been the subject of frequent audit. The most recent audit carried out in April of this year centred on capital expenditure and cost management. Bewilderingly, given what we now know, this area received a rating of substantial assurance.

Clearly our existing internal checks and balances have failed. We now need to look very closely at what information is relayed and how it is relayed upwards. What new checks and balances do we need to design and apply? What are the most effective ways to scrutinize and raise appropriate challenge to what is being reported? These will not be comfortable conversations, but they are necessary and we must not shy away from them.


Dr A. J. Hutchings (University Council and Computer Laboratory), read by Dr R. Charles:

Deputy Vice-Chancellor, I am a postdoctoral researcher at the Computer Laboratory. Earlier this year, I was elected to the University Council. I am also a committee member of the Postdocs of Cambridge Society. However, my remarks here today are made in a personal capacity.

In 2012, the Regent House authorized the North West Cambridge development on the basis that it would provide low-cost housing for key workers, primarily postdoctoral researchers.

I wholeheartedly welcome this mission. The availability of affordable and suitable places to live is critical in Cambridge. At present, market rent is around 60 per cent of a postdoc’s income. To compound this, rents are rising much faster than salaries. The pressure on the market is likely to increase with commercial companies moving to the region.

As a direct result of these issues, key workers are increasingly living outside of Cambridge. Consequently, driving to work causes both environmental and parking problems. Another solution is lodging and shared accommodation. However, there is an unfavourable balance between the high rents and relatively low standards of living. This includes adults having to share crowded flats or houses with strangers. Poor maintenance of available housing also means that this option is frequently unsuitable and sometimes unsafe.

Cost of living is a particular worry for postdocs. As we have little job security, we need to plan and save for when our funding inevitably runs out. These concerns are particularly troublesome for those with dependents.

The North West Cambridge development arose out of good intentions. However, the mission of building affordable housing for key workers does not appear to have been a crucial consideration in subsequent design decisions.

It is my understanding that no options are off the table when it comes to achieving an internal rate of return of 6 per cent. One potential option could be seeking a change to the agreement with the local authority to increase rental charges. I am concerned that, if this were to happen, the housing would become unaffordable for key workers. In combination with relative isolation from the city centre, and limited transport options to the various campuses, the development would be unattractive to potential residents.

Raising rental charges would not be in the University’s best interests. In particular, higher rents would reduce the ability of the University to recruit and keep talented staff. The mission of the development – to deliver low-cost housing – should be at the forefront when it comes to swift, decisive action to get this project back on track.

I look forward to receiving the Audit Group’s forthcoming recommendations relating to governance and management. This issue highlights the need for reforms that provide built-in mechanisms to deliver effective checks and balances at the highest levels.

Professor R. J. Anderson (University Council, Computer Laboratory, and Churchill College):

Deputy Vice-Chancellor, I was elected to Council last year on the position that ‘Empowering academics to do great things means that administration should be supportive rather than a burden’, although I speak here today in a personal capacity. I serve on the Planning and Resources Committee. I was previously on Council from 2003–10, when the North West Cambridge project was being planned. I opposed it then, believing that the land should be kept for our next fifty years’ worth of departments and institutes. But when in 2010 our new Vice-Chancellor acquired his predecessor’s enthusiasm for the project, opposing it became a lost cause.

The first indication I had that the project was in serious trouble was when I received the papers for the Council meeting of July 13th, where we learned that because of building cost inflation and a dispute with the infrastructure contractor, Skanska, the Syndicate – to which the Regent House delegated management of the project – expected it to run £50–£80m over budget.

The account we were given set off alarm bells. Having spent some years working as an IT consultant before starting my Ph.D., I’ve battled with more than one troubled project. I teach software engineering to Part Ib Computer Scientists, and run a systems module for the Masters in Public Policy course too. I get both groups to study the report into the London Ambulance Service disaster. I even get my MPP students to write case studies of other public-sector IT project failures as coursework. My research is not just on the technical aspects of computer security and cryptography, but the economic aspects too, including the economics of dependability. So, although I am not an expert on construction, I do know a bit about how projects fail. The two main causes are vague, conflicting, or contested goals; and divergence between the appearance and reality of authority.

My first reaction was to speak to a member of the Syndicate who told me ‘Yes, it’s just a total mess. I’m surprised you didn’t sack us months ago.’

So I reread all the relevant documents carefully. Together with other Council colleagues, I noticed that while the verbal briefings we’d received every month on Council had been warmly reassuring, the Minutes contained quiet warnings of possible delays because of a dispute with Skanksa. My Council colleague Ruth Charles has already remarked on that.

I then exercised my right as a member of Council to demand all the Syndicate papers back to January 2013 and spent several days reading them carefully. I realized that we shouldn’t have sacked the Syndicate in March 2015, but in March 2014. I wrote a report for Council colleagues, for the Audit Group, and for my former colleagues on the Board of Scrutiny telling the story. The Registrary is anxious that the full story not be told in public yet, arguing that the details of which consultant said what to which contractor, and when, might still be litigated. So the following is a telegraphic summary. The actual details follow the pattern familiar from the NHS National Programme for IT, or Universal Credit, or the Sydney Opera House. In due course the story of North West Cambridge will no doubt join them as yet another classic case study.

After Regent House gave the go-ahead for development, the Syndicate spent much of 2013 doing the fun things such as getting proposals from architects, and put off the difficult things such as the infrastructure. Realizing they were behind, they looked for a single site-wide infrastructure contractor, and when the lowest bid came in at almost £50m they realized that they would break their original budget. The project was costed once more in March 2014; total projected expenditure had risen from £338m to £395m (compared with the £323m authorized by this House). Even cutting the contingency reserve from £33.5m to £4.5m was not enough to absorb the overshoot.

The Syndicate solved the problem by expanding the scope of the project, bringing forward 164 key worker homes from Phase 2 into Phase 1 and extending the completion deadline from 2016 to 2017. Their paper to the Finance Committee in June 2014 emphasizes deferred payments by developers, and more key worker housing; only on p. 4 do we see a £13m charge due to inflation. The Finance Committee’s paper to the Council said that North West Cambridge:

continues to report favourably against key performance indicators agreed with the Finance Committee, though the latest financial model does demonstrate that the indicative peak borrowing limit will be breached as a result of increased costs due to inflation and deferment of capital receipts.

The Council, on 14 July 2014, approved an extension of Phase 1 and placed a Notice in the Reporter on 21 July increasing the borrowing limit from £242m to £311m ('with short term flexibility to £320m'), followed by a Report to the Regent House on 24 September. When discussed in this House on October 14th, it attracted only two comments. The Report also disclosed that Phase 1 would only be complete by March 2017, but it did not mention cost inflation at all; neither do the Council Minutes. The Syndicate smugly described this in its risk register as 'restructuring'. It enabled the Pro-Vice-Chancellor to tell Council: 'Phase 1 of the development was on time and on budget' (Minutes, November 24th) and this line was repeated in the Syndicate’s Annual Report to the Regent House, which covered the year to July 2014 and was published on December 18th. The fact that the budget had changed was not made salient.

In March 2015, Council was asked for a further £300m borrowing facility. We had financed North West Cambridge by issuing a bond for £350m at 3.75 per cent in October 2012 for repayment in 2052; the new facility was represented as being for development elsewhere, specifically for a shopping mall in the Old Press / Mill Lane site and a hotel on Trumpington Street. The Project Director and the Senior Pro-Vice-Chancellor explained that we could borrow money for less than the return we could get by investing in non-operational estate. I dissented, as I simply did not believe that the Old Schools had the managerial capacity to build and operate a shopping mall or a hotel. Nonetheless the proposal appeared in a Report in May and was duly Graced on June 24th. Only then was it admitted to the Syndicate (on June 29th), the Finance Committee (on July 8th), and the Council (on July 13th) that the North West Cambridge project was in financial trouble, with a shortfall of £50–£80m owing to delays in the site-wide infrastructure contract, as well as building cost inflation.

Yet the problems with the Skanska contract had already been notified forcefully to the Syndicate in December 2014; officers met the company’s UK managing director in February to attempt to resolve them, and this meeting was noted quietly in Council Minutes. In March, the Syndicate had an extra emergency meeting to consider the problem; Council was not told. Skanska had threatened litigation by then, yet this threat was not notified to the Council’s Advisory Committee for Benefactions, External, and Legal Affairs, as our rules require. So the Old Schools appear to have considered it prudent to get this House to authorize a further £300m in borrowing before holding up their hand and saying ‘Houston, we have a problem’ – even to the Council.

I find it difficult to discharge my duty as a trustee of this university when I am kept in the dark about its most critical business affairs. That is why I exercized my right to demand access to the documents.

I support the recommendations made by the Audit Group. We do need to replace the Syndicate members with people who have relevant experience; we do need to agree quickly whether the mission is to build cheap housing for postdocs or to help all the architects win prizes; and above all we do need to get somebody competent in charge.

But while necessary, these recommendations are not sufficient.

My assumption all along was that the Registrary was the person who was really running the project, as he’s on the Syndicate, the Finance Committee, and the Council, and that the Vice-Chancellor was the person who’d step in if things went wrong. That’s how public sector bodies operate: civil servants run a department while the minister pretends to. The Old Schools run the University while committees nod sagely. And this is not just the Registrary; many other people in the North West Cambridge Executive, including the Finance Director, were on full-time or even part-time secondment from the Old Schools. This is about structures; about how people behave in organizations. There is a whole academic discipline, public choice economics, which studies it.

The NHS National Programme for IT was not fixed by hiring Richard Grainger. The Smart Metering project was not fixed by hiring an IT director, and the Universal Credit system has not been fixed by hiring a whole series of them. Successive permanent secretaries, directors general, and NHS chief executives have used project boards and ‘big-hitter’ project directors as a means to escape personal blame for the disasters over which they presided. The bureaucracy evolves to become ever better at blame avoidance.

If that is our direction of travel, then Cambridge cannot do projects. We must abandon all idea of a Phase 2 of North West Cambridge and accept that in future we will build out our estate one building at a time using fixed-price design-and-build contracts where the head of institution is the customer and the Old Schools have only a supporting role.

But right now, my overriding concern is that no senior officer in the University seems to want to step up to the plate. There’s always somebody more to be consulted, another committee whose opinion must be sought. It is now four months since the penny dropped and we still don’t have anyone in charge. We’re told that Cambridge’s need for a new project director will become known ‘sometime in November’. It looks like the press coverage of this Discussion will perform that role. At the present rate it will be next year before we have a new project director; and when he says we need another £100m and another two years to fix things, the word will take four months to find its way from the site office through the Syndicate and the Finance Committee to the Council and back again.

So although I support the Audit Group’s view that we need a new, more professional Syndicate, and although I also back Dr Holmes’s argument that in the long term the new Syndicate should report to the Planning and Resources Committee rather than the Finance Committee, in the short term we need much shorter reporting lines. The new Project Director needs to report directly to the Vice-Chancellor, and also report both in writing and in person to the Council every month. Ordnance 11 (Chapter 1, Section 9, p. 135) gives the Council the power, in exceptional circumstances, to discharge the Syndicate and assume full responsibility. It is time for us to do that. Only with the new Project Director reporting directly can we end the blame game, and support him when tough decisions are needed. If he has to fight the Old Schools as well as Skanska, it will cost us.

The first thing to do when you come across a road traffic accident is to prevent more cars crashing into the wreckage, and then the second thing you do is to stop the bleeding. We haven’t done either yet. And while senior officers dodge and weave, we are haemorrhaging millions of pounds a month. Unless we can get this project under control, the costs could double rather than merely increasing by 40 per cent. In that case the rental income from the new flats won’t even cover the bond interest, and our successors in the middle of this century will have to find over half a billion pounds to refinance it. I call on the Vice-Chancellor to consider very carefully whether that is the legacy for which he wishes to be remembered by future generations.

Dr N. Holmes (Department of Pathology), read by the Deputy Junior Proctor:

Deputy Vice-Chancellor, I am a member of the University Council but my remarks here today are made in a personal capacity.

I wish to make points in three areas. These are the status of the North West Cambridge Development (hereafter NWCD), the financial picture, and the future governance arrangements.

First, status: the development currently underway is a major undertaking for the University and can reasonably be expected to produce a strategic asset of good quality and to provide much needed affordable housing for rent to University staff. In addition to the cost increases, there has been a significant, but not unusual, slippage in the schedule. The Report to Regent House in September 20141 put completion of Phase 1 at March 2017. From the papers available, it is not easy to extract the current expected completion date but I would be surprised if Phase 1 is fully complete before March 2020. I believe it would be appropriate to provide Regent House with a clear revised completion date.

Second, financial picture: the Finance Committee, at its meeting on October 7th, agreed the costs associated with the problems arising from the site-wide infrastructure contract (SWIC), including claims and knock-on effects, should be packaged, managed, and reported, as the ‘SWIC Reserve’, separately from the rest of the project.2

Management may be better done in this way. However, in any assessment of the overall cost and financial outcome of the development, all costs including those arising from adjudications on the SWIC issues, must be included. Anything less is delusional. The PricewaterhouseCoopers (PwC) review2 highlights the confusions that have already arisen on the NWCD project as a result of the use of different reporting bases. Therefore, it is important that whenever the project financials are summarized or reported, the effects of the SWIC Reserve must be included in the overall outcomes. The summary in the PwC review (Appendix 2) documents an estimated £154m increase in construction costs in three years. They attribute £46.7m of this to changes to the original design. If the transfer of some scope from Phase 2 is excluded, such design changes constitute 38.5 per cent of the increased costs. Hitherto, I believe the financial impacts of deliberate changes have been insufficiently recognized, while the contribution of inflation has been overemphasized, whereas according to PwC the two are equal.3

Third, future governance: the Audit Group and PwC reports highlight confusion over the respective roles of the Syndicate and the project executive. Recommendation 10 of the Audit Group is that Council should ensure a majority of the Syndicate ‘have extensive familiarity with both property development and the delivery of large capital construction projects’ and recommendation 11 that ‘the respective roles of the Syndicate and executive team should be clarified’ .4 I certainly believe that it is vital that the roles of the Syndicate and executive are clear to all. However, we need to ensure two separate things. One, that the NWCD is efficiently and professionally managed and delivered and two, that the University’s strategic priorities are considered in decision-making at an appropriate level.

If we change the Syndicate composition as recommended, this will require a majority of external professionals. We will then need to revisit questions such as whether the reformed Syndicate is now appropriately configured to oversee the development of West Cambridge (which is also within its current remit). West Cambridge is much nearer to a traditional University development project. Its future plans do not include accommodation, only academic departments and Research and Development commercial space. Whether the best Syndicate to oversee the NWCD executive can also be optimum for the distinct West Cambridge development is doubtful. I also believe that attention needs to be given to the reporting arrangements for the Syndicate. Currently it only reports directly to the Finance Committee. A case can clearly be made for an additional reporting line to the Planning and Resources Committee. This should more effectively ensure that the University’s strategic interests are safeguarded if the Syndicate is given a role more akin to a traditional commercial ‘Board’, holding the executive to account.

Professor S. J. Young (Department of Engineering and Emmanuel College), read by the Deputy Junior Proctor:

Deputy Vice-Chancellor, as Senior Pro-Vice Chancellor for the period 2009 to 2015, I was closely involved in developing the strategy and rationale for the North West Cambridge Development (NWCD). The principal motivation for the project was, and surely still is, the strategic imperative of developing good quality living accommodation for our postdocs and graduate students. Without this development, the University will find it increasingly difficult to recruit the best young research talent to Cambridge.

The projected cost over-run now before us is unfortunate and we must learn to manage ourselves better. However, as pointed out in the Audit Committee’s report, even with this over-run the project will still be self-financing. A successful conclusion to this project will result in a significant asset to the University which will be of great benefit not only to ourselves but to future generations. Furthermore, by financing the project via a very competitively priced public bond, the development will have been achieved without any significant impact on day-to-day operations of the University.

We clearly have to tighten up our procedures and the Audit Committee recommendations set out clearly what needs to be done. However, we must press on with this development. Given the sunk investment in infrastructure and the significant and difficult job of assembling a project team of this size, it would be folly to let the current situation deflect us from continuing to press on with the project. Any deferral of Phase 2 whilst we recover our nerve will ultimately cost us dearly. I therefore support the recommendations of the Audit Committee, but more importantly I urge Regents to continue to give full support to the North West Cambridge Development not just for the completion of the current phase but for the project as a whole.

Dr R. Padman (University Council, Department of Physics, and Newnham College), read by the Deputy Junior Proctor:

Deputy Vice Chancellor, I am a member of Council, but am today speaking for myself.

I was a member of Council also when we approved the North West Cambridge development. While not seeking to minimize the problems with financial management of the project which have led us to report to the Regent House, I do however want to make three points: (1) North West Cambridge was, and remains, a once-in-a-generation opportunity; (2) while there were undoubtedly shortcomings in the financial management of the project, those were reported to the Syndicate and Council as soon as they became apparent, and the Council and its Audit and Finance Committees have taken the necessary actions to limit both the financial exposure and other risks; (3) the project remains on course to realize a Net Present Value (NPV) (or profit, discounted to today) of around £100m on an investment of around £320m, as well as making a substantial contribution to the housing stock for graduate students and postdoctoral researchers. I beg a little time to expand on these points. First, the opportunity and some history.

The University’s primary purpose in developing North West Cambridge is to provide affordable housing for a growing postdoc community, and to accommodate a long-term increase in graduate student numbers. We also wanted to release further research space both for our own use and that of industrial partners. It was realized earlier on that postdocs require more than just accommodation. For the development to be successful, it has to become a true community, somewhere that people want to live, and that the University can be proud of. Quite apart from the University’s ambition, it was clear that City and District Councils required a very compelling offer to allow land to come out of Green Belt.

Council was faced with two slightly separate problems: to find a form of development which would achieve its primary goals, and then to work out how much and how to pay for it. In outline, the solution was a phased development of mixed market housing and graduate/affordable housing. The development has been kick-started with £250m from the proceeds of the University’s bond issue (repayable over forty years). Receipts from the release of market housing are being used to pay for the University’s own development, while rents on the affordable and graduate housing will over time help pay down the debt.

Valuing the development was and remains problematic. The finances play out over a very long time-scale, and Council was unable to find a way to set a value on achieving its strategic goals of easing the housing problem, or of making this a flagship development, rather than a minimum-cost ghetto. We settled on the requirement that the development have a positive Net Present Value (NPV), an Internal Rate of Return (IRR) of greater than six per cent, and a peak borrowing requirement (PBR) of less than the £250m available from the bond issue. This is clearly not as good as simply investing the bond receipts in the Cambridge University Endowment Fund, but nevertheless is a sound investment.

The problems that have surfaced in the last three months are four-fold: (1) the cost and extent of the site-wide infrastructure were severely underestimated, and the consequent delays are affecting progress on other contracts; (2) Building Price Inflation (BPI) is producing cost increases for the contracts not yet agreed; (3) projected receipts from key worker / affordable housing rates are not keeping track with BPI; (4) lax project financial controls encouraged more up-front spending than is consistent with the PBR.

This is not a ‘cost blow-out’ as some have represented it. The headline sums have not been wasted, spent, or even committed. They are simply a potential liability if we don’t take appropriate action. Apart from the site-wide infrastructure issue, this is primarily about evolution of estimates as we have got closer to the actual spend. (And to quote Niels Bohr, predictions are difficult, especially about the future.) Careful timing of contracts means that only about a third of the total Phase 1 expenditure is exposed to increases in BPI. With regard to receipts from key worker housing, we have a problem that Henry Ford would have recognized: we need to pay our workers enough that they can buy our products. (In effect, the extra costs falling on the project from this source are a result of not paying our postdocs enough. Put this way, the additional subsidy is very good value.) Given the positive NPV, the increase in borrowing requirement is primarily a timing issue. The same forces that are pushing up BPI now, will also produce higher future receipts. Nonetheless, the problems with the site-wide infrastructure, and the increase in projected PBR, are an embarrassment: both should have been caught and drawn to the University’s attention much sooner.

In July 2014, in order to build an additional 164 key worker apartments as part of Phase 1, the Finance Committee and Council approved an increase in the borrowing requirement to £311m, with short-term flexibility to £320m. Council has been informed of difficulties in the site-wide infrastructure contract on a number of occasions during the last year, and projections for a further large increase in PBR, of potentially a further £50m–£70m, were drawn to our attention in July 2015. The Syndicate immediately put all Phase 2 preparation on hold, and asked the Finance Committee to look at options to contain borrowing within the agreed £320m ceiling.

At the request of the Vice-Chancellor, the Audit Committee also established a working group chaired by Mark Lewisohn – an external member of Council and Chair of the Audit Committee – to report in two phases: first, on the immediate reasons for the over-run, and second on future governance of large projects. That working group presented its first report to the October meeting of Council.

At that meeting, the Council was presented with a number of options for containing the borrowing requirement, and agreed the recommendations from the Finance Committee for further work. It is clear that with some relatively small changes to the project it will still be possible to reach essentially the same financial targets agreed in July 2014; the IRR is down a bit but should still closely approach six per cent; the NPV is still greater than £100m; the repayment date may be slightly later than planned. We will still have a development that will support our past and ongoing expansion. The immediate scare is therefore over. There are undoubtedly still risks, but the project is not in crisis; the University’s oversight and control procedures have operated as they should; the risks have been contained; the project remains on track for a successful outcome. It is even possible that we will not after all breach the £320m borrowing requirement previously approved by the University.

However, we have probably been lucky. The Audit /Working Group’s report is clear that no fault attaches to individuals, but that there are real problems with the overly-complex management structure established by the Council. In particular, paragraphs 30–32 make sobering reading. In an effort to ensure we retained detailed control of the project on behalf of the Regent House, we failed to specify sufficiently clearly, and to distinguish, the separate responsibilities of the Project Management team, the Syndicate, and the Council. Members of the Syndicate were chosen in part for their ability to represent the University rather than for their expertise, which reduced some of the protections offered by the Board of a more commercially-focused project. Ironically, a structure intended to produce direct accountability in fact had the primary effect of increasing risk.

Neither are Council members generally elected for our project management expertise. Nonetheless, the structures we created have obliged us from time to time to sign off decisions for which we are not well-equipped. My personal view is that Council’s role is not to micromanage, nor even just to manage, but to ensure that we specify clearly what we want, employ good people, empower them to act, and hold them to account for those actions. I am reminded of the adage: ‘good, fast, and cheap: you can have any two’. In our case, it is perhaps ‘Good, micromanaged, timely, and affordable’, but the general idea is the same. I hope the Working Group’s second report, later this term, will prompt discussion of these issues both within Council and more widely.

The Council were given a tour of the site before their last meeting. This was impressive in many ways, not just in witnessing the scale and complexity of the development on the ground, but in seeing the thought that has gone into almost every aspect. The project remains a key part of our strategy.

North West Cambridge by itself won’t solve the housing problems facing the University, but it will transform the landscape for postdoctoral staff, who are now our most numerous staff group. It will provide context for West Cambridge, and help cement crucial relationships between the University and the City and District Councils. I am still pleased to have voted for the development. The Regent House should be reassured that the project remains an excellent investment, and is in good hands.

Professor J. K. M. Sanders (Deputy Chair of the West and North West Cambridge Estates Syndicate, Department of Chemistry, and Selwyn College), read by the Deputy Junior Proctor:

Deputy Vice-Chancellor, I was Pro-Vice-Chancellor for Institutional Affairs from October 2011 to September 2015, responsible for all the University’s 11,000 staff, for environmental and energy matters, and also for the University’s relationships with the local community and local authorities. The development of North West Cambridge was a central feature of each of these responsibilities. In addition, I have been Deputy Chair of the West and North West Cambridge Estates Syndicate since its inception, and I still am. From early 2012 until I stepped down in September, I reported regularly to Council on progress and problems.

My remarks today are informed by this background, but I am speaking as an individual, not on behalf of the Syndicate.

The case for expansion to the West and North West was made as long ago as 1989 by Sir Peter Swinnerton-Dyer. Then, and at all times since then, the opportunity at North West Cambridge was to protect and enhance the University’s status as one of the world’s great academic institutions. By 2006 the University had persuaded the authorities to take North West Cambridge out of the Green Belt in order to help with our housing problems, allowing the beginning of serious planning work. So the University’s need for affordable housing has been long acknowledged, and anybody who has family or colleagues looking for a home in the Cambridge area will know that the problem is becoming a crisis: newly arrived postdocs will have to spend up to 60 per cent of their net income to rent a flat within the City, and the proportion for those on lower grades is even higher. Affordability, and the pressure it places on recruitment, retainment, and salaries, should be very near the top of the University’s Risk Register.

The Vision for North West Cambridge agreed by the Council is:

To create a new district and extension to the City, centred around a mixed academic and urban community: a place that is sustainable, long lasting and ambitious, offering a high quality of life to enhance both the City and the University.

The Syndicate was established to deliver this vision, which has guided all the thinking of the Executive and of the Syndicate, from the creation of the Masterplan through to individual design decisions.

One example of our environmental vision is that we have created the largest rainwater recycling scheme in the UK, and perhaps in Europe. This not only generates lakes of recreational and biodiversity value, but provides water for gardens and lavatories, dramatically reducing the demand for potable water in this semi-arid region of East Anglia. The district heating scheme and photovoltaic arrays on roofs, coupled with high insulation standards, will greatly reduce the energy demands of our homes, while the design parameters around light and ventilation also set new standards.

The s.106 legal agreement accompanying our outline planning permission has put in place very strong environmental requirements that the University must satisfy: we have to meet Level 5 of the Code for Sustainable Homes – the first, and probably last, large-scale development in the UK to do so. This has placed onerous and unpredicted demands on our design: for example, the resolution of conflicting requirements around ventilation and noise abatement in some exposed parts of the development required expensive engineering solutions. Stringent planning regulations have also constrained our actions in other ways, for example in the design of junctions and crossings.

The Syndicate’s role is to deliver the vision and to protect and express the University’s interests. The executive team and consultants came from the private sector with expertise in planning, design, construction, and contracts. They are excellent in their areas, but they cannot be expected to rapidly absorb or predict all the nuances of what will be acceptable – or not – to the Regent House. Matters such as brick colour or street naming may seem trivial in some environments, but in Cambridge everything we do is subject to detailed scrutiny, lobbying, and criticism. The Syndicate has provided the mechanism that attempts to square this circle, balancing short-term costs with the long-term interests of the University, where value can be measured in purely financial terms – but it also has a reputational and quality dimension too.

It should be a matter of pride for the University that, even at this early stage, the quality of the Development has been recognized by winning the World Architecture Festival Masterplanning Prize in Singapore last year. Closer to home, it has meant that we have obtained planning permission for every scheme that we have proposed to the local authorities, usually unanimously. We could have proposed cheaper schemes, with more standardized design and less robust materials, but then we might have had to spend money and experience delay through an even more extended planning process. However, the Syndicate believes that the University has a responsibility around quality of design, build, and social coherence. Investment in design and materials has led to better homes but also to enhanced long-term value as well as bigger cash receipts. The expected return from market housing exceeds even the latest budget, and partly offsets increased costs, because residential developers’ perception of our development and its commitment to quality and community facilities is so positive.

It is worth emphasizing that two-thirds of the building contracts were let at the expected cost, and over 1,100 people are currently working successfully on site. The school opened on time in September, and is hugely popular. It has not been easy to run a school in the middle of major building works, including the County Council’s road works around the Huntingdon Road junction at the entrance to the site, but the future success of the school, under its impressive leadership and with its active parents and their children, seems assured.

It is inevitable that the delivery of a project of such novelty, size, and complexity will include risks and challenges that are difficult to quantify in advance, not least the state of the economy and the housing and construction industries. It is also inevitable that there will be errors and omissions, and some decisions that with hindsight might be different. It may be that there are better mechanisms for managing such a complex set of parameters while protecting all aspects of the University’s interests.

In the short term, much work over the summer has contained the projected over-runs, but the overheated construction industry remains a challenge. This short-term set-back is uncomfortable and unwelcome, but within a couple of years Phase 1 will be complete. In due course the remaining phases will be developed, and for a hundred years and more, North West Cambridge will be providing secure, steady, long-term income to the University, decades after any loans have been paid off, as well as providing an outstanding place for thousands to live and work. The improved value of the University as an academic institution as well as its balance sheet will significantly outweigh the costs.

Deputy Vice-Chancellor, Cambridge is leading the world of Higher Education when it comes to thinking about an institution’s responsibilities to its staff, students, and neighbouring communities. The executive team and I host visits almost every week from the top leadership of leading universities from around the world who come here to learn from what we are doing. It is innovative, and yes, it is risky. But if Cambridge cannot innovate and is not willing to take risks, how can we be world-leading?

Dr M. C. Vernon (Chair of Board of Scrutiny, and University Information Services):

Deputy Vice-Chancellor, the University ‘has learned how to become a developer’,1 a report from external consultants SQW states somewhat optimistically. Shattock and Finkelstein, in reviewing the CAPSA debacle, might similarly have said that the University had learned how to deploy an accounting software system.

North West Cambridge has been a major concern of successive Boards of Scrutiny for the last ten years. We have always been assured that all ultimately was well, including well after it should have been clear that this was not in fact the case.

In 2006, in the Board’s 11th Report, attention was first drawn to the importance of affordable key worker housing,2 and the Board expressed concern about the future management of the project.3 Six years later the Board was still describing its size and complexity as ‘daunting’;4 we were reassured then that members of the Regent House could ‘have confidence that the project is being managed with enormous care and expertise of a very high calibre’.5 In its 19th Report, the Board recommended the constant review of the underlying financial assumptions;6 Council responded that the Syndicate reviewed the projections regularly and updated both the Finance Committee and the Council frequently. Also in the 19th Report, the Board noted that both the integrity of the project’s financial planning and its execution was of the utmost importance to the long-term prosperity of the University7 and last year it was viewed as one of the two main areas of risk for the University in the coming years.8 Yet here we are today.

The Board is grateful to Professor Anderson for his paper on North West Cambridge, and its detailed analysis of who (should have) known what when, and the issues surrounding the site-wide infrastructure contract (SWIC). The Board is aware that this is the subject of legal actions that are likely to be costly and time-consuming and that we have to be circumspect in what we say about it for the time being, but the Regent House needs to have confidence both that the University is getting the best possible outcome from adjudication and litigation, and that the processes surrounding the SWIC do not escape scrutiny. This might be best achieved by Council keeping the Board pro-actively informed of progress and legal advice in this area.

It is clear that the West and North West Cambridge Estates Syndicate has seriously failed the University; it has acted, however unintentionally, as another filter that has stopped bad news from reaching the people it should have. Council has power ‘in exceptional circumstances to discharge the Syndicate and to assume full responsibility itself for the management, development, and stewardship of the West and North West Cambridge Estates for the time being.’9 In the Board’s view, this level of failure is exceptional, and Council should exercise this power. The University is to appoint a full-time Project Director and Finance Director; these should be required to report directly to Council in a manner such that Council (and the Regent House) can be sure they are getting accurate, comprehensible, and comprehensive reports on the state of the project.


Professor D. J. C. MacKay (Regius Professor of Engineering and Darwin College):

Deputy Vice-Chancellor, my remarks concern the governance and management of the design of transport infrastructure associated with Phase 1 of the North West Cambridge development.

I am deeply concerned that the designs of the Eddington Avenue / Huntingdon Road junction and the Bunker’s Hill / Huntingdon Road / Girton Road junction are not safe for pedestrians and cyclists coming and going between the North West Cambridge Development and Girton village, including both Girton Road and Thornton Road; moreover, these designs are utterly inconsistent with the stated aspirations of the University, the City Council, and the District Council, to enhance the transport connections to neighbouring communities.

We note that the University’s Transport Strategy for North West Cambridge1 aims to give cycling and walking high priority and states an aspiration for ‘high quality’ solutions, including ‘safe and convenient crossings for pedestrians and cyclists’.

We note that the University’s Community Strategy2 for the development repeatedly mentions the goal of linking to neighbouring communities through cycling and pedestrian routes.

We note that the City and District Councils’ Policy3 for North West Cambridge stipulates that pedestrian routes should be provided that are ‘direct, safe, and attractive’, and that new and enhanced cycle links should be made, ‘including links to nearby villages’.

The Eddington Avenue / Huntingdon Road junction design that is being built violates all these aspirations and commitments by singularly failing to include any crossings of Huntingdon Road that are direct, safe, and attractive for people travelling from and to Girton and other destinations in the north-west. The design has also introduced a dangerous pinch-point into the north-west-bound on-road cycle path on Huntingdon Road.

This failure of design to conform to vision and policy is of particularly serious concern because over 100 small children need to cross Huntingdon Road every school day to go to the University of Cambridge Primary School, and 41 of those pupils live to the north, in Girton. Future demand from the north will only increase over the coming years: based on this year’s intake, we expect that in two years’ time the school will have roughly 105 pupils who live in Girton; the adjacent nursery will surely also attract cyclists and pedestrians from the north; and all the other amenities on the North West Cambridge site will be very attractive to Girton residents.

The plans for the Bunker’s Hill cycle link at the Girton Road / Huntingdon Road intersection are also inconsistent with the University’s strategy and the City and District Councils’ policies. While the design is partly satisfactory (albeit not ‘high quality’) for inbound and outbound cyclists and pedestrians heading from and to Girton College, and for confident outbound cyclists heading up Girton Road, it provides no satisfactory route for young inbound cyclists coming from Girton Road; nor does it provide a satisfactory route for inbound or outbound pedestrians along Girton Road, because there is no safe route to get between the end of the Girton Road footpath and Bunker’s Hill. Girton Road and Huntingdon Road are both three lanes wide, and both are busy roads from 8 a.m. to 9 a.m.

The hundreds of pages of work that have been published for the North West Cambridge Transport Assessment include detailed consideration of traffic concerns in locations at some distance from the development, including, for example, proposals for increasing traffic calming on Oxford Road and Windsor Road to reduce rat-running problems there; but as far as I can see, no attention has been paid at all to a rat-run much closer to the site, along Thornton Road. Rat-running during the morning rush-hour often makes the road impassible to cyclists; and this is the main cycle route for children and parents cycling to the University of Cambridge Primary School from the north.

I have the gravest concern about the possibility of a tragic accident. Numerous near misses have already occurred.

These pressing safety concerns, and proposed solutions, are explained in more detail with diagrams, five short videos, and a written document, all available from the website

This website also contains the full text of a public petition to the University of Cambridge, Cambridge City Council, South Cambridgeshire District Council, and Cambridgeshire County Council. The petition calls on the University urgently (1) to amend the design of the Eddington Avenue / Huntingdon Road junction by adding two new pedestrian and cycle crossings across Huntingdon Road, eliminating the cycle-lane pinch-point, and widening the southern footpath, and to implement these improvements with the utmost speed; and (2) to amend the design of the Bunker’s Hill junction so as to ensure that all categories of pedestrian and cyclist have a direct, safe, and attractive route in both directions.

The petition has, between 24 October and 3 November, received 438 signatures, of which 142 are from members of the Regent House, graduates of the University, members of the Faculties, or persons in statu pupillari; and 26 are from other employees of the University.

We recognize that implementing these safety improvements will require additional expenditure, which is difficult in the current financial context; but lives are at risk. Accident statistics already show a cluster on Huntingdon Road, and three University members have been killed on Huntingdon Road in the last twenty years. The defective designs that are now being built, combined with the new demand for crossing Huntingdon Road, will surely lead to more injuries and deaths. I therefore ask the University Council to authorize contingency spending to address these urgent safety issues.


Mr R. J. Dowling (University Information Services):

Deputy Vice-Chancellor, members of the Regent House, I am Bob Dowling, with the University Information Services. For eight years I was also a member of Council, and that period included approving the bond that provided funds for the initial North West Cambridge development.

In my experience, Council works well and makes good decisions when provided with sound data in a timely fashion. Council’s Report, and the PricewaterhouseCoopers report especially, make it clear that it has not been receiving sound reports for much of the North West Cambridge project.

By design, the North West Cambridge project is financially insulated from the main University funds. This was a risk mitigation for precisely these circumstances. However, Council receives reports from other projects which are not so firmly separated. How many of these also have similar problems with communication, with unwelcome news being carefully spun? How much confidence can Council have in the other reports from the same people who so badly misreported the North West Cambridge project?

There are, I believe, a number of members of the North West Cambridge Syndicate who are either members of Council or who attend in an official capacity. And yet the Minutes suggest that in none of the reports to Council from one of them did the others interject that they did not think Council had fully grasped the seriousness of the situation. They are all equally culpable, not just the primary reporter.

Council and the Audit Committee are currently focusing on the urgent matter of the North West Cambridge project itself. However, they must not lose sight of the risk that over-rosy miscommunication is happening across the board, and not just for North West Cambridge. A programme of checks should be undertaken where reports that have come up to the top of the management chain are compared directly with the experiences of the workers at the bottom. Council could do worse than to start with the other reports by the people who were their representatives on the North West Cambridge Syndicate. Until that is done, I cannot see how Council can have confidence in anything they say.

Professor G. R. Evans (Emeritus Professor of Medieval Theology and Intellectual History):

Deputy Vice-Chancellor, ‘NWCD Phase 1: Lessons Learnt Report to the University, May 2015’. This appears in the list of documents considered by PricewaterhouseCoopers. See the link in the Reporter of 21 October.1 That list of ‘lessons’ should be published for the ‘University’ to read, for those emerging after the CAPSA crisis a decade and a half ago have manifestly not been ‘learnt’.

On that occasion, after a Discussion on a Topic of Concern held on 10 October 2000,2 a Review was commissioned.3 Among its conclusions, dated 2 November 2001,4 was that:

the University needs to adopt a more accountable culture where individuals can be held responsible for their actions (or inactions) and where committees are more questioning because they may be held responsible if their recommendations to higher bodies can be shown to have been arrived at without proper scrutiny.

Apparently this time it is the Syndicate which was not sufficiently ‘questioning’, though, looking at their Minutes, one might reasonably ask whether the Finance Committee, the Audit Committee, or the Council were sufficiently ‘questioning’ either, until their very recent panic-stricken meetings.

One may read in the Reporter the published Report of the Syndicate of December 2014. ‘The Syndicate has mobilised a design and construction team to deliver the first phase and realise the aspiration of the project.’5 ‘The project remains within the financial parameters set by the University.’6 ‘The project presently remains on budget.’7 Either members of the Syndicate realised costs and schedules were running out of control and chose to assure the Regent House otherwise. Or they remained conscientiously responsible for this vast and high-profile project but did not equip themselves with the skills and courage to ask for the information they needed to be reported to them clearly and in appropriate detail and then to press searching questions. Either way, one recognizes the pattern. Committees tend to become complaisant and in Cambridge the CAPSA recommendation just quoted remains unfulfilled. I have never understood why intellectual rigour and a combative spirit seem to desert academics when big questions arise in a committee-room. A change of that culture on the University’s committees is clearly needed.

What about ‘individuals’ being ‘held responsible for their actions (or inactions)’? The Audit Group now tells us that:

no single factor or individual is responsible for the projected cost overruns which were reported to the Finance Committee in July 2015. Instead, the forecast increases were due to a number of factors operating cumulatively.

But another CAPSA recommendation was that for the protection of a Vice-Chancellor a ‘formal reporting relationship’ should be established between the Registrary and the Vice-Chancellor. This:

would give the Vice-Chancellor a more direct role of intervention in any future CAPSA-like scenario, as might be necessary especially bearing in mind his responsibilities under the Financial Memorandum.

This time, we are told, the Vice-Chancellor was not made aware until summer 2015 of the scale of the mounting crisis which has now been revealed. At the Finance Committee meeting of 8 July:

The Vice-Chancellor expressed his ... concern about the governance and management structures that had led to this level of cost escalation without the earlier knowledge of the Finance Committee or other University officers and bodies. He and other senior officers and bodies had only been alerted to the problems within the last fortnight.8

But the Registrary is one of the ‘senior officers’ and also serves as a member of the Syndicate; surely he should not have been taken by surprise. How well has that ‘reporting relationship’ been working?

The Minutes of the Council on 13 July show discussion of the concerns then raised by the Finance Committee as outlined by Professor Sanders as Vice-Chancellor for Institutional Affairs and Vice-Chair of the Syndicate.9 So there was another ‘senior officer’ who cannot surely have been taken entirely by surprise if the Syndicate was doing its ‘questioning’ properly. Pro-Vice-Chancellors have a reporting requirement too, ‘to the Council through the Vice-Chancellor’ (Statute C III 15). If he really knew nothing the Vice-Chancellor could reasonably ask the Registrary and Professor Sanders why not.

Other members of the Syndicate are also Council members. At the meetings of the Syndicate surely someone ought to have asked the questions it is now recognized were never asked and demanded reports in sufficient detail in plain language? PricewaterhouseCoopers comments that the ‘reporting is difficult to understand’ and ‘the overall cost performance of the project is masked by internal budget transfers’. That obfuscation of the detail of what was happening is not easy to reconcile with the Audit Group’s concern that, ‘in order to avoid accusations that it is not sufficiently achieving consensus within the University, the project has had to burden itself by being overly consultative’. Yes the Regent House has been consulted on a number of occasions, but has it really been told everything it needed to know before giving its permission?

A decade and a half after CAPSA, when various adjustments have been made to the University’s governance following the recommendations of that Review, and the numbers employed in the UAS have expanded hugely, it is all happening again, with those fundamental lessons apparently not learned.

It is not the system, but the culture which needs reform: a culture of inadequate frankness in reporting; failure of committee members to ask awkward but necessary questions; and accountability of responsible persons where they fail to discharge their responsibilities. In the CAPSA review we read:

The internal and external auditors made significant comments to the University about systemic weaknesses in financial information systems and management accounting and specifically on points to do with the CAPSA project but no individual or committee was apparently accountable for ensuring that these comments were acted upon or refuted.

The Audit Committee Minutes regularly report the worrying findings of internal audits – on acceptance of donations, on the management of grants – to which must now be added the present PricewaterhouseCoopers fact-finding exercise. The audits are not published and are indeed likely to be treated as strictly confidential under the contract the University forms with the auditors, routinely Deloitte for such purposes. This PricewaterhouseCoopers report is, however, now in our hands and it may be timely to ask that other internal audits are published too.

This is not an afternoon for long speeches with so many hands raised, so I will end with a mention of the worrying admission that the University faces quite a bit of litigation. ‘Contractual claims [are] being made against the University by key contractors.’ Who should be held responsible for this additional very considerable potential financial and reputational risk?

Dr L. N. Drumright (Secretary of the Board of Scrutiny, Department of Medicine, and Hughes Hall):

Deputy Vice-Chancellor, I address you today in my role as the Secretary of the Board of Scrutiny.

North West Cambridge is the largest investment project of its type that the University has ever undertaken. There is little doubt that we will engage in projects of this magnitude in the future. It is therefore vital that we learn as much as we can from our experiences, both negative and positive. This will ensure that Phase 2 of North West Cambridge goes more smoothly, and that we have confidence in future large construction projects, and that they can be successfully maintained within the estimated limits of delivery in terms of time and costs.

The University’s reputation based on such projects is also important. The University of Cambridge is a world leader and as such it is very much in the public eye. The Vice-Chancellor is quoted on the North West Cambridge website, and I quote:

But because our global pre-eminence will be challenged both internationally and domestically, standing still is not an option. We must continue to adapt and develop.1

It is important that we grow, but also that we maintain our reputation within this growth. The North West Cambridge development has already been used as an Urban Development example at UCL;2 our external reputation will be measured in part by the success of this development.

Taking into account our external reputation and the need to grow and invest in large projects, the Board of Scrutiny recommends that clear policies and procedures are developed around the North West Cambridge project and future development projects; and that these are followed to ensure success.

The Board recognizes the support of audit processes in the development of these policies and procedures, and we are pleased that the Audit Committee is explicitly looking at governance issues in its second investigation. The Regent House will remember that the Board worked with the Audit Committee to commission the external review by Shattock and Finkelstein and the Board would be happy to participate in the second audit by electing one of its members to join the Audit Group for the North West Cambridge development.

There has already been much activity around the delays and additional costs of the North West Cambridge development. As we move forward, the Council must take effective steps so that Regent House can be confident that not only has the University extensively analysed the issues that have occurred, but that we have learned from these issues and changed our approach so that we can face future projects with confidence. Documentation on clear policies and procedures, as well as support from the Board in the next audit, would support movement in this direction.

Dr D. R. de Lacey (Faculty of Divinity):

Deputy Vice-Chancellor, I am here as a member of the University, though I should say that I am also a Parish Councillor and District Councillor for Girton – I need to keep reminding the University that half of this development lies in my Parish – and I am a member of the Joint Development Control Committee which determines the planning applications for North West Cambridge.

Most of the lessons ... are simple and it is well within the capacity of the University to learn and act on them. The lessons relate to clarity of responsibilities; well organized project management and technical processes; properly qualified and trained staff; unswerving strategic focus; careful control of external consultants; in depth scrutiny of project proposals.1

No, that is not from the PricewaterhouseCoopers report. It is from Professor Anthony Finkelstein’s report on CAPSA, published in the Reporter almost exactly fourteen years ago. There are many other such gems in the CAPSA reports,2 and it is clear that we have learned little about project management from that debacle. Why is this so? There are some vital lessons we need to learn – and learn quickly – to avoid another CAPSA.

First, another quotation from Finkelstein: ‘It should be remarked ... that continuity is vital to effective oversight.’3 So I read with trepidation the recommendation that ‘a Project Director should be appointed as soon as possible to lead the NWCD on a full-time basis.’4 The one thing we do not need at this stage is to lose all our corporate memory, as we did with CAPSA (another Lesson Not Learned). If the Project Director and Deputy Director are overworked (though the Audit Group offer no evidence that they are) then please let us release them from other responsibilities, rather than bringing in a neophyte, however big a hitter.

Second, we need to identify and follow the project management scheme being employed: we have a ‘professional team of third party project management’ (PwC report 1.1.7) but I see no reference to methodology. See again the capsa recommendations:5 we have clearly not yet tackled what Professor Shattock called ‘the grey area that lies at the interface between’ management and governance.

It is good to see the report tackle the issues of accountability and risk. On the former it is ironic that the report itself evades the issue by the common device of such reports – the use of passives. Just one example from Appendix 3 of the PwC report: ‘A decision was made in July 2014 to transfer some scope from Phase 2 Lot 2 into Phase 1’. Conveniently, the passive leaves us in the dark as to who made it. Of course the report writer may not know; but if forced to use the active voice the writer would at least become aware that there is an issue. I note wryly that I recommended in the Discussion of 2001 what I recommend again: it should be a requirement of reports that they never contain the passive voice.

On risk may I end with one which is not covered in this report. The metric of success must surely include a stable and contented community at the end of the project. Our concerns over governance of the process should not be an excuse to ignore the issue of governance of the community. As I understand it the University will be imposing a charge on residents for benefits which are commonly provided by local Councils – and for which, willy-nilly, the local Councils will be charging residents through their precepts. And because of the way the lots have been apportioned, next-door neighbours may discover to their surprise very large disparities in the facilities to which they are entitled. These are urgent issues, and I am grateful that the outgoing Pro-Vice-Chancellor agreed that discussion is needed. I invite his successor to begin a serious dialogue with the Councils involved.


Dr M. J. Franklin (Board of Scrutiny, Faculty of History, and Hughes Hall):

Deputy Vice-Chancellor, in financial terms the North West Cambridge project has barely begun, yet the acknowledged overspend is already many times the total lost as a consequence of CAPSA. Others have discussed what should be done regarding North West Cambridge itself, but if the £70m of overspend is not all to be entirely wasted, the University needs to make sure it learns from what went wrong. An internal appraisal can only do so much, so the Board feels that an external review should be commissioned, rather like that which was set up after the CAPSA debacle at the behest of the Board and the Audit Committee. The difficult question is when should such a review take place? For it to be effective, an external review clearly needs to be able to look into the site-wide infrastructure contract (SWIC), since that is where a number of the University’s woes evidently lie. But it would seem that the University’s lawyers are advising that nothing should be said concerning the SWIC in public until possible litigation has been concluded. There is clearly a balance to be struck between avoiding damaging our legal position, having a review that neglects the SWIC entirely, and leaving it too late for the results of the review to properly inform the remaining phases of the North West Cambridge project.

In any case, it is clear that an external set of eyes should again examine our governance processes, more than a decade after Shattock’s endeavours. In 2001, the Council accepted:

that the reports [drew] a number of significant conclusions, and [made] important recommendations about management responsibility and accountability, and the University’s corporate governance.1

Were the lessons of CAPSA effectively learned? Shattock endorsed the Wass principle of Cambridge remaining ‘a self-governing community of scholars’ for the continuance of ‘the high quality of the University’s academic work’,2 and so should this review.


Mr G. Chesterman (Careers Service and St Edmund’s College):

Deputy Vice-Chancellor, I speak in my capacity as Director of the Careers Service, assisting our students, researchers, and postdoctoral research staff to develop their career in academia and research.

The mission of the University of Cambridge is to contribute to society through the pursuit of education, learning, and research at the highest international levels of excellence. To maintain this highest international level of excellence in research we need to attract and retain the world’s best researchers.

The North West Cambridge Masterplan and Council recognize this as a priority and, quoting from the North West Cambridge website:

[T]he University needs to address the issues of the lack of affordable accommodation for its staff and postgraduate students...With high house prices and high rents in Cambridge, we need to provide new affordable accommodation for postgraduates and staff.

Over the next twenty-five years it is projected an additional 3,000 staff, earning academic salaries, will need to be housed in Cambridge. Half of the planned 3,000 homes are currently allocated for key workers.

The real threat, in trying to rectify this cost over-run, and ensure the project sustains itself financially – another priority of the Council – is that plans for affordable housing may be significantly reduced or delayed. It is too tempting for affordable housing to become commercial housing, generating short-term windfall income for the University. Were affordable, key worker housing sacrificed, our global standing in research would suffer: at a far greater reputational and financial cost to the University in the long term.

So, speaking on behalf of the researchers we must attract in the future, many of whom have probably not even started at secondary school yet, the Council must protect the quantity and quality of affordable housing planned for North West Cambridge.

Dr S. M. Oosthuizen (University Council, Institute of Continuing Education, and Wolfson College), read by the Senior Proctor:

Deputy Vice-Chancellor, I am in my second term as an elected representative of the Regent House on the University Council, having previously served on the Board of Scrutiny.

I supported and continue to support the North West Cambridge development. It has, as the Audit Committee notes, a compelling rationale. The financial analyses that were presented to Council in the meetings during which it moved from outline to firm proposal were lengthy and detailed, as were the ensuing discussions, and allowed us to make an informed decision in adopting the proposal. It is reassuring that both the University’s Director of Finance and the Audit Committee regard the project as remaining on target overall.

The Audit Committee’s report pulls no punches. Its credibility is based on the clarity and detail with which it described and analyses the processes leading to the cost over-runs and I suport the recommendations that it makes.

The Audit Committee’s report is a demonstration that our governance structures still work effectively. Yet the second part of the Committee’s work – ‘a more considered and in-depth assessment of the governance and delivery arrangements’ – may have important implications for the future of our governance structures more generally. This is because the history of reporting to the Syndicate, governance of the Syndicate, and reporting from the Syndicate to the Council, is a case-study of the tension between operation-focused management and administration on the one hand and, on the other, the principles of transparency and accountability in decisions made collectively by consensus that are embodied in the incorporation of Chancellor, Masters, and Scholars in a self-governing community.

I hope that the second part of the Audit Committee’s report will also come to the Regent House for discussion.

Dr S. J. Cowley (Faculty of Mathematics), read by the Senior Proctor:

Deputy Vice-Chancellor, for eight years until December 2014, I was a member of the Council, and I was one of two members to have signed the six most recent Reports on North West Cambridge (NWC).1 If the development of NWC is not going to plan, and the difficulties were foreseeable and/or a matter of governance, then I hold some culpability.

Others will presumably address the important issues of how to mitigate the current mess, and how to ensure that matters do not reoccur (although a quick reread of the CAPSA reports would fix much). I will concentrate on what I knew, what I should have known, and lessons that might be learnt.

I was first made aware of the current concerns over NWC at the end of July, when a current member of the Council contacted me asking ‘what did I know and when did I know it’. Unfortunately, the answer was little and intermittently.

More specifically, at the 21 October 2013 Council meeting, it was reported that the:

project presently remains on budget although the remaining contingency at approximately 6.5% of build cost and fees is lower than that which would ideally remain in place at this stage of the project.

In reply to a question that I asked (but which was unminuted), about what would happen if the contingency was exhausted, the Minutes record the Pro-Vice-Chancellor for Institutional Affairs reporting that:

The Syndicate was mindful of the need to remain within the overall budget for the project; ... . If the current contingency in this regard was insufficient to ensure the design integrity of the project into the future, it might be necessary for the Syndicate to make a case to the Finance Committee. At present, the Syndicate was successfully managing the tension between design imperatives and aspirations on the one hand and financial risks on the other.

I took the reply at face value: that the project was on budget and that the Finance Committee (and thence the Council, etc.), would be informed of difficulties in good time. I was mistaken.

Just before my term on the Council ended, the Minutes of the Council of 24 November 2014 record that:

The Pro-Vice-Chancellor for Institutional Affairs reported. Phase 1 of the development was on time and on budget; ... .

Whether this statement was technically correct in an accounting sense can be argued about (my sums below suggest a £23.6m hole at minimum). Again I was gullible enough to take it at face value, but I was not the only one. A far more experienced member of the Council emailed me last week stating ‘I am not exactly innocent of money and funding and there was nothing I can recall hearing that made me twitch about North West Cambridge’.

However, there were tell-tale signs that I missed. The PricewaterhouseCoopers (PwC) report is enlightening, particularly Appendix A3. However, first some clarity is needed as to how inflation was to be taken into account. The Report seeking authority to commence development of University land at North West Cambridge (published on 24 October 2012) stated

Income and inflation forecasts have been based on advice from external parties, who themselves have been required to evidence, as far as is possible, their assumptions based on market data and historic trends.


a substantial financial contingency (over £40m for Phase 1) has been included.

I took, and still take, this to mean that any unanticipated inflation should come out of the contingency. Appendix A3 shows that if one includes unanticipated inflationary costs, but excludes ‘scope transfer’ (which was the subject of a Report to the Regent House on 29 September 2014) then the total construction cost had increased by £34.5m to July 2013, by £58.1m to July 2014, and by £121.1m to July 2015. Paragraph 2.1.2 of the PwC report indicates that there was originally, in October 2012, a development contingency of £34m, with £0.5m allowed for unanticipated inflation. By my sums that means that: (i) within eight months of the Report giving the green light, and seven months after approval of the Grace, the development/inflation contingency had been exhausted; and (ii) that the true hole is not the rather fuzzy over-run of ‘between £49m and £76m’ as reported to the Finance Committee in July 2015, but £86.6m. On working this out I had a sleepless night. Inter alia, I had missed:

the extent of the exhausted contingency in October 2013, and had been too willing to believe the aforementioned answer to my question; and

the fact that the £17.6m increase in the allowance for inflation costs approved by the Finance Committee in July 2014, should in fact have come out of the (exhausted) contingency.

For being naïve, and believing the spin, I apologize. However, there is clearly a serious reporting issue. The Syndicate, Finance Committee, and Council were not provided with an adequate basis for challenging the positive picture being put forward (for example, ‘while warning signs were reported to the Syndicate, the Syndicate did not receive sufficient financial analysis to enable it to understand the full implications of those indicators’). Hence, while it may be true that there were no deliberate attempts to mislead or misinform (a point made at the Audit Committee on 8 October 2015), to my mind if the actions were not deliberate, they were grossly incompetent. There should be consequences.

However, the members of the Syndicate are not blameless, even if they were kept largely in the dark. The Report setting up the Syndicate stated:

The Syndicate would act as a ‘board’ for those with responsibility for delivering the project and managing the estate, and would establish procedures and systems for the long-term financial and development arrangements for the site. A model that provides significant delegated powers of this kind to a Syndicate would be paramount in ensuring the success of the project. A clear organizational structure providing clarity about where managerial responsibilities and strategic oversight lie is essential to minimize risk. … These objectives can best be provided by establishing a Syndicate with the independence to make decisions purposefully and with authority within the framework agreed by the University through the master plan and the conditions attaching to it.

Specifically, the Syndicate’s Regulations state:

4. ... the Syndicate shall be responsible for:

(i)the management, development, and stewardship of the North West Cambridge Estate ...

5. Subject to the restrictions set out in Regulations 4, 6, and 7, the Syndicate shall be authorized to exercise in the name of the University in relation to the affairs of the Syndicate all the powers of the University, ...

Further, as noted in the Audit Committee Minutes of 8 October 2015, the ‘Syndicate had been set up ... to run the project as if it were a business’. Yet we read in the PwC report that there is:

... an apparent lack of clarity within the membership of the Syndicate as to its responsibilities, with some members stating that they see the role of the Syndicate as of an advisory nature and others stating that the Syndicate is responsible for delivering the project within the parameters set by the University.

What is unclear about ‘management, development, and stewardship’? Where is the word ‘advisory’ in the Syndicate’s regulations? What is depressing is that it was either the Chair or the Deputy Chair who thought that the role was advisory (the Regent House ought to know which one). There was deliberate overlap between the Council and those who attend the Council (for example, the Registrary, who provides advice to the Council, such as on the constitution of the Syndicate) and the Syndicate to ensure that the responsibilities were understood. One of the key roles of the Syndicate was to keep the project within budget. It singly failed to do this. Inter alia, PwC noted that ‘the development contingency was not adequately defined and controls were not put in place to manage it’ and ‘it is not normal practice for contingencies to be used to fund significant design and quality enhancements’. Why didn’t the members of the Syndicate get a grip? There should be consequences.

As a side point, what I find ironic, and infuriating, is that two members of the Syndicate repeatedly argued (on the basis of lack of funds) against my reasoned case for increased contributions to USS, when in fact it turns out that they were incapable themselves of keeping track of significant sums of the University’s resources.

Next, PwC note that the ‘project leadership and oversight arrangements are inadequate for a project of the scale and complexity of the NWCD and there is insufficient capacity and accountability’. Why? Because in April 2013 the Project Director transitioned into an expanded role within the University, continuing to act as a Director for the project on a part-time basis of approximately one day per week. As PwC also note, the transition took place when the project was in its early stages, ‘which is widely considered to be one of the most critical of any major project’. Why did this happen? I do not know the details, and I believe that the only substantive discussion that took place at the Council was when the issue of remuneration was raised. As the reserved Minutes of 17 June 2013 record:

Following a long and detailed discussion, the Council agreed as follows: …

To endorse the Remuneration Committee’s recommendation concerning the salary arrangements for the post of Director of Estate Strategy ...

Little else is recorded of the ‘long and detailed discussion’. My memory is that the Registrary assured the Council that Roger Taylor could do both jobs given that the critical initial stages of NWC were coming to an end. This illustrates another problem. As I noted in June during the Discussion of external finance for certain building projects, including North West Cambridge and the non-operational estate, often nothing is ever Minuted in sufficient detail. When I first joined the Council I tried to get this corrected, but I was eventually beaten down, with the consequence of this inadequate Minute. Full and accurate Minutes of what was said (rather than what some hope might have been said) are a good way of enforcing accountability; indeed, why not record Council meetings? The Audit Group should address this issue, as well as ensuring that there are consequences for the above decision.

However, it is not just Council Minutes where there is spin. The Audit Committee Minutes of 8 October 2015 record:

It was not the case that £70m would be lost; instead the project’s IRR (Internal Rate of Return) would potentially be reduced from 6.5% to under 6%.

I have trouble with this. Compared with earlier projections, the University is going to be worse off by (choose one of) £49m, £70m, £76m, or my figure of £87m. This means that money will not be there that would otherwise have been available to the University (for example by a transfer from the Syndicate); money that could have been used for, say, twenty to thirty endowed Chairs, or one-third of a new Cavendish, or one-tenth of a new engineering department, or ... I could go on. Some may say that the Norwegian Blue in a famous sketch was pining for the fjords or stunned, and some in Cambridge may view that the NWC money was never going to be there in the first place, but in my parlance it is lost, and some of the opportunities it was going to fund will also be lost.

I could go on, since there are many other pertinent points that could be made (but whoever is reading this is going to have trouble fitting it into fifteen minutes already). For instance, similar mistakes to CAPSA have again occurred, except that this time the numbers are larger. Again there has been no clarity as to who was in charge, and where the buck stops (it took the Syndicate until April 2015 to realize this). Similarly, as with CAPSA, there have been problems with the contracts (although one has to read the reports carefully to realize that, no doubt for reasons of litigation). Further, as noted by the Audit Group, ‘extensive due diligence in respect of new recruits will be essential’; presumably code for the fact that some appointments were nowhere near the right calibre, and possibly even known to be so. Indeed, my experience suggests that the problem with appointments extends far beyond NWC, and that the recent change to the composition of the Standing Appointments Committee is at best irrelevant.

I will finish with a recommendation to the Audit Group: read the 2015 Cambridge-McKinsey Risk Prize winning essay: The creation of the Contrarian Director and their role in achieving workable board independence and better risk oversight. Aspects of our governance are failing because not enough members of committees are willing to ask awkward questions, and when they do some of those charged with answering them do not treat the questions, or the questioners, with sufficient respect. Much of what was put in place for NWC should have worked; it did not because the culture was wrong and at least some of those in senior positions did not respect the checks and balances, possibly thinking that they knew better. Maybe some of these should leave the Vice-Chancellor a note along the lines of ‘I am just going outside and may be some time’.


Professor P. M. Allmendinger (Professor of Land Economy and Head of the School of the Humanities and Social Sciences, and Clare College), read by the Senior Proctor:

Deputy Vice-Chancellor, I am the Professor of Land Economy and Head of the School of the Humanities and Social Sciences. In addition I am also a member of the Royal Institution of Chartered Surveyors and the Royal Town Planning Institute. My professional and academic backgrounds are in development and planning.

Before I turn to the Audit Group’s report on Phase 1 of the North West Cambridge Development, I would like to make a few broader observations. First, let me say that the decision to proceed with North West Cambridge was bold and far-sighted. Affordable housing is the University’s Achilles heel. The future of Cambridge is dependent upon attracting and retaining the best students, researchers, and academics from around the globe. At present the availability and affordability of housing is a major barrier to our future. That Cambridge has sought to begin to address this issue is looked upon with envy from our competitors. This level of long-term partnership with the City and the sub-region is a key part of the motivation for those firms and others wishing to relocate and be part of Cambridge’s future. Whilst the North West Cambridge development will not on its own solve the problem of housing affordability it is a significant step in the right direction.

Second, the initial decision to develop North West Cambridge as a high-quality, urban extension at the highest levels of sustainability and community cohesion, including the decision to run the primary school, was the right one. Too many modern developments are simply housing estates, added on to unwilling settlements and never to be fully integrated. The underlying principle of integration and inclusion into the City distinguishes North West Cambridge and was, I believe, part of the reason why the local authorities were so supportive and why so few objections were received to the proposals.

This leads me onto my third point. In planning and development terms the process for gathering support for North West Cambridge stands out and has attracted a good deal of attention nationally and internationally. Touching briefly upon one of the Audit Group’s observations about the difference between the approach of the University and a ‘commercially-orientated operator’ I would point out that a commercially-orientated operator would not have put anything like the time and effort into developing a consensus with the internal and external major stakeholders going forward. Many major development schemes are characterized by stand-offs and legal challenges. I can think of no other major development on the edge of an historic city in the Green Belt that has been so readily accepted by the community and the local authorities. The deal that was struck with the local authorities as part of planning permission is testament to the belief that North West Cambridge was not simply a housing development, but part and parcel of the future of the University and the City.

Turning now to the Audit Group’s report itself. I will not attempt to engage with their analysis and recommendations on a point-by-point basis. The recommendations seem sensible and I have not been directly involved in North West Cambridge so cannot comment on the detail. However, I will say that cost over-runs, insufficient detail on which to base development appraisals and budgets, and design changes are characteristic of developments in general. It is also the case that many of the costs around design, green technology, and infrastructure are externally driven and expectations are rising. As the Audit Group say, the situation with North West Cambridge is not uncommon with equivalent projects of its scale and complexity.

Whilst with hindsight we may have approached the management of the North West Cambridge Development differently, the University’s approach to Estates has improved markedly in recent years. The Estates Strategy Committee, the project boards for the University’s major sites, and the improvement in the attitude and engagement of Estate Management are all moves in the right direction towards creating a much clearer, transparent, and cost-efficient approach. The University’s ambitious though necessary estates development plan demands nothing less. Yet there is more to be done, particularly on balancing academic demands and institutional needs in going forward and in making sure that we develop the future space we need to meet our ambitions. Recent initiatives by the Pro-Vice-Chancellor for Education on future teaching needs, the University Librarian on the future of the library service, and Office of Postdoctoral Affairs on researcher space and integration mean that we are better placed to do that.

Deputy Vice-Chancellor, the Audit Group’s report makes a number of common-sense proposals. However, it is important that whilst we should not be complacent neither should we over-react. All major development schemes are a learning process. As an institution we are in a far better place to take forward North West Cambridge and other major development and redevelopment schemes than when we started on this endeavour. I would entirely endorse the Audit Group’s conclusion that it has seen nothing that challenges the original compelling rationale for promoting the development of North West Cambridge.

Professor C. Abell (Director of Postdoctoral Affairs, Department of Chemistry, and Christ’s College), read by the Senior Proctor:

I am speaking in my role as Director of Postdoctoral Affairs. The Office of Postdoctoral Affairs has an ambitious agenda that spans the whole life cycle of the postdoctoral experience. North West Cambridge is a key component in our vision. By 2017 it will provide affordable accommodation for over 600 postdoctoral researchers and their families, effectively tripling the University provision to this community. This accommodation will be in an attractive setting, adjacent to shopping, nursery, community centre, and an infant school. It will enable us to be much more welcoming to researchers new to Cambridge, and provide a vibrant community for them to join. It is so much more than we presently offer! It is also an enormously exciting social experiment. The scale and ambition are appropriate to the need; indeed, with over 4,000 postdocs we need the subsequent phases of the development to continue apace.

I believe the North West Cambridge project cannot be viewed in isolation. It represents a bold and rational step in the refocusing of significant parts of the University to the west of the City. Indeed there will be real benefits to West Cambridge from the proximity of this development and its associated amenities.

While acknowledging the difficulties of dealing with a project on this scale, I want to thank the team that have engaged with us and our vision for postdocs. Having visited universities in many countries, I know that what we are planning is world-leading, and will make us an even more attractive destination for the very best postdoctoral researchers.

Professor D. J. Maskell (Senior Pro-Vice-Chancellor for Planning and Resources, and Wolfson College), read by the Senior Proctor:

Deputy Vice-Chancellor, I am speaking today as a member of the Audit Group formed to investigate the projected cost over-runs on Phase 1 of the North West Cambridge Development. I also took up office as the Senior Pro-Vice-Chancellor (Planning and Resources) on August 1st, only a few days after the July Finance Committee meeting where these projected over-runs were first officially reported. Previously I was Head of the School of the Biological Sciences and before that Head of the Department of Veterinary Medicine at the West Cambridge campus. I therefore have many reasons for speaking at this Discussion.

To be clear, I strongly support the North West Cambridge Development. There is a clear need for key worker and inexpensive housing to make sure that we can continue to attract people to work for the University; a need that will only get more acute in the future as the City continues to develop. At the September meeting of Council it was advised that current estimates show that market rent in Cambridge for postdoctoral researchers is of the order of 60 per cent of their net income, with an even worse outlook for assistant staff. This is not only unacceptable for the staff concerned, it is also likely to be detrimental to the University’s ability to recruit and retain the best people, and is likely therefore to impact seriously on our competitiveness. Phase 1 of the development provides accommodation for postgraduate students and postdoctoral workers, as well as key worker housing, and this is being achieved by developing a new quarter of the City, with a new primary school (already open), a community centre, a supermarket, a hotel, and not least a cricket pitch.

We would have to have dealt with this problem sooner rather than later, and indeed there is an argument to support the idea that spending some of our financial reserves on funding such a development would have been an entirely appropriate use of our funds.

But we did not have to dip into our precious endowment, because there were better ways to fund a long-term development such as this. Taking advantage of our ability to borrow money in the form of a bond issue at a low rate of interest, then lending money internally to the project to fund the development, removes the endowment from the equation.

The current matter of concern was triggered by the report to the Finance Committee in July 2015 that indicated that projections for the finances of the development, as it was then configured, suggested that its Peak Borrowing Requirement (PBR) would be exceeded. The PBR was originally set at £250m in the Report of the Council seeking authority to commence development of University land at North West Cambridge (22 October 2012). Subsequently, by Grace 1 of 29 October 2014, this was reset at £311m with short-term extension to £320m to take advantage of value-adding opportunities. It is important to understand that PBR is one of a number of possible financial parameters by which to measure the progress of a development such as this, and it is not a budget. Nevertheless, a projection that indicated that the agreed PBR might be exceeded should, and did, cause major alarms to sound, and engendered considerable work to be undertaken to ensure that the development could be brought closer to the financial parameters proposed by the Finance Committee.

Why was it that the PBR was likely to be exceeded? There were essentially two reasons. First, there have been problems with the site-wide infrastructure works, and second, building costs in the Cambridge area are inflating rapidly and above our earlier assumptions. Delays caused by the infrastructure over-runs have knock-on effects on developing the various building lots, and thus the effects of building costs inflation are exacerbated. Detail about these issues is provided in the Audit Group report and the independent report provided by PricewaterhouseCoopers, which have been presented to Finance Committee and Audit Committee, and accepted by Council, and are now available for members of the Regent House to read.

Both of these reports are clear that there is no individual blame to be apportioned for this projected cost over-run, but it is clear that there are elements of process that could have been done better. Detailed recommendations about these are to be found in the Audit Group report and these are already being acted on. For example, a dedicated Chief Financial Officer for the project is being appointed, and a full-time Project Director, to take overall executive control, is being sought. A preliminary re-baselining of the project’s finances has already been done, and a full re-baselining exercise is to be completed early in 2016, if not before. These already indicate that, while PBR is still likely marginally to exceed the £320m limit, other parameters remain strong. For example, the Internal Rate of Return (IRR) for the project remains around the 6 per cent mark, which is a long way in excess of the 4.25 per cent interest being charged by the University to the project, and the 3.75 per cent that the University is paying as interest on the bond. The Net Present Value of the project is currently calculated to be around the £100m mark. These are very healthy values for a development of this nature.

It is important to recognize that this kind of over-run and re-baselining is common in development projects of this size and complexity. The development remains broadly on track financially and in terms of delivering the strategic aims of the University. It should also not be forgotten that this development will provide the University with a considerable long-term income stream. The overall long-run financial return on this investment will be attractive, while the social return and benefit to our employees, and to the competitive health of the University, will be immense.

I would also like to note that Phase 2 of the North West Cambridge development is an important and integral part of the whole, and while it was right to pause the process for bringing this forward while the Audit Group investigation was undertaken, it is also right that once the recommendations of the Audit Group have been acted upon, we should press on with Phase 2 sooner rather than later.

Finally, what has happened here raises issues of how governance of these kinds of project should be effected within our University’s overall system of governance. This is a weighty and complex issue, consideration of which the Audit Group is about to embark upon in the second part of its enquiry. The Council expects to receive the Audit Group’s second report by the end of the year.

Mr D. J. Goode (Senior Proctor, Faculty of Divinity, and Wolfson College):

Deputy Vice-Chancellor, I am the Senior Proctor and, ex officio, a member of the Board of Scrutiny, and it is in a personal capacity, as a member of that Board, that I speak today, uncapped.

For most members of the Regent House, what we are discussing today will have come as a bolt out of the blue, and it is important that the Regent House does not lose its focus here.

Yes, there are financial problems with the North West Cambridge project. The cost of Phase 1 is projected to over-run, possibly by as much as £76m, which is serious. There have been some changes to Lot 5, and there are disputes with key contractors which may well have financial consequences. All of these are risks that are more or less inevitable in such a large construction project.

But these problems are only the symptoms, they are not the disease, and it is vitally important that the Regent House does not get distracted by a few tens of millions of pounds of over-run, or possible peak borrowing breaches, or NPVs, or IRRs, each of which is a problem, but none of which is the problem.

The latter part of the PwC report is key, especially sections 3 and 4, and the second part of the Audit Group’s report, which I await with anticipation, will concentrate on governance and delivery, and it is only by picking away at these that we will get to the real cause of the problems.

The PwC report identifies four issues that it believes to be direct contributors to the project’s present state:

Project setup and planning: Phase 1 of the project was given authority to proceed but its performance criteria were not defined and vital inputs and controls were not sufficiently mature;

Project leadership and oversight: The project leadership and oversight arrangements are inadequate for a project of the scale and complexity of the North West Cambridge Development and there is insufficient capacity and accountability;

Risk management: Risk management practises are not sufficiently robust and lack quantification to allow effective prioritization and intervention; and

Cost reporting: The cost reporting regime does not provide a clear view of the project’s financial performance and the range of potential outcomes.

If the Regent House’s jaw was not already on the floor at the start of this Discussion, then I am sure it is now.

And that is just the overview. Scratch the surface a little, and we read that the Audit Group found that, for example:

While warning signs were reported to the Syndicate, the Syndicate did not receive sufficient financial analysis to enable it to understand the full implications of those indicators. The reporting provided by the executive team up to the Syndicate is remarkably brief in financial content and spends insufficient time on trends, risks, forecast, and tracking change versus base budget/business case. In particular, it is highly unusual for there not to be comparisons of actual spend against budget for each constituent part of the project...


...the executive reports supplied to the Syndicate have been inclined on occasion to display ‘optimism bias’, which leads to problems being downplayed where the project team is aware of them but confident or hopeful that they will eventually be resolved. This is a common tendency in many construction projects. However, in this instance, the poor or inconsistent presentation of financial information and the absence of a complete set of performance metrics (which by their nature limit optimism bias) has meant that the Syndicate has not been provided with an adequate basis for challenging the positive picture being put forward.

At the risk of oversimplifying, it looks as though the North West Cambridge project was not planned and set up properly, led by an executive team that was not all full-time and was without sufficient accountability, which did not manage risks properly, and whose reporting was so poor as to misinform a Syndicate which was itself unsure about its own role, and a majority of which has absolutely no experience whatsoever of large building projects.

Clearly, we cannot halt the North West Cambridge project. That would be an act of madness. We are as committed to it reputationally as we are financially, and we need to deliver it.

Council has agreed to apply a few financial sticking plasters, which should enable us to begin to get North West Cambridge back on some sort of track. But, as I said earlier, treating the symptoms is one thing, treating the disease is quite another. The Regent House needs to ask some awkward questions:

Is the West and North West Cambridge Estates Syndicate fit for purpose?

Is the North West Cambridge Development executive team fit for purpose?

Council has also agreed some reforms to both bodies, but if those reforms prove to be just another layer of sticking plaster, then the Regent House will need to look at more radical solutions, beginning with the question: is it any longer possible to have confidence in either?