Research: Value for Money (VfM) Study on the Governance and Budgeting Arrangements for Mega Projects

Why It Matters

Accurate cost data and a tailored governance framework are critical for preventing overruns and ensuring taxpayer money is spent efficiently on large‑scale infrastructure.

Key Takeaways

• HS2 cost correction reduces 2019 estimate by £4.4 bn (~$5.5 bn)
• OVfM study proposes bespoke governance model for future mega projects
• New funding framework aims to align budgeting with project risk
• Findings published June 2025, updated April 2026 with error fix
• Report uses DfT data; error had no material impact

Pulse Analysis

The Office for Value for Money (OVfM) has tackled a long‑standing challenge in the UK: aligning the governance and budgeting of mega‑infrastructure projects with true value for money. By partnering with key government departments, the study delivers a comprehensive review of existing practices and proposes a bespoke approach that blends risk‑adjusted funding with stronger oversight mechanisms. This shift reflects a broader trend among advanced economies to tighten fiscal discipline on large‑scale builds, where cost overruns can jeopardize public confidence and fiscal stability.

Central to the new framework is a flexible funding model that ties capital allocation directly to project risk profiles and performance milestones. Rather than relying on static, legacy budgeting processes, the OVfM recommendation encourages dynamic re‑forecasting and real‑time governance dashboards. Such tools enable ministries, like the Department for Transport, to intervene early when cost trajectories deviate from plan, reducing the likelihood of surprise overruns. The approach also embeds clearer accountability lines, ensuring that project sponsors and contractors share responsibility for meeting budgetary targets.

The study’s most visible amendment concerns the High Speed 2 (HS2) programme, where a mis‑indexed cost figure inflated the 2019‑price estimate by £4.4 bn (approximately $5.5 bn). Correcting the figure to £26.8 bn (about $33.5 bn) underscores the importance of rigorous data validation in public‑sector finance. While OVfM notes the error did not alter the study’s overall conclusions, it serves as a cautionary example of how even presentation errors can skew policy debates. By establishing more transparent cost‑tracking and governance standards, the OVfM study aims to set a new benchmark for mega‑project delivery, offering policymakers a roadmap to safeguard public funds while still pursuing ambitious infrastructure goals.