HS2 must start by March to avoid serious cost rises

Aaron Morby 4 years ago

The Government’s spending watchdog has warned that any further delays in taking a decision on HS2 will dramatically impact on forecast construction costs.

Contractrors must start main works before the end of March to avoid further significant delays and cost rises
Contractrors must start main works before the end of March to avoid further significant delays and cost rises

An investigation into the HS2 project by the National Audit Office said the £30bn cost envelope for phase one is now more bolted down, but raised concern that costs for phase two were more uncertain.

Since April 2017, the forecast cost of phase one main civils has jumped 85% to £10.7bn.

Auditors have warned that any delays beyond March will dramatically increase costs on the project’s second phase.

If work does not begin by this date, the schedule may be delayed or compressed further because some of the construction work can only be done at certain times of the year.

Delays would also compress later parts of the programme, such as integrating the signalling and control systems, which are complex and risky parts of delivering the project on time and budget.

Auditors revealed that shifting the risks on targeted construction costs has saved £1bn through contractors reducing prices in response to the reduced risks.

The report says that HS2 revisions to its commercial approach were sensible but carried risks that it must manage.

Under new arrangements, contractors will no longer be liable for cost increases above a fixed target price.

Instead, HS2 has developed an estimated cost for the works with its contractors that will leave HS2  responsible for funding increases above the estimated cost, while contractors would lose a proportion of their fee for building the railway if they fail to meet cost and schedule milestones.

The NAO said that HS2 must now develop its capability to manage the programme to avoid further cost rises.

The report said: “We welcome the increased realism on the estimated cost and schedule for the programme. However, significant risks remain.

“While the estimated cost and schedule for Phase One are now on a stronger footing, the challenge of getting Phase One into construction, and of monitoring and managing the programme as it progresses, is considerable.”

Phase Two is at a far earlier stage of development with many important decisions to be made before HS2 Ltd and the Department can improve cost and schedule estimates.

HS2 has purchased 66% of the land required to build Phase One and has spent £7.4bn in preparations to start.

The full project cost now sits between £65bn and £88bn (2015 prices), between 17% and 58% more than the available funding of £56bn agreed.

Welcoming the report, HS2 said: “As the NAO recognises, our work – along with a greater understanding of the ground conditions and build requirements – means Ministers have robust cost estimates for Phase One of the HS2 project.”

The High Speed Rail Group made up of contractors and suppliers, said:  “If the Government want to fulfil their promise of an infrastructure revolution, HS2 must be completed in full, without further dither and delay.

“The alternatives spoken of are many years behind HS2 in terms of readiness to begin work and some, like Northern Powerhouse Rail, require HS2 to be delivered to realise their full benefits.”

Robert Nisbet, director of nations and regions at the Rail Delivery Group, which represents train operators and Network Rail said: “It’s time to inject some realism into the debate about HS2.

“There are no shovel ready alternatives. To cancel it would be to worsen punctuality and overcrowding on the railway for years to come, throttling future economic growth and damaging the environment by encouraging car travel.”

Latest news

Lonsdale went down owing £65m to supply chain

More than 600 firms owed money as reduced credit rating sinks M&E giant
2 days ago

Wates only bidder for £80m Cardiff estate rebuild

Council contacted 20 framework firms but received only one bid for 295-home Channel View estate rebuild
2 days ago

£21m legal battle over flawed concrete at Salford flats job

Developer in compensation battle with Arcadis after new concrete core demolished
2 days ago

Abu Dhabi developer Aldar Properties buys London Square

UAE giant swoops on resi specialist in vote of confidence for London market
2 days ago

Hunt for delivery partner to revive New Hospital Programme

Programme delivery partner to get £600m fee to get plans back on track
2 days ago

Green light for new £780m Essex garden village

3,700 homes and four new schools to be built at Dunton Hills
2 days ago

Laing O’Rourke makes a £288m loss

Rampant inflation on fixed-price jobs and problem contracts blow hole in accounts
3 days ago

Keltbray, OCU and Clancy clinch £1bn electricity network upgrade

Scottish and Southern Electricity Networks awards biggest ever deals for central southern England
3 days ago

G&T enlisted for commercial review of HS2 main civils contracts

Phase 1 Main Works Civils Contracts to come under cost scrutiny
3 days ago

TClarke order books doubles to top £1bn for first time

M&E specialist on track to exceed £500m turnover this year
3 days ago

Wates signs Government safety remediation pact

Private builder belatedly signs fire safety developer remediation contract
3 days ago

Liverpool all-electric industrial park approved

McLaren and Caddick in chase for Sefton 800,000 sq ft Atlantic Park scheme
3 days ago

Former Buckingham Group MD to join John F Hunt

Simon Hyams is new Managing Director for Contracting
3 days ago

Three in race for retendered £150m A9 dualling job

Bidders take another look after client takes on more risk
4 days ago

Clancy tops £300m revenue in fifth year of growth

Civils contractor delivers £13.5m pre-tax from water and energy sector work
4 days ago

Tower crane collapses on Edinburgh resi site

Jib falls onto apartment block under construction: Video
4 days ago

Salboy drops office space from Viadux Phase Two

Developer to focus on Manchester residential towers of 76 and 23 storeys
4 days ago

Warwick Uni plan for science and engineering campus

370,000 sq ft science and engineering precinct submitted for planning
4 days ago

Morgan Sindall chalks up Greater Manchester schools treble

Bury, Stockport and Wythenshawe school jobs will create 1,600 pupil places
4 days ago

Plans in for £65m Blackpool multiversity campus

Council leads plan for Talbot Gateway learning campus
4 days ago

Laing O’Rourke wins first phase of £700m Oxford R&D district

Landmark Red Hall and two labs to be built in phase 1a of Oxford North scheme
5 days ago

Ardmore wins retrofit deal on £200m Chancery Lane office

Building will be transformed to provide 105,637 sq ft of office space
5 days ago

Construction’s “Leading Lights” recognised

More than 50 winners in latest Considerate Constructors Scheme awards
5 days ago

Balfour Beatty clinches £20m Norfolk coastal defence jobs

Firm will install rock armour at Cromer and Mundesley
5 days ago

Architects join construction union Unite

Section of Architectural Workers forms official branch
5 days ago

Boot to build £20m lightweight aviation composites factory

Work starts on Sheffield University's COMPASS R&D facility
5 days ago

GMI secures £27m Leeds City College job

Site clearance underway for new Mabgate campus
5 days ago

Balfour signs deal with Koreans for UK power transmission jobs

Contractor strengthens large-scale onshore power transmission capability
6 days ago

36 storey south London build to rent flats tower approved

Construction to start next year on £220m Croydon scheme
6 days ago

Hunt for firms for £400m volumetric offsite deal

Procurement for Housing aims to expand its pool of firms on major offsite framework
6 days ago

Contractor services