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HS2 cost and schedule concerns raised in new report

Hs2 2by3

The planned opening date for phase one of High Speed 2 (HS2) is at risk due to mounting cost and schedule pressures, according to a report published today by public spending watchdog the National Audit Office (NAO).

The report has raised concerns about the scheduled 2026 opening date for phase one, despite positive progress withthe procurement of some major aspects of the project.

According to the report, the schedule set by the Department for Transport (DfT) for HS2 Ltd’s delivery of the project was too ambitious. This follows concerns raised in 2013 by the Commons public accounts committee about the ambitious timetable for the project.

The DfT and and project promoter HS2 Ltd previously delayed the first of three formal review points – which test HS2 Ltd’s readiness to deliver – by 10 months because HS2 Ltd failed to reached the required level of capability in time. HS2 had to pass the first review point before it could be given the authorty to issue tender documents for the main civil engineering contracts. By May 2016, HS2 Ltd had the capability it had was supposed to reach in July 2015, but failed to pass the first review point, because of concerns about cost and schedule. It was, however allowed to issue tender documents after carrying out “assurance work” for the DfT and the Treasury.

The report has advised HS2 Ltd to build and embed organisational capability, and produce fully assured plans to enable it to complete work on schedule, and to gain the delegated authority to deliver the programme efficiently.

“HS2 is a large, complex and ambitious programme which is facing cost and time pressures. The unrealistic timetable set for HS2 Ltd by the Department means they are not as ready to deliver as they hoped to be at this point. The Department now needs to get the project working to a timescale that is achievable,” said head of the NAO Amyas Morse.

The report also highlighted the cost pressures currently facing the project. Phase one is currently forecast to cost £27bn, exceeding available funding by £204M. According to the report, there is a risk that the combined impact of cost and schedule pressures could result in reduced programme scope, and lower the benefit cost ratio.

The benefit cost ratio for phase one assumes that the programme is delivered well within its available funding. If the outturn is closer to or exceeds available funding, then the benefit cost ratio, including wider economic benefits, would fall from 1.7 to around 1.5. If the programme is delayed, then benefits would be deferred.

According to the report, another key challenge is effective integration of HS2 with the wider UK rail system. The NAO has advised the DfT to address a number of issues including how HS2 services will complement or compete with other rail services, and how HS2 will interact with proposed improvements in the north of England.

HS2 has welcomed the report and acknowledged the challenges that remain ahead.

“The role of the NAO is to challenge projects such as HS2 and through that challenge improve the way they deliver for the taxpayer. This report does this and we accept that challenge. It also, however, recognises the real progress we have made in taking the concept of HS2 and moving it nearer reality,” commented HS2 chief executive Simon Kirby.

“As the report says, HS2 remains a highly ambitious project, but as it also demonstrates there are real and substantial grounds why the public, government and parliament should have increased confidence in our ability to deliver the project. Our job is to keep earning that confidence going forward.”

Readers' comments (1)

  • Michael Thorn

    This grandiose and expensive ego-project looks less and less viable as the reports and estimates roll in. Presumably any fall in the value of sterling resulting from BREXIT will increase costs further. It is not an issue of engineering feasibility, but of whether this huge amount of money can be better invested in increasing the speed, capacity and comfort of the rail system as a whole, and in particular the cross-country and regional routes. HS2 looks like another London-centric obsession that will turn Birmingham into a commuter suburb of the City.

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