High Speed 2 (HS2) chief executive Mark Thurston has admitted that there are “cost pressures” on building the line, in an exclusive interview with New Civil Engineer.
In June this year New Civil Engineer reported that the main civils packages were collectively coming in at around £1bn over the target cost to build the line. As a result the notice to proceed, the point at which the costs are agreed and construction of the line can start, was pushed back three months from February to June next year.
Despite the setback, Thurston said that new measures have now been put in place and he remains “confident” that the target cost would be agreed in June next year,
Thurston added that as the designs had developed it had become clear that the ground conditions were more complex than first thought and the risk taken on by the contractors was now an area to be revisited and potentially shared by HS2 Ltd.
He said the move to push back the notice to proceed had been agreed in late spring this year after it became clear at the end of gateway three (of six) that the costs to build the line were coming in above budget. The three-month extension was designed to give contractors time to reduce the cost of the design.
“When we got to gateway three, they [the contractors] said we just haven’t been able to make the physical progress with the scheme that we hoped, it’s far more complex, we’ve got new information from ground investigations, we better understand the geology, we better understanding the standards, we need more time,” he said. “That meant we moved gateway four to October.
“The outcome of gateway four clearly shows we have cost pressure. That’s not a surprise based on what we now know.”
He added: “The designers now have a much better definition of the scope, cost and how long it’s going to take to build it. That will continue to be a work in progress with our supply chain and joint ventures until we get to a point where we have an affordable scheme to be able to build it.”
Over the next six months, Thurston said that there would be some “tough decisions” which would have to be made to cut costs. However, he insisted that he was “confident” that the design could be brought down to the target cost by June next year.
“We’re confident we’re going to take a big chunk of this away,” he said. “The whole point is that’s the challenge between now and gateway five, we now require the whole industry to come together to get to a point where the government will sanction to move onto construction next year.”
To do this, he said he had agreed with the board around two weeks ago, to a new method of working with the supply chain. This would include a new, more collaborative way of sharing innovations between the different contractors and looking at ways in which risk could be shared between the HS2 and the contractors. Currently, contracts state that the contractor will take on the risk for building the line.
“Where does risk best sit between the client body, HS2 and the contractors,” he said. “We should have the risk sat with the parties best sat to manage it and actually in many of those areas we should be managing it jointly as opposed to one or the other as risk has the price associated with it and it’s a case of is that the best value for money from the public purse.”
Thurston added: “HS2 is so big that if we don’t improve the balance sheets of the supply chain on a job line this so that we’ve got a lasting, sustainable industry it’s negligent on our part,” he said. “So it’s not about margins, it’s about finding the smart solutions, jointly, which we can all stand behind that we can afford. That’s the game.”
Thurston also confirmed the line would run into Euston and not terminate at Willesden Junction, near Old Oak common as some news reported had stated.
In parallel to the work which is being carried out to cut costs on the main civils packages, he said there was also a separate piece of work being carried out to work out the cost of building the entire line. He said it is hoped this will be submitted to the Department for Transport (DfT) to coincide with the June notice to proceed deadline, triggering the start of construction.
Like what you’ve read? To receive New Civil Engineer’s daily and weekly newsletters click here.