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Exclusive | HS2 boss admits budget pressures on civils works

High speed 2 hs2 1

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. 

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Readers' comments (7)

  • Philip Alexander

    Surprise, surprise. The classic salami slicing approach to cost over-runs on railway projects. It's been the same since at least 1948. The railway people know that politicians will baulk at the real cost of any railway project so they deliberately suppress it until it is too late for the politicians to cancel. It's so transparent as to be a joke and quite why the sensible members of the ICE get taken in by this patently worthless project I cannot understand. The BCR will be NEGATIVE so why government would want to pour billions down the drain like this I do not know. Perhaps they think it will be a diversion from their Brexit woes.
    The sooner the whole catastrophic project is cancelled the better. I'm sure the enabling works at Euston could be turned into something useful. And a few architects and consultants have taken the government for an expensive ride, so they can't complain. Or will they build the whole sorry fiasco of a project for well over £100 BILLION and put signs on the facades of the stations which will read "FOR THE RICH KNOBS ONLY". ?

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  • I'm in favour of HS2 but the second phase to Leeds has not been properly appraised. There is a £10 billion cheaper alternative that delivers benefits 10 years earlier and integrates with the existing network
    This option was rejected earlier as it cost 3 minutes in travel time at Leeds and has not been revisited now HS2 is about 'capacity'. What nonesense.
    There is a sensible way forward, but this does require Failing Grayling to admit he got it wrong. Better to waste £10 billion....and they wonder why we loose faith in our Politicians.

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  • Adrian, what is the scheme you are referring to? I've followed the HS2 project quite closely and I've not heard of it.

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  • Michael Thorn

    The HS2 saga has been, and still is, a text-book example of how an egotistical project with powerful backers can be distorted in terms of cost and benefits to make it appear economically desirable. First the case was made in terms of a theoretical "saving in precious business time". When that fallacy was exposed, it became an issue of capacity. The projected costs have been manipulated to keep the benefit-cost ratio more than unity, and now there is an admission that the cost estimate of the original plan was too low and savings and variations are necessary. Are we surprised? Do we think that the latest cost estimates have any more credibility than the previous estimates? The only thing that seems certain is that if HS2 is built, it will cost far more than is being admitted, and will exceed the theoretical benefits being claimed. Meanwhile, the planned modernisation and improvement of the rest of the rail network is being culled to save money.

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  • While I have no knowledge of the alternative phase 2 scheme to which Adrian refers, there is a similarity as regards the speed/cost criteria with phase 1. The direct route through the Chiltern was chosen because it gave the shortest journey time to Birmingham and a good BCR based on business time savings. When capacity became the more important criterion and opposition forced expensive (and speed - reducing) tunnelling through the Chiltern, all originally considered options should have been revisited. In my opinion, by far the best of these is a Loddon terminus at Stratford International, with options of onward travel to St Pancras or the Channel Tunnel. Proper connection to Crossrail at Stratford would provide comparable overall journey times to many London stations to those with a terminus at Euston.

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  • Philip Alexander

    To address Adrian's remark about being in favour of Phase 1 but not Phase 2, I refer him to the comments by no less than the Chairman of HS2 (I quote directly from the NCE website so it might not be accurate.....) . Even he thinks it's not worth doing Phase 1 on its own. And this is a project that starts in the wrong place in London, has no fast connections (apart from walking) to any of the other mainline stations in London, including HS1, ends in the wrong place in Birmingham without any direct connections to New Street, Moor Street or Snow Hill stations and all for the sake of about 10 minutes saving on the overall journey from London.

    "HS2 and Crossrail chair Sir Terry Morgan, transport secretary Chris Grayling and Transport for the North chief executive Barry White all urged rail bosses to “make the case” for HS2 Phase 2, connecting Birmingham with Manchester and Leeds.

    All three agreed that Phase 2 “wasn’t in the bag”, after a growing number of politicians called for the project to be scrapped.

    “I absolutely do think that we still have a selling case to do for HS2,” Morgan said at the Railway Industry Association annual conference. “The truth is, that without the northern section of HS2 there isn’t a business case for the line at all.

    “You wouldn’t do HS2 on the basis of Phase 1 [London to Birmingham] on its own. HS2 definitely needs Phase 2, otherwise it does not work.”

    So why build any of it? It won't release spare capacity on existing lines because freight will still use existing and so few people will be able to afford the "speed premium" that numbers of existing services will not reduce at all. So where's the extra capacity coming from?

    Spend this £100 BILLION which apparently exists sloshing around in the government's back pocket (despite the demands of a post-Brexit Britain) on the existing network and get some real benefits. I could give Grayling a whole list of much needed improvements which really would increase overall network capacity, starting with the re-opening of the SR route through Devon as an alternative to the Dawlish seawall route.
    I just cannot believe that this vanity project could have got so far without some sane politician saying, "Hold on, the king's got no clothes".

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  • The issue with HS2 is lack of ambition on the part of the UK and the result of the the UK Tier 1 contractors procurement strategies coming home to roost. HS2 repeats the UK motorway building program mistake when we did not take land for additional carriageways when we built the original system. We have paid dearly for that decision.

    HS2 is just not ambitious enough. It should have provision for 3 streams of concurrent traffic, High Speed Trains, Local and freight with direct routes through London. If this was Asia there would be no question as to what was needed and it would be built.

    The second major problem is that the UK construction industry seems to have gotten out of the construction business. It simply does not know how to do the basics anymore and cannot or refuses to manage manage risk. With the exception of a few big sub-contractors we are on a spiral to the bottom where the supply chain is concerned. The competent supply chain is disappearing under the UK's aggressive T1 procurement terms. Competency and responsibility seems to be in very short supply. I continually see things that go wrong because people chose not be responsible. We simply have lost the mentality to build efficiently. That is why our construction costs are so high.

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