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Smaller, cheaper Tideway had chance says NAO

Thames Tideway Tunnel

The £4.2bn Thames Tideway Tunnel could have been smaller and cost less claims a new report by public spending watchdog the National Audit Office (NAO).

The report says that correcting inaccurate modelling predictions could have resulted in a ”smaller”, lower cost tunnel. However, the same report also acknowledges the government’s claim that the current size future-proofs the project. 

The Review of the Thames Tideway Tunnel published by the NAO today is the second in a series of expected updates to an earlier report published in June 2014. It outlines six areas it considers most critical to achieving value for money for customers and the taxpayer. As the tunnel will not be operational for several years, the NAO said it could not yet say whether the project was value for money.

The report says that in 2007, the Environment Agency’s consultants reported that the models which could predict dissolved oxygen levels – which indicate pollution levels in the river resulting from combined sewer overflows – were overly pessimistic when compared to measurements in practice, and made recommendations to refine the modelling in 2009.

But the report says that although the Environment Agency partially adopted these recommendations it had not carried out another validation exercise since 2007. The NAO report concludes that although more accurate modelling was unlikely to have affected the choice of a tunnel as the solution, it may have resulted in a “smaller”, cheaper  tunnel.

It said that refinements to Thames Water’s sewer model after 2007 indicated that the planned capacity of the tunnel would considerably outperform the four spills threshold. This allowed Thames Water to reduce the length of the reference design by 9km in 2009, saving £646M, while still achieving the same threshold.

The Environment Agency responded by saying that although further modelling to reduce uncertainty was always an option, this would have made little difference to the choice of full length tunnel. It said although the NAO inferred that carrying out further validation work could have led to a smaller, lower cost tunnel though this was not certain.

“Post 2007 we reviewed, together with Thames Water, the assumptions made during the initial modelling and worked with the modelling consultants to identify improvements that could be made,” an Environment Agency spokesperson said.

“Based on their recommendations, further work was commissioned and we have continued to work with them on testing and improving the water quality model, incorporating the effects of climate change and testing its overall sensitivity. In 2012 they concluded that the model remained fit for purpose.”

However, while the report said that further reductions to the tunnel could have been made, the Department for Environment, Food & Rural Affairs (Defra) considered that reducing the diameter of the tunnel would not have a significant cost reduction overall.

Despite reducing the construction costs, Defra said that a smaller diameter tunnel would have carried a greater risk of non-compliance and fines, and that, following a 2012 ruling, the European Commission would have known it was possible to capture more spills with a minor cost increase.

As a result, Defra said it considered the cost of rectifying a tunnel with inadequate capacity would be prohibitive, and that the tunnel design chosen offered greater certainty that the tunnel will be ”future-proof”.

“Reducing the Thames Tideway Tunnel’s width from 7.2m to 5.2m would halve the capacity, but yield a cost saving of only 5% to 8%,” said a Tideway spokesperson. “Critically, a 2m reduction in the diameter of the tunnel would still mean sewage being discharged to the river, in excess of the required standards.

“Given the set-up costs remain relatively constant, the width of the tunnel, as designed, helps future proof its value to the capital.”

Thames Water customers are footing the bill for the new tunnel, however the report said that the eventual costs to the customer was uncertain. It stated that the expected impact of tunnel costs on household bills from the 2011 prediction were between £70 and £80 a year.

The report also highlighted that due to “inherent” construction risks, Defra has agreed to provide contingent financial support to the project in the “highly unlikely” situation where the risks materialise. However, Defra has estimated that in this event, the impact could be very large, putting estimates at £6.6bn in its “reasonable worst case” scenario.

Tideway said: “The National Audit Office report rightly highlights the need for the Thames Tideway Tunnel to deliver value for money.

“The project is key to tackling the problem of sewage pollution to the Thames from London’s overstretched, Victorian sewerage network – effectively stopping the river from being used as an open sewer.

“It will directly create around 4,000 jobs and provide seven new open spaces by the river for the public to enjoy. Good progress is already being made and eight construction sites are now up and running.

“Everyone involved in the project is focused on keeping costs down and delivering best possible value for Thames Water bill payers.”

A Defra spokesperson said: “London desperately needs an updated sewage system fit to deal with its growing population.

“The Thames Tideway Tunnel will dramatically reduce the amount of sewage overflowing into the river. It is privately financed and delivered, with no public money expected to be spent on its construction, and it will modernise our capital’s ageing sewage system for the next 120 years.”

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