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One road, one contract?

Roads - Staggered widening of the M25 is expected to take place under a single privately financed contract.Andrew Bolton reports.

As major engineering challenges go, the job of widening some of the busiest sections of the M25 to four lanes over the next 15 years must be up there with the biggest.

The Highways Agency's latest programme involves widening the 100km that has three or fewer lanes to four, between 2007 and 2015. Some sections earmarked for widening are used by up to 148,000 vehicles per day. Most of the work will be in the north between junction 16 west of London and junction 30 in Essex.

There is also a southern section between junctions 5 and 7.

There is much to be done.

Contractors will have to work out how to squeeze the extra lanes under the brick arch viaduct supporting the Chiltern Line between Denham and Gerrards Cross. New lanes will be needed on the concrete viaduct which spans the West Coast Main Line, and threading the widened motorway through the junction with the M1, where the M25 goes down to two lanes, will also be a challenge.

But if traffic management and construction present some of the biggest challenges for contractors, organising and paying for such a major works programme is what is taxing the brains of the Agency's procurement team.

At the moment it is consulting the industry on how best to proceed with the programme and has presented contractors and bankers with a mix of ideas and options.

Officials expect work to be staggered, with the most difficult sections to be tackled first, and the last section being completed in 2015. They have also presented options for carrying out the work as a single contract, or as a series of smaller jobs. All will be done under 30 year design, build, finance and operate (DBFO) concessions where the contractors also take on maintenance responsibility.

The options are:

Single DBFO contract with a capital value of over £1bn, where the contractor takes over the whole of the M25. Work will take place in five phases between 2007 and 2015.

Two separate DBFO contracts which would split the M25 roughly in half with the River Thames as the boundary. The southern section would include the relatively small amount of widening between junctions 5 and 7.

Two separate DBFO contracts:

One including the work between junctions 16-23 and junctions 5-7 and the other covering the work between junctions 23-30.

Three separate DBFO contracts, one between junctions 13-23, one junctions 23-27 and one junctions 27-3.

'We expect to do a large single DBFO and have prepared the scheme on that basis, ' says Highways Agency procurement director Steve Rowsell. 'The benefits are that it allows the contract interfaces to be managed and so reduces the risk of (widening) contracts affecting each other.' Rowsell's concern is that if multiple contracts are let, there could be problems on the northern section of the M25 if delays to earlier contracts start to affect neighbouring widening jobs which are timed to follow on.

Major contractors appear to favour this approach.

But the single DBFO option comes with pricing issues which need resolving. For a start, it will be impossible to put figures on the cost of widening the sections which are not programmed to start until after 2010.

As a result the Agency is considering an innovative pricing structure under which the contractor will agree a fixed price for the first sections and work to a target price for later ones.

This could, however, create problems for bankers who lend to the project, as they usually demand pricing certainty when agreeing to fund into major projects.

Another option could be to index link prices to counter the effect of inflation. Contractors could also subcontract work under a competitive tender closer to the start of work.

Final options are expected to be decided over the summer in time for the Agency to invite prequalification bids towards the end of the year.

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