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Road cost estimates rocket by £1bn in just 12 months

Costs of some projects have risen by more than 100% according to government figures.

Road building costs have soared by more than £1bn over the last 12 months, new government figures showed this week.
Department for Transport (DfT) figures for seven major motorway and trunk road schemes show recent cost increases of
nearly £1.2bn.

The latest increases, revealed by the government in an answer to a parliamentary question by Liberal Democrat MP Norman Baker, showed that one scheme – the A14 from Ellington to Fen Ditton – had almost doubled in cost to £944M from the £490M cited in the
Nichols Review into the Highways Agency's major roads programme, published in March 2007.

The massive M25 widening project, for which three consortiums are currently bidding, is looking at cost increases of around 50% in 12 months.

Work to widen Junction 16 to Junction 23 has gone up from £496M to £697M and costs for the Junction 27 to Junction 30 section are up from £402M to £583M.

A section of the M1 from Junction 10 to Junction 13 is up from £382M to £601M.

Campaign for Better Transport roads campaigner Rebecca Lush claimed that the cost of road schemes had been "deliberately underestimated" to make them look more attractive.

"It's too easy to blame all this on construction inflation," she said.

"I understand how difficult it is to forecast these figures accurately but it shows there is a tendency to deliberately underestimate costs at the beginning of the project to make the benefits look much bigger than they are and easier to get ministerial approval."

Lush was backed by Baker, who has also obtained figures from the government showing that on average in the last 10 years, the cost of road schemes had risen by 55% from publication of the tender price to completion.

Baker told NCE that the government should protect the taxpayer more from such cost increases.

"There is something seriously wrong with financial planning and contract management of major road schemes," he said.

"The government has to change the method of contract allocation to ensure the taxpayer is better protected."

The Highways Agency said this week that the cost increases resulted from a cost "re-estimation" process that had been introduced as part of the Nichols review of its procurement practices.

The Nichols Review into the Highways Agency's road building programme was commissioned by the DfT in July 2006 following major cost increases for proposed schemes. The review, published in March 2007, recommended a series of changes to the way the Agency estimates the cost of schemes (NCE 22 March 2007).

New cost estimates for the Agency's 65 major schemes are expected to be published later in the Spring.

"These schemes continue to offer good value for money and the increases are consistent with

Nichols' conclusions," an Agency statement on the new figures claimed.

It added that the cost increases were the result of construction inflation as had been recognised by Nichols.

"Nichols recognised that estimating road scheme costs is inherently difficult, subject to uncertainty and showed that the main reason behind the increases was the higher than expected rate of construction inflation."

The DfT has committed to meeting the cost of the seven schemes mentioned in the parliamentary answer but it is feared that other projects in the Agency's major roads programme could be scrapped and replaced by initiatives such as hard shoulder running.

The South East Regional Assembly (SERA) revealed that it had also received figures from the DfT that showed major cost increases on three Agency schemes on the A21 and the A23.

One of the projects – the A21 Kippings Cross to Lamberhurst Improvement – is reported by DfT to have gone up more than 150% from £40M to £103M while the cost of the A21 Tonbridge to Pembury dualling has risen from £64M to £112M.

Costs for the A23 Handcross to Warninglid widening have risen £40M to £69M.

SERA has written to Transport Secretary Ruth Kelly to warn that unless "extra funding" is made available to the region, the schemes could be scrapped.

"I must emphasise the board's serious concern that failure to provide additional funding, over and above the region's existing Regional Funding Allocation, will have an adverse impact on the region's ability to deliver the agreed regional programme," wrote SERA regional transport board chairman Nick Skellett in his letter to Kelly.

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