The series of supply chain outreach roadshows for the HS2 project was in London yesterday (Wednesday 6 July 2016) and it was to a packed house at the Royal Institute of British Architects (RIBA) that UK Secretary of State for Transport, Patrick McLoughlin, provided positive endorsement of the project by the UK Government despite the result of the recent UK referendum to leave the EU.
“Now more than ever we need HS2,” said McLoughlin when asked the direct question about the certainty of the project following the Brexit result. “I was passionately for staying within the EU but we must now make Britain as strong as it can be outside the EU and the case is now even stronger for HS2, to unite the clear divide in the country as illustrated by the referendum vote, and to fire up the northern powerhouse of the UK. When I joined the Ministry of Transport 27 years ago rail was low on the priority of infrastructure development. In 1990, 750 million rail journeys were made per year. Last year (2015) that number was 1.6 billion. We need HS2 not only to improve connections up and down the country but also to meet this growing demand in capacity.”
There is also major support of the project in Parliament, said McLoughlin. “Members of Parliament supported the project, ten to one, to its third reading of the hybrid bill that will sanction its construction,” he said. “The Bill is now in the House of Lords for consideration and the project is on track to receive Royal Assent by Christmas this year. We also have £11 billion pounds worth of work out or ready to go out for invitations to tender for enabling works, and the main civil construction contracts, and these are on programme for award later this year and early next year.”
When asked directly about the report of the National Audit Office (see TunnelTalk report below) McLoughlin said: “Of course there will be close scrutiny of this project and there will be yet more and more reports, without them the writers of the reports would be without a job, but we must keep the project on course and moving forward.” He added: “All big projects are controversial. Back in the day, there were those who argued against the railway connections between Birmingham and London, saying that the canals were perfectly adequate. We need HS2 and now is no time to argue against it to save money.”
The attendance of the Secretary of State for Transport at the outreach event was billed as the highest possible commitment of the UK Government to the project, but as soon as his presentation was done he dashed off to other pressing engagements, including the need within the Government and the ruling Conservative Party to select and elect a new leader and Prime Minister following the resignation of David Cameron immediately after the UK referendum vote to leave the EU.
The event continued with a presentation by Beth West, Commercial Director of HS2, who described the procurement strategy for construction of the estimated £55 billion Phase 1 of the project over its programmed 16-year construction period towards its inauguration date of 2026. Several important statements were presented to provide clarification to the packed audience.
In answering questions by TunnelTalk, West agreed that the project cannot be built by the UK alone, and that services, contractors and materials will be needed from the EU and further afield. When asked about the impact of the falling value of the British pound sterling, which will make imports markedly more expensive, West commented: “We have no contracts submitted yet for consideration of award but of course the financial situation must always be considered.”
The financial case for building HS2 Phase 1 and its cost estimates will consume much time between here and receiving bids for award of the main construction contract on programme for later this year and early in 2017. As well as the future of the project, the security of more than 1,200 employees of HS2 now depend upon it.
The 2026 opening date for Phase 1 of the UK’s High Speed 2 rail project between London and Birmingham is “at risk” according to a report by the Government Audit Office. One possible measure being considered to get the project back on track is a “reduction in programme scope”.
HS2 Ltd, the delivery arm of the UK Department of Transport, has told the Government that it is only “60% confident” that Phase 1 will be ready to enter service by December 2026 as scheduled. Design, procurement and construction is being funded from public money, although some European Union money has been made available to part-finance early design and planning. Construction procurement has already started (Table 1 and 2) with the first contracts expected to be awarded next year (2017).
The report was written before the UK Referendum decision to pull out of the European Union, but uncertainty exists about the country’s ability to pursue publicly-funded mega-projects now that its credit rating has been reduced and as inflation is set to rise in response to the declining value of sterling on the world currency markets.
The report, entitled Progress with preparations for High Speed 2, says: “HS2 Ltd have made good progress with some major procurements for Phase 1, however a range of indicators suggest that the schedule is under pressure.
“The Department’s view is that [60%] is too low, and it has asked HS2 Ltd to revisit the programme schedule in order to increase confidence in delivery to 80%, without increasing costs. It has asked HS2 Ltd to assess the impact of extending the timetable for opening Phase 1 by up to 12 months.”
The report also says the project is facing cost pressures. “For Phase 1 of the programme the current forecast cost slightly exceeds available funding by £204 million, and there is less contingency to deliver Phase 1 than the Department and HS2 Ltd were aiming for at this stage.”
It is also claimed that the cost/benefit ratio, which was £1.70 for every £1 spent at the time of the 2013 economic case for the line was made, could fall to £1.50/£1 spent should the programme overrun or go over budget. “To help manage costs, the Department has asked HS2 Ltd to explore options for reducing the programme scope in ways that do not have a significant impact on programme benefits,” says the Audit Office report.
|Table 1. Shortlisted bidders for HS2 Phase 1 construction|
|Align JV||Buoygues/VolkerFitzpatrick/Robert McAlpine||S2/C1/C2/C3|
|BBV||Balfour Beatty/Vinci/BeMo Tunnelling||C1/C2/N1/N2|
|CEK||Carillion/Eiffage Genie /Kier||S1/S2/C2/C3|
|Fusion||Morgan Sindall/BAM Nuttall/Ferrovial Agroman||S1/S2/N1/N2|
|LFM||Laing O’Rourke/FCC/J. Murphy||C1/N1/N2|
|Table 2. Major civils contracts scope|
|S1||Euston Tunnels and Approaches||8,000m||600-900|
|C1||Chiltern Tunnels and Colne Valley Viaduct||15,000m||800-1,300|
|C2||North Portal Chiltern Tunnels to Brackley||n/a||800-1,300|
|C3||Brackley to Long Itchington Wood (LIW)||n/a||600-900|
|N1||LIW to Delta Junction/Birmingham Spur||n/a||900-1,500|
|N2||Delta Junction to West Coast Main Line Tie-in||n/a||800-1,300|
Phase 2, between Birmingham and Manchester and Birmingham and Leeds is said to be £7 billion over the £28.3 billion funding level agreed as part of a 2015 spending review, although £9 billion worth of savings have been identified since that review was completed, and £2 billion of these have been agreed.
The report concludes: “HS2 Ltd has struggled to meet the overly ambitious timetable set for it by the Department for building delivery readiness, while also developing the programme. This will add to the challenge of delivering an already ambitious programme over the next few years. The programme is now facing cost and schedule pressures and, in response, the Department and HS2 Ltd are considering the impact of extending the Phase 1 schedule by up to 12 months.
“Unless the Department and HS2 Ltd make forthcoming decisions promptly, with greater realism about timetables and full understanding of the trade-offs between costs, schedule and benefits, including the impact on the wider rail network, value for money will be at risk.”