Busting the HS2 budget

Today’s Independent reports on the HS2 Ltd board minutes from December 2012, and adds more information about HS2 going overbudget.  All the HS2 minutes are available on their website, and looking through them in order makes interesting reading.

The Independent says the minutes confirm “recent revelations in The Independent on Sunday that HS2 is already threatening to bust its budget four years before construction even starts”.

Back in September 2012 last year, the HS2 Ltd minutes say

“There continues to be an under spend against budget. An increase in the rate of expenditure for August and going forward is expected. “

However, this was not a good sign for the project, as hinted elsewhere in the minutes. An item on the agenda referred to the setting up of a Phase 1 Cost ‘Efficiency Challenge’ group which would

11.2 The group will focus its activities on looking at efficiencies, not at scope or specification changes, and will seek to encourage greater efficiency across government and industry.

Meanwhile, the minutes also refer to the tight timetable for the Hybrid Bill:

10.Timetable for Deposit of the Hybrid Bill

The Board considered the detailed timetable for the period to the deposit of the Hybrid bill, and the risks in achieving it. It was noted that a number of assumptions would need to be made in order to meet the timetable which is very tight. It was accepted that this would require strong coordination of the planning work required and regular testing/validation of the assumptions made.

The next three board meetings in October and November refer to submitting forecasts and funding requests to the Department for Transport, with a plan to submit it to the board in December.

And then in December 2012, an apparent bombshell of

“13.2 It was noted that the current year rate of expenditure is higher than forecast on the Professional Services Contractors. Further explanation of this will be provided. Action: Kieran Rix
13.3 It was noted that additional measures were being implemented in order to keep very tight control on expenditure.”

But the HS2 project has consistently been delayed.  Although in 2010, the Phase 1 consultation was due to start in January or February 2011, Philip Hammond set the the start date of 28th February 2011.  The announcement of the results by Justine Greening were also delayed, from December 2011 to January 2012. 

This delay also shows up in the awarding of contracts in 2012. They started in February 2012, with the last ones being awarded in June.

A typical example are the contracts offered to Atkins. At the end of April 2012 they were awarded a £13.3m contract, which was set to conclude in the deposition of the Stage 1 Hybrid Bill in October 2013. However, by January 2013, they had already spent £14m. Design contracts awarded so far are simply for preliminary design work, as detailed design for Stage 1 would not happen until 2016, after the Hybrid Bill is due to be passed, and it seems that other contracts awarded last year have similar overspends.