The upgrade of the A66 across the north Pennines will complete the dualling of the route between the A1(M) at Scotch Corner and the M6 at Penrith. But at the current cost estimate of £1.3bn, the benefit cost ratio (BCR) is at 0.90, resulting in poor value for money.
BCR needs to be 1.0 before a project is calculated as giving a positive return.
And this analysis is even before recent inflation has been taken into account, pushing up costs but doing nothing for benefits.
Latest estimate for the project is £1,490m, including allowances for risk and inflation.
The value for money assessment is shared by both National Highways chief executive Nick Harris and Department for Transport permanent secretary Dame Bernadette Kelly, the top civil servant in the department who have jointly signed the latest assessment of the project .
However, although they know that it is poor value for money, they are pushing the project through because they deem it “essential for levelling-up and economic growth in the northern regions”. They say that it improves freight transport connectivity and that it is also “a critical link for the government’s energy security strategy”.
At stage 3 in National Highways’ (NH) project control framework, the project cost has increased following further design development and stakeholder consultation to produce a consentable scheme, their report says. This increase in cost has had a material impact on the value for money (VfM) assessment, they add.
They say that the cost increase is a consequence of increased costs for development, land and construction (enabling works). This includes design evolution to take into consideration views from stakeholders and to sufficiently address environmental concerns to get an acceptable development consent order (DCO) submission. The DCO has now been accepted for examination.
One of the steps being taken to help control costs is having four contractors work together in collaboration – Balfour Beatty, Costain, Keltbray and Kier. [See our previous report here.]
National Highways reckons that “there are opportunities and efficiencies that could bring costs down, including value engineering”. It is also working to reduce the impact of inflation, including frontloading construction activities and early procurement of materials.
There are opportunities for cost reduction in the next stage of the project that "are likely to positively impact" on the BCR and value for money assessment, National Highways says. It is also working to ‘capture all benefits’ as part of developing the full business case.
The latest independent assurance review published in July by the Infrastructure & Projects Authority (IPA) gave the A66 dualling project an 'amber' rating. This means: “Successful delivery appears feasible but significant issues already exist, requiring management attention. These appear resolvable at this stage and, if addressed promptly, should not present a cost/schedule overrun.”
Transport Action Network director Chris Todd said: "This is just another scheme alongside Stonehenge and many others that don't stack up financially and actually represent a drain on the economy. They will cost far more than they will ever deliver in benefits and should be scrapped. This could save the Exchequer billions of pounds and help plug some of the budget deficit created by Liz Truss's mini-budget.
"Despite there being no economic case for this proposal, it's clear that National Highways thinks it can massage the figures to get a more positive outcome. The problem is it can only do this by cutting costs which could lead to more community severance and greater landscape and biodiversity impacts. These are things that only appear on the balance sheet as a cost and hence are always vulnerable when the case for a road is weak or budgets are tight. This is just one example of the many concerns around the current appraisal process and the way that roads are approved."
Another campaign group, Friends of the Lake District, said last month: “We are aware of the road’s poor record on safety, the traffic issues endured by many using the route and the importance and urgency of its improvement for the benefit of local people, visitors and the local economy.
“We believe however that these issues could be mitigated through junction improvements, changes to alignment and lower speed limits. Throughout the route evaluation process, we have made numerous requests to National Highways to look at upgrading junctions and building underpasses or bridges for farm and local traffic that needs to cross the main road to increase safety on the A66, rather than wholesale dualling it.
“We do not consider that the proposal has adequately assessed all the options – a legal requirement of the Environmental Impact Assessment Regulations – and we remain unclear as to why safety upgrades without dualling were not considered as part of the evaluation.”
It added: “This is a questionable project to be brought forward and paid for by the public purse during a cost of living crisis, high interest rates and a recession when it does not even break even.”
A National Highways spokesperson told us: “As part of the design process the costs of the A66 Northern Trans Pennine project have risen, as a consequence of increased costs for development, land and construction (enabling works). The cost increase has negatively impacted the value for money assessment for the scheme. However, National Highways will continue to seek opportunities to reduce the cost in the next stage of the project, which would assist in improving the value for money assessment.
“We are committed to ensuring that the design process and costs of the A66 Northern Trans Pennine project are kept to a minimum to ensure value for taxpayer, and will continue to overcome external increases in costs of development, land and construction.”
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