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Mon June 01 2020

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Costain’s Welsh road is £100m over budget and two years late

20 Feb Costain’s contract to upgrade an 8km stretch of the A465 between Gilwern and Brynmawr will cost around £100m more than originally estimated take more than two years longer than expected to complete.

The A465 Section 2 project
The A465 Section 2 project

While Costain and the Welsh government remained embroiled in legal proceedings over who should pay for the overruns, a report from the Wales Audit Office1 today sets out the facts.

In part, the problems are the result of the specification changing – the addition of an extra junction, for example – and in part due to unforeseen technical problems.

Asbestos found on the site of the former Anacomp factory in Brynmawr, which was demolished in 2008, had to be dealt with and retaining walls (designed by Costain) proved difficult or impossible to construct because of ground conditions.

Once the legal issues are settled, the Welsh government is expecting to pay Costain £80.5m on top of the initial £159.5m agreed contract price and £16.7m for variations.

Widening the A465 between Gilwern and Brynmawr involves building on a steep-sided valley – the Clydach Gorge – through the Brecon Beacons National Park. It includes 15 new bridges and 12,500 metres of retaining structures. The project is also using 16,400 metres cubed of reinforced concrete, 5,000 tonnes of reinforced steel, 109,000 tonnes of flexible pavement, and has installed more than 20km of pipework.

Gilwern-Brynmawr represents Section 2 of a larger £1bn scheme to improve 40km of the A465 between Hirwaun and Abergavenny.

The final cost and timescale for Section 2 remain uncertain, the auditor’s report says. The work was supposed to have finished in September 2018, but full completion is not now expected until April 2021. It is currently about 85% complete.

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Welsh government estimates from November 2019 suggest a total bill of around £321.1m to the public purse. However, Costain considers that the latest estimates of Welsh government liabilities are understated, while the Welsh government considers that the figures represent a reasonable allowance for its liabilities at this stage.

The £321.1m figure is less than the £336.2m estimated in April 2019, but at the start of the detailed design and construction contract in December 2014 the client estimated a cost of £223.2m. Some of the increase relates to design changes requested by the Welsh Government and additional measures to address environmental impacts, but the engineering and contractual challenges experienced on the project by Costain (which calls itself ‘the smart infrastructure solutions company’) account for most of it, the auditors say.

In June 2019, the Welsh government started arbitration proceedings against Costain on an issue decided in Costain’s favour in adjudication. The arbitration award, received in early December 2019, has split responsibility for the works information between the Welsh government and Costain and is a partial reversal of the earlier adjudication decision. The exact costs in respect of the matters under dispute are yet to be fully determined.

Auditor general for Wales Adrian Crompton said: “This is not the first time that the Welsh government has faced difficulties with significant cost increases and delays on road projects and it is vital that lessons are learnt for future infrastructure schemes. Despite some wider benefits being delivered and expectations about the eventual impact of the road improvement, those living and working locally are paying a higher than expected price for the ongoing delays and disruption during construction.”

A Welsh government spokesperson said: “This project is widely recognised as one of the most complex road engineering projects in the UK at the moment, presenting significant construction challenges. We recognise the frustration caused by the issues highlighted in the report, and will of course consider its findings. Lessons from the project so far have already been incorporated into subsequent projects.We remain confident that this ambitious and complex scheme will be completed as intended and will bring significant benefits to the region.”

In a trading update in December 2019, Costain chief executive Alex Vaughan said: “Clearly the situation regarding the A465 contract is disappointing.”

1. A465 Section 2 – Interim Findings is published by Wales Audit Office and is available at www.audit.wales/publication

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