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Fri December 13 2019

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HS2 may have to re-tender major contracts

12 Nov The Oakervee review of the HS2 project recommends that the project go ahead in full, it is reported today, but warns that the major civil engineering contracts ought to be re-tendered.

The cost of HS2 is currently estimated at £88bn
The cost of HS2 is currently estimated at £88bn

The Times newspaper says that it has seen a leaked copy of Douglas Oakervee’s report, commissioned by prime minister Boris Johnson to advise on what to do about HS2. According to the newspaper, the report advocates full construction of the entire project, despite projected costs having already escalated from £56bn to £88bn and likely to go higher still.

Some have argued that costs could be cut by scrapping the Leeds line or by making Old Oak Common the London terminus instead of Euston. Doug Oakervee’s only concession to cost reduction is suggesting cutting the number of trains from a maximum of 18 an hour in each direction to 14.

The report says that HS2 would bring greater economic benefit to the north than the south of England and that there are no shovel-ready alternative projects that could deliver the additional rail capacity that is needed.

But while Oakervee defends the project, he is critical of the procurement process, which (again, according to The Times) misjudged the risk transfer process. Contractors have "significantly inflated" their prices to cover against risks that they are not bearing. The report says that HS2 Ltd is “carrying most of the risk and all of the pain with little gain”.

In effect, big construction stands accused of seeking to line its pockets with HS2 and taxpayers' money.

The major contracting teams lined up for phase one of the project are: Skanska/Costain/Strabag; Bouygues/VolkerFitzpatrick/McAlpine; Eiffage/Kier; Balfour Beatty/Vinci; and Mace/Dragados.

The review recommends that HS2 Ltd should “consider re-procuring” these contracts to get best value.

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The Times comments that the leaking of the Oakervee report will put pressure on Boris Johnson to actually commit himself to the project one way or another during the general election campaign. He is defending a fairly slim majority in his Uxbridge seat of just 5,034 and HS2 is a toxic issue in the constituency. At the last election in 2017 he postured as an opponent of HS2; given that he commissioned a known HS2 supporter to lead his review of the project – Doug Oakervee is a former chairman of HS2 Ltd – it is getting harder for the prime minister to distance himself from the controversy.

Mr Johnson told the Nottingham Post last week that he had not seen the report and that a decision on HS2 would not be taken until after the election.

However he appears warmer to the project today than previously, telling reporters: “I’m a believer in infrastructure. I love infrastructure. The problem with HS2, is that it’s incredibly expensive. So we’re looking, as is only responsible for a new government to do, at whether the cost is rightly profiled, whether the spend is rightly timetabled, whether it’s geographically rightly profiled and targeted.

“Doug Oakervee knows a good infrastructure project when he sees one and he’ll give a good answer as to whether we need to do this differently.

“Instinctively I hesitate as somebody who’s done a lot of big infrastructure projects, and who’s seen the damage that can be done to the UK by delaying big infrastructure, I hesitate before just taking something like HS2 and just putting it on the scrap heap."

The Oakervee report says that HS2 Ltd has already spent £9bn on the project. While two or three billion could be recouped in land and property costs, scrapping the scheme now would cost an additional £2.5bn-3.6bn.

The Times also reports today that Labour peer Lord Berkeley, the civil engineer who was deputy chairman of the Oakerview review panel, is preparing a dissenting report to civil servants for the attention of the prime minister.

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MPU

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