Britain’s rail minister rejects latest cost estimate from HS2 Ltd

BRITAIN’S minister of state for rail and High Speed 2 (HS2), Mr Huw Merriman, has rejected the latest cost estimate produced by government project delivery company HS2 Ltd, which has increased the price tag from £49bn to £57bn at 2019 prices.

“This is a very significant upwards revision,” Merriman says in his latest six-monthly update on the project, given as a written statement to parliament, before stating that the government disagrees with this figure for two reasons.

“First, it was drawn up by HS2 Ltd before they were notified of the decision to cancel Phase 2,” Merriman says. “It reflects HS2 Ltd’s understanding of the project in September - that it would be proceeding to Manchester and the East Midlands, and with more expansive plans for Euston.”

Secondly, he adds that the Department for Transport (DfT) makes different assumptions on how much cost risk remains addressable. DfT takes a different view from HS2 Ltd on how future risk could be actively mitigated, on how revised incentives “could change the trajectory on the costs of completing the civils and systems work,” and on the size and composition of HS2 Ltd’s own operating costs.

“I have asked the HS2 Ltd executive chair, Sir Jon Thompson, to update HS2 Ltd’s estimate to consider the revised scope of Phase 1 and the cancellation of the wider scheme reflecting reduced scope and the costs of any changes,” Merriman says.

The government says it will support Thompson by appointing “a highly capable chief executive focused on delivering HS2 to schedule and the revised budget,” following the departure of HS2 Ltd CEO, Mr Mark Thurston, in September.

However, Merriman also says that the government will tighten the reins on the project by requiring HS2 Ltd “to provide a detailed action plan setting out how it intends to work with the government and its supply chain to deliver the remainder of HS2 at the lowest reasonable cost including shared assumptions and metrics to assess progress.”

The project delivery company will be required “to secure ministerial approval for any contract award decisions and contract changes that are above its agreed affordable budget,” and the government will strength scrutiny of delivery, cost and schedule performance through a revised sponsor board.

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