The Highways Agency mishandled the M25 widening programme, potentially leading to a waste of £1bn, according to the Public Accounts Committee.

The Public Accounts Committee report into the procurement of the M25 widening project issued a damning verdict, highlighting an extra £660m in finance costs, caused by the severe delays in getting the contract signed, as well as poor cost estimates and the fact no consideration was given to alternative solutions.

Chair of the Public Accounts Committee, Margaret Hodge MP, said: “The Highways Agency’s mishandling of the project to tackle congestion on the M25 could cost the taxpayer an extra £1bn.

“The agency should not have focused just on widening but also have given proper consideration to a much cheaper alternative, hard shoulder running.

“A private finance project intended to transfer risk to the private sector should not have restricted innovation by ruling out this alternative solution.”

She added: “The decision to stick with widening was also substantially influenced by a technical error in the agency’s cost estimates.

“Had the error not been made, hard shoulder running would have been shown to be the cheaper option.

“The costs of the widening project have also been driven up by the nine years it took to conduct the procurement process, from the first commissioning of consultants in 2000 to the signing of the private finance contract in May 2009.

“This delay exposed the project to the credit crisis, resulting in £660m of extra financing costs.”

Condemning the firms advising on the scheme, she said: “And the advisers upon whom the agency spent an excessive £80m would have benefited from the drawn out procurement.”

In May 2009, the Highways Agency signed a 30-year private finance contract for widening two sections of the M25 motorway, and maintaining the entire 125 mile length of the road, including the Dartford Crossing, and 125 miles of connecting roads and motorways.

The contract has a present value cost of £3.4bn.