Prime minister turns to ex-London 2012 boss to cut costs as Building’s research reveals overspend

All of the contracts for the civil and structural engineering design of HS2’s initial London to Birmingham route have run over budget, an analysis of government figures carried out by Building has revealed.

The findings on the work – being delivered by firms including Arup, Mott MacDonald, Atkins and Capita – comes after prime minister David Cameron this week vowed to have incoming chairman and former London Olympics boss Sir David Higgins crack down on the costs of the £43bn project.

According to figures from the Department for Transport (DfT), the total spend by HS2 Ltd on the civil and structural engineering design services contracts was £10.6m above the £58.7m estimated worth of the contracts.

Capita and its joint venture partner Ineco had the biggest overrun of £4.6m - 42% over budget – for the north section while Arup’s design work for the Birmingham area went 27% over budget.

HS2 Ltd currently has six sets of consultants working on different aspects of the project, but only the performance of the engineering design contracts on phase one is fully identifiable in the data.

Arup, Mott Macdonald and Atkins all signed a letter to the Daily Telegraph in September pledging to build HS2 on time and under budget.

Shadow transport secretary Mary Creagh said that although she supported HS2 the government had “financially mismanaged” the project.

She added: “Our message to David Cameron is clear. Get a grip on this project, get control of the budget and get it back on track.”

Higgins, who takes on the new role in January, told Building he would be considering the specification and scope of the project, as well as whether the length of the construction programme could be reduced.

“I want to look at the staging and the timing of construction, as well as the big stations and whether there are opportunities there in combining with the regeneration around them. But until I have a chance to look at the project in detail it wouldn’t be appropriate to say more.”

But Richard Houghton, spokesman for HS2 Action Alliance, which opposes the project, said Building’s findings showed the prime minister’s words were “hollow”.

He said: “Consultants are always happy to let budgets grow. But the fact that all the contracts are over budget points to unprofessional and slack management from the DfT and HS2 Ltd.”

Martin Tett, chairman of 51m, the 19-strong alliance of local authorities challenging the HS2 project, said such overspending on HS2 was “of great concern”.

“We would have hoped that, after the East Coast Mainline Franchising fiasco, the DfT would have learned lessons and put in place more robust financial control procedures,” he added.

Beth West, HS2 Ltd’s commercial director said: “The original value of these particular contracts were early estimates based on knowledge of environmental requirements for previous hybrid bills. 

“The scope of these contracts has been amended as we have better understood the current requirements for the environment statement that we will be submitting with our hybrid bill for phase one of the route between London and the West Midlands.” 

Graham Watts, chief executive of the Construction Industry Council, said cost overruns were not surprising when the government was not clear on whether the project was about increasing speed or increasing capacity.

He said: “I think there are so many different aspirations at work here that they need to be pulled together into a simple brief. We compare everything to the Olympics but that had a simple brief.” He added that it was better to spend extra money on design than to make changes on site.

Additional reporting by Mike Brown

HS2 spending table