Let’s be courageous, part 3

(… continued from Let’s be courageous, part 2, posted on 16 Aug 2016).

Under the subheading Uncertain delivery in Section One of his Taxpayer’s Alliance briefing paper, Rich man’s toy: The case for scrapping HS2, Policy Analyst Harry Fairhead assesses the chances that HS2 will not be delivered on time.

He reminds us that the recent annual report from the Infrastructure and Projects Authority (IPA) reveals that the delivery confidence assessment (DCA) for the HS2 project is amber/red, meaning that successful delivery of the project is “in doubt”, and that the IPA’s predecessor, the Major Projects Authority (MPA), also rated the project amber/red in the years 2012/13, 2013/14 and 2014/15 (see footnote 1). Bearing in mind that the flagging of a project as amber/red implies that “urgent action” is required to address the situation (see footnote 2), it is surely of concern that HS2 has been condemned as such for four successive years – not a sign of the problems that have been identified being addressed with urgency, you might think.

That there has been no improvement is hardly surprising though given the Department for Transport’s project track record. The IPA report advises that there are nine major projects currently running under the Department’s control and looks at the change in the DCA for these projects since the previous year (2014/15). In no cases has the DCA been improved and the rating of three projects has worsened (see footnote 3).

In its June 2016 report on HS2 that I referred to in part 1 of this blog series, the National Audit Office (NAO) describes the “schedule for delivering the programme” for HS2 as “ambitious” (see footnote 4). If progress to date can be taken as an indicator of what is yet to come, then this judgement would appear to be reasonable: the report tell us that, “Across the programme as a whole, HS2 Ltd has missed 32% of planning and development milestones so far” (see footnote 5). The report gives three particular examples where the schedule has proved to be too optimistic.

Firstly, there is the target date for achieving Royal Assent for the Phase 1 hybrid Bill. This has been shifted by twenty-one months from the original date of March 2015 to December 2016. The NAO acknowledges that progress is “now on course to achieve Royal Assent by the revised target date”, and the Lords HS2 Select Committee appears to be doing its best to assist the Government in this respect, but the NAO ranks getting the Phase 1 Bill through Parliament, even to the revised schedule, as “a significant achievement” (see footnote 6).

Secondly, HS2 Ltd has failed to clear the first of three defined review points, originally scheduled for July 2015. As HS2 Ltd was not ready then, the Department for Transport (DfT) delayed the examination by ten months, to May 2016, by which time, according to the NAO, “HS2 Ltd had met the capacity requirements, but did not pass review point 1 due to ongoing concerns about cost and schedule” (see footnote 7).

The NAO warns of potential knock-on effects from failing to clear review point 1, as the “main objective” of this review was “for HS2 Ltd to gain delegated authority to carry out all procurement activity up to, but not including contract award without first having to seek approval from the Department [for Transport] and H M Treasury”. According to the NAO, the consequence of HS2 Ltd failing to obtain these delegations is that “all procurement milestones will therefore have to go through more governance and approval stages than originally anticipated, which adds time to the process” (see footnote 8).

Thirdly, the NAO reports that “risks are starting to emerge” as the capability of HS2 Ltd is being built up to that required to meet the tasks in hand. The NAO reports, in particular, that “land and property acquisition has fallen behind schedule, partly as a result of having too few staff to meet the demand, and the volume of work required to develop the route plan and business case for phase 2 is placing a greater strain on resources than originally anticipated” (see footnote 9).

Despite these front-end delays, and the NAO report advises that “the main civil engineering work is now scheduled to begin in mid-2018 rather than early-2017 [as was the case] when [the NAO] last reported [in 2013]”, the ready for service date of December 2026 has, so far, been maintained. Further time pressure has resulted from the decision to bring forward the “deadline for completing construction” by around twelve months “to allow time for commissioning and testing the railway” (see footnote 10).

The NAO report also warns of future timescale risks, noting that these are “particularly high” for certain project elements: the construction of the HS2 station at Euston; the reconfiguration of the Euston Underground station; moving the Great Western depot at Old Oak Common; and, relocating the Heathrow Express depot to Langley (see footnote 11).

Perhaps most worrying is that the NAO report notes that the timely delivery of the HS2 project “is dependent on Network Rail and other stakeholders delivering projects on the existing network in preparation for construction of the new railway” (see footnote 12). Network Rail, in particular, has a poor record for the delivery of projects on time.

Given this background, it is no surprise that HS2 Ltd currently (April 2016) advises a sixty per cent confidence level of opening, on time, at the end of 2026 – described by the NAO as a “low confidence level”. Also no surprise is that the DfT has, according to the NAO, asked HS2 Ltd to work on upping this to eighty per cent “while remaining within available funding”, but has also shown at least a degree of realism by asking the Company to advise whether or not the programme should be extended by up to twelve months (see footnote 13). That this request had been made was confirmed to the House of Commons Public Accounts Committee (PAC) by the DfT’s David Prout, Director General High Speed Rail Group. That we will have to wait for the outcome was made clear, at the same PAC session, by Simon Kirby, Chief Executive of HS2 Ltd. He told the PAC that advice on this matter will be delivered to the DfT in “September or October” this year, but that it will “ultimately be a matter for Ministers to take decisions on what the timetable is” (see footnote 14).

You might wonder whether slipping the opening date of Phase 1 by up to a year is really significant in the grand scheme of things, aside that is from prolonging the agony for residents along the route and passengers trying to use trains in and out of Euston station and delaying the receipt of any fares revenue to help pay for the thing. Well the Chairman of HS2 Ltd, Sir David Higgins, believes that timescale and ultimate project cost are linked. In his first report on HS2 he said (see footnote 15):

“Put simply, the shorter the timescale, and the more certainty about the timescale, the lower the costs will be.”

I think that, bearing in mind Sir David’s extensive experience of the executive management of large civil engineering projects, we should heed his view and regard this area of performance against timescale, both past and anticipated, and any consequent impacts on project costs that might be expected as matters that should definitely be included in any review of the project.

(To be continued …)

Footnotes:

  1. See Figure 18 (on page 29) in Annex A to the publication Annual Report on Major Projects 2015-16, Infrastructure and Projects Authority, July 2016.
  2. See the definitions on page 25 of Annual Report on Major Projects 2015-16.
  3. See Figure 19 in Annex A to Annual Report on Major Projects 2015-16.
  4. See paragraph 3.1 in the report Progress with preparations for High Speed 2, National Audit Office, June 2016.
  5. See paragraph 3.6 in Progress with preparations for High Speed 2.
  6. See paragraphs 3.3 and 3.4 in Progress with preparations for High Speed 2.
  7. See paragraph 3.8 in Progress with preparations for High Speed 2.
  8. See paragraph 3.9 in Progress with preparations for High Speed 2.
  9. See paragraph 3.10 in Progress with preparations for High Speed 2.
  10. See paragraph 3.13 in Progress with preparations for High Speed 2. The earlier report is High Speed 2: A review of early programme preparation, National Audit Office, May 2103.
  11. See paragraph 3.15 in Progress with preparations for High Speed 2.
  12. See paragraph 3.16 in Progress with preparations for High Speed 2.
  13. See paragraph 3.14 in Progress with preparations for High Speed 2.
  14. See Q55 and Q60 in the transcript Oral evidence: High Speed 2, HC 486, Commons Public Accounts Committee, 11thJuly 2016.
  15. See page 16 of the report HS2 Plus, HS2 Ltd, March 2014.

 

 

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