Contracts under negotiation include main works civils, stations, and systems supplier contracts
The HS2 contract renegotiation include contracts with the four main civils companies, the Align JV (Bouygues, McAlpine, VolkerFitzpatrick), Balfour Beatty Vinci JV, Eiffage Kier Ferrovial Bam JV, and Skanska Costain Strabag JV.
This renegotiation is a part of the fundamental reset being undertaken throughout HS2 Ltd.
The current contracts are lower value for money
The current contracts have been criticised as not giving enough incentive to ensure fast work, while also not allowing much room to penalise firms for underperforming. It also allowed contractors to renegotiate both scope and value continually.
In February, the Public Accounts Committee (PAC) published HS2: Update following the Northern leg cancellation, in which the handling of the HS2 project was criticised and the benefit for money was called into question.
The report said that “The High Speed Two (HS2) programme has become a casebook example of how not to run a major project”, highlighting that the Department for Transport (DfT) disagreed with HS2 Ltd on the costs of Phase 1, with DfT estimating £45-54bn, while HS2 insist on £54-66bn.
However, the PAC’s own investigation showed that the total cost of the programme, accounting for inflation, could exceed £80bn.
A fundamental reset
Other criticisms in the PAC report include the redevelopment of Euston station, with a lack of a plan for work for the station, existing Network Rail station, underground station, or nearby commercial and housing developments, as well as the infamous bat tunnel issue, which the report states doubled the cost of that particular section of track to £100m.
Sir Geoffrey Clifton-Brown MP, chair of the Public Accounts Committee, said: “It is ultimately the Department of Transport that has failed to manage this enormous project and manage HS2 properly. This is likely to have wasted billions of pounds of taxpayers money in delays and overspends. The department as well as resetting the project must now reset itself to manage this project to a workable conclusion in line with the eventually agreed budget and timescale. To do this they will need to employ people with the correct range of skill sets to critically supervise and oversee this huge project. This is the only way to salvage its severely tarnished reputation. We expect to see a real improvement when we next examine this matter.”
As a result, the HS2 programme is now undergoing a full reset, including the HS2 contract renegotiation, working to shift the risk from being held by the government to the supply chain to hold them accountable.
The negotiations will seek to price the risk properly and form an agreement with the suppliers on the verifications of historic expenditure, a revised and aligned baseline schedule, and a demonstrated willingness from the supply chain to work to new contract terms.
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