Suppliers on the HS2 project are set to be financially rewarded for helping drive down costs to the taxpayer, transport minister Heidi Alexander has announced.
Alexander told Parliament that firms working on the high-speed rail line between Birmingham and London will be offered improved returns if they can help reduce construction costs.
A reformed contracting strategy will now include incentives for firms to identify and implement efficiency savings, she said.
“As far as I am concerned, suppliers should make a better return the more taxpayer money they save,” she said.
Alexander said the government has accepted all recommendations of an independent review of HS2 governance, led by infrastructure expert James Stewart.
The review found that previous Conservative ministers had signed off major HS2 contracts without adequate oversight, contributing to spiralling costs, she said.
In response, ministers have slashed HS2 Ltd’s financial delegations and ordered a complete overhaul of its cost-estimation practices until the ongoing reset of the project “is complete and we regain confidence”.
Further details are expected in the government’s upcoming 10-year infrastructure strategy.
Alexander added that the Stewart review would also lead to HS2 “fundamentally changing [its] approach to estimating costs”.
Alexander said that Stewart’s findings would be implemented more widely across all government departments delivering infrastructure.
The opening of HS2 will be delayed by at least two years from 2033, Alexander said.
She described how a “litany of failure” on the megaproject under the Conservatives had helped turn British infrastructure work into a “laughing stock”.
She added: “I’m calling time on years of mismanagement, flawed reporting and ineffective oversight. This government will get the job done between Birmingham and London.”
HS2 chief executive Mark Wild, who started in his role in December, announced a “reset” on the project and previously said the project’s contracts were not managed in a coherent manner.
He told a parliamentary committee last year that a new estimated timeline and budget for the project would not be complete until 2026.
Joint venture contracts would be renegotiated to bear down on costs, he added.
Latest estimates on the cost of the project by HS2 were said to be £54bn-£66bn, though the figures were rejected by the Department for Transport.
Alexander told parliament that she told Wild the project should be delivered safely “at the lowest reasonable cost, even if this takes longer” and that his work estimating the new budget had already identified it would be delayed beyond 2033.
Announced in 2012, the project was originally meant to run from London to Manchester and Leeds via Birmingham but both northern legs were scrapped under the previous government.
According to the Telegraph, which first published reports that Alexander was due to make the announcement, a new report published later today will also highlight £2bn wasted on the northern branches of the project and £250m on two failed designs for Euston station.
The transport secretary ruled out reinstating any axed parts of the scheme as unaffordable.
Alexander also expressed concern about the recent allegations of subcontractor payment fraud on HS2. “If fraud is proven, the consequences will be felt by all involved,” she said.
Earlier this week, it emerged that HS2 reported a subcontractor to HMRC.
The allegations, first reported last month, relate to two labour suppliers employed by the Balfour Beatty Vinci (BBV) joint venture on the London-to-Birmingham high-speed line.
Alexander also today appointed Mike Brown as chair of HS2 Ltd. Brown was a former Transport for London commissioner from 2015-2020 and replaces Sir Jon Thompson, who left earlier this year.
The Crossrail megaproject was meant to have been completed in 2018 but was repeatedly delayed, until after Brown left the organisation.
He announced his departure six months after rejecting calls from the London Assembly transport committee to consider his position after emails were released that appeared to show his staff playing down the prospect of Crossrail delays to Mayor of London Sadiq Khan in 2018.
A spokesperson from the High Speed Rail Group said: “HS2 has long required a fundamental reset, and today’s reports mark an important step in that direction. Under the leadership of Mark Wild, the project is being refocused after years of instability, where repeated chops and changes to scope have inflated costs and disrupted delivery.
“This reset begins the difficult but essential task of restoring confidence in one of the UK’s most vital infrastructure projects.”
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Ian Weinfass