M25 widening was not best value, NAO finds

19 November 2010

19 November 2010 | Angeline Albert

The Highways Agency’s PFI contract to widen the M25 could have been better value for money, according to a report by the National Audit Office.

The agency was criticised for being too slow to investigate potentially cheaper alternatives, such as allowing traffic to use the hard shoulder.

The NAO study said: “The agency should have adopted a more agile approach to procurement, recognising the potential for making savings using an alternative method of relieving congestion: hard shoulder running.”

It estimates this could have saved between £400 million and £1.1 billion. It said slow progress on testing hard shoulder running and the agency’s commitment to widening the motorway limited its options and provided less value for money.  

An 18-month delay in preparing and finalising the procurement work to widen the road meant the contract was let in May 2009, at the height of the credit crisis. This increased the cost of the deal by almost a quarter to £3.4 billion.

The report also described “shortcomings in its cost estimation process”. The Highways Agency’s cost estimates were 27-43 per cent higher than the bids it received. The NAO recommended the agency investigate the reasons for the difference.  

The NAO also called on the agency to develop its in-house skills in procurement and contract management because it is “over-reliant” on consultants.

“The agency has not reviewed the total costs of its procurement to identify lessons for future projects,” said the NAO.

“The agency continues to rely on advisers for contract management support and documentation about the procurement.

“The agency’s reliance on advisers has built up over time and in part reflects insufficient commercial and technical skills within the agency.”

The Highways Agency spent £80 million (7.5 per cent of the capital value) on advice and support from external organisations, including £45 million on technical advice, during the course of the procurement for the road widening.

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