Procurement delays send M25 spend out of control

8 February 2011

8 February 2011 | Adam Leach



The Highways Agency overspent by about £1 billion on a project to widen two sections of the M25, according to the Committee of Public Accounts (PAC).



In a report published today, the committee cited, “poor cost estimation” and a lack of “robust information” as key flaws in the handling of the project, describing it as “poor value for money for the taxpayer”.

In May 2009, the Highways Agency signed a 30-year private finance contract to widen the M25, but the committee said the agency lacked up-to-date data for the cost of construction and over-estimated the market rate for operation and maintenance over a 30-year period. This, the committee said, undermined the agency’s ability to challenge the bids received.

The agency received particularly strong criticism for its lack of information and research that would have shown hard shoulder use was the cheapest method. 

PAC chairwoman Margaret Hodge MP said: “The agency should not have focused just on widening but also have given proper consideration to a much cheaper alternative, hard shoulder running.” 

The report also highlighted that the nine-year procurement process for the project had led research and consultancy spending to spiral out of control. During the procurement process, the agency spent heavily on research and consultancy, much of which was judged to have been unnecessary.

Hodge said: “This delay exposed the project to the credit crisis, resulting in £660 million of extra financing costs. And the advisers upon whom the agency spent an excessive £80 million would have benefited from the drawn out procurement.”

The findings of the report match those of the National Audit Office’s own investigation into the project from November of last year. The NAO study also criticised the Highway Agency for leaning too heavily on external agencies. It said: “The agency’s reliance on advisers has built up over time and in part reflects insufficient commercial and technical skills within the agency.”

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