Source · Select Committees · Public Accounts Committee
Recommendation 2
2
Accepted
Publish agreed HS2 cost estimate methodology and update programme costs regularly
Conclusion
The Department and HS2 Ltd’s failure to work together effectively is starkly illustrated by them not being able to agree how much HS2 will cost. The Department and HS2 Ltd have still not agreed on how much it will cost to complete Phase 1. They are yet to reach agreement on the methodology and assumptions that underpin their cost estimates. This has been exacerbated by HS2 Ltd failing to ensure it receives reliable data from its supply chain. The existing budget, set in 2019, is no longer viable. With the estimates for completing Phase 1 now as high as £66bn in 2019 4 prices and inflation adjustments potentially representing an additional £10bn, the total programme costs could be close to £80bn. Only when the Department and HS2 Ltd are able to agree on cost estimates will they be able to agree a budget with HM Treasury. In the interim, the Department is agreeing annual budget settlements for HS2 Ltd, a short–term funding approach that provides poor value for money for the delivery of any long– term infrastructure project. recommendation Alongside its Treasury Minute response, the Department should write to the committee, setting out details of the agreed cost estimate methodology. The Department should also include in its next six–monthly update to Parliament when it will update programme costs into current prices and how frequently it will do this in the future.
Government Response Summary
The government agrees, stating it is finalizing the cost estimating methodology with HS2 Ltd over the summer and will fully implement it as part of the program reset in 2026. It commits to providing a further update to the Committee with details on the agreed approach once this process is complete.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee's recommendation. comprehensive review of the programme, including HS2's current cost position and the capability and culture of HS2 Ltd, and to make recommendations to inform the programme reset. The department and HS2 Ltd have agreed the areas of cost estimation that need to be addressed to enable a robust and reliable life-cycle cost of HS2 to be set, these include, reset of project schedule and duration, consolidation of costs incurred, scope delivered, quantities remaining and an evaluation of supply chain productivity. The department is working closely with HS2 Ltd, accompanied by NISTA and HM Treasury advice, to finalise the cost estimating methodology over the summer and to fully implement it as part of the reset of the programme in 2026. Once this process is complete, the department will provide a further update to inform the Committee at the earliest opportunity providing additional further details on the agreed approach to cost estimation methodology.