Source · Select Committees · Public Accounts Committee
Recommendation 2
2
Accepted
Require Department and HS2 Ltd to implement effective cost controls and oversight for programme
Recommendation
Costs have continued to escalate and the Department and HS2 Ltd do not know how much the programme will now cost. This Committee has repeatedly raised concerns about the Department’s and HS2 Ltd’s management of costs. But, despite our warnings and recommendations, costs have continued to rise. The Department’s estimate of how much it will cost to complete Phase 1 is now £45 billion to £54 billion (in 2019 prices), above a budget of £44.6 billion that had been reset only three years previously in 2020. HS2 Ltd is estimating an even higher range, of from £49 billion to £57 billion (also in 2019 prices). HS2 Ltd estimates that inflation since 2019 will add a further £8 billion to £10 billion to the cost. HS2 Ltd has not been able to constrain costs in its main works civils contracts, despite this being an area we flagged for attention in spring 2020. In our view there has been insufficient senior level focus on cost control before; but HS2 Ltd says it is now implementing changes to increase its focus on cost control, for example through new senior roles and better management information. The Department has also set out its intention to bear down on the costs of Phase 1, help HS2 Ltd to change its culture on cost control, and strengthen its own governance and control of the programme with increased oversight and reduced delegation. 6 HS2 and Euston Recommendation 2: The Department and HS2 Ltd should set out in its next six- monthly update: • Progress in recruitment of Executive and Non-Executive Board roles at HS2 Ltd. • How they are going to ensure that effective cost controls, oversight, transparency, design, and contracting are put in place so that cost overruns and delays which have been a constant problem throughout the whole HS2 project will now be brought under acceptable and properly accountable control. • Progress in reviewing existing contracts to ensure that contractors are now incentivised to minimise costs.
Government Response Summary
The government agrees and states that recruitment for key board and executive roles at HS2 Ltd commenced in early 2024. It reiterates commitments to bear down on costs, embed cost control, reinforce leadership, and strengthen governance with a plan developed for implementation, with updates to be provided in forthcoming six-monthly reports.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. department commenced a recruitment exercise to identify new Non-Executive Directors in January 2024. Additionally, HS2 Ltd commenced a recruitment exercise to identify a new Chief Executive Officer in February 2024 and is also recruiting to a number of senior executive roles. As noted in the Network North command paper of 4 October 2023, HS2 Ltd and the department are committed to: • bearing down on the costs of Phase 1 and only delivering what is essential; • embedding a singular focus on cost control in HS2 Ltd and its supply chain and being prepared to take difficult decisions on contracts, scope and benefits to hold to budget; • reinforcing the leadership of HS2 Ltd, under Sir Jon Thompson, to change the culture on cost control with challenge from the department, HM Treasury and the Infrastructure and Projects Authority; and • providing strengthened governance and control from the government whilst this reset is developed and delivered, with increased oversight and reduced delegation. A plan has been developed by the department, HM Treasury and HS2 Ltd to implement the above commitments. The department will provide an update in its forthcoming six-monthly reports to Parliament. HS2 Ltd and the department are working together and with the principal suppliers to ensure focus on cost-effective delivery of the remainder of the civil works. The department will provide an update on that work in forthcoming reports to Parliament, subject to commercially sensitive details.