Recommendation 13

HS2 Ltd told us more directly that 89% of the difference between the Departments’ 2020 estimate of £44.6 billion and now was about how the Main Works Civils contracts were manifesting. It said that the Government’s decision to let cost-plus contracts, with few incentives and penalties, had left HS2 Ltd without any real levers on contractors to do better in relation to schedule and costs. The Department then agreed that the Main Works Civils had been the principal driver of cost increase.28 In our May 2020 report we had noted how the revised commercial model with main civil contractors had left HS2 Ltd (and therefore the taxpayer) bearing more of the risk of cost increases. We had pointed to the corresponding need for HS2 Ltd to ensure that it had the right commercial skills to manage these arrangements, and for the Department to be able to oversee and challenge HS2 Ltd’s performance.29 HS2 Ltd told us that the decision to let cost-plus contracts had not itself made the costs increases inevitable, and that there was the key factor to consider of how well the company had managed those contracts, as well as just the form of those contracts.30 23 Transport Committee, Oral evidence: HS2: progress update, HC 85, Q 408 24 Qq 41, 55, 56 25 Qq 56, 58 26 Qq 83–85 27 Q 59 28 Qq 59, 60 29 Committee of Public Accounts: High Speed 2: Spring 2020 Update, 3rd Report of Session 2019–21, HC 84, 17 May 2020 30 Q 95 HS2 and Euston 13