What went wrong on HS2?

The UK government recently published the findings from an independent review of governance on major transport projects.

The review was led by James Stewart, a former Infrastructure UK chief executive.

His report sets out 89 recommendations which the government has fully accepted.

Its findings echo the ICE’s lessons from the cancellation of HS2’s northern leg.

Here are five key takeaways from the Stewart review:

1. Critical governance failures

The scale and complexity of mega-projects like HS2 mean they need a bespoke governance model.

The National Audit Office drew a similar conclusion in a recent report.

Problems with the governance structure on HS2 included:

• blurred accountabilities
• the failure to evolve it as the project moved from design to construction
• the lack of protection from political interference

The latter point meant key decisions were driven by schedule rather than controlling costs as politicians sought to keep up momentum early on.

The project was therefore pushed forward before the design was mature enough.

As the ICE also pointed out in its paper, this was critical because the conceptual stages are where most value can be achieved.

A new approach

The Stewart report recommends a new governance structure – including creating a shareholder board, a new programme board with independent members, and specialist sub-boards.

More broadly, the system of government in which HS2 operates needs to be adapted.

Changes should include five-year funding cycles for the project, and the flexibility to move money between years.

2. Escalating costs

The failure to control costs on the main contracts is “by far” the main contributor to the huge overall cost increases on HS2.

Much of the report’s findings are redacted for commercial reasons.

However, it suggests the contractors couldn’t deliver outcomes within what the project could afford.

The ICE’s report noted that the size of the contracts and speed of delivery created an imbalance of power between the Department for Transport (DfT) and the contractors.

Gold-plating

A culture of “gold plating” also drove up costs. HS2 was dominated by the desire to “build the best” – with the aim to reach speeds in excess of 320kmph.

This goal, rather than cost control and affordability, set the tone for the project.

The ability to control costs was further undermined by HS2 Ltd’s consistent inability to produce reliable cost and schedule estimates.

3. Trust and capability

The scale of the cost overruns has also undermined trust between DfT and HS2 Ltd.

In addition, neither party had enough commercial and delivery capability.

HS2 Ltd was intended to be a ‘lean’ client. But this meant it lacked the resources to deal with significant issues – and there was no change of course as the problems grew.

HS2 Ltd and DfT need a plan to restore trust. The new programme board could help as “a forum for collaboration and problem solving”.

And there needs to be much more data transparency.

The report also notes the impact of negativity around the project on workforce morale and its ability to retain talent and skills.

The balance between criticism of the project and support for it needs to be restored.

4. Next steps for HS2

The Stewart report was published alongside new HS2 Ltd CEO Mark Wild’s initial assessment of the project and how it can be reset.

He sets out four priorities:

• optimising how the HS2 line will operate from day one
• developing a new commercial approach to regain control of the major contracts
• developing a new, cost effective, simpler HS2 Ltd organisational structure
• resetting HS2 Ltd’s relationship with the government

Based on his advice, the government says the project will be further delayed beyond 2033.

Euston station

The government has already committed to funding HS2 through to London’s Euston station.

The Stewart review noted the urgency of developing a delivery plan and agreeing funding and the governance structure.

In the 10-year Infrastructure Strategy, the government says it will explore the use of PPP models to fund the station.

5. Wider lessons and NISTA’s role

The Stewart report is the latest to point out the UK’s poor track record on delivering infrastructure over the last 10 years.

It adds that the better performance of the regulated sectors, especially energy, shows that private funding and leadership should have a key role in delivering public sector infrastructure.

The report also looks at the opportunities arising from the creation of the National Infrastructure and Service Transformation Authority (NISTA).

NISTA has been asked to provide overall leadership of delivering the UK’s infrastructure programme, as the report recommends.

Stewart says the government should consider appointing a specific minister for infrastructure and construction.

The report makes further recommendations for NISTA, including:

• To review the capacity and capability of the civils construction sector, including what is needed, how to build capacity and the relationship between design and construction.
• Establish a team of commercial/delivery specialists to support the public sector in the delivery of infrastructure projects.
• Develop an Infrastructure Capability Plan to increase the pool of infrastructure talent in the UK.
• Review how delivery capability can be built, retained, shared and transferred from project to project.

However, the scale of the task means these will have to be prioritised and staggered.

How this is done will be crucial as the government looks to deliver its new 10-Year Infrastructure Strategy.

In case you missed it

• What’s in the UK government’s long-awaited 10 Year Infrastructure Strategy?
• What should NISTA's priorities be?
• Why do major infrastructure projects cost so much and take so long?