"In Shropshire we have recent experience of the way the Highways Agency is a law unto itself when it comes to charging what it likes for road projects. The roundabout on the A49 junction with the Clun Road in Craven Arms cost the local authority roughly double what was initially estimated by the Agency. Sadly this appears to be all too typical of the way the Highways Agency manages its multi-billion road building programme. Governments have been building roads since the days of the horse and cart, but the Agency is still apparently unable to get on top of providing accurate estimates. As the costs of schemes soar, the Agency keeps within its budget by delivering the schemes late, sometimes years down the line."
Mr Dunne was speaking as the Committee published its 58th Report of this Session which, on the basis of evidence from the Department for Transport and the Highways Agency, examined the steps taken to improve value for money and oversight of the roads programme and contracting methods and project management capability.
The Department for Transport (the Department), the Highways Agency (the Agency) and local authorities have considerable experience of road building, but the Agency and Local Authorities have a poor track record in estimating the costs of road schemes. By September 2006, the Agency's 36 completed schemes in the Targeted Programme of Improvement cost 40% more than estimated initially. For schemes still to be completed, while the latest ministerially approved estimates are 5% more than the initial estimates made when the scheme was approved, the latest forecasts indicate that final costs could be 27% more than those original estimates. Local authority schemes undertaken within Local Transport Plans fared little better, with the 20 completed schemes costing 18% more than estimated and approved estimates for current schemes 11% more, with latest forecasts for final costs 31% above original estimates.
Estimates are prepared at an early stage, often when there is considerable uncertainty, for example on the line of the route, and before risks are fully identified, making preparation of a robust estimate difficult. The Agency should however, have a wealth of data and experience from completed schemes to inform and improve the reliability of estimates. The Department and the Agency have not until recently collected or analysed data on cost increases and delays for schemes or aggregated them to identify the main trends or reasons for cost overruns. Work by the National Audit Office and others identified the main causes for costs exceeding estimates as increases in construction cost, higher than forecast land prices and compensation to landowners, inflation and changes in the scope of the project. The Department and the Agency had not monitored emerging market trends closely, relying instead on inaccurate historical data on construction costs. The Agency had also made slow progress in comparing its costs both internally and against others, and on developing unit standard costs.
The Department has not been rigorous enough in its oversight of the Agency's delivery of major road schemes, allowing it too much latitude on delivery and cost plans. The Department has not monitored in-year expenditure against progress and delivery milestones. Agency schemes slipped from one year to the next and some regional and local schemes had been deferred on the basis of prioritisation at regional level. The Agency is overly reliant on consultants for project management expertise and needs to develop its in-house capability so that it can be an intelligent customer of contractors and consultants and to negotiate and manage the Early Contractor Involvement schemes. The Agency faces a particular challenge over the next five years, with some of its most experienced staff due for retirement at the same time as the larger and more complex road schemes come on stream.
