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HS2 civils: What today means for bidders

So there we have it, the government has finally awarded its seven civils packages for phase one of the HS2 line.

Over the last three years these have been the highest-profile and most sought after contracts in the construction sector.

And there have been twists and turns throughout procurement; a delay here, a new chief exec there and even an over-eager chancellor inviting Chinese firms to bid for the civils packages.

While we haven’t any representation from China – well not yet – we have some of Europe’s biggest construction firms partnering with the UK’s finest. 

And in many respects it was a ’tour de force’ in bidding from the French firms, with the joint ventures including French companies scooping £4.9bn of the £6.6bn on offer.

But with every winner there are those to miss out, and there will be disappointment for a number of firms, particularly those based on the Iberian Peninsula.

Ferrovial, for instance, will see it as an opportunity missed, after its Fusion JV, in partnership with Morgan Sindall and Bam Nuttall, could not capitalise on its enabling works success in November – missing out on all four of the packages it bid for.

Dragados will feel the same disappointment, having landed the £479m Eastern Running tunnels deal on Crossrail, the highest-valued contract let by the London project. It would have hoped to secure at least one of the big central tunnelling packages.

But it became clear a few weeks ago that its team, which also included Hochtief and Galliford Try, was out of the running.

For Acciona, yet to win a major infrastructure contract in the UK, HS2 was very much a dip of the toe into the UK construction market. Expect it to come again when Highways England launches its Routes to Market framework next year.

It also brings up questions over the future of compatriot FCC’s construction prospects in the UK.

The Spanish contractor was not part of the joint venture between Laing O’Rourke and Murphy, which secured the most northernly enabling package last year. 

After learning that the Welsh government would not finance the Circuit of Wales, all but putting an end to the project, the lack of a HS2 deal for the LFM JV – which consists of FCC, Laing O’Rourke and Murphy – leaves FCC with very little construction work or prospects in the UK.

This will also be a hard one to swallow for Laing O’Rourke, too.

After reporting big losses in its last full-year, a £900m construction package would have been warmly welcomed.

Of the winners, Skanska and Costain have arguably pulled off the biggest blinder of HS2 civils procurement, providing a lesson in efficient bidding.

Today, alongside European tunnelling giant Strabag, the firm won two of the three packages it bid for, landing both southern civils packages.

This was to add to the southern enabling package it won in November, the only package it bid for.

The deals will come as a major bonus for Skanska’s UK business, which had its group chief executive Johan Karlstrom reveal today that he would be reviewing UK costs after the company posted a profit warning last week.

Many were shocked when Balfour Beatty missed out on all enabling packages despite bidding for three. However, the company’s JV with Vinci were the biggest winners in terms of value, scooping both northern packages worth a total of nearly £2.5bn.

For Sir Robert McAlpine, who last year revealed it was aiming for 20 per cent of all of its work to come from civils, the winning of the £965m Colne Viaduct and Chiltern tunnels package, means a sizeable step towards that.

Bouygues TP, which partnered SRM and VolkerFitzpatrick, will also be breathing a sigh of relief.

The contractor currently carrying out the civils, has seen a few contracts slip through its fingers of late, namely the Barking Riverside rail extension and the Silvertown Tunnel deal, which it failed to make the shortlist for.

But the winning of the package will breathe new life back into its UK venture.

But it wouldn’t be an HS2 procurement without a bit of drama. 

The decision to award two of the packages, worth a combined total of £1.34bn, to a Carillion / Eiffage / Kier JV was bound to garner attention when you consider Carillion’s current problems.

For a company hit by a profit warning, the prospect of hundreds of millions of pounds of secured work is very welcome.

It had a good effect on the firm’s share price, too, which was as high as 70p today, up 24 per cent from the 56.45p at market close on Friday.

But, whether you are a company that has won or a company that has just lost, the big winner of today’s announcement is the construction sector. 

Recent headlines of profit warnings and financial problems show times becoming increasingly difficult for construction companies, with the future still uncertain.

At the time of the recession it was Crossrail that largely kept the infrastructure sector on its feet, and HS2 could now play a similar role.

It is imperative that the construction or procurement of HS2 is not delayed and the supply chain has a clear visibility of opportunities, and access to these opportunities when they go out to market.

Because days like this not only show how important government deals are for the construction sector, but also how important the construction sector is for the government in building the type of infrastructure that will ultimately benefit the country.

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