HS2’s chief executive has said the government will not give the project any more money despite its current cost gap, CN can reveal.
Speaking exclusively to Construction News, Mr Thurston said there was “no more money” for the scheme, having told the CN Summit that HS2 was currently in talks with phase one civils contractors to reduce costs by spring next year.
“We’ve just started this process with the contractors based on the submissions we had from them in October,” he said.
“We both recognise that we have a gap between where our cost cuttings are and where our budget is.”
However, Mr Thurston would not disclose the size of the current cost gap.
“The Department [for Transport] is very clear as the sponsor of the scheme that there is a budget for High Speed 2: that’s how much money we’ve got,” he said.
“There’s no more money […] we’ve got to come together as an industry to make HS2 affordable.”
HS2’s phase one civils packages, budgeted at £6.6bn, were awarded to joint ventures involving Balfour Beatty, Bouygues, Costain, Eiffage, Kier, Sir Robert McAlpine, Skanska, Strabag, Vinci and VolkerFitzpatrick in July 2017.
The chief executive listed four areas where HS2 and contractors were looking to reduce costs: by reviewing technical specifications and standards; “streamlining” organisation between contractors; investigating ground condition works; and rethinking which stakeholders manage risk.
Work was being done to develop a “better understanding” of the geology and ground conditions along the phase one route, which he said was driving “a lot of the costs”.
Furthermore, Mr Thurston said the company was looking at how risk had been allocated in contracts.
“They [contractors] all accept that there is cost in the current proposals that is based on the risk provisions, so if we change the risk profile, I think that can be different,” he said.
Mr Thurston added that the company was looking at whether the approach to risk was driving up costs by “protecting positions”, and whether costs could be cut by parties being more transparent in this area.
“If we’re more open and understand the true cost and the true risks, and we develop that jointly with the contractors, would that give us a different answer?” he told CN.
HS2 and its contractors have until March next year to establish how to close the cost gap on phase one, Mr Thurston said, adding that he was “confident” costs could successfully be addressed.
Mr Thurston said the project was looking into different funding options for phase two – described as an “important piece of work” for 2019.
The company was also in regular discussions with the government over costs, according to Mr Thurston.
“We keep the department, ministers and Treasury well aware of what we’re doing: there is full visibility in government of the current situation that we find ourselves in,” he said.
He added that the Treasury would be briefed this week about the state of the project, and that HS2 had already spoken to the transport secretary earlier this month.
“There’s nothing that you’ve seen in the media or that I’ve said today that isn’t shared with government,” the chief executive said.
Despite the cost gap on phase one, Mr Thurston confirmed that the client would announce the two winning contractors for the Euston and Old Oak Common station contracts before Christmas.
During an exclusive interview with CN in March this year, Mr Thurston said his brief following predecessor Simon Kirby’s exit was to “set up HS2 so that it can deal with what is in front of it”.
When asked if he believed he had successfully fulfilled this brief, Mr Thurston said: “The company is in a much better place than it was in a couple of years ago. We continue to evolve and mature as an organisation.”
Mr Thurston issued a call to arms for the industry to support the project.
“If we miss the opportunity that HS2 presents we’ll never forgive ourselves,” he said. “Let’s use the next 10-15 years of High Speed 2 to really move our industry forwards.”