HS2 phase one central programme boss Mike Hickson lifts the lid on what comes next now £6.6bn of contracts have been agreed and hits back at concerns over Carillion.
On 23 February this year, the High Speed Rail Bill achieved royal assent.
After more than four years, 820 petitions and over 50 debates and committees in parliament, the hybrid bill completed its passage and HS2 was granted powers to build phase one of the £55.7bn line.
With that, HS2 had moved from a development to a delivery body. “Royal assent fundamentally changed the mindset of everyone here,” explains Mike Hickson, the programme director for the central section of phase one – from the M25 to just south of Birmingham Airport. “Before that, we were very limited in what we could do, it set us off on the journey.”
From Kosovo to HS2 via the US
Mr Hickson’s journey will centre on overseeing nearly £2.3bn of civils construction.
He joined HS2 at the start of 2015 from US engineering giant Fluor, where he was logistics director for the multi-billion-dollar Future Growth oil project in Kazakhstan. Prior to that he spent 30 years as part of the Royal Logistics Corps – the army’s largest corps – including the last two as its director.
“I have built a train line before, between Kosovo and Macedonia,” he recalls. “I drove the first train down it, and when we got part of the way in we found that they’d actually built a market over the train line because nobody thought it would be used again.
“But I can’t say that has really given me the background to build a high-speed rail line,” he laughs.
Indeed, very few in the UK have the background for a project like HS2 phase one: managing the country’s biggest contractors to build something that has been done only once before in the UK. And HS1 was less than half the size HS2’s first phase.
“We want to get to a stage where by the end of 2018 we have an agreed price and agreed programme”
While the contractors have now been chosen, it will still be well over a year before work starts in earnest, or – Mr Hickson admits – before HS2 knows exactly what the final design of the line will be.
“The main works contractors have done a lot of work on their bids, there’s lots of good information in there,” he explains. “But it’s not even scheme design yet – just ideas and thoughts.”
While the £6.6bn civils deals were agreed in July, it was in fact only the design contracts – a fraction of the value – that were officially signed. The construction part of the deal will only come into play when the design is complete and a target price and works programme is agreed with HS2, a process that could take until early 2019.
“The design houses will be really firing up in the new year,” Mr Hickson says. “We want to get to a stage where by the end of 2018 we have an agreed price and agreed programme.”
How design will be kept in line
To ensure the teams remain on track, HS2 has put in place a series of design gateways that firms must pass through to remain on the project. “These gateways are not easy to pass,” he says. “You don’t have to be perfect but you have to show us you can get through them pretty quickly.”
He measures the scoring by codes. If a JV receives a ‘code one’ through a gateway, it is a green light to proceed. A ‘code two’ means it can pass through but needs to make alterations suggested by HS2 promptly. If the team hits a ‘code three’, it will be asked to redo the work. Repeat failures would put firms at risk of having packages removed and handed over to a rival.
“It is written into the contract [and the contractors are aware] that we can change out a contractor who is not performing,” Mr Hickson says. “We have effectively created a framework; if contractor A was not performing we would say to contractor B, C, D or E, ‘You go and bid for the work’.”
“The enabling works is all about de-risking the project; we need to do all of this so that when civils workers arrive on site they can get going on day one”
But before any tunnels can be bored or viaducts constructed, it is important HS2 de-risks the project through its enabling works. In November 2016, three teams were chosen for the enabling deals for the north, south and central sections of phase one, worth a total of £900m. “We are keeping enabling works separate from the design stuff,” he explains. “We don’t want to constrain the designers at this point.”
Flexibility has been built into these deals to support this, and Mr Hickson admits values could increase. “When we awarded the enabling works it didn’t have a specified scope and it is now about identifying what needs to be done. They are currently moving all over the place, as we start to identify new surveys.”
This is the case in Mr Hickson’s central section, where initial underestimations of the number of great crested newts has caused headaches. “Let’s say we made the presumption there was x number of newts but that doubled, then the whole package has grown exponentially,” he explains.
There is also extra works now being let outside of the original enabling packages. One example is the deal to build a new slip road connecting the M25, just north of the M40, to the start of the Chiltern Tunnels southern portal. The project, run by Highways England and delivered by Jackson and Osborne, will be built exclusively for traffic supporting HS2 construction.
“The enabling works is all about de-risking the project; we need to do all of this so that when civils workers arrive on site they can get going on day one.”
When the work begins, there will be a large contingent of staff from across the Channel. “We do have a strong French scene,” Mr Hickson says. “But France is at the cutting edge of high-speed rail.”
When the civils bidding began it was largely billed as France versus Spain and which country HS2 perceived as having the best high-speed calibre. It is fair to say ‘Les Bleus’ won hands down.
“French firms aren’t going to be able to naturally translate stuff across to here; we have requirements that go beyond some of the French requirements”
French giants Eiffage and Vinci were both part of teams that won two packages each, while the Bouygues joint venture secured the coveted Chiltern Tunnels package.
The only Spanish presence on phase one will be Ferrovial after its Fusion joint venture alongside Morgan Sindall and Bam Nuttall won the central enabling works package.
HS2 ground investigation work at Curzon Street Birmingham
“If I was pulling together a high-speed rail team, I would naturally look at what has just been done, what has just been done well, and in a similar sort of environment,” Mr Hickson says. “China is different to France; France is much more akin to the UK, but there are differences.”
He warns that the overseas contractors still need to be open to change when delivering HS2. “French firms aren’t going to be able to naturally translate stuff across to here; we have requirements that go beyond some of the French requirements.”
Can Carillion cope?
Of course, concerns have been raised around HS2’s supply chain closer to home.
For Mr Hickson’s central section, Carillion was chosen through its venture with Eiffage and Kier (CEK) to deliver £1.34bn-worth of contracts. Just weeks before this, the UK’s second largest contractor released a shock profit warning, revealing contract writedowns of £845m.
The dire financial situation immediately prompted questions over HS2’s decision to select Carillion among its contractor JVs, forcing transport secretary Chris Grayling to defend the award.
“We have a contract with CEK, not just Carillion. I’m absolutely confident; we would not have appointed CEK if we felt it couldn’t deliver this”
Mr Hickson admits that HS2 was not aware of Carillion’s financial state before the profit warning but carried out extra due diligence immediately after it heard the news. Discussions were swiftly arranged with the JV, as well as board members at Kier and Eiffage, which were able to give HS2 assurances over CEK’s ability to deliver.
Last week, Carillion’s situation worsened with the firm releasing a fresh profit warning, which sent its share price plummeting to 15p at one point.
Mr Hickson, speaking to CN prior to Carillion’s latest warning, says he is confident the JV can still deliver, taking into account Carillion’s woes. “I must stress we have a contract with CEK, not just Carillion. I’m absolutely confident; we would not have appointed CEK if we felt it couldn’t deliver this.
“[From] what we have seen so far, [CEK] is as good as any of the others, and I am not seeing anything that concerns me at this stage – and I wouldn’t expect to either. The JV should ensure that if there are issues in the JV, the JV doesn’t represent them to us; they cover them.”
It is this culture of not viewing contractors as standalone parties that HS2 wants to instil not only in the JVs but across all civils contractors. “We want to look at this as running seven contracts as one,” Mr Hickson says. “We want people to not just think of it as ‘my area’ but look at HS2 as one single entity, one team.”
HS2 has set up a collaboration board, chaired by phase one managing director Jim Crawford and attended by board members from every JV, to look at where efficiencies can be created through working together. “There has to be areas where we can work together. A batching plant is a good example: there has to be a batching plant somewhere between central and north that could serve three contractors – it would be barking to build two separate ones.”
Collaboration will also be driven by financial incentives. “There is a share gain pool, there are incentives to bring this under budget, with overall and individual share gain both pre- and post-Notice to Proceed.”
Those that missed out
For every winner of a civils deal, there were teams that missed out. A total of four shortlisted bidders failed to secure a package, with some spending up to £10m on their bids, CN understands.
So with teams having been established and significant sums invested, what can HS2 offer those that missed out?
“Phase two is not a million miles away; if you are a big contractor and are interested in phase two construction you will be likely putting together your bid teams now”
When phase one bidding was launched in 2015, it was mooted that HS2 would automatically shortlist any phase one bidder for the packages covering phase 2a of the line from Birmingham to Crewe. HS2 has still not made a decision on whether to trigger the option on those works, which are estimated to be worth £3.2bn.
However, Mr Hickson says there are plenty more construction opportunities coming up, such as the stations packages and the lines to Manchester and Leeds. “Phase two is not a million miles away; if you are a big contractor and are interested in phase two construction you will be likely putting together your bid teams now.”
He adds: “Someone had to win phase one. What we chose is what we thought were the best; the others were very good and should be looking at phase two.”
For phase one the timeline is now clear. Designs and costs will be signed off at the end of 2018 ahead of civils work starting in February or March 2019, with activity peaking in 2021 before the line finally opens in late 2026, Mr Hickson explains.
A recent assessment conducted by HS2 found it was now 80 per cent confident that phase one would be completed by December 2026, up from 60 per cent in the summer of 2016.
On price, questions continue to be raised. The day before the civils contracts were awarded, the Sunday Times reported that phase one would cost £48bn – nearly twice the £27.8bn funding envelope allocated. The figures came from Michael Byng, an expert who devised the standard method used by Network Rail to cost its projects. HS2 has dismissed these calculations.
Mr Hickson shrugs off the doubters and remains confident the line can be delivered on time and on budget. “Part of the ITT was the firms agreeing they could do the work within the budget they signed up for. We have got some of the best high-speed engineers in the world; they will bring that [cost] down.
“At the moment all the programmes are telling us that we have got a sensible and achievable target, and today, if everything flows, we should get there on those dates.”
And the most successfully delivered section of the line?
Mr Hickson smiles as he replies instantly: “Well I can definitely tell you that will be the central section.”