The Highways Agency mishandled the major M25 widening project costing the taxpayer an extra £1 billion, the Public Accounts Committee has found.
The agency’s predictions for a private finance contract, won by a consortium led by Balfour Beatty and Skanska, for widening two sections of the M25 and maintaining the entire 125 mile length of road, including the Dartford Crossing as part of a 30-year, £3.4 billion deal were described by the Committee as “poor”.
According to the report, the Highways Agency justified the widening deal through a flawed and biased cost estimation and has been criticised for failing to include hard shoulder running at peak times to reduce the cost of the project.
The report said the agency over-estimated the market rate for operation and maintenance over a 30 year period, which undermined its ability to understand and challenge the bids received, the report said.
The substantially lower costs quoted by the PFI bidders also raised concerns about the maintenance regime the agency employs in its other contracts and the value for money being achieved.
The committee’s chairman, Labour MP Margaret Hodge said: “The Highways Agency’s mishandling of the project to tackle the congestion on the M25 could cost the taxpayer an extra £1bn.
“The agency should not have focused just on widening but also have given proper consideration to a much cheaper alternative, hard shoulder running.
She added: “The costs of the widening project have also been driven up by the nine years it took to conduct the procurement process, from the first commissioning of consultants in 2000 to the signing of the private finance contract in May 2009.
“This delay exposed the project to the credit crisis, resulting in £660m of extra financing costs. And the advisors upon whom the agency spent an excessive £80m would have benefited from the drawn-out procurement.”
Roads minister Mike Penning welcomed the report and said it was another example of Labour costing taxpayers dearly.
Highways Agency chief executive Graham Dalton said: “We note the conclusions reached by the public accounts committee and will act on its recommendations.
“Meanwhile the widening of the M25 in Buckinghamshire, Hertfordshire and Essex is progressing to time and under budget and will be completed before the opening of the Olympic Games in summer 2012.”