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M25 widening delays raised costs by a quarter says watchdog

The cost of widening Britain's busiest motorway has increased by 24 per cent, or £660 million, partly due to the slow way the Highways Agency took the project forward, according to a report by a Government spending watchdog.

An 18-month delay in preparing and finalising the widening procurement for the M25 meant the contract was let in May 2009 at the height of the credit crisis, the report by the National Audit Office (NAO) said. This increased the net present cost by £660 million to £3.4 billion.

The report to Parliament added that the Government had announced in 2003 its intention to reduce congestion on the M25 orbital motorway encircling London.

At that time, the Highways Agency was starting to carry out trials of an alternative, potentially cheaper solution of allowing drivers to use motorway hard shoulders at peak times - known as hard shoulder running (HSR).

The NAO says that the savings from a conventionally-procured HSR solution for the M25 might range between £400 million and £1.1 billion.

The report said: "The slow progress on testing HSR and the agency's commitment to widening meant that the agency limited its options.

"As a result, it did not give itself the opportunity to secure a better price for the taxpayer. The agency is now using HSR on a number of major roads."

NAO head Amyas Morse said: "The Highways Agency's PFI (private finance initiative) project to widen the M25 could have achieved a materially better value-for-money outcome.

"This was partly because the slowness with which the project was taken forward subjected it to the cost effects of the credit crisis.

"The agency should have adopted a more agile approach to procurement, recognising the potential for making savings using an alternative method of relieving congestion - hard shoulder running. The agency should have kept its contracting approach open to allow the use of this method."

Roads Minister Mike Penning said: "This Government is driven by the need to get value for money for taxpayers. I am determined to learn the lessons of the report and we will act on its recommendations.

"The NAO is right to argue the merits of using output-based specifications for DBFO (design, build, finance and operate) contracts. We agree that hard shoulder running should be used more and that is why we have recently announced that 10 such schemes should go ahead."

A spokesman for the Highways Agency said it will respond to the NAO report at a forthcoming meeting of the Public Accounts Committee.



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