Recommendations to keep HS2 on track taken on board, NAO says

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Spending watchdog issued 14 recommendations to keep costs and schedules under control

HS2 and the Department of Transport have taken on board all recommendations it was given last year to keep costs and schedules on the project under control, the National Audit Office (NAO) has said.

The NAO gave the project 14 recommendations across two reports in 2016 and 2020 to keep it on track as the price tag of the line nearly doubled from £56bn in 2015 to around £100bn in 2020.

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Work to dig Phase 1’s Chiltern tunnels started last month

Recommendations (see below) included making sure it had arrangements in place to enable it to make accurate assessments of the feasibility of agreed completion dates and a clearer delegation of authority on the project from the Department of Transport to HS2.

The NAO also said that HS2 and the department should develop common sets of information which would allow them to more consistently track the project to identify emerging risks.

In its latest progress report, the NAO said HS2 and the department had implemented half of the recommendations while the remaining seven were a work in progress.

It said that many of the recommendations will remain relevant throughout construction of HS2 and will need ongoing work by the department and HS2 Ltd but accepted some recommendations cannot be implemented until key decisions have been made on phase 2 of the route from Birmingham to Leeds and Manchester.

The NAO’s 2020 report found that HS2 Ltd and the department had underestimated the programme’s complexity and HS2 had not accounted for the level of uncertainty and risk in the programme when previously estimating the costs of Phase 1.

The NAO’s 14 recommendations for HS2 and the Department of Transport

The Department for Transport (the Department) should periodically assure itself about the feasibility of completing the High Speed Two programme (the programme) to agreed revised opening dates and the likely success of actions to improve delivery confidence, and whether any delays against schedule are reducing the time allocated for the critical stages of systems integration and testing of the railway.
Following its review of sponsorship arrangements for major projects, the Department should ensure that it has appropriate arrangements to gain assurance on programme delivery, while also providing HS2 Ltd with sufficient freedom to deliver the programme.
The Department should assure itself that HS2 Ltd has the capabilities it needs to deliver the programme, including the capability needed to manage the revised commercial approach for main civil construction. This assessment should recognise that HS2 Ltd will need a range of skills because the phases of the programme will be at different stages of maturity.
The Department’s accounting officer should continue to periodically assure himself of the deliverability of the programme schedule as the programme progresses. In the near term the Department and HS2 Ltd should ensure that the programme schedule for phases 2a and 2b is based on lessons learned from the challenge of balancing cost and schedule in the detailed design of the Phase One schedule.
The Department should assess whether the pace at which the programme is planned to move over the next few years allows key recommendations and decisions to be supported by full assurance, and to allow governance bodies sufficient time to consider fully the implications of their decisions.
The Department should establish a clear, thorough and realistic process by which HS2 Ltd will gain the delegated authority it needs to deliver the programme efficiently, and for the Department to be able to focus on sponsoring and overseeing Phase One.
HM Treasury, the Department and HS2 Ltd should take decisions on the scope and available funding for the programme, taking into account the trade-offs between cost and benefits. It should reflect a realistic assessment of the full cost of the programme and include appropriate contingency. It should also include the potential impact on cost, schedule and benefits of decisions made during parliamentary scrutiny of the Phase Two hybrid bills and provide this information to Parliament.
While we support the use of cost and schedule ranges in major programmes, the Department and HS2 Ltd should have a plan to narrow the range as the programme goes on. This plan should reflect the level of risk remaining in the programme.
The Department and HS2 Ltd should develop a common set of management information, so that they can clearly and consistently track performance on the programme and identify when risks are emerging. The management information should use consistent terminology and definitions and include the rationale for any changes. It should also be clear about what the Department and HS2 Ltd are measuring the programme costs and schedule against, for example the difference between the forecast cost of the programme, the budget and the target cost.
HS2 Ltd and the Department should ensure that the rationale behind its key future decisions about High Speed 2, including the implications for the wider network, are clearly communicated to all stakeholders in order to allow the rail industry as a whole to prepare for the future.
The Department and HS2 Ltd should quantify the impact that proposed and future changes to the existing plans for Phase Two will have on core benefits, and the wider strategic aims of the programme, and communicate the expected impacts clearly and promptly to all affected stakeholders.
On programme management the government should throughout the life of a programme, consider setting ranges for cost estimates and completion dates to reflect uncertainty, with a point estimate within this range set to help delivery bodies and programme sponsors closely manage performance.
On programme management the government should ensure that it takes appropriate account of the limitations of cost benchmarking information when using this approach to estimate costs. It should also use other available sources of information on costs.
On programme management the government should be realistic about the cost of complex and ambitious programmes and not assume arbitrary efficiency savings to make them affordable within available funding. Targets should be based on a realistic assessment of how robust cost control and different approaches to delivery can lower costs.