Friday, 28 June 2013

HS2 Contingencies

It's six months since I first highlighted concerns with HS2.

In the latest twist it has been announced HS2 may cost £42.6bn as opposed to the original £33bn - let's remember that we're still in the early stages of this project.

But what struck me as strange was George Osborne's interesting explanation of the £14.6bn contingency sum on Sky News:
"... one of the reasons why the cost has gone up is we're actually building in more contingency to make sure that we don't actually overrun. We've got a proper budget from the start that way we know we can afford" (27 June 2013).
If the chancellor is correct and we had a proper budget from the start (or is this the start?), what was the original £33bn?

Is the contingency a slush fund or a contingency fund? A contingency is to cover costs which could not reasonably been foreseen. It isn't intended to cover increases due to changes in specifications, clients intentions, costs of materials, contract omissions, or new regulations.

It would be really useful to understand what this 'contingency' of £14bn is allowed to cover and what it won't? It will also be interesting to understand how it will be managed? Can we now assume the Treasury have said, "the absolute maximum HS2 will cost is £42.6bn"? If that's the case, who will be held accountable for overruns? I suppose another way of looking at it would be, who involved in making these commitments will be around in 2032?

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