By David Williams
8 February 2011
MPs have condemned the ‘mishandling’ of a Private Finance Initiative project to widen the M25 motorway, estimating the scheme could potentially cost an extra £1bn more as a result
The Highways Agency came under fire in a report published today by the Public Accounts Committee, which found delays to the project, over-use of consultants and data errors that meant a cheaper option was overlooked.
Chair Margaret Hodge said that, in drawing up the 30-year contract with Connect Plus, the agency had neglected to consider the more affordable alternative of using the hard shoulder.
This was due to a technical mistake in the agency’s cost estimates. ‘Had the error not been made, hard shoulder running would have been shown to be the cheaper option,’ said Hodge.
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 first commissioning to the signing of the contract in May 2009. This delay exposed the project to the credit crisis, resulting in £660m of extra financing costs.
‘The advisers upon whom the agency spent an excessive £80m would have benefited from the drawn-out procurement.
She concluded: ‘The Highways Agency’s mishandling of the project to tackle congestion on the M25 could cost the taxpayer an extra £1bn.’
In the report, M25 Private Finance Contract, the committee expressed concerns that in this case the PFI, which is intended to transfer risk from the public purse to the private sector, had restricted innovation. ‘Public authorities must encourage innovative solutions and avoid the possibility of building in potential obsolescence’, it stated.
MPs also highlighted ‘potential conflicts of interest’ as the ‘senior responsible owner’ of the project had left the Highways Agency since the contract was signed and now works for a firm that had given advice on the project, and which is owned by one of the scheme’s major contractors and investors.
The committee said: ‘We note that Cabinet Office clearance was obtained for this move, but there remain potential conflicts of interest.’ It called on the Treasury to examine its guidance on officials who have worked on PFI projects who leave the public sector.
