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Elevated risk means increased cost

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Elevated risk means increased costMultiple sources close to the HS2 project have confirmed that ‘interim costs’ for main civil works for phase one submitted by contractors are currently above HS2 Ltd’s target cost of £6.6 billion (New Civil Engineer reported).

[HS2 civil works £1bn above target cost, Katherine Smale, NCE, 12 June 2018]

While one source said that the collective price was coming in at “around £1.2bn” over budget, another said that some bids were “as much as 30% to 40% higher” than their individual target price.

As a result, NCE understands that the notice to proceed has been pushed back from November until February 2019 with one source claiming that they had been told to “go away and sharpen their pencils” to cut costs.

[…] However, a HS2 spokesperson said that the project “remains on track, and within [the] original cost package”.

Last month, NCE’s sister publication Ground Engineering reported how the cost of delivering HS2 could rise sharply as a result of the use of target cost contracts without geotechnical baseline reports (GBRs).

[HS2 price hike warning over rejection of risk allocation tool, Ground Engineering, 3 MAY, 2018, BY CLAIRE SMITH]

[…] “HS2 has not got enough data to be able to get the work to target cost,” [an engineer who has worked closely on the project] told GE. “When you look at the availability and quality of the ground investigation data, in some areas it is good but in other there is none and there is a risk associated with that. Contractors will price according to this risk and so the target cost will go up.

[…] “Some will say that the technical standards are too onerous but it is the risk allocation that is the problem. HS2 choosing not to use GBRs places all of the risk on the contractor and infrastructure owners should take some of the risk.”

He told GE that a number of consultants were asked to develop GBR 0 by HS2 ahead of the hybrid bill. “GBR 0 does not exist in any guidelines for use of GBRs and was a concept developed by HS2,” he said. “It is essentially a GBR nothing.”

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Written by beleben

June 13, 2018 at 8:10 am

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