Highways England’s ‘reprofiling’ of its first Road Investment Strategy (RIS) from 2015-2020 has reduced its budget shortfall from £800m to around £600m, chief executive Jim O’Sullivan has said.
Mr O’Sullivan was speaking to Highways/Transport Network after the announcement last week that there would be a significant restructuring of the RIS, with six schemes being shelved to undergo further analysis to make them meet benefit cost ratio (BCR) targets and two schemes set to move into RIS 2.
‘I think we sold this [reprofiling] to government on two benefits. The first is the benefit to users, which is that of not having to do all this work at the same time. There are seven schemes in production on the A47 for example.
‘The second is the benefit to the supply chain, which was of equal interest to government, and smooths the work flow. I will take the A47 as an example; if you a start work on seven sites you need all the same labour, in all seven places at the same time. That is clearly not a good way to manage production. You would rather people move from job to job for each project.’
Highways England has a BCR threshold of 1.5. If a scheme falls below this level Mr O’Sullivan must write to government with a view to the scheme being paused while the Government reevalutes it. All six schemes that appear to have been shelved from the current RIS fell below this threshold.
Mr O’Sullivan revealed he has never had to write to government prior to this recent restructering; however one scheme – thought to be on the A1 – did fall to 1.48, but was subseqently carried out anyway after an agreement was reached.
‘I thought this is ridiculous am I really going to write to the secretary about this.’
When asked if the problem rested with what the National Audit Office described as the rushed planning behind the RIS in the run up to the 2015 election, Mr O’Sullivan responded: ‘It goes back to the timing of the RIS. If you are going to put together a five-year control period then you end up designing a lot of schemes at the same time and if you look at earliest possible date for delivery you end up with them all going into production at the same time.
‘I am not necessarily sure [the RIS] was rushed. There was a certain element of pump priming. Every time you do a control period for the first time there is going to be a degree of invention about it. I am not sure I agree it was rushed in terms of where we sit today. We sit in the halfway point of the RIS; in the round what we have been asked to do is very deliverable.’
Asked about Highways England’s budgetary shortfall, Mr O’Sullivan said: ‘I think that the latest revision brings that over programming down from £800m to £600m.’
When asked if the shelving of schemes had saved the cash, he answered: ‘It’s more complex than that because don’t forget 10 schemes come forward. The 10 schemes that come forward will cause us to increase expenditure. People are very interested in our funding and the adequacy of our funding; two and a half years in, to have a £600m challenge on a £11.5bn capital programme is perfectly normal.’
Mr O’Sullivan rejected the suggestion that this was a wake-up call to ensure more early contractor involvement in schemes, stating: ‘I don’t think we need a wake-up call. I think we are doing reasonably well.’
He added that for RIS 2 Highways England is looking at bringing in more private finance into its programme.
‘We are looking at a special procurement vehicle for the Lower Thames Crossing rather than fit it into the framework. The tunnel will be built with public funds but we are considering whether the roads would be built using private finance.’