Press Release - Department for Transport: Estimating and
monitoring the costs of building roads in England
15 March 2007
Building and improving the country’s roads are proving to be
more expensive than originally estimated, according to a new report
published today by the National Audit Office.
The report looks at the Highways Agency’s investment in
motorways and major trunk roads and local authority major roads
schemes funded by the Department for Transport. The Department has
approved the development of new and existing roads projects, which
they had estimated at some £13 billion, between 1998 and 2021. But
many schemes are costing more than initial estimates indicated.
Around a third (36 out of 103) of planned motorway and trunk
road schemes had been completed by September 2006. These cost on
average 40 per cent more than the estimates prepared some years
previously but falling to around six per cent more once the initial
estimates are updated in line with latest Government guidance to
include VAT, inflation and a contingency. The July 2006 estimates
of the cost of the remaining 67 schemes indicates a 27 per cent
rise above initial estimates.
For local major road schemes, by July 2006 a quarter (20 out of
81) had been completed. These cost 18 per cent more than the
initial estimates and the Department’s funding contribution
increased by 14 per cent. According to local authority forecasts,
the remaining 61 schemes are likely to have a final cost around a
third (31 per cent) more than initial estimates, although the
Department considers that had these estimates been updated on the
same basis as those by the Highways Agency these increases would be
much smaller.
Today’s report states that there are a number of factors behind
the increased estimates some of which are outside of the Department
and the Agency’s direct control, such as the effect of construction
inflation and Public Inquiry outcomes. Most schemes enter the roads
programme at an early stage with only an indicative estimate of
costs, and insufficient information on the design, scope and timing
of the final scheme to form an accurate view of the likely final
costs. Other reasons for cost increases include underestimates of
construction, land and utility costs.
Around a quarter of road improvement schemes due to be started
by the end of 2005-06 had not begun by that date. The Department
and the Agency have been able to absorb the increases in costs to
date because of delays on some schemes and changes to the roads
programme but this may change.
The report acknowledges efforts by the Department and the Agency
to improve the quality of their estimates of the cost of schemes
and the management of costs. They are developing more accurate
forecasts for inflation and taking steps to improve the estimating
of the costs of land. And the Department now requires a more
comprehensive business case from local authorities.
However, it is too early to assess the impact of these changes.
They must now act to improve the evaluation of completed schemes
and examine costs against budget and the scheme’s progress against
timetable so that they have better information to prepare
estimates. The Department and the Agency should improve how they
work together by better sharing of lessons learned with each other
and local authorities.
Sir John Bourn, head of the NAO, said
today:
“The Department for Transport and the Highways Agency
need to define more clearly the risks to estimates at the point
schemes enter into the programmes and the Agency should make sure
that they have sufficient numbers of skilled project management and
commercial staff”.
Notes for Editors
- Press notices and reports are available from the date of
publication on the NAO website at www.nao.org.uk. Hard copies can
be obtained from The Stationery Office on 0845 702 3474.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 800 staff. He
and the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 19/07
All enquiries to Neil Gadhok, NAO Press Office:
Tel: 020 7798 7020
Mobile: 07796 940 746