Do we have credible costing methods for major projects?
Lord Berkeley, chairman of the Rail Freight Group and member of RTM’s editorial board, questions the methodology of estimating costs on major projects, including Great Western electrification.
For some time I have been strongly critical, not just of Network Rail’s ability to produce realistic costs for projects, but to justify them on the basis of past experience, and to deliver them on time and to budget.
This Public Accounts Committee ‘Modernising the Great Western Railway’ report is a good start but I fear not the end for this project, since the outturn cost for Great Western electrification on a like-for-like basis could be over £4 bn.
There are similar problems with HS2 Phase 1 where, using the Realistic Cost Estimates and data from other projects in a structured way with the Rail Method of Measurement (RMM) written by QS Michael Byng and commissioned by Network Rail, we gave evidence to the HS2 Lords Select Committee that the likely cost of their Euston to Old Oak Common section was over £8bn. This was not challenged by HS2 – as they did not appear to have any credible costs themselves.
In January, during Committee Stage of the HS2 Bill, I quoted Michael Byng’s Calculation that, using the same RMM suite for the whole of the Phase 1, the cost would be £54bn rather than the £24bn quoted in a Written Answer to me on 21 December 2016. How can the first 8km from Euston, albeit with an expensive station, possibly be one third of the cost of the whole 200km of Phase 1, which also includes expensive tunnels, stations, junctions and viaducts?
So, I conclude that neither Network Rail nor HS2 have a credible methodology of estimating costs of projects; it is extraordinary that they can go ahead with HS2 Phase 1 without any justification or response, based on the RMM Suite and costs from other projects, that their costs will be double their quoted figure.
Has the Treasury given the DfT a blank cheque for HS2 Phase 1? ‘Similarly, Network Rail must quickly get a grip of their costing methodology by fully and quickly implementing the RMM Suite that they have commissioned.
Lord Berkeley will be writing further on this topic in the April/March edition of RTM.
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