The contract model that let £15bn go, and the one HS2 signed instead

HS2 Ltd has signed new commercial deals with EKFB and Align covering more than 100km of route. The HS2 contract reset changes how contractors get paid, and highways clients are reading closely.

HS2 Ltd confirmed on 31 July that it has renegotiated contracts with two of the four civil engineering joint ventures building the London to West Midlands route.

EKFB and Align cover more than 100km between them. Both have signed new commercial terms.

What the HS2 contract reset actually changes

The old arrangement was put in place before construction formally started in 2020. Here is how HS2 Ltd now describes its own contracts: “ineffective at encouraging efficient delivery of civil engineering works, placing almost all risk on the taxpayer by failing to incentivise schedule or cost targets”.

That is a client writing a report card on a deal it signed itself. Costs rose, the client absorbed them. The programme slipped, the client absorbed that too. There was no mechanism that made finishing early worth more to the contractor than finishing late.

The replacement, in HS2’s words, “resets incentives by rewarding efficient delivery and cost control through a revised payment structure”. Contractors now carry more of the consequence of overrunning and take a share of the benefit of not doing so.

HS2 has not published the detailed terms, including the target cost arrangements, the pain-gain shares, the thresholds. Until it does, nobody outside the negotiating room knows how hard the new mechanism bites.

The £15bn that went before the job was finished

One line in the release does more work than the rest of it combined. By 2024, the original £15bn allocated in 2020 for the main civils contracts on Phase 1 had been spent, with the works far from complete.

Not overspent by a margin. Spent. The whole main civils budget, gone, mid-job.

Mark Wild flagged the contracting model as one of the central problems in his initial advice to the Transport Secretary last year, and this is the correction. HS2 says the new approach gives “greater confidence” it can deliver the remaining programme within the £93.2bn cost ambition government set out in May.

Lord Hendy, Minister of State for Rail, called the deals “an important milestone in the reset of HS2” and said “the waste and mismanagement of the past are behind us”. Wild was more careful: “This is good news, but there’s more to do.”

The reset also lands against a wider performance backdrop in road infrastructure, including National Highways performance targets.

The two joint ventures that signed

EKFB, Eiffage, Kier, Ferrovial Construction and BAM Nuttall, is delivering the 80km section between the north portal of the Chiltern Tunnel in Buckinghamshire and Long Itchington Wood in Warwickshire.

Align, Bouygues Travaux Publics, Sir Robert McAlpine and VolkerFitzpatrick, is building 24km through outer London and south Buckinghamshire, including the Colne Valley Viaduct and the Chiltern Tunnel. Align’s project director, Adrien Baudard, says the JV is now “focusing on preparations for a successful handover and transition to rail systems”, which is the tell: on that stretch, the heavy civils are largely done.

Two joint ventures are still negotiating. Balfour Beatty VINCI holds the 90km West Midlands section. Skanska Costain STRABAG is driving the 21km of London tunnels from West Ruislip to Euston. Neither deal has been announced, and neither side has published a position. We are not going to guess at one.