Balfour Beatty and Kier have warned that a major motorway project faces potential cost overruns and delays.
Both contractors have served National Highways with early warning notices on the £1.3 billion A66 Northern Trans-Pennine dualling project, following last month’s announcement that Costain will stop working on the project.
It is not known if Keltbray, a third-party contractor working on the project, also sent an early warning notice.
The documents, dated June 19 and seen by Construction newssaid the Costain work would be split between Kier and Balfour Beatty, but said the potential effects of Costain’s departure were delays, an “increase in contractor costs” and an “increase in total work prices” .
National Highways declined to comment on the early warning notifications due to commercial sensitivity, but said there was “nothing to suggest” any deviation from the £1.3bn target project cost and the expected start of the works in the spring of 2024.
In the documents, Kier and Balfour Beatty said they will “use additional resources from both [their] own staff and staff of [their] designer” for the “transition team”, which will “agree and implement a transition plan for the redeployment of the works” after Costain’s departure.
Both notices call on National Highways to “arrange a risk mitigation meeting to agree how the impact of the transition team will be managed both commercially and contractually”.
The documents add: “While no formal instruction has been issued and Costain has not been issued with a formal termination certificate, [we] to confirm [we] will work in partnership with the project manager to make the transition period a success.”
In separate announcements last month, National Highways and Costain said the latter’s exit from the project was due to an agreed “change in procurement strategy”. Neither gave further details.
The road project, which will double the remaining single carriageway sections of the A66 between Scotch Corner and Penrith, was initially estimated to cost £1 billion, but the projected cost rose to £1.3 billion by 2021.
In 2022, a funding statement from National Highways indicated that the cost could be even higher, saying in a funding statement: “The project has a more likely estimate of £1.49 billion, including provisions for the risk and inflation at the date of application”.
However, National Highways said CN it was still “committed to delivering the £1.3bn plan”.
When the funding statement was released, the scheme’s National Highways project manager Lee Hillyard said the higher estimate “includes allowances for risk and inflation at the time we applied DCO”.
The road was selected as a research project for the government’s Project Speed program in 2020, meaning its construction time would be halved and the opening of the road brought forward by five years to in 2029.
However, it has since been identified by the Department for Transport (DfT) as ‘poor value for money’ in an accounting officer’s assessment published in October 2022.
The assessment added: “The latest cost increase [to £1.3bn] it presents issues of affordability and value for money, which National Highways and DfT will need to continue to work collaboratively to resolve. Despite these concerns, there remains a strong strategic case for dualling on the A66.”
The Infrastructure and Projects Authority has also flagged the A66 as delivery amber, meaning significant issues around delivery exist and in March 2023 National Highways decided to change ownership main responsible for the plan.
Project challenges are in the context of broader cost challenges for projects. Only three of the 22 DfT projects are classified as green (“no significant outstanding issues”) by the Infrastructure and Projects Authority, with the majority defined as amber (“there are significant issues that require the attention of the direction”).
