The High Speed 2 (HS2) project, envisioned as a transformative high-speed rail network linking London to Birmingham and beyond, is undergoing a significant overhaul. The Department for Transport (DfT) has embarked on renegotiating contracts with major contractors to address persistent issues of cost overruns, delays, and poor management. This initiative follows sharp criticism from the Public Accounts Committee (PAC) and other stakeholders, who have called for a fundamental reset of the project to ensure it delivers value for money and meets its objectives.
Contract Renegotiation: Scope and Stakeholders
The renegotiation process targets the main works civils, stations, and systems supplier contracts, involving four major civil engineering joint ventures:
- Align JV: Comprising Bouygues, McAlpine, and VolkerFitzpatrick
- Balfour Beatty Vinci JV
- Eiffage Kier Ferrovial Bam JV
- Skanska Costain Strabag JV
These contracts, critical to the construction of the railway from London to Birmingham, have been criticized for their structure. According to reports, they lack sufficient incentives for timely completion, offer limited penalties for underperformance, and allow contractors to continually renegotiate scope and value, resulting in poor value for money. The renegotiations aim to address these shortcomings by pricing risks accurately, verifying historic expenditures, aligning the baseline schedule, and securing the supply chain’s commitment to new terms.
In February 2025, the Public Accounts Committee published a report titled “HS2: Update following the Northern leg cancellation,” which sharply criticized the project’s management. The report opens with a damning statement: “The High Speed Two (HS2) programme has become a casebook example of how not to run a major project.” It highlighted significant cost discrepancies, with the DfT estimating Phase 1 costs at £45-54 billion, while HS2 Ltd projected £54-66 billion. The PAC’s investigation suggested that the total cost, including inflation, could exceed £80 billion.
The report also pointed to specific failures, such as the lack of a concrete plan for the redevelopment of Euston station, which includes the Network Rail station, the underground station, and surrounding commercial and housing developments. Additionally, a bat tunnel, intended to mitigate environmental impact, escalated costs to approximately £100 million, doubling the cost of that section of the railway. The PAC questioned the balance between environmental considerations and financial efficiency.
Sir Geoffrey Clifton-Brown MP, Chair of the PAC, was unequivocal in his assessment: “The Department for Transport has failed to manage HS2 properly, and as a result, billions of pounds are likely to have been wasted through delays and overspends.” He called for a reset within the DfT, emphasizing the need for skilled staff to oversee the project and restore the department’s reputation. He expressed hope that future examinations would show improvement.
Table: Key Issues Highlighted by the PAC
The HS2 project has faced ongoing scrutiny for its escalating costs and management issues. Former HS2 Ltd chair Jon Thompson noted that the original contract structures were a primary reason for cost increases, as they provided little incentive for efficiency and minimal ability to penalize poor performance. Transport Secretary Heidi Alexander, in December 2024, acknowledged external factors like Covid and high inflation but also criticized the project’s management, citing cost underestimation and low productivity.
The Guardian reported on 22 October 2024 that contractors had taken advantage of poorly structured contracts, with Transport Secretary Louise Haigh describing the project’s delivery as “dire”. Additionally, a Construction News article from 14 March 2025 quoted a Balfour Beatty executive expressing scepticism about achieving significant savings through renegotiation, highlighting the challenge of aligning contractor and taxpayer.
The HS2 programme is undergoing a “fundamental reset,” as described by HS2 chief executive Mark Wild in December 2024. Speaking to the PAC, Wild confirmed there would be no re-procurement of existing contracts but emphasized immediate efforts to “bear down on costs,” particularly in the main works civils elements. HS2 chief financial officer Alan Foster noted that contractors recognize the need for better-aligned incentives, stating, “There’s a recognition that we need to find a better alignment of incentives between the taxpayer and the delivery of the works.”
The reset includes shifting more risk to the supply chain to enhance accountability. The DfT and HS2 Ltd are working to ensure that new contract terms are sustainable and deliver value for money. Official documents from GOV.UK indicate that recent contract awards for rail systems were approved by the Investment, Portfolio and Delivery Committee (IPDC) and subjected to rigorous Treasury and Cabinet Office oversight, with a focus on long-term affordability through the 2025 Spending Review.
However, the PAC remains unconvinced that contractors have sufficient incentives to agree to significant changes, warning that financial pressures could be passed down to smaller enterprises in the supply chain, which may struggle to absorb them. The committee has called for regular progress updates on renegotiations and a clear plan if favourable terms cannot be secured by the 2025 summer recess.
The renegotiation of HS2 contracts represents a pivotal moment for the project, aiming to address deep-seated issues of cost, efficiency, and accountability. While the DfT and HS2 Ltd are committed to a comprehensive reset, scepticism persists about the feasibility of achieving significant savings. The success of these efforts will be closely monitored by stakeholders, parliament, and the public, who are eager to see HS2 deliver on its promise of transforming UK rail connectivity. For more information on HS2 Ltd, visit https://www.hs2.org.uk/about-us/.
