Question to the Department for Transport:

To ask His Majesty's Government why and when they authorised the use of cost-plus instead of fixed-price contracts for payment of contractors on HS2; what consultations they held prior to the change; and who authorised that change.

This government has been clear that the position on HS2 is totally unacceptable for passengers and taxpayers. It is acknowledged by this government and new CEO Mark Wild that the past contractual performance of our delivery partners has failed to meet cost and schedule expectations.

We have taken action to grip the project and tasked Mark Wild to reset the project, including reforming and resetting the relationship with the supply chain, and to deliver Phase 1 safely and at the lowest reasonable cost.

Throughout the development of the HS2 programme there has been engagement with industry, and input sought from wider government stakeholders, to seek to ensure that the commercial approaches and contracts adopted are appropriate for the individual assets being delivered. Consequently, a variety of different contract forms are in use across the HS2 programme including both fixed price and defined cost contracts (similar to cost plus), as well as other contract forms. For example, HS2 Ltd’s Main Works Civils Contracts (MWCC) are defined cost, incentivised, two-stage design and build contracts based on the NEC 3 Option C target cost contract model. Such NEC contracts are in common usage throughout the UK construction industry as they provide flexibility and encourage a collaborative approach.

Notice to Proceed was granted on HS2 Ltd’s Phase One Main Works Contracts in 2020. At that time there was no prospect of determining a reliable fixed price, nor getting the supply chain to agree to such a model given the residual risk. Therefore fixed price contracts were not viewed as viable.

As with all procurement activity on HS2, these contracts were let in line with HS2 Ltd’s governance and assurance requirements which conform with UK procurement law.