Highways Agency to seek bidders' budgetary feedback

The Highways Agency (HA) is looking to give itself better protection against escalating costs on early contractor involvement schemes (ECIs) by asking its tenderers to provide detailed comments on whether they think its budgets are realistic during tendering.

The ‘stick or twist’ move comes after a series of ECI schemes have come in well over budget due to factors such as rising construction costs; some estimates have placed the figure as 300% higher than when they were first included in the HA Targeted Programme of Improvements.

Contractors who submit tenders for ECI schemes will soon be required to look at the budgets and risk-sharing being offered by the HA, based on its own actual-cost database and information on the scheme, and state whether the scheme is buildable or not.

As part of this feedback, contractors will also be expected to provide their own detailed budgets and cost estimates, taking into account issues such as risk and inflation, to give the HA an accurate picture of what cost implications contractors are expecting on future schemes.

The feedback is not expected to play a part in the selection process, but will prove invaluable when it comes to any future conflict over budget overruns.

Those that agree with the HA’s budget will be expected to adhere to the figure provided, unless there are exceptional circumstances. This, in turn, will give the HA greater protection when contractors go over budget.

"There have been a number of instances where schemes have gone over the cost threshold and we had to ask ‘why didn’t you tell us this earlier?’", said HA procurement director Steve Rowsell. "With this approach, we have greater transparency and more of a buy-in from the supply chain. It also gives greater protection when things go wrong."

Those contractors that disagree with the HA’s budgets will be expected to explain why the budgets are not feasible enough through detailed alternatives. If successful, the HA might reconsider its initial budget estimates, or it could lend the opinion that the contractor has got its sums wrong.

Rowsell said the first projects looking to introduce the new requirement will be the M1 widening at junctions 21 to 30, and the widening scheme for the A14 between Fen Ditton and Ellington.

[Contract Journal, 19 July]