Cost increases and delays on the A465 Section 2 road improvement

Cost increases and delays on the A465 Section 2 road improvement
20 February 2020

A report issued today by the Auditor General for Wales shines a light on the issues that have affected the project

Welsh Government estimates suggest improving an 8km stretch of the A465 between Gilwern and Brynmawr will cost the public purse around £100 million more than estimated at the start of construction and take more than two years longer than expected to complete.

The A465 Section 2 is an 8km stretch of road between Gilwern and Brynmawr. It involves building on a steep-sided valley – the Clydach Gorge – and passes through the Brecon Beacons National Park. The work to improve the road is part of a larger scheme to improve 40km of the A465 between Hirwaun and Abergavenny which is expected to cost around £1 billion overall. The scheme is intended to have a considerable impact on investment and economic activity along the Heads of the Valleys corridor.

The work was due to finish in September 2018, but full completion is now expected to run into 2021.

The final cost and timescale for Section 2 remain uncertain. The work was due to finish in September 2018, but full completion is now expected to run into 2021. Welsh Government estimates from November 2019 suggest a total bill of around £321.1 million to the public purse. However, the Welsh Government and the main contractor, Costain Ltd., have been in dispute about who is liable to pay certain costs. Costain considers that the latest estimates of Welsh Government liabilities are understated. The Welsh Government considers that the figures represent a reasonable allowance for its liabilities at this stage.

The £321.1 million figure is less than the £336.2 million estimated in April 2019, but at the start of the detailed design and construction contract in December 2014 the Welsh Government estimated a cost of £223.2 million. Some of the increase relates to design changes requested by the Welsh Government and additional measures to address environmental impacts, but the engineering and contractual challenges experienced on the project account for most of it.

The report highlights that despite the increasing costs and delays, the project has delivered some wider social, economic and environmental benefits already. These include employment opportunities and the creation of a construction training academy, contracts with other Welsh companies, the acquisition of land for tree planting along the route and wider community outreach and charitable work.

However, the disruption and delays have had a significant impact on the local community. By the end of November 2019, this had included 57 weekend closures and a further 75 weekday overnight closures. The level of disruption has been substantially greater than expected at the start of construction and has raised complaints from drivers and the local community.

This is not the first time that the Welsh Government has faced difficulties with significant cost increases and delays on road projects and it is vital that lessons are learnt for future infrastructure schemes.

Despite some wider benefits being delivered and expectations about the eventual impact of the road improvement, those living and working locally are paying a higher than expected price for the ongoing delays and disruption during construction.

Notes to Editors:

  • While the dispute resolution process continues between the Welsh Government and Costain, this report has been prepared to set out, in factual terms, interim findings from audit work.
  • Figure 3 in the report outlines the issues that have been at the centre of the contractual dispute. Figure 4 provides a breakdown of the Welsh Government’s latest estimates of the cost to the public purse, compared with earlier estimates.
  • The Auditor General is the independent statutory external auditor of the devolved Welsh public sector. He is responsible for the annual audit of the majority of the public money spent in Wales, including the £15 billion of funds that are voted on annually by the National Assembly. Elements of this funding are passed by the Welsh Government to the NHS in Wales (over £7 billion) and to local government (over £4 billion).
  • The audit independence of the Auditor General is of paramount importance. He is appointed by the Queen, and his audit work is not subject to direction or control by the National Assembly or government. 
  • The Wales Audit Office (WAO) is a corporate body consisting of a nine member statutory Board which employs staff and provides other resources to the Auditor General, who is also the Board’s Chief Executive and Accounting Officer. The Board monitors and advises the Auditor General, regarding the exercise of his functions.
A465 Section 2 - Interim Findings