Finance For Project Managers (ACC372)

Finance For Project Managers (ACC372)
AE1
A Critical appraisal of HS2: Is it
speeding towards disaster?

Table of Contents
Executive Summary .......................................................................... 1
Introduction .................................................................................... 2
Funding ......................................................................................... 3
Budget & Cost Controls ...................................................................... 5
Investment Appraisal ......................................................................... 8
Provider Selection and Management .................................................... 10
Procurement ................................................................................. 13
Sustainability ................................................................................ 15
Key Lessons Learned ....................................................................... 17
Recommendations .......................................................................... 18
Conclusion .................................................................................... 19
References ................................................................................... 20
Appendices ................................................................................... 23
Appendix 1 .................................................................................. 23
Appendix 2 .................................................................................. 24
Appendix 3 .................................................................................. 25

1
Executive Summary:
‘High Speed Two Limited (HS2 LTD)’ is non-departmental public body, who has
been tasked by the ‘Department of Transport’ (DfT) with managing the delivery of
a new national high-speed rail network. (HIGH SPEED TWO (HS2) LIMITED, 2018)
The objectives of the large-scale infrastructure project HS2 are;
• “To provide sufficient capacity to meet long-term rail demand and improve
resilience and reliability on the network.
• To improve connectivity by making journeys shorter and more frequent.
• To Boost economic growth across the UK.”
(HS2 LTD, 2019)
This report provides a critical appraisal of HS2 and as to whether the project itself
is speeding towards disaster. This is done by looking at the PRINCE2 methodology
and its current application and examining key variables from PRINCE2’s application
such as;
• Budget & cost control
• Funding
• Investment appraisal
• Provider selection and management
• Procurement
• Sustainability
HS2 is an ongoing project with serious concerns due to; budgets, costs and funding
that severely deviate from estimated baselines. In addition, ‘HS2 LTD’ arguably
does not take responsibility or corrective action to ensure continued business
justification that would improve efficiency with the management of the project.

2
Introduction:
The aim of this report is to provide a critical appraisal of the HS2 project. This has
been done by analysing the key variables and evaluating issues project managers
on the project have experienced. As well as looking at how the PRINCE2
methodology has already and, can be further applied to management of the
project to deliver on objectives. Thus, enabling a clear analysis of the lessons
learned relating to the project delivery and how these lessons would assist
managers of future large-scale projects.
HS2 is a highspeed rail project inspired by ‘Tōkaidō Shinkansen’. TOPHAM (2019)
states “the project was officially launched in 2009, was tweaked by the coalition
government and greenlighted in 2012 as a Y shaped network”. This allows
passengers to travel between the city centres of London, Birmingham, Manchester,
and Leeds at up to speeds of 250mph, reducing journey times, supporting job
growth & accessibility, all whilst providing a low carbon method of travel,
supporting the transition to a net-zero carbon Britain. HS2 will be completed in
multiple phases; Phase 1, Phase 2A & Phase 2B.
Limitations of research can be seen in appendix 1.

3
Funding:
In 2013 a hybrid bill was passed for HS2’s phase one to be initiated. The hybrid bill
enabled ‘HS2 LTD’ to “compulsory acquire interests in the land and carry out work
on listed buildings and demolish buildings in conservation areas” (GOV.UK, 2017).
According to GOV.UK (2013), in 2013 ‘HS2 LTD’ estimated that “phase one would
have costed up to £19bn pounds”. However, over time that figure has significantly
changed, as the cost of phase one has risen to £54.5bn in 2019.
The original estimate of HS2 in 2011 excluding rolling stock was £32bn. This
estimate was revised to “a figure of £38.4bn in October 2013, with £19.0 bn
allocated to Phase 1 and £19.4 bn to Phase 2 with another £6.9 bn for rolling
stock” (HS2 LTD, 2019). In July 2015 the spending review of HS2’s estimate rose to
£55.7 bn with Phase 1 costing £27.2 bn, Phase 2a costing £3.7 bn and Phase 2b
costing £24.8 bn respectively.
“The figure of £55.7 bn has been repeated many times by ministers as the only
budget for the project, including most recently as part of the debate of the Third
Reading of the Phase 2a Hybrid Bill in the House of Commons on 15 July 2019.”
(BERKELEY, 2019).
HS2 LTD (2019) states the “programme delivery of HS2’s Phase 1 will be completed
by the end of December 2026, Phase 2a by the end of October 2027 and Phase 2b
in 2033W.”
Lord Tony Berkeley enlisted help from an independent consultant who reviewed
the project outlined costs. BERKELEY (2019) insists; “HS2 could no longer be
delivered within the available funding envelope of £55.7 bn”. Further stating “the
overall and comparable total cost for delivery of the project was increased to
between £72.1 and £78.4 bn... representing an increase of between “29.4% and
40.8% on the above funding envelope figure”. Including inflation, “the Chairman’s
Stocktake estimate increases the upper figure to £88 bn. (+58%)”.
There are significant underlying concerns regarding funding and cost of the
project, as the project is being funded by taxpayer money and the expenditure
costs are significantly increasing alongside the expected timescale of HS2. The
changes to the expected timescale can be seen in appendix 2.

4
Lord Tony Berkeley who is a member of the house of lords and Labour Party
transport spokesperson has published his own review of HS2 raising awareness to
the project’s actual performance & underlying issues and concerns.
Suggesting HS2 is not financially viable nor provides the benefits promised. Such as
economic regeneration, BERKELEY (2019) states “there is no evidence that this
would not come from improved local and regional rail services as opposed to those
which enable faster journeys to or from London”. This is because NPH (Nothern
Powerhouse) & MC (Midlands Connect) lines would only benefit, as HS2 benefits the
northside of the UK’s travel more, when research conducted by South West Rail
suggests that the south is more desperate need.
In addition, concerns over the environment and how the “situation has been
exacerbated by the appalling treatment of stakeholders, residents, businesses &
councils in areas over which it plans to construct the lines” (BERKELEY, 2019).