HS2 should not re-negotiate contracts, says Balfour Beatty boss

The chief executive of a construction firm tasked with delivering Old Oak Common station has said HS2 should not prioritise re-negotiating its contracts and instead focus on delivery.

A scathing report from the Public Accounts Committee (PAC) last month concluded HS2 Ltd’s contracts were “unacceptable to the public purse” and that it was “imperative” the project delivered on its assurances to re-negotiate them.

However, MPs warned they were “unconvinced” contractors had the necessary incentives to make changes that would deliver “significant cost savings.”

Asked whether they should be re-jigged, Balfour Beatty’s outgoing boss Leo Quinn told City AM: “No, not really, the contracts for the time they were written were appropriate.

“There’s no contractor in the UK that could actually have a balance sheet to deliver something of that size, so it has to go back to the Exchequer.

He added: “Isn’t it good news in a way that the balance sheet as a country is able to carry that, because if you had actually put that liability down to all of your contractors, and the cost had overrun the way it’s overrun, you wouldn’t have a construction industry in the UK.”

Quinn’s comments appear to pour cold water on HS2’s claims it will be able to achieve more favourable terms with its contractors, a central pillar of its plans to reset the project and rein in spiralling costs.

Balfour Beatty is delivering HS2’s Old Oak Common station as part of a joint venture with engineering consultant Systra. It also holds a major civil engineering contract on the Area North section of the project.

Executives at HS2 had assured the PAC that “all major contractors” had expressed a willingness to discuss and work through a renegotiation.

Speaking to City AM, Quinn said: “If someone wants to renegotiate the contract, that’s the wrong priority.

“The priority is how do you get the project completed as soon as possible and motivate the contractors you’ve got to finish early.”

HS2 declined to comment when approached.

HS2 can still be a success

Balfour’s veteran chief, who will step down this September after nearly a decade, believes the embattled project can still be made a success.

“We’re working very, very closely with Mark Wild and the team to have a successful delivery. And we’ll work flexibly with the client to make sure it gets finished and on time.”

“When you come and see [HS2] your jaw will drop in terms of how awe-inspiring it is,” he said. “It’s an investment by the government in building skills and capabilities that will actually serve us for the next 100 years.

Discussing winder concerns over the UK’s infrastructure sector, Quinn argued the difference between now and when he first started at Balfour was “night and day.”

The Labour government has put fast-tracking major infrastracture projects at the top of its plans to kickstart the UK economy.

Ministers earlier this week unveiled wide-reaching reforms intended on speeding up the rate at which planning proposals receive approval, as part of the Planning and Infrastructure Bill.

“10 years ago there wasn’t an awful lot of work on the horizon and we were struggling. Today, the rising tide is of a proportion that I’ve not seen before. It’s a great, very encouraging place to be at this moment in time,” Quinn said.

Investors in Balfour Beatty are set to cash in on a booming £18.4bn order book. The London-listed firm unveiled a £125m share buyback scheme and hiked dividends by nine per cent in its annual results on Wednesday.