Euston Station HS2 Platforms with Train
A computer generated image of what the HS2 platforms will look like at Euston Station © HS2 Ltd

HS2 Ltd, the taxpayer-owned company building Britain’s new high-speed rail line, has scrapped a key contract following allegations of a conflict of interest.

CH2M, the US engineering group, has said it will hand back a £170m contract to design the second phase of the £56bn HS2 project, which entails both extending the London-Birmingham link to Manchester and building a branch from the Midlands to Leeds.

Mace, an engineering firm that lost the bidding for that contract, had threatened legal action after pointing out that Mark Thurston, HS2’s new chief executive, was a former CH2M employee — as was his predecessor, Roy Hill, who had filled the role on a temporary basis.

In a statement, CH2M said it had “provided formal notice to HS2 Ltd that we are withdrawing our interest in the HS2 Phase 2b contract”. It added: “CH2M has demonstrated all appropriate measures taken throughout to ensure the integrity of the procurement process.

“Notwithstanding these efforts, we have taken the decision to alleviate any further delays to this critical national infrastructure project which could ultimately lead to increasing costs to UK taxpayers, as well as to our firm.”

HS2 Ltd said: “As they have announced, CH2M have decided to withdraw from the phase 2b development partner bid process, a decision which we welcome.”

Mace said it had only learned the outcome via the Financial Times, ahead of a meeting with HS2 on Friday. “The investigation regarding our concerns about conflict of interest has clearly raised some serious questions about the process. When millions of pounds of British taxpayers’ money is being spent, the public rightly expect decisions to be made following a thorough process and on a level playing field,” the company said.

CH2M has already been paid about £500m for working on the line as development partner and then delivery partner on phase one of the project, from London to Birmingham. The company has 37 staff on secondment to HS2 and 25 of its former employees are on the project’s payroll.

The US group, which is also working on London’s new Crossrail train line and the capital’s “supersewer” project, is understood to have become frustrated with the slow progress in resolving the issues on the part of the Department for Transport and HS2. The wrangle has already postponed work on phase two by more than a month and will cause further delays as a replacement is found. HS2 has already approached Bechtel, one of the losing bidders, to replace CH2M.

This is the second UK contracting setback this week and will raise further questions over the government’s procurement processes. On Monday the government admitted it had had to scrap a £6bn deal to decommission 12 Magnox nuclear power sites after a “flawed” tendering process, costing taxpayers £100m.

In 2012 FirstGroup won a 13-year deal to run the West Coast main line linking London to Scotland, only for Virgin Trains to challenge the decision in court and eventually force a government U-turn.

Tony Berkeley, a Labour peer and former engineer who worked on the Channel tunnel, said it had taken the government a “ridiculously long time to acknowledge that there is a conflict of interest”. He said: “Their decision indicates that the DfT believes the procurement process was seriously flawed. It doesn’t demonstrate much confidence in HS2’s management and procurement procedures.”

Although the HS2 project received royal assent this year it remains controversial, with more than 2,600 petitions heard in parliament and successive reports casting doubt over its value for money. This included a 2013 report by the National Audit Office that criticised HS2’s cost-benefit analysis. The Commons Public Accounts Committee at the time said it has used “fragile numbers, out-of-date data and assumptions that do not reflect real life”.

Joe Rukin, manager of the campaign Stop HS2, said: “The only reason HS2 is being built is because of strong lobbying from vested interests in the construction industry. The whole project is crony capitalism at its worst. We call on the government to investigate all contract awards from HS2 Ltd.”

Get alerts on High Speed Two Ltd when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article