Improving the Strategic Roads Network - The M1/Westlink and M2 Improvement Schemes

Today, Kieran Donnelly, Comptroller and Auditor General, published his report into the Department for Regional Development’s procurement of the M1/Westlink and M2 Improvement Schemes. The schemes were delivered through the Private Finance Initiative using a Design, Build, Finance and Operate contract. Collectively known as DBFO Package 1, the schemes included improvements to the M1/Westlink; provision of slip roads on the M2 at the Antrim Hospital; widening of the M2 from the Sandyknowes to Greencastle junctions; and associated network maintenance over a 30 year period.

Key findings

• DBFO Package 1 attracted four bids ranging from £189 million to £246 million - this created competition and helped drive down construction and operational costs which helped achieve better value for money.
• The winning bid of £186 million, arrived at following negotiation, is significantly less than the projected cost of £250 million calculated by the Department for delivering the schemes through a conventional procurement route.
• The procurement compares favourably with PFI deals in other UK regions; the Department  applied elements of good project management, putting in place sufficient governance structures, incorporating the lessons learned by the Highways Agency in managing a number of DBFO projects in England and engaging with the Strategic Investment Board and other professional advisers.  
• However, the internal costs associated with the procurement process, including those of the Strategic Investment Board, were not captured by Roads Service.
• Work began on the M1/Westlink Project in January 2006 and the final phase, the widening of the M2 from Sandyknowles to Greencastle, was completed in May 2009, some three months ahead of schedule.  
• While the Department has yet to formally review the benefits and outcomes of the schemes, initial assessments in relation to the Westlink improvements indicate that significant benefits are accruing. For example, a reduced journey time of seven minutes from the Saintfield Road junction of the M1 to the Grosvenor Road at peak hours.
• However, the Department’s ability to complete a more accurate calculation of the potential economic benefits was constrained by limited information on up-to-date traffic statistics for the proposed routes and the absence of a full economic analysis for the M2 widening scheme.  
• As a result some of the economic benefits the Department attributed to the PFI solution could equally, in Mr Donnelly’s view, have arisen through traditional procurement.
• Financing for the project included funding from the European Investment Bank and use of index linked bonds, both a first for Northern Ireland. This has delivered benefits to Roads Service both in terms of value for money and affordability.  
• In addition, the payment mechanism designed by the Department means that there is greater certainty regarding the future costs and the affordability of the project.  
• The Audit Office report does not examine the detailed circumstances surrounding the flooding of the Westlink underpass in August 2008. However, the report recommends that indemnified costs incurred by the Department in dealing with, or as a result of, the incident are identified and recouped from the Consortium; the scope for recovering other Departmental costs should also be investigated. Similarly, costs incurred by other public sector organisations, for example costs to emergency services, should also be identified and the potential to recoup these costs investigated.