Unexpected challenges push London “super sewer” costs up 8%

The company building London’s new "super sewer" to stop waste spilling into the Thames has said projected construction costs have risen 8%, to $3.8bn, due to unexpected challenges.

These include dealing with an unforeseen Victorian gas main at Blackfriars, more difficult than expected ground conditions at Wapping, and a decision to move more materials by river, rather than by road.

Yesterday’s announcement by Tideway (Bazalgette Holdings Group) follows its revelation late last year that costs were mounting due to engineering challenges, which had "substantially eroded" contingency funds set aside for building the 25-km-long tunnel under the Thames.

The scheme is a private venture commissioned by Thames Water, to be paid for through Londoners’ water bills.

But if construction costs go over budget by more than 30%, the UK taxpayer may be liable through a government support package agreed with Bazalgette. This sees the government either providing equity to Bazalgette, or discontinuing the project and paying compensation to investors, as reported by the UK’s National Audit Office (NAO). 

However, Tideway said the "first and most unpredictable phase" of the project was now complete, accounting for what it said was 40% of overall construction works.

Pre-construction work began in January 2016. Since then, three large contracting consortiums have built seven new pieces of land in the river and have dug five shafts up to 50m deep. Tideway said a workforce of more than 2,000 people, including miners from across the world, are working underground.

The first kilometre of tunnel, from Battersea to Chelsea, was completed at the end of March. Two other tunnelling machines have started their journeys.

The project is due to be operational in 2024, but the government’s liability expires only when a three-year post-construction project testing period is complete, scheduled for February 2027, the NAO noted.

"Unforgiving tidal river"

Overall project costs, including running costs after construction, were set at £4.2bn.

Tideway said there will be no change to the estimated £20-25 annual cost for Thames Water bill-payers, adding that "costs remain well within the original projection for customer charges".

It said it had already raised enough money to complete the project and requires no further funding as a result of this upward cost revision.

Andy Mitchell, Tideway’s CEO said: "To build the super sewer we are working in an unforgiving tidal river in the centre of one of the busiest cities in the world. We have got train lines and bridges above our heads, and the tube and utility pipes below our feet.

"As we approach the half way point of construction, the time is right to update our cost estimate. The most important thing to say is that there will be no impact on the estimated cost to Thames Water bill payers and to recognise that our teams have done a great job in getting us this far and keeping us on schedule. Every day we get closer to our aim of giving London a cleaner river."

At Blackfriars, Tideway said it had avoided the need to divert the Victorian gas main, which would have meant closing the Embankment to traffic for up to six months.

But to avoid the diversion, Tideway had to make fundamental changes to the construction methodology for the site, adding costs to the original estimate.

At Wapping the team found difficult and unexpected ground conditions, which meant they have had to reinforce the ground to make it stable for construction, also adding cost, Tideway said.

To mitigate the cost hikes revealed last year, Tideway asked contractors to eliminate overlap, increase productivity, cut overheads and undertake value engineering.

The tunnel, which will run from Acton in west London to Stratford in east London, will extend London’s Victorian sewer system, stopping millions of tonnes of raw sewage polluting the Thames.

Tideway will publish its full annual report and accounts in June.

  • Note: The original budget for the Thames Tideway Tunnel was set in 2014 at £4.2bn. This comprised £1.1bn of preliminary work, delivered by Thames Water, and £3.14bn (£3.52bn in 2019, accounting for inflation) for the new tunnel infrastructure, to be delivered by Tideway.

Image: Scuba workers have completed more than 500 dives in the Thames during enabling works for the "super sewer", Tideway said in February 2019 (Tideway)

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  1. The huge receiving shaft at Beckton (the deepest of the project) was built as an add-on to the Lee Tunnel project a few years ago. The cost of this shaft has not been deducted from the budget estimate. This results in a higher increased cost than that reported. Surely the consequential costs of not closing the Embankment for 6 months results in a significant cost saving (these costs were omitted from the government’s cost:benefit analysis). Also; Tideway applied to change transport of spoil from Greenwich, adjacent Deptford Creek from river to road. This was refused by Greenwich Council because of the impacts on local residents and roads to/from Kent. It is disingenuous of Tideway to claim that this has resulted in additional costs when they have actually been seeking to reduce costs by switching from river to roads.

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