This is an HTML version of an attachment to the Freedom of Information request 'Full Approval for Norwich NDR'.

From:   [DfT]
Sent:   24 September 2015 10:00
To:     [HMT]
Cc:     [HMT}; [DfT]; [DfT]; [DfT]
Subject:        RE: Norwich Northern Distributor Road - Final Approval
Categories:     Egress Switch: Unencrypted
The differences on costs is due to their fact that the scheme on which we are seeking 
Ministerial approval is only part of the full NNDR scheme. The full scheme includes the 
A47 Postwick Junction which has already been approved and which is close to opening 
for which we are providing £19m; the section of road between Postwick and the A140 
which is the section on which approval is being sought (because of the decision 
originally reached at initial approval in 2011 to support only part of the full scheme for 
cost saving reasons); and an extension from the A140 to the A1067 which Norfolk are 
funding in its entirety. The full cost the full scheme is now £178.45m which includes the 
£29.9m cost increase. The full cost of the scheme on which we are seeking approval is 
now £105.89m with the full cost of the scheme including the extension but minus 
Postwick is now £151.147m
The original cost of the scheme on which we are seeking approval (excluding Postwick 
and the A1067 extension) was £86.74m of which DfT had agreed to provide £67m. The 
revised cost of £105.89m is an increase in cost of £19.15m. Norfolk asked DfT to fund a 
pro-rata increase based on the percentage of their and our contributions to the original 
cost which worked out at £15m. Our Minsters did not want to provide all of that but 
suggested £10m.
As background the funding for the full scheme is coming from the following sources:
£19m                     DfT Postwick allocation (already drawn down)
£67.5m                  Original DfT NNDR allocation (Postwick to A140)                   
£1.71m                  Growth Point Funding                                                   
£60.34                   Local Authority (Norfolk CC supported by up to £40m CIL 
funding from Norwich, Broadland, S.Norfolk DC’s)
Total  - £148.55 (to meet 2013 estimated cost, leaving £29.9 shortfall.)
£10m                     DfT additional allocation                                                
£10m                     New Anglia LEP allocation (to be funded from the proposed 
2016/17 Future Growth Fund so Norfolk are underwriting)
£10m                     Norfolk County Council additional funding.
Total - £178.45
As to the points you set out it would be difficult to row back on the cost increase which 
our Minister has already approved in principle, and which is public knowledge.
Would you also be able to provide a bit of info on what will happen if additional funding 
is not provided now
 – Norfolk would have to re-consider whether it wants to continue 
with the scheme and if so where it could find the additional £10m. Given the New Anglia 
LEP have already stated that their £10m will come from the next round of LGF funding, 
which of course is subject to the Spending Review, Norfolk is already underwriting that 

so if they had to fund a further £10m that would mean they would potentially be 
underwriting all the additional £30m. This would have to be considered and approved by 
the Council which I expect would take them a few months during which time both we 
and you would be subject to significant lobbying by local MPs and the cost of the 
scheme may well rise again if the time taken means the period in which the 
agreed  prices are held is passed.  
How much delay would we expect?
 – see above (and that is if it is resolved by NCC quickly). 
Would they be able to get funding elsewhere eventually?
 – There is nowhere else they can find the additional funding (assuming the LEP won’t cover it) 
except from their own internal sources which are already stretched. I don’t know whether they 
would do this but given the long history and background to the scheme I think they would find it 
hard to drop it at this late stage and if they did our Ministers would face a considerable 
backlash.
And would we expect the project to go ahead at all if it is delayed?
 – Depends on whether they can find the money.
On your further points:
The scheme has overrun on its originally forecast cost by £30m and the government is 
now stepping in with an extra £10m to help plug the gap, setting an unhelpful precedent 
for central government help for LAs with cost overruns.
•         There are benefits to insisting that LAs need to meet all cost overruns themselves 
– a position that has been generally taken before in such cases. To do otherwise risks 
making it harder to refuse similar requests in future and thus reduces pressure on LAs 
to control costs. The LA could seek other sources of funding e.g. own budgets or LEP 
allocations (as they will do for the remaining £20m). 
•         But it is not a principle that we have applied universally – for instance earlier this 
year we allowed DfT to provide an extra £34m for Croxley rail link (an LA project to 
extend the Metropolitan line to Watford). This case was arguably different in that the 
extra funding coincided with the LA handing over responsibility to TfL (providing a bit 
more assurance about delivery), though in that case the value for money of the project 
was low (BCR circa 1) whereas in this case the value is very high (BCR circa 6).
This is OK
The increased cost of the project has been attributed to construction cost inflation 
attributable to a two year delay in approval – but the actual increase in costs (circa 33%) is 
roughly double the actual rate of construction cost inflation (circa 16% calculated using BIS 
TPI index). So the project should be re-tendered to get a better price.
•         (This seems to relate to addition of two items to the original estimate, for design 
development and design standards, totalling £10m – actually if these are stripped out 
the cost increase is nearer to being in line with construction inflation but this still means 
inflation is only part of the explanation.)
•         [Is this a correct account of the increases in price relative to inflation? Are we 
satisfied that the council has scrutinised the causes of cost increase properly? What do 
we think is the true cause of increased cost, and is this justified? Is it realistic to re-
tender the contract?]
 

The cost increase is due to both the cost inflation and additional requirements placed on 
Norfolk following the Public inquiry by Natural England and the Environment Agency. 
The Council has considered the cost increase and provided the following comments:
As part of the target cost process with Balfour Beatty, the Council commissioned 
a report from Franklin & Andrews [copy attached] to assess the level of 
construction inflation experienced between 2010 and 2015. This demonstrated 
that the BB target cost was ‘not unreasonable’ when compared to other typical 
schemes as represented by nationally accepted measures of construction 
inflation. This was then further tested by comparing the NNDR cost per mile with 
the cost of the recently delivered A11 dualling per mile. As set out in the report to 
Full Council, this again was ‘not unreasonable’. Neither of these comparators 
impact on the target cost provided by BB, but they have informed the officer view 
that the BB costs have been tested and are robust.
This led to the officer advice that retendering the contract would lead to delay, 
the cost associated with this delay, and given our understanding of construction 
inflation, this was likely to lead to higher tender costs and worse value for the 
public purse. This obviously differs from Cllr Boswell’s view, but Members 
considered this information and officer advice when coming to their decision.
We have not been able to obtain independent advice on this but it is clear that to 
retender the contract would add significant delay - many months - after which it is not 
clear that the cost would be lower and quite possibly could be higher due to further cost 
inflation caused by the delay.
The council has failed to explore a cheaper, more environmentally friendly scheme 
properly as an alternative option.
•         [Do we know about this alternative option? Is it really cheaper/better? Are we 
satisfied that the council has appraised all realistic options and made a reasonable 
judgment about which is this best?]
It is not for this Department to tell LAs what schemes they should submit for funding. 
The scheme has been though our 2010 Development Pool process following which it 
was granted initial approval along with all the other such schemes. It was then subject 
to a Development Control Oder inquiry where alternatives were considered and rejected 
by the Inspector. Our Secretary of State considered the recommendation of the 
Inspector and supported his/her view that the legal orders for the scheme as proposed 
by Norfolk should be approved allowing them to seek funding approval. The main 
alternatives (as far as I am aware) are to just implement sustainable measures (bus 
improvements, walking, cycling etc. without small scale road improvements) with a 
different spatial allocation of housing to fit with this which given the current congestion 
would be difficult to implement and unlikely to meet the scheme objectives, or to use the 
individual elements of internal roads to be built by each housing developer to join 
together to create a developer funded single carriageway inner orbital road link between 
A47 Postwick Interchange and A1151 Wroxham closer in to the city centre. 
 
The proposal to finance this in part through borrowing serviced by Community 
Infrastructure Levy is unrealistic because the assumptions on property value underlying 
this is overstated.
•         [Do we know anything about this? Does this actually put the viability of the project 
at risk or is it just a risk to the LA’s own finances? If the latter is it a big enough risk that 
we should worry about it?

We have not sought detailed assurance on this. Many schemes we deal with have 
considerable CIL funding. Norfolk will have agreed this with the local councils in 
advance of approval being sought. As with all such schemes Norfolk will be underwriting 
this and its S151 officer has signed the bid document.
Finally I think we’ll need to point out to ministers that the government’s intention to 
provide additional funding was in the public domain before HMT ministers had a chance 
to take a view on this. I understand this project followed an unusual route in that it had 
previously not been a scheme needing HMT approval – can I suggest we provide a bit 
of info to our ministers on what process DfT will put in place to ensure that in future, 
where clearance is needed, HMT ministers are consulted before decisions become 
public? (They will always be happy to provide a quick informal steer if we get a heads 
up that an indicative view is needed at an earlier stage than formal approval.)
As you say the previous scheme cost was not high enough to require HMT approval 
and only the cost increase raised it above the £100m level by just over £5m. We had 
believed that as we would still need HMT approval to the full cost you would not need to 
approve the additional funding. It is unlikely that we will face the same issue in future 
but if we do we will ensure that you are consulted before any decisions and public 
announcements are made.
Happy to discuss further. 
xxxx xxxx  | , Local Infrastructure Division, Department for Transport 
2/15 GMH |  020 7944 xxxx |  
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From: [HMT]  
Sent: 23 September 2015 15:17 
To: [DfT] 
Cc: [HMT]; [DfT]; [DfT] 
Subject: RE: Norwich Northern Distributor Road - Final Approval
Hi xxxx,
 
Sorry one more question. The total cost increase in the SoS letter is £19m, but the correspondence 
we’ve had and media reports say that the council had a funding shortfall of £30m to be made up with 
equal contributions from DfT, LA and LGF. Do you know how these figures fit together?
 
Ta,
xxxx
 
 
xxxx xxxx  
Policy Adviser | Transport Strategy & Reform 
HM Treasury | 1 Horse Guards Road | London SW1A 2HQ | 0207 270 xxxx 
xxxx
 
------------------------------------------------------------------------------------------------
From: [HMT]  
Sent: 23 September 2015 13:00 
To: [DfT] 

Cc: [HMT]; [DfT]; [DfT] 
Subject: RE: Norwich Northern Distributor Road - Final Approval
 
Hi xxxx,
 
Thanks for sending this across.
 
You’ve already provided the summary business case so we can use that to inform advice. Would you 
also be able to provide a bit of info on what will happen if additional funding is not provided now. How 
much delay would we expect? Would they be able to get funding elsewhere eventually? And would we 
expect the project to go ahead at all if it is delayed? 
 
As discussed previously we’ve also had several letters from local campaigners, some of which raise what 
appear to be plausible claims about the process/decision – I think our ministers will want to be sure 
these have all been checked out before we go ahead. I’ve set out below the claims and what I think we 
can say to our ministers about them – I’d be grateful if you could confirm and provide an answer to 
questions in square brackets.
 
The scheme has overrun on its originally forecast cost of £30m and the government is now stepping in 
with an extra £10m to plug the gap, setting an unhelpful precedent for central government help for LAs 
with cost overruns.
 

There are benefits to insisting that LAs need to meet all cost overruns themselves – a position 
that has been generally taken before in such cases. To do otherwise risks making it harder to 
refuse similar requests in future and thus reduces pressure on LAs to control costs. The LA could 
seek other sources of funding e.g. own budgets or LEP allocations (as they will do for the 
remaining £20m). 

But it is not a principle that we have applied universally – for instance earlier this year we 
allowed DfT to provide an extra £34m for Croxley rail link (an LA project to extend the 
Metropolitan line to Watford). This case was arguably different in that the extra funding 
coincided with the LA handing over responsibility to TfL (providing a bit more assurance about 
delivery), though in that case the value for money of the project was low (BCR circa 1) whereas 
in this case the value is very high (BCR circa 6).
 
The increased cost of the project has been attributed to construction cost inflation attributable to a two 
year delay in approval – but the actual increase in costs (circa 33%) is roughly double the actual rate of 
construction cost inflation (circa 16% calculated using BIS TPI index). So the project should be re-tendered 
to get a better price.
 

(This seems to relate to addition of two items to the original estimate, for design development 
and design standards, totalling £10m – actually if these are stripped out the cost increase is 
nearer to being in line with construction inflation but this still means inflation is only part of the 
explanation.)

[Is this a correct account of the increases in price relative to inflation? Are we satisfied that the 
council has scrutinised the causes of cost increase properly? What do we think is the true cause 
of increased cost, and is this justified? Is it realistic to re-tender the contract?]
 
The council has failed to explore a cheaper, more environmentally friendly scheme properly as an 
alternative option.
 

[Do we know about this alternative option? Is it really cheaper/better? Are we satisfied that the 
council has appraised all realistic options and made a reasonable judgment about which is this 
best?]
 

The proposal to finance this in part through borrowing serviced by Community Infrastructure Levy is 
unrealistic because the assumptions on property value underlying this is overstated.
 

[Do we know anything about this? Does this actually put the viability of the project at risk or is it 
just a risk to the LA’s own finances? If the latter is it a big enough risk that we should worry 
about it?
 
Overall I will make the point that these comments all came from groups opposed to the scheme or 
favouring another option – but nonetheless we want to be sure they’ve been checked out before we put 
advice to ministers.
 
If you haven’t seen any of these before and want a copy of the correspondence let me know and I can 
dig them out.
 
Finally I think we’ll need to point out to ministers that the government’s intention to provide additional 
funding was in the public domain before HMT ministers had a chance to take a view on this. I 
understand this project followed an unusual route in that it had previously not been a scheme needing 
HMT approval – can I suggest we provide a bit of info to our ministers on what process DfT will put in 
place to ensure that in future, where clearance is needed, HMT ministers are consulted before decisions 
become public? (They will always be happy to provide a quick informal steer if we get a heads up that an 
indicative view is needed at an earlier stage than formal approval.)
 
Many thanks, 
xxxx
 
 
 
xxxx xxxx  
Policy Adviser | Transport Strategy & Reform 
HM Treasury | 1 Horse Guards Road | London SW1A 2HQ | 0207 270 xxxx 
xxxx
---------------------------------------------------------------------------------------------------
 
From: [DfT]  
Sent: 16 September 2015 07:56 
To: [HMT] 
Cc: [HMT]; [DfT]; [DfT] 
Subject: RE: Norwich Northern Distributor Road - Final Approval
 
Please find attached a copy of the signed letter from my Minister to the Chief Secretary 
seeking HMT approval to the NNDR scheme. Happy to provide any additional 
information.
 
xxxx xxxx  | , Local Infrastructure Division, Department for Transport 
2/15 GMH |  020 7944 xxxx | 
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From: [DfT]  
Sent: 07 September 2015 10:03 
To: [HMT] 
Cc: [HMT]; [DfT]; [DfT] 
Subject: RE: Norwich Northern Distributor Road - Final Approval

 
Thanks. The group (or groups) and Councillors raising these concerns have been 
opposed to the scheme since it started. We had thought they would seek judicial review 
of the legal orders recently approved but we understand they decided not to do that.
 
I attach the summary table templates which we have produced which our Minister will 
consider should the scheme be approved the Investment Board. It gives more detail on 
the scheme.
 
As to the recent decision by our Minister to approve an additional £10m we did not put a 
particular recommendation but set out the pros and cons as follows:
 
a) 
Stick to the long standing policy of not providing additional funding leaving 
Norfolk to find the additional funding through: 
i. 
additional local contributions;
ii. 
advising Norfolk to seek the additional funding from the New Anglia Local 
Enterprise Partnership; or
iii.  offering to provide advance payment of the various agreed formulaic 
funding to be provided to Norfolk for maintenance and general transport 
(IT Block and maintenance block);
b) 
Provide the extra funding or negotiate a smaller DfT contribution than £15.8 
million - say £10 million.
 
The Minister considered the advice and, to prevent further delay to scheme, said that in 
this instance we should make an exception to our policy of not providing additional 
funding and said we should not agree the full £15m request but a smaller amount (we 
had suggested £10 million which he felt was sensible).
 
Let me know of you require any further information.
 
xxxx xxxx  | , Local Infrastructure Division, Department for Transport 
2/15 GMH |  020 7944 xxxx | 
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From: [HMT]  
Sent: 07 September 2015 09:52 
To: [DfT] 
Cc: [HMT]; [DfT]; [DfT] 
Subject: RE: Norwich Northern Distributor Road - Final Approval
 
Thanks for this.
 
If possible it would be really helpful if we could see the assessment and more detail of the reasoning put 
to your ministers for the additional funding – this will help us turn around the formal approval more 
quickly when it comes, especially since the local concerns mean we’ll need to look at this carefully. 
 
Do you know – are the groups raising concerns also against the project in principle? Or are the concerns 
they have mentioned their only problem with the decision?
 
Thanks,
xxxx
 
 

xxxx xxxx  
Policy Adviser | Transport Strategy & Reform 
HM Treasury | 1 Horse Guards Road | London SW1A 2HQ | 0207 270 xxxx 
xxxx
---------------------------------------------------------------------------------------
 
From: [DfT]  
Sent: 04 September 2015 07:57 
To: [HMT] 
Cc: [HMT]; [DfT]; [DfT] 
Subject: RE: Norwich Northern Distributor Road - Final Approval
 
Assessment has been done (vfm very high). Scheme will be considered for approval by 
the local investment board next Wednesday following which a submission will be sent to 
the Minister. Assuming he approves the scheme a letter should be with you probably in 
the week of 14th September. It would be good if a response could be received as soon 
as possible so that we can make the announcement and Norfolk can sign the contracts 
and get on with the scheme.
 
As to the e-mails we sought Ministers views on whether or not to provide additional 
funding. He agreed to provide an additional £10m on an exceptional basis even though 
this does set a precedent. 
 
Let me know if you want any additional information.
 
xxxx xxxx  | , Local Infrastructure Division, Department for Transport 
2/15 GMH |  020 7944 xxxx |  
----------------------------------------------------------------------------------------
  
From: [HMT]  
Sent: 03 September 2015 17:39 
To: [DfT] 
Cc: [HMT]; [DfT]; [DfT]; [DfT]; [DfT] 
Subject: RE: Norwich Northern Distributor Road - Final Approval
 
Hi xxxx,
 
What’s the latest on this approval – are we still expecting it to come to HMT?
 
We’ve had emails from the Campaign for Better Transport and from the leader of the opposition on 
Norwich Council, both expressing concerns about a decision to give more DfT funding to the project. I 
think you may have had the same emails. Do we have a view on whether their concerns are justified?
 
Thanks,
xxxx
 
 
 
 
xxxx xxxx  
Policy Adviser | Transport Strategy & Reform 
HM Treasury | 1 Horse Guards Road | London SW1A 2HQ | 0207 270 xxxx 

xxxx
 
------------------------------------------------------------------------------------------------
From: [dft]  
Sent: 10 August 2015 15:53 
To: [HMT] 
Cc: [HMT]; [DfT]; [DfT]; [DfT] 
Subject: Norwich Northern Distributor Road - Final Approval
 
I thought I would give you early warning that the Norwich Northern Distributor Road’s 
final approval bid has just arrived with us.  Details of the scheme are below but I am 
providing early warning as the total cost of the scheme has increased to over £100m - 
£106m to be precise – so I am assuming if our Ministers make a decision to fund 
the  scheme they will need to seek the Chief Secretary’s agreement to the funding. 
Norfolk CC has asked for additional funding (£15m) about which we are currently 
seeking our Minister’s views. If agreed this would bring the Department’s total 
contribution to £83.3m from the current £67.5m with the total cost increasing from £87m 
to £106m. We are on a tight timetable to agree the scheme so that work can start in 
October otherwise there could be delays caused by winter and other issues. I would 
hope that our Ministers would consider the scheme around 11th September following 
which a letter would be sent to the CST. I understand Andrew Jones, the relevant 
Minister, may be visiting Norfolk around this time so it would be good if he could 
announce the decision if it were possible assuming it is positive during his visit. I am 
assuming that we can continue to seek approval whist the SR process is on otherwise 
we would have to wait until after the SR announcement which would significantly delay 
the scheme and cause a considerable political problem given the high profile nature of 
the scheme.
 
I would be happy to discuss further.
 
Details
 
1.       Norwich Northern Distributor Route (NNDR) is a 20km dual carriageway road 
planned to run from the A47 at Postwick, round Norwich, to the A1067. Previously the 
Government gave initial approval, on cost grounds, for a shorter 14km section of the full 
route - from Postwick to A140 – which is the scheme on which we will seek approval 
from Ministers. Norfolk plan to pay for the scheme to be extended to the A1067. 
 
2.       The current transport network is claimed to inhibit current and future housing and 
employment growth in Norwich. Norfolk estimate that up to 8,000 houses and 95ha of 
employment land (largely for office employment) leading to some 12,200 jobs will be 
unlikely to proceed without improved transport provision for which NNDR (including the 
Postwick Junction) is deemed the best solution. In addition current peak hour 
congestion on radial routes and the Norwich Outer Ring Road leads to congestion and 
rat-running on inappropriate routes to the north of Norwich causing environmental 
problems. Norfolk state that its ability to provide further sustainable transport measures 
in the City, as set out in the wider Norwich Area Transportation Strategy (NATS), is 
inhibited without the reduction in traffic the road would bring about.
 
3.       When last assessed the scheme had a very high vfm with a BCR of 5.4. 
Programme Entry was re-confirmed in November 2011 at total cost of £111m of which 
DfT would provide £86m subject to satisfactory completion of the remaining statutory 
procedures and procurement. The Postwick Junction element was subsequently 
separated out and approved as a stand-alone scheme given the wider employment 

benefits it will bring even if the NNDR is not built. It is currently under construction at a 
total cost of £24m with a DfT contribution of £19m and is expected to open in October.
 
4.       The Secretary of State approved the legal orders for the NNDR on 2 June and 
they are now free of any objection period.
 
 
 
 
 
         
xxxx xxxx  
, Local Transport Funding Growth & Delivery Division 
2/15 GMH, Great Minster House 
33 Horseferry Road, London, SW1P 4DR 
020 7944 xxxx       
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