Highway works costs in a development appraisal

Section 278 works belong in the build cost line of a development appraisal, not in the planning obligations line, and the number you put there should include six things: construction, the highway authority's design check and supervision fees, commuted sums, the bond and its cost of carry, statutory undertaker diversions, and the audits. Appraisals that carry a single round figure for highways are the ones that come apart at contract stage.

The distinction matters because the same junction can appear twice, once as works you build under section 278 of the Highways Act 1980 and once as a contribution in a section 106 agreement. Counting it twice overstates your cost. Counting it once when both are being asked for understates it.

What actually goes in the highways line

Section 278 covers works to the existing public highway carried out at a developer's expense. Section 38 covers new estate roads offered for adoption. Section 184 covers a vehicle crossing. Most residential schemes of any size touch at least two of the three.

The cost build-up an experienced civils quantity surveyor will give you looks like this.

Two of those are routinely missed. Statutory undertaker diversions can exceed the highway works themselves where a scheme moves a kerb line across a gas main, and the only way to price them is to request budget estimates from each undertaker early. Traffic regulation orders take months and can be objected to, which is a programme cost rather than a works cost.

Fees against works, and why the percentage matters

Highway authorities publish fee schedules for section 278 and section 38 agreements. The charges are normally expressed as a percentage of the estimated works value, split between technical approval and supervision, with a minimum fee for small schemes and sometimes a sliding scale that reduces above a threshold.

Take the percentage from the authority's own published schedule rather than from a previous scheme in a different county. They differ, they are reviewed, and several authorities now charge separately for the legal agreement, for checking a road safety audit response and for each design submission after the first.

Where the works value rises during design development, the fee rises with it. Build that relationship into the appraisal rather than fixing the fee as a lump.

Commuted sums and the maintenance period

A commuted sum is a capital payment to the authority for the future maintenance of an asset it would not otherwise have adopted, or would have adopted in a lower specification. Traffic signals, structures, non-standard surfacing, street trees, drainage in highway and some lighting all attract one.

The sum is calculated from the authority's own policy, usually as the whole-life cost of the item over a stated period. Periods vary by asset class, and structures are commonly assessed over a much longer horizon than surfacing. Ask for the policy document at pre-application stage and ask which items in your layout it will catch, because a designer can often avoid a sum altogether by specifying a standard product.

Keep commuted sums on their own line in the appraisal. They are paid to the authority, they are not construction, and lumping them into build cost hides them from the sensitivity analysis.

Bonds, surety and the cost of carry

Both section 278 and section 38 agreements require security, normally a surety bond, occasionally cash or a parent company guarantee. The bond value is set as a percentage of the works value, with the percentage driven by the authority's policy and the perceived risk.

The appraisal cost is not the bond value. It is the annual premium on the bond, multiplied by the period it stays in place, which runs from the start of works to the end of the maintenance period after the final certificate. On a long-phased scheme that is a real finance cost, and where the surety requires cash collateral it locks up equity that would otherwise have been working.

Model the release profile. Bonds are usually reduced at provisional certificate and released at final certificate, so the carry falls in steps rather than running flat.

Programme risk, and how to price it

The agreement itself is the slow part. Technical approval of the design, the legal agreement, the safety audit cycle and any traffic regulation order run in sequence, and works cannot begin until the agreement is completed.

Where permission carries a condition preventing any start on site until the highway works are secured, that condition sits on the critical path. Whether it is expressed as a Grampian condition or as a planning obligation changes who controls the timing and what happens if the authority is slow. Price the delay as a finance cost against the full development cost to that date, and run a sensitivity at three and six months.

Seasonal constraints add to it. Surfacing is restricted in cold weather, and many authorities impose embargoes on town centre works in the weeks before Christmas.

Evidence the authority and a reviewer will expect

A viability case that relies on highway costs has to evidence them. The usual pack is the pre-application response from the highway authority, the published fee schedule and commuted sum policy, budget estimates from each statutory undertaker, and a cost plan from a quantity surveyor with the works priced against a recognised schedule of rates.

Where the appraisal is being scrutinised, expect the reviewer to test whether the abnormal is a real extra cost or is simply the cost of developing that site, which should already be reflected in the land value. A Viability Assessment of this kind is work councils expect from a suitably qualified author, and professional review is strongly advised before it is submitted. The way costs are tested at appeal, and whether an appraisal can be kept confidential, is a separate question worth understanding early.

Illustrative example. A 90 unit scheme needs a new priority junction, a 60 metre footway, a pedestrian refuge and a signal upgrade at a junction 400 metres away. The junction and footway go in as section 278 works. The signal upgrade is a wider improvement shared with two other sites, so it is taken as a section 106 contribution instead. The appraisal shows the junction works, fees, bond carry and a commuted sum for the signals as separate lines, and the section 106 contribution once. The figures are illustrative.

Keeping obligations and works apart

The rule of thumb is that anything you build is a works cost and anything you pay for is an obligation. Apply it line by line.

Check the section 106 heads of terms against the section 278 scope before the resolution to grant. Where a contribution is described in general terms as a highways or transport contribution, ask the officer in writing what it will fund. If it funds the same junction you are building, say so, because an obligation must be necessary to make the development acceptable, directly related to it and fairly and reasonably related in scale and kind.

The trip generation work in the Transport Assessment is what links the two. It identifies the impact, the mitigation follows from it, and the split between direct works and contributions should be visible in the assessment rather than negotiated afterwards.

This is general guidance, not legal advice. Check the position with the highway authority, your local planning authority or a qualified professional before relying on it.

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