Section 278 and section 38 costs in a development appraisal

Highway agreement costs are the line in a development appraisal most often carried as a single figure taken from the civil engineer's estimate, and that figure is usually the construction cost alone. A section 278 agreement under the Highways Act 1980 and a section 38 agreement for adoption each bring design fees, authority technical approval and supervision fees, legal costs, a surety bond with an annual premium, commuted sums for anything non standard, and a maintenance period before the final certificate. On a scheme with a new access and an estate road, the additions can be a substantial proportion of the works value.

Price the agreements, not just the works.

What each agreement secures

Section 278 covers works to the existing public highway carried out at the developer's expense, typically a new access, a junction improvement, a footway, a crossing, traffic calming or a bus stop relocation. The authority permits the works, approves the design, supervises construction and takes the result into its maintenance.

Section 38 covers the dedication and adoption of new roads within the site, so they become highway maintainable at public expense. It is optional in principle: a developer can keep estate roads private and set up a management company instead, and that choice has consequences for service charges, for sales and for the appraisal.

Section 38 also tends to drag section 278 behind it. An adopted estate road connecting to the public highway needs the junction built to adoptable standard, which pulls the access works into the agreement.

Design, check and supervision fees

The authority charges for its own time, and it charges on top of your designer's fee. Most highway authorities publish a scale, expressed as a percentage of the estimated works value, covering technical approval of the design and inspection during construction. The percentage varies between authorities, so take it from the published scale for the authority you are dealing with rather than from a scheme elsewhere.

Your own design costs are the other half of this. A junction design that needs road safety audits at the design and pre-opening stages, swept path analysis, visibility splay calculations, drainage design and street lighting design is an engineering commission rather than a drawing.

Where a departure from standards is needed, budget for it separately. A departure application takes time, often needs supporting evidence, and may be refused, in which case the design changes and the fees are incurred twice.

Commuted sums for future maintenance

A commuted sum is a payment for maintaining something the authority would not otherwise accept. It is the cost item most often missing from early appraisals, and it can be large.

The usual candidates are block paving and other non standard surfacing, street trees and soft landscaping within the highway, structures such as retaining walls, culverts and bridges, pumping stations, unusual street lighting, and sustainable drainage features where the authority is being asked to maintain them.

Two defensive moves work. Design to the authority's standard details wherever the scheme can take it, because each departure converts into a sum. And where a feature is wanted for placemaking reasons, decide early whether it sits inside the adopted highway with a commuted sum or outside it under private management, since the second option moves the cost to the service charge and that has its own effect on sales.

Bonds and the cost of capital

Both agreements normally require security for the works, by surety bond, cash deposit or bank guarantee, set by reference to the estimated cost of the works plus an allowance.

The headline figure is not the cost. The cost is the premium, charged annually on the bond value, plus the effect on your facility if a bank guarantee ties up part of the borrowing capacity. Both run from the date the agreement is entered into until the bond is released, which is after the maintenance period and the final certificate rather than at practical completion.

So the duration matters as much as the value. A bond in place for four years because adoption stalled on an outstanding defect costs considerably more than the same bond released after two. Build the release date into the cashflow rather than assuming it falls at completion.

Programme risk on highway works

The programme risks are predictable and they all cost money.

1. Technical approval takes longer than the period allowed, because the authority's team is small and the submission was incomplete.
2. Legal drafting of the agreement runs in parallel and depends on title, plans and the bond being in place.
3. Utilities inside the works area need diversion under the street works legislation, with its own notice periods and lead times. Our note on budgeting utility connections and diversions covers that sequence.
4. Traffic management windows restrict when work on a busy road can happen, often to nights or school holidays, at a higher rate.
5. Surfacing has temperature constraints, so a late autumn finish can slip to spring.
6. Road safety audit recommendations at the pre-opening stage can require physical change after construction.

Where the access is onto the strategic road network, the consultee is National Highways rather than the local authority and the process is different again, with its own guidance and longer timescales.

Where estimates go wrong

Five errors account for most of the overrun, and all of them are avoidable at appraisal stage.

Using a contractor's rate for the works and nothing else, with no authority fees, no legal costs, no bond premium and no commuted sums. Assuming adoption without checking the authority's current adoption policy, which may exclude features the layout depends on. Omitting the cost of utility diversions because they were not visible on the topographic survey. Allowing nothing for a departure application or for audit driven redesign. And treating the bond as a cost of one year when it will be outstanding for three.

A sixth, less obvious one: forgetting that a section 106 obligation may require the highway works to be completed before occupation of a stated unit, which converts a programme slip into a sales delay. The cost of a condition or obligation you cannot discharge is its own problem, as our note on the cost of a condition you cannot discharge sets out.

Presenting the figures in an appraisal

Give the highway agreements their own block in the cost plan, with the timing attached to each line rather than a single lump in year one.

Separate construction works, consultant design fees, authority approval and supervision fees, legal fees on both sides, bond premium with its duration, commuted sums with their trigger, and a contingency specific to departures and audit findings. State the source for each figure: the published fee scale, a quotation, the authority's commuted sum schedule or an allowance.

Then show the dependency. If the access works must be complete before the first occupation, the appraisal should make the link between the agreement programme and the sales programme visible, because that is where the real money is. The trip generation and access design assumptions behind all of it come from the Transport Assessment, and the construction phase arrangements from the Construction Traffic Management Plan, so keep all three consistent.

PlanScope drafts the planning documents around this work: reports are AI-assisted, should be reviewed before submission, and we do not guarantee planning approval. For specialist technical reports, qualified professional input may be required, and highway design and audits are engineering commissions rather than report drafting. See PlanScope pricing for what a single report or the Professional tier costs.

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