Section 278 and section 38 highway costs explained

Highway works are the line in a development appraisal most likely to be wrong, because the figure people budget is the construction cost and the figure they pay is the construction cost plus fees, bonds, audits, commuted sums and the cost of the months spent reaching agreement. A section 278 cost is never just the works.

Two agreements under the Highways Act 1980 do the work. Section 278 covers works to an existing highway, paid for by the developer and carried out for the highway authority's benefit. Section 38 covers new streets the developer builds and the authority later adopts as maintainable at public expense.

What each agreement actually covers

A section 278 agreement is used where a scheme needs something done to the public highway: a new junction, a widened carriageway, a right turn lane, a signalised crossing, a bus stop relocation, a dropped kerb on an unusual scale or a footway improvement.

A section 38 agreement is used where a scheme creates new streets intended for adoption. It sets the specification, the construction standards, the inspection regime and the maintenance period before adoption takes effect.

Plenty of schemes need both. A residential development with an access junction onto a classified road and internal estate roads to be adopted will run a section 278 for the junction and a section 38 for the streets behind it, often with the same officers and on different timescales.

Both are separate from planning permission. A permission will usually be conditioned so that development cannot begin until the agreement is completed, which makes the agreement a critical path item rather than a later administrative step. A Transport Assessment that identifies the works is not an agreement to build them.

Design check and technical approval fees

Highway authorities charge for checking the developer's design. The charge covers technical approval of drawings, structural approval where a structure is involved, checking calculations for drainage and lighting, and the administrative work of issuing approvals.

Fees are commonly expressed as a percentage of the estimated construction cost, with each authority publishing its own rates and minimum charges. Ask for the published schedule at the start rather than assuming a figure from another authority, because the percentages differ and some authorities charge separately for each discipline.

Two factors inflate the fee beyond the headline percentage. Resubmissions, because each round of comments consumes officer time and some authorities charge for further checks. And non-standard details, since anything outside the authority's standard construction details takes longer to approve and sometimes requires a departure from standards.

Road safety audits sit alongside this. A scheme of any size will need audits at successive stages, commissioned from an independent audit team, with the designer responding formally to each recommendation. Budget for the audits and for the design changes they generate.

Bonds and how they are sized

Both agreements are secured by a bond or other surety, so that the authority can complete the works if the developer fails.

The bond is normally sized on the estimated cost of the works plus an allowance for inflation and for the authority's cost of arranging completion itself, which is higher than the developer's own cost. It is not the same number as the construction contract.

The bond is a cost even though it is not a payment. A surety charges a premium, usually annually, and a bond backed by cash or a parent company guarantee ties up capital or covenant strength that could be used elsewhere. On a scheme with a long build period, the cumulative premium is not trivial.

Release follows the process rather than the calendar. On a section 38 the bond reduces on practical completion and is released at adoption, after the maintenance period and after any defects are made good. A scheme that stalls with streets built but not adopted carries the bond indefinitely.

Commuted sums for future maintenance

A commuted sum is a payment for the future maintenance of assets the authority will adopt but would not normally have to maintain, or would have to maintain at higher cost than a standard street.

Items that commonly attract a commuted sum include traffic signals, structures such as bridges, retaining walls and culverts, non-standard surfacing, street trees within the highway, sustainable drainage features, and lighting to a specification above the authority's standard.

Sums are calculated from the authority's published methodology, usually as a whole-life cost over a defined period. Two points matter at design stage. The specification drives the sum, so a decision to use a bespoke paving material or an ornamental lighting column has a cost that appears years later in the section 38 negotiation. And some authorities will not adopt certain features at all, which means either redesigning or retaining them in private management with a management company and a service charge.

Ask for the commuted sum methodology before the street design is fixed. It is one of the few places where an early design decision has a directly calculable financial consequence.

Inspection during construction and what else is charged

Supervision or inspection fees cover the authority's site inspections during construction, and are usually a further percentage of the works cost, charged in addition to the design check fee.

Beyond those, expect:

• Legal fees for the authority's solicitors in drafting and completing the agreement, payable by the developer.
• Temporary traffic regulation orders, road closures, signing and diversion costs.
• Statutory undertaker diversions, which are quoted separately and which frequently exceed the highway works themselves.
• Land costs where the works require dedication of land as highway, plus the conveyancing.
• Third party costs where the works affect a bus operator, a rail crossing or a watercourse.
• Reinstatement and defect correction during the maintenance period.

Utility diversions deserve particular attention, because the quotations take time to obtain and the programme cannot be fixed without them. The same applies to the connections a scheme needs, covered in utility connection budgets for a single new dwelling.

The cost of delay in reaching agreement

Agreements take months. Technical approval, legal drafting, bond arrangement and land matters all run in parallel and any one of them can hold the rest.

The financial cost of that period is rarely in the highway budget even though it is real: finance on the land, extended professional appointments, a construction contract held open or repriced, and on a residential scheme a sales programme pushed into a different part of the year.

Three things shorten it. Starting the technical submission before planning permission is granted, where the design is settled enough to do so. Instructing solicitors on the agreement at the same time rather than after technical approval. And resolving land ownership and any third party consents early, because a strip of verge in unexpected ownership can stop everything.

Where a scheme is phased, the agreements and their fees recur phase by phase, which is part of the pattern described in how planning costs recur when a scheme is phased.

Budgeting the works realistically

Build the highway line of the appraisal with every component visible.

1. Construction cost from a measured estimate, not a rate per metre.
2. Design fees for the developer's own engineer, including audit responses.
3. Authority design check and technical approval fees, from the published schedule.
4. Road safety audits at each required stage.
5. Authority inspection fees during construction.
6. Bond premium across the expected period to adoption.
7. Commuted sums, calculated from the authority's methodology against the actual specification.
8. Authority legal fees and your own.
9. Utility diversions, quoted rather than estimated.
10. A contingency for a design round the authority asks for.

Then check the construction management implications, because works on the public highway need their own traffic management and that usually belongs in the Construction Traffic Management Plan.

Ask the highway authority for its fee schedule, its commuted sum methodology and its standard agreement at the pre-application stage. All three are usually published, and having them before you price the land is worth more than any amount of later negotiation. Where you are costing the supporting documents alongside the works, PlanScope pricing covers that side.

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

PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.