Section 278 highway works: how the cost is built up
A section 278 agreement is six or more separate costs arriving at different times. Here is how each element is calculated and where developers most often underestimate.
A section 278 agreement is not a single price. It is at least six separate costs that arrive at different points in the programme, and the construction of the works is rarely the largest surprise. Developers who budget only for the kerbs and tarmac find the design check fee, the supervision fee, the bond, the commuted sum, the legal fees and the statutory undertaker diversions turning up afterwards.
None of it is part of the planning application fee. Section 278 of the Highways Act 1980 sits entirely outside the planning system, even though a planning condition is usually what forces you into it.
What the agreement covers
Section 278 lets a highway authority enter an agreement with a developer to carry out works on the existing public highway where those works benefit the developer. A new priority junction, a ghost island right turn, a signalised access, a pedestrian crossing, footway widening, a bus stop relocation, kerb realignment and drainage connections all sit here. Anything on land that will become new adoptable highway inside the site is a section 38 matter instead, and the two agreements are often signed together.
The trigger is normally a Grampian condition on the planning permission requiring the access works to be completed, or at least the agreement to be entered into, before occupation. That gives the highway authority a strong negotiating position, which is worth understanding before the first meeting.
Design check and supervision fees
Highway authorities charge for checking the developer's design and for supervising the works. These are usually expressed as a percentage of the estimated construction cost and are published in the authority's own fee schedule, which is where the figure for your scheme should come from. Percentages vary between authorities and are revised, so use the current published schedule rather than a figure from a previous scheme.
The check fee covers technical approval of drawings, calculations, drainage design, lighting design, road safety audit review and any departures from standard. It is charged whether or not the design is approved first time, and a design that goes round three times can absorb additional fee under many schedules.
The supervision fee covers site inspection during construction and the final inspection before the works are certified. Where the works are phased over a long period, expect the supervision element to be reviewed.
Building up the construction cost
Price the works from a proper drawing set, not a sketch. The build-up usually breaks into site clearance and traffic management, earthworks, drainage, sub-base and surfacing, kerbs and footways, street lighting, signs and markings, signals and controller equipment where relevant, landscaping, and reinstatement.
Traffic management is the item most often underestimated. Working on a live carriageway with lane closures, temporary signals or overnight working carries a cost per week that can rival the permanent works on a busy route. If the authority insists on night working to avoid peak disruption, the labour rates change and so does the programme.
Statutory undertaker diversions sit alongside the works and are quoted separately by each utility. The sequence is a budget estimate at the design stage followed by a detailed quotation once the design is fixed, and the gap between the two is a genuine risk that should carry a contingency. A diversion of a high-voltage cable or a large water main can exceed the cost of the highway works themselves.
Bonds and how they are sized
The authority takes a bond or other surety so that, if the developer fails, the works can be completed without public money. The bond is normally sized on the estimated construction cost with an allowance for inflation and for the authority's cost of stepping in and re-procuring, and it is released in stages as the works are certified.
A bond is not a cash cost, but it is not free either. A surety company charges a premium, and a bond taken against the development's banking facility reduces headroom for everything else. Ask the authority early whether it will accept a bond from a surety, a parent company guarantee or a cash deposit, because the answer changes the cost.
Commuted sums for future maintenance
Commuted sums pay the authority to maintain something it would not otherwise have to maintain, or to maintain a standard item for a defined period. They typically attach to non-standard surfacing materials, structures such as retaining walls or culverts, traffic signal equipment, street trees and soft landscaping, and sustainable drainage features within the highway.
The calculation is usually a whole-life cost over a set number of years, published in the authority's own commuted sums policy. Two points are worth taking to the design meeting. First, specification drives the sum, so a decorative block paving scheme in a town centre can generate a commuted sum several times that of standard materials. Second, some authorities will not adopt certain features at all and will require a private management arrangement instead, which moves the cost into the estate service charge.
The costs that sit outside the works
Legal fees on both sides are payable by the developer. The authority's solicitor drafts the agreement and the developer pays for that drafting as well as for its own advice.
Traffic regulation orders are separate again. A new waiting restriction, a change to a speed limit, a loading bay or a bus stop clearway each need an order made under the Road Traffic Regulation Act 1984, with advertising, a consultation period and the possibility of objections. Authorities charge for making an order and the charge is normally payable whether or not the order is confirmed.
Road safety audits are commissioned at defined stages of design and construction, with the audit team independent of the designer. Each stage carries its own fee, and a stage 1 audit that recommends changes triggers design work the developer pays for.
We have set out the mechanics of bonds, fees and commuted sums in more detail in a companion article on section 278 works, and the equivalent legal and monitoring costs on the planning side in our note on section 106 costs.
An illustrative build-up
The following is illustrative and not a quotation for any real scheme. For a single new priority junction onto a classified road serving 45 dwellings, a realistic budget line would carry the following items:
- Construction of the junction and associated footway.
- Traffic management for the full works duration.
- A statutory undertaker allowance pending detailed quotations.
- The authority's design check and supervision fees, taken as a percentage of works cost from its published schedule.
- Road safety audit fees at two stages.
- Legal fees for both parties.
- A traffic regulation order for revised waiting restrictions.
- A commuted sum for the new street lighting column and any non-standard materials.
- A bond covering the works.
Set the contingency against the items you cannot fix at the time of the appraisal, which are almost always the utility diversions and the traffic management duration.
Negotiating scope with the authority
The scope is set by what the Transport Assessment and the highway officer's response identify as necessary to make the development acceptable. That is a test of necessity, not a wish list, and the same tests that apply to planning obligations are a reasonable reference point for arguing that an item is disproportionate.
Three arguments tend to work. Evidence that the existing arrangement already performs adequately for the additional demand. A design that achieves the same safety outcome at lower cost. And a phasing proposal that delivers works when the trips actually arrive rather than before the first completion.
Get the fee schedule, the commuted sums policy and the bond requirements in writing at the pre-application stage, and put the totals in the appraisal before the land price is fixed. This is general guidance, not legal advice; check the position with your local planning authority or a qualified professional before relying on it.
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Frequently asked questions
Is the section 278 cost part of the planning application fee?
No. The planning fee is set by the national fees regulations and covers determination of the application only. A section 278 agreement is made under the Highways Act 1980 with the highway authority, and every element of it, including design check fees, supervision, bonds, commuted sums and legal costs, is additional to the planning fee.
How is the bond amount calculated?
Authorities normally base the bond on the estimated construction cost of the highway works, with an allowance for inflation and for the authority's own cost of stepping in and re-procuring if the developer fails. It is released in stages as works are certified. Ask early whether a surety bond, a parent company guarantee or a cash deposit is acceptable, as the cost differs.
What triggers a commuted sum?
A commuted sum is payable where the authority will have to maintain something beyond a standard adopted specification, such as decorative surfacing, structures, traffic signals, street trees or drainage features. The calculation is a whole-life maintenance cost over a defined period set out in the authority's own commuted sums policy. Specification choices drive the figure more than anything else.
Can a section 278 be avoided by using section 38 instead?
They do different jobs. Section 278 covers works to existing public highway, while section 38 covers the adoption of new streets built within the development. Most schemes with a new access and internal adoptable roads need both, and the two agreements are commonly completed at the same time by the same legal team.
When should the section 278 budget be fixed?
Before the land price is agreed if possible, and at the latest before the planning application is submitted. The information needed is the authority's published fee schedule, its commuted sums policy, its bond requirements and budget estimates from the statutory undertakers. Those four documents convert a guess into a defensible appraisal line.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.