Section 278 works and how they land in an appraisal

A section 278 agreement cost is rarely one number. It is a works figure, a design check fee, a supervision fee, a bond, a commuted maintenance sum, legal costs and a set of statutory undertaker diversions, spread across a period that starts before your first sale. Developers who carry a single line labelled "highways" in the appraisal are usually carrying about two thirds of the real cost, and the missing third tends to appear at technical approval stage when the layout is fixed.

What a section 278 agreement covers

Section 278 of the Highways Act 1980 lets a highway authority carry out, or allow a developer to carry out, works to the existing public highway where someone else pays for them. It is the mechanism for everything your development needs to do to the road outside it.

Typical scope includes a new priority junction or ghost island right turn, footway widening and crossing points, a relocated or new bus stop, alterations to traffic signals, street lighting, highway drainage, resurfacing across the frontage, traffic calming and the traffic regulation orders needed to change waiting restrictions.

Section 38 of the same Act deals with a different thing: the adoption of new streets inside your site as highway maintainable at public expense. A small scheme with a dropped kerb needs neither, and is dealt with under section 184 as a vehicle crossing application. Knowing which mechanism applies to which part of the work is the first step in pricing it.

Design, approval and supervision fees

The works cost is only the visible part. Highway authorities charge for the technical approval of your design and for supervising its construction, generally under a published schedule expressed as a percentage of the works value, and the percentage varies between authorities.

Get the authority's current schedule before you budget. Then add the items the schedule does not cover.

• Your own designer's fees for the highway design, road safety audit responses and the technical approval submissions.
• Road safety audits at the stages the authority requires, with designer responses to each.
• Traffic regulation order costs, including advertising and the officer time to process objections.
• Statutory undertaker diversions, quoted under the New Roads and Street Works Act 1991 process, which are frequently the largest single surprise.
• Traffic management, road space booking charges and any out-of-hours working premium.

Utility diversions deserve a separate line and a separate contingency. A high pressure gas main or a fibre route under the footway can cost more than the junction, and the quotes take months to obtain.

Bonds, securities and the cost of capital

The authority will require security for the works, usually a surety bond or a cash deposit, so that it can complete the scheme if you do not. The bond amount is set against the works value plus the authority's fees, and the bond provider charges for it.

Two appraisal effects follow. The bond premium is a real cost that belongs in the cost plan. And the security is not released until the maintenance period has expired and the works have been certified, which is typically a year or more after completion, so the capital or facility supporting it is tied up beyond practical completion of the development.

A cash deposit is simpler to arrange and worse for cash flow. On a small scheme the difference is immaterial. On a scheme with a £600,000 junction it is not.

Commuted sums for future maintenance

Where the works include anything the authority would not normally maintain, it will ask for a commuted sum to cover future maintenance. Common triggers are non-standard paving materials, street trees in the highway, structures, signals, and drainage features that need cleaning.

Authorities publish rates for these sums and the periods they cover. The design lesson is direct: specify standard materials in the highway unless there is a design reason not to, because a block-paved crossing point can carry a maintenance sum out of all proportion to its construction cost. Where a council's design guidance pushes for the non-standard material, ask for the commuted sum figure at pre-application stage rather than discovering it in the draft agreement.

Interaction with section 38 adoption

Most residential schemes need both. Section 278 handles the connection to the existing network, section 38 handles the estate roads once built. They run on separate timetables with separate bonds, separate inspection regimes and separate maintenance periods.

The sequencing problem is familiar to anyone who has built out a phased site. The junction has to be finished before the first plot is occupied, while the estate roads are adopted at the end, so the highway spend is front-loaded and the bond release is back-loaded.

Programme risk and cash flow

Technical approval is iterative. Each submission round takes weeks, safety audits generate changes, and a design that did not allow for a statutory undertaker's apparatus goes back to the start. Build a realistic number of rounds into the programme rather than one.

Then layer on the constraints that are outside your control. Road space bookings compete with other works, some authorities operate seasonal embargoes on works in retail areas, signal alterations need a road space booking and often night working, and a traffic regulation order that attracts objections can add months.

The appraisal consequence is a cost incurred before any revenue arrives, financed at the development rate. On schemes where the highway works are substantial, that finance cost deserves its own line rather than being absorbed into a blended contingency. Our note on infrastructure funding statements explains how councils report what they collect and spend, which is a useful check when you are asked for a contribution towards works you are also building.

Budgeting the item honestly

A section 278 line built from the following components will survive scrutiny better than a single allowance.

1. Works construction cost, priced from the approved-in-principle drawing, not from the illustrative access sketch.
2. Statutory undertaker diversions, quoted, with a stated contingency.
3. Authority design check and supervision fees from the published schedule.
4. Your designer's fees, including safety audit responses and approval submissions.
5. Traffic regulation order costs.
6. Bond premium or the cost of the deposited capital.
7. Commuted maintenance sums.
8. Legal fees for the agreement, both sides.
9. Traffic management and road space charges.
10. A contingency that reflects how far the design has progressed.

Where a Transport Assessment has identified junction capacity mitigation, price that mitigation at the same time as the assessment is written rather than after permission. And keep the figure consistent with the appraisal in any Viability Assessment, because a highway allowance that differs between the transport chapter and the viability appendix is the kind of inconsistency a council's reviewer finds quickly.

One point that catches smaller developers. Section 278 payments are not planning obligations, so they sit outside the section 106 negotiation, and a contribution sought for the same works under both routes should be challenged. Contributions to open space and play space are separate again, as set out in our note on open space and play space contributions on small schemes.

The worked figure above is illustrative. This is general guidance, not legal advice; highway costs should be confirmed with the highway authority and a qualified highway engineer. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.