Questions are swirling over a major contract at HS2 Euston after a failed bidder alleged foul play during the procurement process.
According to Michael Gross, a property tycoon who led a rival consortium’s bid for the £4bn regeneration of Euston, a key figure in HS2’s procurement team raised concerns of misconduct after the contract was awarded to the Australian developer Lendlease.
Karen Campbell, HS2’s former head of commercial development, is understood to have sent a letter of protected disclosure to higher ups alleging HS2’s procurement lead, Tom Venner, held undisclosed meetings with Lendlease and that its bid was neither credible nor deliverable.
Gross says Campbell informed him of the letter in a phone call in February 2020. It was passed by Campbell to Mark Thurston and Sir David Higgins, the former chief executive and chair of the embattled high speed railway project.
A former HS2 director, who requested anonymity, was also approached by Campbell with her concerns about the letter and Venner’s meetings with Lendlease.
The property developer won the 25-year, £40m Master Development Partner (MDP) contract back in 2018 after a highly competitive bidding process that roped in some of the biggest players in UK construction.
Lendlease ultimately pipped Argent Related and a joint venture between Canary Wharf Group and MTR Corporation to the deal, which saw it take charge of planning for the 54 hectare Euston site and gain priority rights to acquire land upon the project’s completion, potentially worth billions of pounds.
But fast forward to today and the future of the company’s UK contracts has become shrouded in uncertainty.
Lendlease announced dramatic plans last year to wind down its heavily loss-making international operations and re-focus on Australia. Those plans took a leap forward in January when its UK construction arm was sold for £35m to the US private equity giant Atlas Holdings, after losses of more than £100m.
Lendlease says it is committed to the MDP contract, which is held by a separate part of its business, despite the sale.
Michael Gross is the billionaire founder of Sydney and London Properties and a former Euston landowner
A revolving door?
Campbell told Gross she was immediately placed on gardening leave after raising concerns about the Lendlease deal and offered an ultimatum; be sacked without compensation or sign an NDA in return for a compensation package and aftercare in finding another job.
She confirmed she was under an NDA and declined to comment when approached by City AM.
Venner, who is now chief development officer at Canary Wharf Group, went onto a lucrative job leading the entire Euston development project as the first Managing Director of the Euston Partnership – an umbrella body of stakeholders including Lendlease, the DfT and Network Rail.
He did not respond to multiple requests for comment but Lendlease maintains it had no say in his subsequent appointment.
Campbell, herself a former top executive at Lendlease, went on to head up Heathrow Airport’s commercial development team around six months after HS2, according to her Linkedin.
Concerns surrounding HS2’s closely intertwined relationship with Lendlease were raised at the time of the MDP tender.
Former HS2 chair Higgins was Lendlease’s chief executive many years prior to his tenure. They also worked together to build the athletes’ village for the 2012 Olympics, whose delivery authority he headed up.
Higgins stepped down from his role at HS2, where he earnt £240,000 for three days work per week, in 2018.
Approached by City AM, Higgins said he had “no contact” with Lendlease during the tender and had “no recollection” of Campbell’s letter or employment termination. He added he was not involved in the selection or bid evaluation process for the MDP, a decision he said was ultimately signed off by the Department for Transport (DfT).
Former HS2 chief executive Mark Thurston, who is now the boss of Anglian Water, did not respond to multiple requests for comment.
The fresh revelations follow a seemingly endless series of damning reports on HS2’s chaotic internal procedures. Whistleblowers have alleged corporate fraud on a massive scale took place at the high speed line, the budget of which has ballooned from around £35bn to more than £100bn.
There have been consistent allegations that the true cost of the project was covered up and HS2 has faced criticism for its use of NDAs on former employees.
HS2 procurement in the spotlight
Procurement has proven a particularly contentious issue. The global rail giant Siemens Mobility took HS2 Ltd to court in 2023 amid alleged conflicts of interest and unregulated meetings between a member of its procurement team and the winner of a £2bn rolling stock contract, a joint venture between Hitachi and Bombardier.
Siemens ultimately lost, but joined a growing list of complainants about the high-speed railway project’s procurement process.
In 2017, the US engineering firm CH2M withdrew from a £170m contract after officials investigated concerns from rival bidder Mace over an alleged conflict of interest.
How best to deliver the Euston contracts was hotly contested during the MDP tender. A former c-suite at another rival bidder told City AM they approached Mark Thurston at a function to say “we believed the whole basis of their procurement strategy was flawed,” adding it had been “run by people who didn’t understand development.”
“Frankly I was pleased we didn’t win. Even before the bid went in I told my chair that if we won it would suck the life out of us,” the person said.
Many argued the contracts for development and delivery of the actual station should have been tendered as one. This was the vision of former Transport Secretary Patrick McLoughlin, who had big ideas for Euston following a visit to the collosal Hudson Yards project in New York.
“They should have been trying to find a partner who would help them maximise value, but they didn’t understand that,” the c-suite added.
“Integrating the station design and construction with the oversite development would have been a key part of that collaboration and would have led to significant cost savings.”
Gross said: “The only way you can do this is if you have a single developer from the foundations to the building, and that was explained to them and emphasised to them.”
A spokesperson for HS2 Ltd and the DfT said it did not recognise any of the claims made by Gross. “These contracts were agreed in advance with DfT and Network Rail, and HS2 Ltd ran the procurement process on their behalf.
“We follow a rigorous procurement process and follow all necessary legislation and best practice on public procurement, including in respect of the identification and management of conflicts of interest. HS2 Ltd has a strong track record on procurement, and has not lost any legal challenges.”
The future of Lendlease’s international operations is yet to be fully realised. Its disastrous foray into the US, UK and European construction markets has prompted significant backlash from investors and it is looking to generate billions by retreating to Australia.
The construction and real estate giant has previously said it plans to “revise land management agreements” on several massive schemes and accelerate capital release across its pipeline of European development projects. Where it is master developer, this could include taking schemes through to planning but then selling plots to other developers.
Responding to City AM, Lendlease’s International Group Executive, Andrea Ruckstuhl, said: “We’re working closely with government, the Mayor of London and Camden Council to drive forward a truly transformational opportunity for regeneration at Euston.
“Following the recent announcement on tunnelling, and as master developer, we plan to bring forward new buildings and public spaces at Euston through a planning application and partnerships with investors.
“The redevelopment of Euston is a once-in-a-generation opportunity to deliver improvements for the local community that will include new homes, businesses and community spaces; while also generating significant value for the UK economy.”